Commodity Swaps for Buyers
Like any other financial market, the farm commodities market can be volatile, resulting in unstable prices for grain and other agricultural products. Our swap for buyers allows you to lock in a portion of the price1 you pay for farm inputs, reducing the impact on your cash flow. Contact your Account Manager
Buy farm inputs at a fixed price
Locking in prices with the swap for buyers allows you to:
- Secure your costs by locking in a portion of the purchase price when the market price is favourable
- Manage your cash flow more effectively with predetermined payments
- Focus on production
The swap for buyers in four steps
Decide on the transaction amount and time period.
Negotiate a fixed price (swap price) with National Bank.2
Purchase your physical farm inputs from the supplier of your choice (merchant, distributor or producer) at the price available at the time of sale.3
At the end of the term, settle up any difference between the market price and the swap price.
Two possible scenarios
The market price is higher than the swap price
National Bank will pay you the difference between the swap price and the market price for the value of the contract.
The market price is lower than the swap price
You will pay National Bank the difference between the swap price and the market price for the quantity negotiated for the swap.
Features of National Bank's swap for buyers
- Price can be locked in up to 18 months in advance
- Flexible reference dates (monthly or weekly average, set date, etc.)
- Access to a range of agricultural price indices including corn, soy, wheat and pork
- Generally, no upfront payments (margin calls) or refunds are required during the contract period
- Has less impact on your cash flow than a futures contract
- Currency risk is reduced with swaps available in both U.S. and Canadian dollars
- Purchase at least 2,000 tonnes of grain or equivalent per year
- Have set up a credit facility and obtained the legal documents required by National Bank
- Undergo a complete risk assessment by our specialists to establish the suitability of the product
2 The price negotiated with National Bank will be slightly different from the market price, to reflect the credit valuation adjustment, or CVA. This price difference is subject to change based on market conditions at the time of negotiation.
3 Price available at the time of purchase: current market price (spot price) +/- local cash basis.
This content is for information purposes only and does not constitute an offer or solicitation to buy or sell any securities or financial products. Users must individually evaluate the benefits of a particular transaction, in consultation with their own professional advisors to determine whether the terms and risks of the transaction are appropriate for their specific needs.