Holding in hand the book “Coffee price risk management by standard contracts on ICE” by two co-authors MSc. Nguyen Canh Tho (editor) and Dr. Dang Huu Man, reading and happy at the same time.
In fact, many growers and coffee traders, large and small, are no strangers to the two London and New York arabica derivatives exchanges. Anyone involved in the production and trading of coffee beans in Vietnam as well as around the world must also use the listed prices on those two exchanges for reference.
Cover of the book “Coffee price risk management using standard contracts on ICE”
Congratulations here in the sense that although the authors are “academic” people, the book seems to be written not only for those studying financial business and commodities, but also for readers. people who are interested in coffee production and trading and commercialization of this commodity. Not only professional coffee makers, but other commodities such as rice, cocoa, soybeans, corn, even gold, crude oil, etc. can also use the operating mechanisms of the exchange. derivative coffee to apply to their industry.
True to the title of the book, this work covers the knowledge and practical experience for “risk management” because the editor Nguyen Canh Tho is currently the Deputy Director of the Money Business Center at Saigon Thuong Tin Commercial Joint Stock Bank. (Sacombank). Through 12 years of professional experience in consulting solutions to reduce and prevent risks of interest rates, gold-foreign currency rates and commercial commodities, it must have been enough to “absorb” the gains and losses of the manufacturing profession. and coffee business.
The main structure of the book consists of 10 chapters in only 196 pages by the Economic Publishing House of Ho Chi Minh City. Ho Chi Minh City has just been printed in the first quarter of 2020.
In the first two chapters, the authors briefly present why coffee derivatives are present in the market and people involved in this industry need to pay attention, the factors that affect the price of coffee of the exchanges. and in producing countries. The analysis of the relationship between the value of coffee beans with monetary factors such as the US dollar, Brazilian reais. It is thought that the interplay between monetary policy and commodities has now become a very important part of the daily coffee business as a commodity.
The interesting things are in chapter 3 when the authors give the coffee business situations of purchasing agents with quite full details of the delivery, inspection of goods, signing of sales contracts “for money”. fresh” (outright) or sold on the difference between the listed price of the floor and the FOB price (delivered across the ship’s rail) or in the industry, it is often called a contract of “reduction” or “addition” (differentials). Struggling with buying and selling at prices up and down on the domestic and export markets was not enough…then there was a time when they had to “default” in series.
Chapters 4 to 9 show how to operate, especially a “handshake” section for those who trade in coffee and want to avoid risk with derivative contracts including futures, futures and options. These types of contracts are familiar, but the operating niches, regulations, and “play” are not clear to everyone.
The final chapter contains specific practice situations for commodity traders who trade on derivatives exchanges, especially buying agents who like to follow the routine. In this section, the authors also give problems and suggested solutions to help business owners calculate profit and loss, risk reduction plans to preserve capital.
With 10 chapters encapsulated in a book of less than 200 pages, the authors have cleverly distilled the necessary operations when trading in coffee, what to do when not using the floor and how to go with the derivatives floor.
For a long time, for the coffee business as well as a number of other commodities affected by commodity trading floors, they often go to extremes when they lose or win big.
There are many industry association leaders who once advised against selling coffee contracts “retraction”, but were immediately reacted by members such as “If you don’t sell that method, you can sell it to anyone”.
Of course, “Coffee price risk management using standard contracts on ICE exchange” is not a universal key. But the contributions of a book that is quite full of knowledge and practice as general advice for traders of coffee and many other agricultural products and commodities are worth a neat “bedside pillow” and The easiest to understand compared to other books of the same type.
According to TBKTSG No. 14-2020 dated April 2, 2020
