Dodd-Frank Act Could Force Companies to Provide Cash for Derivatives

According to an article this week in the Wall Street Journal, the Dodd-Frank Act could force companies who use derivatives to hedge commodity price fluctuations to provide cash collateral on the transactions.  If that happens, then the cost will be transferred to the consumer in the form of higher prices.  One company that anticipates price increases is MillerCoors LLC.  Here’s what the head of risk management at MillerCoors had to say according to the Wall Street Journal.

Craig Reiners, director of risk management at beer giant MillerCoors LLC, said the derivatives rules were designed to reduce threats to financial stability, whereas companies such as his “pose no systemic risks.” If end users aren’t shielded, the rules “would have a very harmful effect on our risk-management of the business and for that matter ultimately the cost of a six-pack of beer.” MillerCoors uses over-the-counter derivatives to hedge against price volatility in areas such as aluminum, hops and energy.