SAP Agricultural Contract Management

Product Information

Use

The trading of agricultural commodities, such as wheat, corn, soybeans, and coffee, is a niche business that has highly specific requirements. Commodity traders can have relationships with many counterparties and maintain several contracts with each one. The terms and pricing data in an agricultural commodity contract can be highly complex and include pricing adjustments based on quality factors. In addition, the contract execution can involve both planned and unplanned deliveries, which must be recorded and assigned to one or more contracts. Finally, the contract settlement process must handle prepayments, reassignments, quality-based pricing, tolerances, and optionalities. SAP Agricultural Contract Management enables commodity traders to capture and manage these complex commodity contracts. It is an end-to-end solution that supports the full contract life-cycle, including the capture of the contract terms, the logistical processing, and the final settlement and closure.

SAP Agricultural Contract Management supports the following commodity contract scenarios:

• Third Party Purchase
• Third Party Sale
• Intercompany
• Intracompany
• Back-to-Back
• Spot Purchase
• Commingled Stock
• Washout (including the Circle variation)

Integration

SAP Agricultural Contract Management is an add­on for SAP ERP. A minimum release of SAP ERP 6.0 enhancement package 6 is required. SAP Global Trade Management and SAP Trader’s and Scheduler’s Workbench must be active. SAP Agricultural Contract Management is also fully integrated with SAP Financial Accounting.

Optionally, SAP Agricultural Contract Management can be integrated with a third party trading system via an SAP NetWeaver Process Integration (SAP PI) system. In this implementation scenario, contract data is captured through the third party trading system and then flows into SAP Agricultural Contract Management. Then, any changes made to the contract data or contract master data in SAP Agricultural Contract Management are communicated back to the third party trading system.

For more information about PI content that is supported with SAP Agricultural Contract Management, see Process Integration Content for SAP Agricultural Contract Management.

The following figure illustrates the technical architecture of SAP Agricultural Contract Management:

Technical Architecture Model for SAP Agricultural Contract Management

Features

Contract Capture and Maintenance

You can capture all of the complex terms and conditions that govern the fulfillment of a commodity contract directly in SAP Agricultural Contract Management. However, before you can begin to capture commodity contracts, you must configure certain contract master data. For more information, see Master Data. For more information about capturing contracts in SAP Agricultural Contract Management, see Contract Capture and Maintenance.

Commodity Pricing Engine

You can use this feature to retrieve pricing formulas in business documents and evaluate them to calculate final prices for commodities. The resulting price is then transferred to the condition types that are used in commodity pricing. You can use the system to capture basis and futures price components. You can also enter additional pricing data at commodity item level and at CPE level. The system also enables you to enter provisional prices that can later be overridden when the contract is finally settled. For more information, see Commodity Pricing Engine.

Expense Management

You can use the system to manage the costs associated with a commodity contract. For more information, see Expense Management.

Call-Off

During the execution of a contract, you can call-off a quantity of the contract by raising a purchase order or a sales order to link a delivery to a specific contract. For more information, see Call-Offs.

Load Data Capture

You can use the system to capture the details of delivered loads, including weights, volumes, and quality characteristics. The system then uses these details during the contract application and contract settlement processes. For more information, see Load Data Capture.

Contract Application

You can use the contract application features to validate a delivered load and assign it to the appropriate commodity contract. For more information, see Contract Application.

Contract Settlement

During the execution of a contract, you can financially settle various quantities with the contract counterparty, for example, moved quantities, washout quantities, and canceled quantities. For more information, see Contract Settlement.

Inventory True-Up

You can use the system to calculate the value of the firm’s inventory. The inventory true­up process takes account of both contract related inventory changes and non-contract related inventory changes such as shrinkage. For more information, see Inventory True-Up.

Exposure Management

You can use the system to manage the risks and exposures that the various products may face due to several unforeseen circumstances. Various types of exposures are created at different points of the lifecyle of the contract. for more information, see Exposure Management.

Possible Third Party Integration

Agricultural commodity management may require sophisticated risk analytics, portfolio management, and granular relationships with financial instruments. To support these additional requirements, SAP Agricultural Contract Management can be integrated with a third party trading system. For more information, see Possible Third Party Integration.

Country-Specific Features

The solution provides additional features that are designed to meet country-specific requirements for agricultural commodity contracts. For more information, see Country-Specific Features.