COMMODITY RISK MANAGEMENT

AGR3CRM

2020

Credit points: 15

Subject outline

This subject introduces students to factors impacting on agricultural production which are beyond the farm gate. It focuses on understanding commodity markets and the price discovery mechanism, local pricing, supply chains, price-currency risks, and the global agribusiness environment. Risk is examined and the need for forward markets to offset this risk is explained. Problems with supply chain integration will be detailed, while strategies to manage both price and currency risk will be evaluated. Topics include the market price mechanism, commercial trade markets, characteristics of forward markets, identifying market position and calculating exposure through position valuation, risk transfer mechanisms, establishing risk management objectives, problems with forward contracts under high default risk, futures and options hedging, basis risk, over-the-counter bank pricing products, and managing commodity risks within the organisation.

SchoolLife Sciences

Credit points15

Subject Co-ordinatorGary Clark

Available to Study Abroad/Exchange StudentsYes

Subject year levelYear Level 3 - UG

Available as ElectiveNo

Learning ActivitiesN/A

Capstone subjectNo

Subject particulars

Subject rules

PrerequisitesN/A

Co-requisitesN/A

Incompatible subjectsFIN3DER

Equivalent subjectsN/A

Quota Management StrategyN/A

Quota-conditions or rulesN/A

Special conditionsN/A

Minimum credit point requirementN/A

Assumed knowledgeN/A

Readings

Agricultural Price Risk Management: The Principles of Commodity Trading

Resource TypeBook

Resource RequirementRecommended

AuthorWilliams, J. and Schroder, B.

Year1999

Edition/VolumeN/A

PublisherOxford University Press

ISBNN/A

Chapter/article titleN/A

Chapter/issueN/A

URLN/A

Other descriptionN/A

Source locationN/A

Agricultural Supply Chains and the Challenge of Price Risk

Resource TypeBook

Resource RequirementPrescribed

AuthorWilliams, J.

Year2014

Edition/VolumeN/A

PublisherRoutledge

ISBNN/A

Chapter/article titleN/A

Chapter/issueN/A

URLN/A

Other descriptionN/A

Source locationN/A

Career Ready

Career-focusedNo

Work-based learningNo

Self sourced or Uni sourcedN/A

Entire subject or partial subjectN/A

Total hours/days requiredN/A

Location of WBL activity (region)N/A

WBL addtional requirementsN/A

Graduate capabilities & intended learning outcomes

Graduate Capabilities

Intended Learning Outcomes

01. Identify the major risk variables in agricultural food-fibre supply chains.
02. Analyse forward commodity market characteristics in commercial trade markets.
03. Apply the principles of market risk management to supply chain situations.
04. Evaluate hedging tactics and calculate hedging risks and the impact of basis movement in order to minimise the impact of risk variables on business profitability.
05. Design flexible strategies to achieve the risk target objectives.
06. Implement over-the-counter bank products.

Subject options

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Start date between: and    Key dates

Melbourne (Bundoora), 2020, Week 09-15, Day

Overview

Online enrolmentYes

Maximum enrolment sizeN/A

Subject Instance Co-ordinatorGary Clark

Class requirements

Block Mode Week: 9 - 9
Five 9.00 h block mode per week on weekdays during the day from week 9 to week 9 and delivered via face-to-face.
"Five 9-hour days in Week 9"

Lecture Week: 12 - 12
One 3.00 h lecture per week on weekdays during the day from week 12 to week 12 and delivered via face-to-face.

WorkShop Week: 12 - 12
One 4.00 h workshop per week on weekdays during the day from week 12 to week 12 and delivered via face-to-face.

Assessments

Assessment elementCommentsCategoryContributionHurdle% ILO*
One written 2-hour examinationN/AN/AN/ANo60 SILO1, SILO2, SILO3, SILO4, SILO5, SILO6
One written in-class test - (equivalent 500 words)N/AN/AN/ANo10 SILO1
One written report (hedging exercise) - (equivalent 1500 words)N/AN/AN/ANo20 SILO2, SILO3, SILO4, SILO5, SILO6
One written report (trading account exercise) - (equivalent 500 words)N/AN/AN/ANo10 SILO2