Commodities trading to be introduced, good or bad?

[boybi]

The PSE is planning to have a local commodities trading in the Phils., will this be good or bad for our farmers? Does this mean the government cannot impose price control anymore to the affected crops?

Bourse eyes spot trading of commodities
Agriculture agency to work on legal requirements
By Doris Dumlao
Philippine Daily Inquirer
First Posted 21:31:00 11/01/2009

MANILA, Philippines – The Philippine Stock Exchange plans to introduce a platform for the spot trading of commodities like rice, corn, sugar and coconut to help boost transparency in the pricing of the country’s key farm produce while offering an alternative outlet to investors.

The PSE signed a partnership with the Department of Agriculture Friday night to lay the foundation for such a commodities trading platform. Under the agreement, the DA will support the enactment of laws, rules and regulations and circulars necessary to create an enabling environment for an organized commodity market for agricultural products.

The ultimate goal is to come up with a trading system that will link Filipino agriculture farmers to profitable markets for their products.

The PSE wants to set up the platform the soonest time possible.

“We believe that an organized commodities exchange in the Philippines can help relieve the pressure on commodity prices. If we can establish more transparency in pricing, the players in the food supply chain will face fairer prices,” PSE president Francis Lim said during the signing with Agriculture Secretary Arthur Yap.

“Price transparency allows our farmers to get better prices for their produce as intermediation costs are reduced. Traders, end-users and consumers will also benefit as prices shall now be determined at the national level, unlike in the present scenario where price discovery can be limited to local geographic areas,” Lim added.

But unlike most commodities exchanges across the globe, Lim said the Philippines may start with trading based on spot or real-time prices rather than futures, whereby investors buy contracts at a specified price with delivery set at a specified future date.

As such, he said pricing of the agricultural products to be traded would be mostly based on local pricing.
In the 1980s, there existed a platform for commodities futures exchange trading in the Philippines under the Manila International Futures Exchange (MIFE), which shifted to foreign exchange trading in the 1990s. The Securities and Exchange Commission eventually padlocked MIFE due to a multitude of investor complaints about unscrupulous “boiler room” operations.

In more developed markets, commodities futures exchanges match parties with the need to hedge against price fluctuations such as farmers with investors willing to bet on price fluctuations for profit.

“This partnership is beneficial not only for investors and other market players but for the economy as a whole. A strong agricultural sector means a strong economy, considering that agriculture accounts for one-fifth of this nation,” Yap said.

“The way to accelerate agri-fishery expansion is through innovative financing mechanisms. Having the PSE study a mechanism of selling commodities for forward or current basis is a step toward that direction,” he added.

The PSE and the DA are still exploring several soft commodities—referring to those that are grown, rather than mined—to be traded at the proposed exchange. The local bourse has engaged New York-based The CBM Group Inc., a management consulting firm specializing in the financial services industry, to help set up the new platform.

“Bringing in additional investment products through the proposed commodities exchange presents a whole new motive for the public to boost investments in our stock market,” Lim said.

http://business.inquirer.net/money/t...of-commodities

[uls]

good or bad depends on how the seller and buyer is affected

we will find out when the exchange is up and running

pag meron na commodities exchange dito, magkakaroon na ng uniform pricing ang commodities sa bansa (ngayon kasi ang presyo depende sa lugar)

bad for producers who will experience drop in prices (good for buyers)

and good for producers who will experience rise in prices (bad for buyers)

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as for govt price controls...

i don't think an exchange will prevent that

to improve their popularity ratings, politicians will always take the pro-masa, anti-business stand

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now it would be easier for speculators to make money on local commodities

you no longer need to hoard physical commodities

you just buy up all the contracts hehe

[tidus1203]

Overall its good it creates transparency in pricing, it also prevents arbitrage...

[niky]

I think it's a good idea, to stimulate investment... nay... to ensure businessmen actually put money into our local agricultural system.

Whatever short-term issues that arise due to pricing should smoothen out as the goods find their level. Obviously, traders can't push prices so high that people will not buy the items and will resort to alternatives... they'll have to find some middle ground between profit and affordability... (and there is no China willing to buy regular rice for P100 per kilo... other countries can buy cheaper locally... so why buy ours? Thus it's not going to be as volatile as oil)... and with the money pouring in, productivity should increase.

I hope. This move might help revive our ailing agriculture sector... or it might not... I don't know if businessmen are willing to take the same weather-related risks that those already involved in local agriculture are already taking. Losing, for example, 200 million pesos on rice due to Ondoy (I feel really bad for that family) is no joke.

But if this stimultes agricultural development... maybe it might help us change our status from net importer back into net exporter again... maybe, maybe, maybe.

[boybi]

But this won't mean that the prices traded in the bourse will translate into actual prices for the commodities involved, or am I wrong?

[tidus1203]

It might not but it will be close kasi at least may reference na...

[Alfonso01]

There are not many hard-and-fast rules in trading, even though the prices are so high. I think it might change to net exporter. We just have to wait and watch.

[eld]

Ever since the gov't. stole the 500 hectare land of our relatives via CARP a decade ago I really don't give a s&%t anymore about agriculture in this country. The farmers can rot for all I care. Kaya more El Nino pa!