The online predictions marketiPredict is launching stocks for five year forecasts of Fonterra payouts:
Draft stocks are currently available at https://www.ipredict.co.nz/forum/read.php?4,13546,13546#msg-13546 to enable traders to review and comment on their fine-print prior to the formal launch. Dairy farmers and other dairy industry experts are also encouraged to comment and trade.
“Fonterra is New Zealand’s most important company, responsible for around a quarter of our exports and around 7% of GDP,” iPredict CEO Matt Burgess said today.
“Until now, the only source of rigorous data about the company’s future payout to farmers has been the company itself, and then usually with only a two-year horizon.
There’s a very good reason for that – an open market for primary produce is very volatile.
There are so many variables which affect supply and demand it is extremely difficult to predict very far into the future with any degree of certainty.
Who knows what the exchange rate will do, what the weather will be like here and where our competitors are, how much fuel and fertiliser will cost, what decisions politicians might make which affect production and price . . .?
“With iPredict’s new stocks, dairy farmers, the wider industry, economists, banks, the government and everyone with an interest in New Zealand’s medium-term economic prospects, will be able to obtain free snapshot information on how the company is likely to perform, in terms of payout, for the next five years.”
Mr Burgess said the stocks would be based on Fonterra’s final payout, per kilogram of milk solids, to a 100 percent share-backed farmer (before retentions), for the five financial years from and including 2010/11.
“Currently, Fonterra is forecasting a payout in the range of $8.00 to $8.10 for 2010/11 and $7.15 to $7.25 for 2011/12. The iPredict stocks will provide farmers and everyone else with an independent assessment of the forecast payout.”
Mr Burgess said the iPredict forecasts for the three further out-years would be more indicative but would give a general indication of the likely performance of the company.
“iPredict produces consensus views on the likelihood of future events, based on the theory of the ‘wisdom of crowds’. This holds that where people pool their perspectives and knowledge about a future event, their opinion is likely to be accurate,” he said.
iPredict’s binary contracts of political and economic events had an accuracy rate of 88%, he said.
Predictions markets like iPredict are mainstream throughout the world, with the most prominent being http://www.Intrade.com in the United States. iPredict operates in New Zealand with authorisation of the New Zealand Financial Markets Authority. The company is owned by Victoria University of Wellington.
It will be very interesting to follow this but I suspect most punters will be from outside the industry.
Insiders find farming itself is enough of a gamble, without the added excitement of prediction markets.