NFDM Prices Present Significant Profit Opportunity

Lower your production costs and your profits will increase. This is why companies do all they can to leverage the best prices on raw materials.

Food product manufacturers are doing this today, taking full advantage of Non-fat Dairy Milk (NFDM) powder prices that are at five-year lows. This low point is an opening for companies to utilize an asset-based line of credit to stockpile the commodity. But food product manufacturers aren’t the only ones who can benefit.

The down market also presents a fantastic opportunity for savvy NFDM manufacturers and traders to hedge. Given the right financing terms, setting aside product now for a later sale can pay significant dividends in the months ahead.

Consider this scenario. Powder is selling today for roughly $1 per pound. Let’s say a company was able to secure advantageous finance terms, which came out to $.02 per pound every three months. If the price of NFDM were to increase to $1.15 in three months, that’s $.13 of profit per pound.

Now what if NFDM rallied within a year to its 3-year average of $1.60? Subtract the $1.08 in finance costs, and the profit becomes $.52 per pound.

All of this depends on a financing mechanism that not only gives companies highly competitive rates, but also is agile enough to put them in a hedging position now, while the market is at a low point. The old adage holds true – time is money.