Question

Hello

This project about a company which mission is to develop a product or process that will slow down global warming. my responsibility presenting Hedging strategies.
I need you to write hedging strategies for this company. I need 3 points each one has one paragraph in the hedging strategies of this kind of company.
this information about the company which we will create:

Topic: Meat - Regulating Meat Production (collect cow dung and turn it into biogas fuel)
Company Type: Manure Processing Company
Company Name: Poo 2 Fuel,
Market: Meat Producers/Ranchers/Farmers
Initiative: We’re a US based company that travels to each cow ranch to collect cow dung using a cow manure removal machine (alibaba makes it). From there, we’re creating cleaner air, cleaner soil and cleaner water. The gases emitted from the cow dung is hazardous to the environment. From collecting the dung, we can burn it and turn it into biogas which can be used to create fuel. This fuel can meet a quarter or more of the world’s demand for transportation fuels by 2050.
11 cows for 20 acres, 1.8 acres per cow.
How: Process:
Analyze farms, cattle and animal capacity. From there, we determine how often our team comes. 1x a day or 1x per week. Average ranch has between 800-1200 cows
Our Biofuel motored dung scooping machine will pick up the dung.
Dung will be transported to a processing center where the manure is cured of harmful components such as methane and hydrogen. The methane and hydrogen will be refined into biogas fuel. The remains will be converted into organic fertilizer.
A share of the fertilizer (50%) and biogas is then given back to the farmer free of charge. Our share will be sold.

What: Cow manure is a major source of carbon emissions. It contains methane which is a powerful greenhouse gas that is 20x more potent than carbon dioxide. At the moment, there are 94.4 million cattle in the United States. 1.5 billion in the world. A cow produces 400 liters of methane per day. This is more than a car.
How
Why
Mission Statement - Our mission is to turn this harmful methane into a useful fuel. This fuel will allow us to provide a new source of natural gas that could be used to replace dirtier fuels such as coal and oil. Lastly, it will reduce the need for fracking which is the extraction of natural gases from the earth. We are unable to 100% remove the harmful substance from the earth, but it does leave a lower carbon footprint. By removing the harmful cow manure from the earth, we’re taking on the greenhouse effect in 3 different ways (cleaner air, cleaner soil, cleaner water). Not only are we making the air cleaner, but we are making the soil cleaner to allow crops to grow and we’re decontaminating the water in the ground.

Answer 1

Hending strategies are techniques used inorder to protect your business from risks. Poo2 fuel is engaged in producing fuel from cow dung there by reducing the global warming. In such companies several hedging strategies can be used inorder to protect their business namely diversification, pricing strategies and future contracts

Diversification: This is the most effective strategy the company has used inorder to avoid underutilisation of resources. Cow dung is the main commodity that they purchase.The company being a a producer of manure has diversified into the production of natural bio manures along with the production of Biogas fuel. Apart from this they can also use their product (biogas) to run their own equipments to reduce the usage of electricity or other types of fuel.

Pricing Strategies: The company has used an effective menthod of paying in commodities and not in cash. A 50% share of fertilisers and biogas is returned to the farmers as the price of the cow dung. This strategy will reduce the liquidity risks. There is will be no shortage of stock even if there is a lack of liquid cash to pay for it.

Futures Contract: Another effective strategy is to purchase futures contract which are nothing but financial contracts to buy and sell the commodities at a future date. The company has already arranged the pricing for buying the assets and it knows that the demand for the fuel will rise and by 2050 they can cover a quarter of the demand. hence they should lock the price with a future date with their clients they can make use of a long futures contract with the farmers and ranchers and a short futures with the clients.