Lock in today's painful prices, or bet that volatility breaks your way? CFOs are forced to choose.
Commodity hedging is no longer a technical activity buried in the treasury function. As price volatility spreads across energy, metals, and agricultural commodities, CFOs are forced to make clear, high bets about the future — locking costs at today's high levels or staying open in the hope that markets turn around. What was once a risk management tool has become a strategic decision with a direct impact on margins, prices, and competitive position.
That shift is reflected in earnings across a range of industries, a reminder that hedging decisions are increasingly tied to financial performance and investor expectations. “We use our hedging to offset volatility,” said Andrew Murray, CFO of Fonterra, a New Zealand farmer-owned cooperative, on the group's March 2026 earnings call.
Others take flexibility as an opportunity to act. In its latest earnings call, Infinity Natural Resources CEO Zack Arnold said the company “has taken this opportunity… In some cases, the impact is measurable. In Siemens' latest earnings call, the global industrial giant's CFO, Ralph P. Thomas, reported that hedging has contributed nearly 100 basis points to its margins, due to the volatility of copper and silver prices.
Visual Innovation, the Key Role of Integration
Power, it turns out, no longer comes from military power. It comes from metals and other elements, such as cobalt. That's the argument that underpins “Things of Power,” Nicolas Niarchos' new book about the supply chains that hold modern civilization together — or fail. Niarchos is not interested in geopolitics as it is often taught, border stuff and aircraft carriers. He traces something hard to see and now hard to ignore: the fragile networks of abstraction, processing, and integration that make electric cars move, smartphones think, AI infrastructure hum, and modern life move forward.
Those networks are long and exposed. The ore mined in the Congo passes through Chinese processing facilities before it reaches a factory in Europe or America. Disturbances anywhere, such as mine closures, trade embargoes, or war-locked seas, do not stay local. It is moving quickly between pricing and production timelines in ways that almost no one expected and few can bend over the fence about.
Niarchos' short-term supply chain risk has graduated from a logistics problem to a strategic one. Hedging, once the quiet task of treasury and trading desks, is becoming synonymous with foreign policy.
Darrell E. Fletcher began his career as a global powerhouse at Alcoa and is now managing director of assets at Bannockburn Capital Markets, the trading and advisory arm of First Financial Bank. He says the past two years have been “dramatically volatile” across energy and metals, forcing manufacturers and fossil fuel organizations to reevaluate their approach.
On the producer side, many firms take advantage of higher prices to cover revenue. “There has been a significant increase in commercial hedges … covering the remainder of 2026 to 2027,” Fletcher said, as companies receive cash flow above internal targets and support borrowing capacity. But the strategies differ in size: the various oil majors tend to avoid hedging altogether, reflecting investors' expectations that their equities provide direct exposure to commodity prices.
For organizations that use gasoline, the change has been more effective. Companies with established plans are expanding the fence in the future. Some are entering the market for the first time as prices fluctuate with income. “Those who thought exposure was meaningless are now realizing it can be,” Fletcher said, noting an increase in discussions with CFOs and treasurers in recent months, some seeking help with the initial consolidation plan.
The underlying problem may be less about timing the market than understanding exposure. “Eighty percent of any solid hedging plan is: what is the exposure – and does it matter?” Fletcher says. He points to the importance of cost-sensitive stress testing before implementing a strategy. He also warns that managers are being called out on lead calls for failing to have a clear rationale for protection, backed up by analysis. The fencing equipment is “the easy part,” he notes.
Plan against the Plan
That gap between companies with a plan and those without is something Charlie Macnamara sees firsthand. As head of derivatives products at US Bank — where his desk serves clients ranging from Permian Basin oil producers to automakers that buy aluminum to EV companies that find lithium — Macnamara has insight into what separates hedging programs that work from those that don't.
Bank of the US
“The ones who get it wrong are the ones who don't have a plan – and they are the ones who let the market movements be the ones to do,” he said. The result can be a company that ends up buying high, reacting with fear or surprise rather than strategy, he adds.
Among the industries and organizations that Macnamara describes as doing well, oil and gas producers stand out. Despite the sharp swings in energy markets over the past year, industry players have remained remarkably disciplined, hedging in place, rather than chasing prices. “It was cool, calm, and collected,” Macnamara said. That skill and maturity in leadership has been building for many years, he explains.
For CFOs considering the plan for the first time, Macnamara suggests starting with the balance sheet rather than the market. “The plan should be based on how the property affects the balance sheet and the volatility of income,” he said. From there, he says the finance team can define the level of volatility they want to accept and plan derivatives or other market instruments accordingly.
Boardroom Mindset Shift
Some organizations, and especially at board level, need to rethink what hedging means, Macnamara points out. People who hedge on the ground, he says, often fear that if the hedge loses money, the C-suite will conclude that they did a poor job. He considers this idea wrong, and can cripple programs before they start.
“If you're hedging 25% of your currency's volatility and you're losing money on that hedge, that means you've saved 75% — you've just bought 25% insurance,” he says. The philosophical hurdle is getting the whole organization to understand that hedges are not meant to make money. It is intended to reduce volatility. “It sounds very simple, but that's often a big area of conflict,” he says.
Not everyone is convinced that locking prices at today's levels is the right move. Rob Handfield, Bank of America University Distinguished Professor of Supply Chain Management at NC State University and author of “Flow: How Best Supply Chains,” urges caution in assuming that financial hedging can adequately compensate for the unpredictability of physical supply chains. “Financial hedging assumes that people have a strong belief that supply and demand will move in the opposite direction,” he said. “This is a challenging gamble.”
However, tangible flows are difficult to predict outside of periods of economic stability, according to Handfield. In the current climate, marked by geopolitical tensions, threats to major shipping lanes such as the Strait of Hormuz, and resulting energy disruptions, the variables shaping commodity markets are too numerous and volatile to model with confidence.
“Unless one has insider knowledge of how governments make decisions, this is a very risky bet,” he said of positions in oil, gold, silver, copper and other metals. And the effects of the disorder can be long-term. Handfield points out that rebuilding the natural gas infrastructure alone could take at least a year.
A Matter of Restraint
On the important question of whether to lock in today's high prices, Handfield opposes a ban.
“I think locking in high prices is a mistake,” he said, expressing the view that once the country's tensions subsided and supply chain normalized, volatility would decrease, thus rewarding companies that had the last option rather than those locked in at the top. The big deal, he says, is that supply and demand are dynamic: “You can guess what's going to happen today, but you don't really know what's going to happen tomorrow.” Hedging makes the most sense when prices are historically low, not during a supply chain crisis, Handfield believes.
That divide – between market practitioners who see today's conditions as an opportunity for hedging and supply chain strategists who warn against overconfidence in financial instruments – may be the main tension between CFOs heading into 2027. Fletcher and Handfield agree on at least one thing: many companies still underestimate how much material is disclosed in their disclosures. Where they diverge is in the solution.
This article appears in the May 2026 issue of Global Finance Magazine.
