Milling & Baking News - September 2, 2014 - 7

Editorial



Benefit from new electronic age

obert J. Shiller, winner of the Nobel Prize in eco- had climbed to new record totals in recent seasons. The
nomics, famously declared, "There is no way prospect for this year outruns those.
to predict the future." He made that statement
There's hardly a better affirmation of Professor
in cautioning investors in stocks against believing that Shiller's warning than what two major international
the current business cycle is different from the past, trading companies revealed about their operations
while pointing out that people are much too eager to in a recent quarter where miscalculations led to large
believe that the present differs from what occurred be- losses. While these were certainly not the first losses
fore. One of the main reasons that investors think that it that major international traders have sustained, inis possible to disregard prior experience while relying cluding instances of trading losses forcing companies
on the superiority of present knowledge has as much to exit the grain business, they were sizable enough
to do with grain-based foods and other crop-related and unique enough to cause a shock. One of these
businesses as it affects trading strategies in securities. losses did not occur in grain, and was explained as
That supposition stems from modern communications follows: "Earnings were trimmed by a trading loss reoffering access to information and data that were dif- lated to an unprecedented price spike in U.S. power
ficult, even impossible, to find in the past.
markets." Also contributing to this company's setMany recent market-related events have shown back were non-trading developments focused on
that no matter how perfect information resources may grain, such as China's rejection of corn imports and
have become and regardless of
rail service disruptions. Yet anothNo industry should benefit
how large and efficient data bases
er company said, "Results in the
more than grain from
are, the task of forecasting prices,
quarter were primarily impacted
this new age of electronic
much less any part of governing
by losses in our grain trading." It
communication and data
supply-demand equations, is nigh
further noted, "Our commercial
sourcing.
on to impossible. The devastating
and risk management strategies
impact of drought on the hard red winter wheat crop anticipated lower grain prices." Instead, prices rose,
in America's southern Plains states comprises an un- pressuring margins.
predicted occurrence in the same way that no one exNo one may say that utilizing of present-day inpected the Russia-Ukraine crisis to be translated into formation resources would have prevented either of
a possible limit on Black Sea wheat exports.
these problems. Yet, it is happenings like these that
While weather and international turmoil lead the list have been part of industry history for generations
of surprises that few observers forecast, it is important that one might hope would be alleviated or even prein this context to note that both futures and cash grain vented. Such systems are not only designed to inform
markets have provided adequate protection for market when danger looms but to provide a point for taking
participants following a cautious course in hedging. action to change both position and strategy commitIndeed, some commentators consider that futures mar- ments that accommodate or avoid these risks. In a
kets have gotten ahead of the actual reality of still large time when companies are putting together systems
global supplies of wheat and corn. Instead of adher- that identify future risks related to weather, crop prosing to the frequently bullish interpretations of global pects, national instability and conditions affecting
supply-demand, this questioning viewpoint relies in consumption, these new approaches could help all
the case of wheat on high U.S. prices sharply curtailing parts of the industry. That these resources and these
foreign demand and shifting livestock feeders away systems are available now represents a huge plus
from wheat. Powerfully underscoring the surprises for businesses like grain-based foods. No industry
in the current situation is the expanded flow of Ca- should benefit more than grain from this new age of
nadian wheat to U.S. mills. Canadian wheat imports electronic communication and data sourcing. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
WE'RE EAGER TO GET YOUR FEEDBACK: E-mail editor@sosland.com or write to us at
Milling & Baking News, 4800 Main Street, Suite 100, Kansas City, Mo, 64112
EDITORIAL STAFF
Editor-in-chief
Morton I. Sosland
Executive editor, markets
Neil N. Sosland
Editor
L. Joshua Sosland
Senior editor, markets
Jay S. Sjerven
Managing editor
Eric J. Schroeder

Senior editor, markets
Ron Sterk
Associate editor
Jeff Gelski
Assistant editor, markets
Laura Lloyd
Internet editors
Monica Watrous
Maggie Young
Graphic designer, market
graphics, data
Christina Sullivan

7bakingbusiness.com Milling & Baking News
/ March 13, 2007 / world-grain.com

PUBLISHING STAFF
Chairman
Charles S. Sosland
Vice-chairman
L. Joshua Sosland
President and publisher
Mark Sabo
Associate publisher
G. Michael Gude
Vice-president, chief financial officer
Melanie Hepperly

Audience development director
Don Keating
Director of e-business
Jon Hall
Director of on-line
advertising and promotions
Carrie Fluegge
Promotions manager
Lon Davis
Advertising manager
Nora Wages

Director of design services
Sadowna Conarroe
Circulation manager
Judith Tinberg
Digital systems analyst
Marj Potts
Manager of advertising design
Becky White

Milling & Baking News September/ 2, 2014 / 7
bakingbusiness.com world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - September 2, 2014

Table of Contents for the Digital Edition of Milling & Baking News - September 2, 2014