Freight derivatives are financial instruments whose value derives from future freight rates, such as freight and tank car rates. Freight derivatives are often used by end-users (shipowners and grain farmers) and suppliers (integrated oil companies and international trading companies) to reduce risk and guard against price fluctuations in the supply chain. However, as with all derivatives, market speculators – such as hedge funds and retailers – are involved in both the purchase and sale of freight contracts that allow for a new, more liquid market. For this reason, the shipping contract generally contains clauses that stipulate that any delay in the delivery of goods is not subject to carrier control and is not responsible for losses incurred by the delay. Armed with the correct data in an accessible mode, freight brokers will be able to make discoveries that will benefit their end result. The integration of a carrier is not absolutely necessary for the transport of goods from one destination to another. However, because the import and export process is highly regulated and can be complex, many companies choose to use a forwarder to cope with the stress of transporting goods to the nearest destination. Unlike allkinds freight (FAK) shipping, auction negotiations for perishable goods such as fruits, vegetables and fish must begin at least 4 to 6 months before the start of next season, giving both parties sufficient time to agree on prices, space, refrigeration equipment, etc. Because refrigerated freight rates are much higher than dry, these negotiations are becoming increasingly difficult for carriers. While the carriers do not carry the goods themselves, they act as intermediaries on behalf of the shipper. They negotiate the most commercially efficient business for their customers, advise on import and export rules, assist in the necessary documentation, advise on the storage of goods and insurance, and handle other logistics involved in the transportation process. If you are unable to secure the tender level rates directly from a forwarder, you may want to consider going with an NVOCC or forwarder.

This option may increase your FF volume with the forwarder for next year, but ultimately the forwarder can know who the real customer is, which could help you in the long run. If you have multiple supply points in different geographic areas, identify the high season in each area and try to avoid cargo negotiations at these times. For example, if you ship goods from Asia and Europe, you should act strategically: avoid shipping contracts that would be active in High Season Jan/Feb and instead trade your shipments from Europe during this period. You get cheaper prices and your airlines will thank you for that. The instruments are billed using various freight price indices published by the Baltic Exchange and the Shanghai Shipping Exchange.

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