The link between the dizzyingly complex world of financial derivative trading, McDonald’s chicken McNuggets, the world’s largest hedge fund, and agri-food businesses in Northern Ireland may not be readily obvious.
But they all come together in a new short course on hedging risk in the agri-food industry being offered by the Agri-Food Business Development Centre at Ulster University Business School in January.
The course is aimed at assisting agri-food companies to deal with price volatility and explores various financial instruments which can be used to hedge against it.
The link to McDonalds goes back to the 1970s when the restaurant chain wanted to introduce chicken to its menu for the first time. The problem, however, was price volatility in the chicken market. McDonalds feared that rising prices could either generate losses or embarrassing price increases.
In stepped Ray Dalio, founder of the Bridgewater Associates hedge fund, who came up with a financial derivative which combined corn and soya futures and could be used by the restaurant chain to hedge against chicken prices. It worked, and the proof remains on the McDonalds menu to this day.
This is the type of financial strategy which will be explored on the half-day course.
"The course was developed following a visit by agri-food business representatives to the university's Financial Innovation Lab and aims to raise awareness around the use of derivative products to hedge against the uncertainty and volatility encountered by producers, particularly in the dairy sector", says Mike Pogue, senior lecturer in financial services business development at Ulster University.
The Agri-Food Business Development Centre offers specialist teaching on aspects of agri-food business and engages with industry and policy-makers to provide businesses with evidence-informed research to help improve the competitive position of the Northern Ireland agri-food industry. Its objectives are to support knowledge and skills development in agri-food business and to provide research and innovation support to the industry.
Other short courses to be offered in January are one on using social media to build competitiveness in the food industry and another on starting to export.
The courses are a direct response to demand from the industry, according to centre manager Dr Lynsey Hollywood.
“The importance of the agri-food industry to the Northern Ireland economy has been recognised in both the Programme for Government 2011-15 and the Economic Strategy 2011-15”, she says.
“Opportunities exist for increased collaboration between government, industry and academia to deliver sector specific training and education programmes. Through our extensive range of business contacts within the food and drinks industry, demand for this type of course has been expressed on numerous occasions.”
The course on social media marketing is aimed at owners of micro and SME businesses and those responsible for marketing who are unfamiliar with digital marketing and social media marketing and wish to have a beginners’ guide to how it can benefit their organisation.
“Consumers today are becoming more connected and digitally savvy, especially in the way that they shop for food and drink, therefore it is vital that the industry keeps up with such trends,” says Dr Hollywood.
"Platforms like Instagram and Twitter are important for businesses to help build their presence in the domestic markets and further afield. This half-day course aims to support the food and drinks industry in understanding the value of using social media to support their marketing effort."
Starting to export is a one-day course which will provide participants with an introduction to key issues to consider in getting started in selling into overseas markets.
“It will look at the main benefits and challenges of exporting, how to identify and select markets for export, different types of exporting, legal and cultural differences and making modifications to the product, its pricing and promotion in response, as well giving a practical guide to getting started and the supports available,” says Hollywood.
"The importance of export-led growth is vitally important for a small peripheral economy such as Northern Ireland," says Professor Barry Quinn of the Ulster University Business School.
“For the agri-food industry the development of export capabilities is a key strategic priority as identified by government and industry and through the work of the Agri-Food Strategy Board, with an ambitious target of growing export sales by 75 per cent by 2020.”
For more information see: https://www.ulster.ac.uk/faculties/ulster-university-business-school/agri-food-centre