A new risk management platform that helps farmers and other market participants manage their marketing of commodities is now available. The software program organizes, tracks and analyzes commodity positions so farmers can make better business decisions.
Converge was created by INTL FCStone Inc., a leading provider of financial services related to commodities trading, risk management, market intelligence and post-trade services.
Its developers describe Converge as a comprehensive, fully customizable program for producers and consumers of exchange-traded commodities that require the services of a brokerage firm to connect to global financial markets, but lack the resources of traditional account holders. The platform interacts with commodity exchanges worldwide and enables users to enter custom commodity prices, and track and manage their futures market and cash market positions.
Track your market position
“Converge uses real-time data to help middle-market participants analyze and manage their marketing,” says Jared Ortner, director of innovation and commercial technology at INTL FCStone. Users can manage their commodity positions in a way that provides risk protection and enables margin growth through the use of hedging and risk management tools. Converge leverages the brokerage and market advisory resources of INTL FCStone and serves as a technology supplement to these services offered by the company.
“Whether you are a typical crop or livestock producer in the Midwest, a small coffee grower in Colombia or the manager of a regional supermarket chain, you can use Converge to customize your risk management solutions and rely on our proven analytical instruments to help protect your bottom line,” says Ortner.
“The platform is easy to navigate and combines our cutting-edge technology, risk management solutions and market expertise to provide middle-market clients with financial transparency and risk management tools to efficiently manage their marketing so they can focus more of their time on other business operations,” he says.
Analyze what-if scenarios
Converge provides middle-market clients with a way to guard against adverse market conditions by using sophisticated strategies once reserved for the largest market participants. It streamlines the management of multiple commodity positions. The platform includes information to help users understand their positions, their exposure to risk, and their historical performance, as well as analyze what-if scenarios.
Converge also provides users with financial market insights, as well as educational materials on risk management, foreign exchange and commodities, enabling users to more effectively plan their go-to-market strategies. “Converge allows farmers to identify and understand risk embedded in commercial activities, and develop detailed situational analysis, all on a historical performance dashboard that tracks marketing activities and hedges,” explains Ortner.
What prompted Ortner and his colleagues to develop Converge? More software and online tools have been developed the last few years to help farmers manage information generated from the field. That is, capturing and interpreting data from yield monitors in combines at harvest, and data generated by planters, sprayers, soil tests and fertilizer application.
Farmers have more information being generated now, notes Ortner. But a lot of it has to do with improving yields and controlling costs, using data to improve things you can physically do on the farm. Meanwhile, keeping track of marketing activity, analyzing marketing positions and developing a good marketing plan to help make better marketing decisions is something that can be lacking for many farmers. You can do your best job of producing crops and livestock, and still not get adequate price protection.
“Converge software allows middle-market participants to analyze their physical activities and financial activities using a single platform, enabling them to run simulations and determine how market conditions could affect their position,” he says. “Users can conduct evaluations of their current marketing positions and determine if and how they should be altered.”
What the dashboard shows
“Converge provides users with proprietary intelligence from INTL FCStone’s commodity market research group,” says Ortner. “The dashboard shows the financial performance of a client’s marketing portfolio over a period of time and provides macro market insights and analysis for those commodities applicable to a user’s business.”
There will be a monthly fee to subscribe to Converge. The program was first introduced in early December. “We haven’t decided on a price yet,” says Ortner. “Currently, our Converge program is in open beta as we test it with clients. I anticipate that we will provide a free trial offer, then users will have to subscribe in order to continue using Converge.”
Similar competing products are available that specialize in commodities such as energy or those specific to agriculture. Converge works with a wide range of commodities. “We’ll be priced competitively,” says Ortner.
A brokerage account with INTL FCStone is not needed to use Converge, says Ortner, “You don’t have to be clearing your market positions or hedging through us.” However, several advantages are inherent for INTL FCStone brokerage clients using Converge, including price protection for forward contracts and automated data feeds.
For example, for corn you can enter the price basis (difference between local cash price and futures contract price). You can also enter information such as cost of anhydrous ammonia and other inputs to figure your cost of production. That will help you establish a break-even price.
Clients of INTL FCStone have the advantage of receiving basis information automatically, as the brokerage tracks about 2,000 locations in the U.S. “However, we can add a basis for any location applicable to each user’s business,” says Ortner. “If a client has multiple farms in different locations, they can actually manage the basis individually for each farm.”
Know your financial situation
“We built Converge with flexibility in mind, enabling users to conduct a scenario analysis to determine the impact of price rallies or falls for a wide range of commodities,” Ortner says. For instance, you could run an example to see what would happen if corn prices plunge. Are you properly positioned in the market, say through hedging or options or some other marketing contract? How would a price plunge affect you?
Markets can change rapidly and farmers are becoming more sophisticated in their marketing of crops and livestock. There are more farmers and market participants now who want to have the ability to take more control themselves in their marketing and in keeping track of their financial situation. “Converge allows users to do this,” says Ortner.
The program can provide access to your lender, so the lender can monitor how you are doing financially, or how your crop or livestock marketing strategy is working.
For more information about the Converge marketing program, go online to converge.intlfcstone.com.