Commodity-Hedge Governance Board Adviser

The mandate

The group hedges grains, oils, dairy inputs, energy and currencies, yet reported hedge performance does not explain the margin realised when products are manufactured and sold. Procurement volumes, formulation substitutions, demand revisions and customer pricing move outside treasury’s hedge view. The board’s standing question is whether risk activity protects an identifiable physical margin or produces technically compliant positions whose basis and volume mismatch emerge too late.

The adviser will review monthly exposure and performance packs, meet procurement, commercial and treasury owners before committees, attend four Copenhagen reviews and lead one scenario workshop. The cadence will challenge forecast confidence, commodity specification, location and timing basis, substitution, hedge horizon, customer repricing, liquidity, collateral and designation. Advice will separate economic risk management from accounting presentation while keeping both consequences visible.

The appointment runs for ten months through two procurement seasons and the annual risk-appetite review. Renewal requires an explicit board minute naming a different strategic question after management has produced physical-to-margin attribution and exercised revised decision triggers. The role should conclude when accountable teams can challenge volume and basis together, not become outside approval for individual trades.

The adviser carries no line authority and undertakes no executive responsibility for procurement, commodity forecasts, derivative trades, customer prices, hedge accounting, collateral, risk limits or financial reporting. Designated officers retain those duties. The adviser may question whether a hedge protects the stated exposure and document dissent, but cannot instruct dealing or certify accounting treatment.

Conflicts must be disclosed involving commodity traders, suppliers, customers, brokers, banks, exchanges, food companies and relevant investors. The adviser will recuse from counterparties with material ties, avoid personal dealing in affected commodities during restricted periods and accept no brokerage, placement or performance-linked compensation. Confidential supply and pricing information may not support other mandates.

Why the board wants this voice

Procurement values supply certainty, sales values pricing flexibility, treasury values risk-limit compliance and finance values predictable reported results. Their separate measures can all improve while physical contribution deteriorates. Directors want an independent operator who can trace commodity exposure through formulation and customer price, challenge basis and volume assumptions, and explain when hedge activity creates liquidity pressure greater than the margin protection achieved.

What you will own

• Challenge exposure from forecast purchase, inventory, formulation, substitution, production, sales commitment and customer-price reset.
• Examine commodity, grade, location, timing, currency and index basis between physical flows and derivative instruments.
• Test volume confidence, hedge horizon and adjustment triggers under demand, yield, supplier and recipe changes.
• Review economic attribution across physical price, hedge result, basis, volume mismatch, customer recovery and operating variance.
• Assess collateral and liquidity consequence under adverse price moves even when economic margin protection remains sound.
• Give directors choices on appetite, delegation, permitted instruments, forecast thresholds and accountable exception treatment.
• Leave a board scorecard linking physical margin, hedge purpose, forecast quality, basis, liquidity and decision owner.

Candidate qualifications

• Has governed commodity hedging for a food, ingredients or consumer producer with variable formulations and customer pricing.
• Understands physical volume, grade, location, timing, substitution, basis, futures, options, currencies and collateral together.
• Can attribute realised product margin without confusing economic hedge value, operating variance and accounting presentation.
• Has challenged over-hedging and false precision in forecasts during material demand or supply change.
• Has advised boards on liquidity and collateral consequences of otherwise rational commodity risk protection.
• Preserves procurement, dealing and accounting authority while making cross-functional exposure and dissent legible.

Non-negotiables

• Can attend all Copenhagen hedge reviews and the physical-to-hedge scenario workshop during ten months.
• Will disclose relationships with traders, suppliers, banks, brokers, exchanges, food groups and investors.
• Brings physical commodity margin governance; financial derivatives knowledge without operating exposure is insufficient.
• Will not direct trades, certify hedge accounting or accept brokerage and performance-linked compensation.

1. 49 words maximum. Which basis difference most often explains a hedge that succeeds financially but fails operational margin?
2. 49 words maximum. How would you change hedge volume when formulation substitution becomes commercially likely?
3. 49 words maximum. What counterparty or trading interest would require your recusal?