Pricing methods in CTRM Solution Agiblocks

Pricing methods might be the biggest differentiator where CTRM is fundamentally different from ERP. Pricing a commodity can be done in several manners where the flat price is the most obvious one. When a flat or fixed price is given, the challenge remains to hedge it properly as the underlying physical commodity will fluctuate. Depending on the nature of the commodity other pricing methods are there which a CTRM system should handle.

The most used is probably the differential price, based on an underlying future the commodity is priced to be fixed towards a certain future and future month of expiration, a system should allow then only the quality or location difference as a premium or discount. Sometimes these differences are called parities, which is basically the incoterm, quality difference and location where the commodity is. Traditional CTRM provides functionality for these pricing methods. There is however more, some commodities or derived commodities cannot be captured in these pricing methods. A good example is a cocoa product such as cocoa butter or cocoa powder, they have definitely a relation to the cocoa bean futures contract but require so called ratio’s to price and to hedge. Another good example might be milk, where the price is mostly depending on fat content which needs to be measured. In that perspective milk does have somewhat a relation to pricing metal concentrates as the measurement or assays to determine the final price.

Agiblocks

Agiblocks allows to administrate and manage all these different pricing types and methods and associated workflows in a unique easy to set structure. Within Agiblocks these different methods can even be combined in a single overview, allowing alerts and views on the consequences: e.g. it is a single click to see how much still has to be fixed. Agiblocks even allows even to use all different methods to be used for a single commodity when that is applicable.

Administration

Pricing methods are by definition complex, as to be fixed contracts can be also priced partial or can be rolled with a broker. Agiblocks accommodates these processes with a clear, easy steps, user interface. Even more important, the trail back administration is kept by Agiblocks as the trail is usually a challenge in for example a spreadsheet. Here the value of a CTRM system becomes very obvious as a system like Agiblocks not only keeps the trail but also provides immediately the risk consequence and allows
the user to manage that risk as it becomes visible.

Commodity trading

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