How one produce buyer found success with OFX’s Forward Contracts

The Covid-19 pandemic created market fluctuations and inconsistent produce availability, leading North American Produce Buyers and their OFXpert, Jeff to develop a hedging strategy that has provided currency confidence and helped their business maintain over 50 years of success.

North American Produce Buyers, a partially family-owned business located in Etobicoke, Canada, has been in the produce industry for over 50 years and has been passed down for three generations. This well-established wholesaler sources fruit from around the world to resell to grocery stores in the Canadian market. 

Due to the nature of the produce business, NA Produce Buyers is continuously leveraging foreign exchange (FX) products like spot transfers for payments to overseas suppliers and forward contracts* to navigate the inconsistent produce industry. When Vice President of Finance, Steven Moffat started at NA Produce Buyers over 22 years ago, they were using their bank for all of their foreign exchange needs. “The day we needed something we would go to the bank and they would give us whatever the exchange rate was that day, there was no tactical approach to FX,” Moffat said. 

After years of using their banks for day-of FX rates, Moffat began looking into alternative FX partners, “I knew someone who used OFX and had a really good experience so they referred me.” As they say, the rest is history. NA Produce Buyers started working with OFX in 2011 and have continued to build up their business, customer base, and FX strategy alongside specialist currency support from their OFXpert, Jeff.

After NA Produce Buyers began working with OFX, Moffat and his team quickly learned the value OFX brings to their business and their ongoing foreign exchange needs, “I like to be able to communicate with someone and have a real relationship with business partners, Jeff knows me and knows how I like to do business so our relationship is symbiotic. It’s never a sales pitch, it’s gathering information and sharing solutions,” Moffat said. 

OFXpert Jeff quickly began learning about the produce industry and all the places that NA Produce Buyers sourced their fruit from as well as how unpredictable the produce industry can be at times. Depending on weather and natural disasters sometimes sourcing produce can be difficult and unexpectedly expensive. As time went on, Jeff ingrained himself in the business and became an extension of the NA Produce Buyers team.  This allowed him to provide FX support and help Moffat’s team to find the right FX solutions and products to help stabilise the cost of currency exchange. “We would have these rap sessions and plan ahead. He [OFXpert, Jeff] knows my business’s busy seasons and he prepares for that, we talk about rates and always have open communication,” Moffat said.  

Like all of our OFXperts, Jeff became a part of the team at NA Produce Buyers, letting Moffat know when a Federal Reserve announcement was coming out or a recent Bank of Canada decision that could impact rates. Jeff became an asset for the financial team at NA Produce Buyers, “I can buy dollars anywhere and one competitor or another will always say they can beat the rate, but anyone can beat a rate. What makes our OFXpert different is the relationship and the easy process,” Moffat said. With this in mind, Moffat and his OFXpert began developing an FX hedging strategy to ensure that NA Produce Buyers was getting the most out of their FX transfers.

After learning more about the pain points of currency exchange for NA Produce Buyers, Jeff discussed FX hedging and risk management strategy with Moffat, including the following risk management tools:

After discussing all of the risk management tools available, Moffat chose to move forward with the solution of a Forward Contract* for NA Produce Buyers. “I use forwards, I like the stability and knowing that I’m not getting taken advantage of if the market dips,” Moffat said. Periods of high currency volatility can expose your business to increased costs or decreased revenues, putting a squeeze on your margins. This creates currency confidence because it helps you stay ahead of market moves and allows businesses like NA Produce Buyers to plan their finances more accurately for future needs.

Forward Contracts can be anywhere in length between 2 days to 12 months. Short versus long-term Forward Contracts all depend on the business need. Long-term contracts are often used by businesses looking to hedge against “longer-term risks” such as an import/export trade enterprise that needs to buy merchandise for future seasons. While there are both long and short-term Forward Contracts, North American Produce Buyers use short-term forwards, “…in produce, we’re not holding on to inventory for a long time or it will go bad, so we don’t need any long-term forwards,” Moffat said. OFXperts like Jeff, work with a business to understand the business’s needs, payment frequency, and associated risks to create an informed risk management solution unique to the needs of each business and product.

All businesses should consider whether a Forward Contract is the right approach for them. If you have chosen to use a Forward Contract to fix a rate, you need to accept that if currency volatility worked to your advantage, you would still have to abide by the contracted rate of exchange, thereby missing out on the potential upside. Wanting the best of both worlds, some clients will hedge half of their exposure and do half at the ‘spot’ or ‘on the day’ rate to potentially take advantage of upticks in the rate. Ultimately, the hedging strategy that’s right for your business will depend on the attitude (from the top down) to risk-taking and sensitivity to exchange rate shifts.

The hedging products and strategies that Jeff brought to Moffat helped the company budget and prepare for future FX costs. “Jeff knows my business’s busy season and he prepares for that,” Moffat said. Having an OFXpert like Jeff helped Moffat and NA Produce Buyers to plan for future payments, lock in exchange rates, and stay ahead of the volatile market. Whether it’s hedging strategies, spot transactions, or market updates, OFXperts like Jeff are always just one call away.

*If you book a Forward Contract, it may mean losing out if the market rate improves because you’re contracted to settle at the agreed rate. Read more. Forward Contracts are not available for clients in New Zealand or personal clients in Hong Kong.

Whether your business is looking for risk management support for your FX needs, or simply want to execute spot transfers online, our OFXperts like Jeff are ready and willing to partner with you on your next transfer. Interested in partnering with an OFXpert like Jeff? Register today.

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