Commodity traders · Export-oriented and SEZ units
One daily view of every commodity position and its value
A commodity trader's profit is decided by price movements between purchase and sale, and is often not known until the last shipment settles. We put every physical position, hedge and open contract onto one daily view at market value. We also track the quality claims, demurrage and letters of credit that turn a paper margin into cash.
In one paragraph
Import, export and merchanting traders in agricultural commodities, metals, coal and other bulk goods live on thin margins across large volumes. Unlike domestic distributors, they carry international price and freight exposure, depend on trade finance, and face claims after almost every bulk shipment. Turnover typically runs from ₹50 crore to ₹2,000 crore, with a lean finance team behind it.
Promoter or managing director, with the head of trading and finance head
The economics
How the money moves in this trade
A trader buys and sells contracts that may be priced at different times, on different benchmarks and in different currencies. Between purchase and sale the position carries price risk, currency risk and freight risk, some of it hedged on an exchange or through a bank. The result of a trade depends as much on how the position was managed as on the price agreed. Bulk shipments are financed through letters of credit or trade finance lines, so the cost of funding and the timing of documents matter as much as the margin.
After delivery come the adjustments: quality and weight differences at discharge, demurrage and dispatch on vessels, and price finalisation on provisionally priced contracts. Merchanting trades, where goods move between two foreign countries without entering India, carry their own FEMA conditions on timing and payment. Without a daily position report, profit is recognised at shipment and revised for months afterwards.
The problem
Where the numbers usually break down
Positions are not marked to market
Open purchases, sales and inventory are carried at cost, so the effect of price movements is not known until the trade closes.
Hedges and physical trades are recorded separately
Exchange or bank hedges sit in a different ledger from the physical trades they protect, so the net exposure is never shown.
Quality and weight claims settle months later
Discharge adjustments, quality penalties and weight shortages are agreed long after the sale is booked, and are not provided for meanwhile.
Demurrage is discovered at settlement
Vessel laytime and demurrage are calculated by the shipping team and reach finance only as a final invoice.
Merchanting trade timelines are not monitored
The gap between outward payment and inward receipt on merchanting trades is not tracked against the period permitted.
What we do
The work, and the result each part produces
Daily position report
Physical purchases, sales, inventory, shipments afloat and hedges brought into one report by commodity, with net exposure by price and currency.
Management sees the open position every morning.
Mark-to-market valuation
Open positions valued against market prices on a stated basis, with unrealised results separated from realised ones.
Profit reflects the market, not only closed trades.
Trade-level profitability
Each trade costed with freight, insurance, finance cost, demurrage, claims and hedge result.
Every trade shows what it actually earned.
Claims and demurrage provisioning
Quality, weight and demurrage exposures recorded per shipment as soon as discharge data arrives.
Adjustments are provided for before they are settled.
Letter-of-credit and trade finance tracking
LCs, document deadlines, discrepancies and finance utilisation tracked per shipment.
Documents are presented on time and finance cost is known per trade.
Merchanting and remittance records
Outward and inward legs of merchanting trades matched, with timelines monitored.
Each merchanting trade can be shown to have met its conditions.
Where we start
The first steps of an engagement
Contracts, hedges and LC records
We ask for open purchase and sale contracts, hedge statements from your broker or bank, shipment and vessel documents, letters of credit and trade finance statements.
Open position rebuilt and agreed
Physical contracts, inventory, cargo afloat and hedges are brought into one position by commodity and currency. That position is agreed with the trading desk's own book.
Daily report and claims log
A daily position report starts on a stated valuation basis. Each shipment's quality, weight and demurrage exposure is logged as discharge data arrives.
First position and trade report
Net open position by commodity and currency at market value, realised and unrealised results, and margin on closed trades after freight, finance, claims and hedges.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Net open position by commodity and currency, daily
- Realised and unrealised result, by commodity
- Trade margin after freight, finance, claims and hedges
- Claims and demurrage provided against settled
- Letters of credit open, discrepant and expiring
- Merchanting trades open against permitted timelines
Who it suits
Written for, and not the right fit for
- You want trading or hedging advice on what to buy or sell — we report and control positions, we do not take or recommend them.
- You trade only domestically from stock — the trading and distribution pages are a closer match.
- Import, export and merchanting traders in agri commodities, metals and bulk goods.
- Traders using exchange or bank hedges alongside physical trades.
- Firms with large trade finance lines whose bankers ask for position reporting.
Cities where this trade concentrates
Services
Services this work draws on
MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗Banking, funding and due diligence
Information a lender or investor can verify without a reconstruction.
Explore service ↗SEZ and foreign trade advisory
SEZ, EOU and export scheme records kept continuously, not at assessment.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
We know our positions. Why a formal report?
The trading desk usually knows its own book. A formal report brings in shipments afloat, hedges, claims and finance in one place, and gives your bankers and partners the same view you have.
Will you advise us on hedging?
No. We measure the exposure and report the effect of hedges you take. Decisions on what to hedge, and the trades themselves, stay with you and your bank or broker.
What records does a merchanting trade need?
Both legs matched — the purchase and the sale — with remittances in each direction, and the gap between outward and inward payment kept inside the period FEMA allows. We keep those records and give your bank the information it needs to report the trade.
5th Quadrant does not give trading, hedging or investment advice. Merchanting trade reporting and approvals are handled through the client's authorised dealer bank, and statutory or tax-audit reports are signed by an independently engaged CA. Full detail is on our Professional Scope page.
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