A major brewing company approached ChAI looking for assistance in managing its raw material costs, particularly for purchasing barley from farmers in North America and South Africa. When buying from their farmers, the company needs to offer a price that maintains its profit margin but is also viewed as fair by the farmers to ensure they guarantee a sufficient volume of barley. As commodity price volatility has increased in recent years, it has become more challenging to forecast what price they should offer to the farmers.
Based on retrospective analysis, by using ChAI’s price forecasts to vary their coverage strategy in 2021, the company would have saved approximately $3 million (50x ROI) on their barley spend in 2021. The company was able to determine in which months they would have increased their coverage in the spot market purchasing by identifying short-term price trends with ChAI’s Probability of Upwards movement feature.