Milling & Baking News - August 23, 2011 - 7

Possibilities from new index of world grain prices
onsidering the degree to which trading indexes that are meant to represent commodity prices. in financial derivatives is done in indexes The latter include many of the grains in GOI, but also created solely to attract dealings by the crops like cotton as well as minerals and similar goods public, it is tempting to look on any new index as a broadly defined as commodities. These indexes, marketing ploy. Of course, that is not the intention of meant to facilitate knowledge about costs in industries the International Grains Council, which last spring that process these raw materials, have become an launched an index named “GOI” to represent the important trading medium. This is due in large I.G.C. Grains & Oilseeds Price Index. The index, part to the relatively new definition of commodities created at the suggestion of member countries, is as an asset class, where ownership is facilitated by designed to provide a meaningful measure of prices trading derivatives defined by a commodity index. of the grains and oilseeds that the organization now Institutions managing the index acquire ownership covers in periodic reporting on developments in of commodities mainly through futures contracts, export markets. From a mid-20th century beginning stirring questions about responsibility for hugely that focused solely on wheat, the Council now seeks expanded futures trade. to provide understanding regarding developments in As controversial as allegations may be that indexthat food grain, as well as in rice, all the feed grains, and related trading distorts traditional supply-demand soybeans, canola and soybean factors, recent commentaries Indexes like the new GOI become meal. The I.G.C. explains that on the gold market show how marketing forces, whether so the new index is computed far the power of indexes can intended or not, and that is at the weekly Friday closing go in unexpected ways. In the deﬁnitely not the goal of the I.G.C. case of gold, many individual prices of global markets. It is “is intended to provide an overall measure of export traders have become increasingly suspicious of price movements in the major grains and oilseeds the way institutions sponsoring indexes actually markets,” the Council says. accumulate gold to cover the outstanding index Only time will tell all the purposes such an index exposure. Rather than relying on indexes or even serves. With 100 based on average prices on the on futures contracts to represent desired ownership four Fridays in January 2000, the current reading of gold, an expanding number of individuals have is 283, compared with the high first reached last taken to buying gold to own as their under-theFebruary of 355 and 204 a year ago. That prices for mattress protection. this agglomeration are 40 per cent above a year In other words, indexes like the new GOI become earlier provides some guidance as to export price marketing forces, whether so intended or not, and fluctuations and direction across a group that has that is definitely not the goal of the I.G.C. But once little relevance to one another except for commonality the public catches on to the possibilities of trading within the I.G.C.’s mandate. Any other relationship is in any index and questions are asked about what not indicated by index moves. Thus, the competition stands behind the index, the potential outcomes are between wheat, corn and soybeans for acreage in fascinating. Nothing untoward has happened in wake major producing countries like the United States or of the longstanding I.G.C. Wheat Price Index, based China is not amplified by this index. The index could on July-December 1986 as 1,000, and which currently measure how countries aspiring to export all these stands at 3,085. The much more all-encompassing grains and oilseeds might be doing. But very few GOI has a different set of avenues to move along, and nations ship all these products. while offering the global world of grain an interesting Commodity indexes have been published for years. and helpful measure of prices, poses interesting It seems desirable to separate the GOI from the many possibilities for grain-based foods. MBN MORTON SOSLAND, EDITOR-IN-CHIEF
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7bakingbusiness.com Milling & Baking News / March 13, 2007 / world-grain.com

Milling & Baking News August 23, 2011 / 7 bakingbusiness.com / world-grain.com

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Milling & Baking News - August 23, 2011

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