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As a young child, my understanding of the exact dynamics involved behind the manufacturing, production and logistics, for some of life’s necessities were unknown as is expected for the average 8-year-old. My Mum would send me to the local store for a packet of sugar or my Dad would stop for fuel on the way to the corner sweet store on a Sunday drive and I was blissfully unaware of the workings of the secret logistical underworld that made it all possible. For me, everything came out of a point-of-sale, and if it didn’t, in the most extreme cases, these products were created, by some magical source, at the local industrial area near our neighbourhood. In fact, our little local industrial sector was made up of a few factories that made ice cream (!) and detergents, but as a kid, I imagined everything, even fuel for a car, was magically made there.

For the long and tortured years of adolescence, I somehow imagined products always held firm to their pricing. A loaf of bread, a litre of fuel, a bottle of coke and even that packet of sugar – that I would run to the store for – would be the same price forever. I could not have fathomed that there was an entire mechanism of cost built into the raw material of each product. Could I have imagined that fuel was derived from raw crude oil and wasn’t made in my local factory? Where did I think a bottle of Coca Cola`s pricing came from? I had no idea it was dependent on the underlying pricing of raw ingredients that were needed to create the end-product, not to mention that glass used to manufacture the glass bottle that it was housed in. And one day between then and now, my point-of-sale-creation theory was turned upside down and the reality of costing each item in its raw essence dictating the final product pricing was made a reality. In the little South African town I grew up in, the pricing of raw products changed too and the current price didn’t exactly mean it would stay that way forever. And sometime between then and now, geopolitics, supply and demand, the weather, market sentiment and technological advancements all suddenly had a major impact on pricing the commodities needed to produce our everyday necessities.

As time has gone by, my experience of understanding politics, economics, production, logistics, and of course, the complex balancing of the supply and demand scale, deepened the knowledge of just how important it was for supply of commodities to be secured and more importantly, its future supply. While having a steady supply of products yesterday and today and probably for the next month may be convenient, if we haven’t planned well enough for the future, then we have simply taken a bet with a high risk, that is, we have assumed that the supply would be constant and the pricing of said product, would be frozen in time. This, however, hardly ever happens, as even without the immediate effect of inflation, should there be drought, employment shortage, fluctuation in currency or any other incrementally attributed reason, then the very price we imagined, to purchase a commodity for, would be unrealistic and therefore, the importance of securing future contracts of supply being sustained is the key. For most governments, this is fundamental to make sure the population does not face a shortage. For many large corporations, this is also vital to stay ahead of the competition. Many times in history, even recent history where we faced lockdown during the pandemic, we have borne witness to the results of impacts where commodity shortages have been encountered. Hence the importance of securing supply.

Years later, as a seasoned financial planner and market specialist, my extensive experience in the financial sector has instilled a deep appreciation for the economic sector and the critical role played in securing future contracts. I have had the privilege of witnessing firsthand the power that secure contracts have, in shielding portfolios from a fusion of volatility.

In referring to the current commodity sector geopolitical dance, supply chains find themselves trapped in a web of regional conflicts and disputes which adds to initial complexities. Ongoing escalating tensions in the Middle East region threaten oil supplies, which in turn, always send huge shockwaves through the pricing dynamics of this vital source of fuel.

The agricultural sector is not completely cushioned either and constantly grapples with tariff walls and export restrictions between nations, highlighted by the current Russia-Ukranian crisis, the latter of which, according to the World Economic Forum’s pre-war estimation, boasted 42 million hectares of agricultural land and served as, what was referred to as, the bread-basket of Europe. Now though its negative supply, triggered mostly by the war itself, the logistical nightmare of shipping through the black sea has caused a knock-on effect and further cast a looming shadow over the availability and cost of essential foodstuffs globally. This further highlights not only Europe’s, but Africa’s, need to reignite and prosper its agriculture sector for self-reliance. Until self-reliance can be achieved, though, the key is securing supply.

In my view, the ability to secure commodity futures goes beyond risk mitigation. It’s a completely strategic manoeuvre that symbolizes foresight and wisdom. The idea is to not to be reactive to market shifts but to be proactive and insulate portfolios from potential speedbumps.

These potential gains from secured and locked-in contracts award traders and their string masters with an opportunity to seize, amongst many benefits, a sanctuary of price stability, immunization against disruption through assured supply, for fund managers' strategic dispersion of risks across commodities, industries, and global regions, as well as a refined financial strategy by chartering a course with greater precision.

My views, which are based on lessons learned from history, such as the 1970s oil crisis, underscore the essential of securing future contracts as a highly strategic manoeuvre. My emphasis on an ability to show foresight in financial planning does not merely serve as a tactical advantage, but is also a moral responsibility to our end consumer – our children going to the store for a packet of sugar.