Macquarie Commodities Research has created a new global agricultural commodity index designed to indicate the future level of food inflation.
The forward looking index, which will be published every Monday could provide a useful guide to food manufacturers and retailers – provided it is more accurate than current forecasts and futures prices.
The index tracks the prices of futures contracts for 28 different agricultural commodities. The index currently indicates a 10% decline in 2014 following an 11% fall this year. Further food price deflation is forecast in 2015.
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Few details are available as to how the index works. How for example does it capture the risk of another drought in the US and what assumptions are made about the level of substitution between commodities?