Can AI help protect bakers from ingredient price swings?

Bakers and ingredients suppliers are being given the chance to take out insurance against changes in commodity prices.

ChAI Protect says it can offer businesses of any size access to commodity price protection tools that were previously only available to multinationals.

The London-based business was set up by CEO Tristan Fletcher last year to enable SMEs to benefit from the AI that is used by hedge funds to speculate on commodities pricing.

“We created a new, accessible approach by making our AI forecasting technology so precise that for the first time ever commodity price movements are insurable by tier-1 insurance brokers,” said Fletcher.

He explained that this means a bakery company could mitigate the price risk in ingredients such as cereals, egg, dairy, fats and oils, and sugars using a simply arranged insurance product. The most sought-after commodity price protection is for butter, he added.

“From craft bakeries and flour mills to global conglomerates, ChAI Protect provides businesses of every size at every stage of the UK bakery supply chain with simple, affordable access to price protection tools,” said Fletcher.

He added that hedging had been the only way to protect from pricing volatility but to do so required a dedicated investment-bank derivatives trading team, while insurance can be bought as a premium by anyone.

“At a time of so much supply chain uncertainty we are thrilled that bakery businesses of all sizes can insure raw materials pricing risks just like they insure their production lines, premises and delivery vehicles.”

As well as covering the main raw materials for baking, ChAI Protect also covers areas such as packaging materials and recycling materials.

“The bun, the icing, the cardboard base and the wrapper – the whole thing can now be protected from unfavourable raw materials price movements,” said Fletcher, adding that ChAI is currently speaking to several UK bakery firms and already works with a major European milling firm.

The business is also looking at creating pricing protections in energy markets.