One of the trickiest challenges for trading companies dealing directly with farmers is exchange rate risk. When you’re buying commodities in the local currency and shipping them to your warehouse, figuring out the real cost of those goods in your main currency can feel like chasing shadows. Fluctuating exchange rates can throw off cost calculations, impacting everything from pricing to profit margins. Fortunately, Trackon has a way to tackle this problem that keeps things simple and accurate.

CTRM solutions can have multiple ways to deal with exchange rate differences, and at Trackon, we take a straightforward approach.

The Real Cost Dilemma

Imagine you’re purchasing cocoa beans from farmers in Ghana. You’re paying them in Ghanaian Cedi (GHS), but back in your home office, you’re managing your accounts in Euros (EUR) or US Dollars (USD). Now, you could use some standard market rate to convert those costs, but it won’t reflect the real rate you dealt with when making those payments. So how do you value the goods when exchange rates fluctuate daily?

Trackon’s Solution: Keeping It Real

Here’s where Trackon steps in. Our system uses the actual exchange rates you’ve encountered in real transactions—those moments when you’ve converted USD to GHS, for example. Not the central bank rate, not an average market rate, but the real deal you got on the ground. Over time, these transactions create an average exchange rate for your local currency account.

This is where the magic happens. As you make payments to farmers from this local currency account—often as advance payments—the system captures the average rate at that moment. When you eventually receive goods from the farmer, Trackon uses this accumulated rate to value the cargo. This way, you’re using the actual rate you experienced, not some abstract market figure.

Why This Matters

By using the actual rates accumulated in your local currency account, Trackon gives you a clear and consistent way to value your goods. This isn’t just some accounting trick. It’s about having a real grip on your costs and ensuring you’re not losing out because of exchange rate fluctuations. And the best part? When you look at your cost of goods sold (COGS) account, it becomes evident that this method is working. Once you’ve shipped or invoiced all the cargo in your branch warehouse, you’ll see a zero balance in both the local currency and USD inventory accounts. That’s a clear sign that you’ve tracked and valued your goods correctly across the board.

Simplifying Complex Problems

Exchange rate risk doesn’t have to be a headache. By flowing actual rates through the payment process and into the valuation of goods, Trackon turns a complex problem into a manageable process. It’s like having a built-in compass for navigating the ever-changing seas of currency fluctuations.

In commodity trading, getting the numbers right can be the difference between profit and loss. With Trackon, you can be sure that your valuations are grounded in reality, not guesswork. That’s how we help you keep your business on course.