Hi, my name is Bernard Otabil, and I led the launch of the first ever agricultural commodity index in Ghana. It’s known as the Esoko Ghana Commodity Index (EGCI), and it’s a market price index composed of data on physical commodities. The index tracks prices at two levels: the Esoko Ghana Commodity Index-Retail (EGCI-R) and the Esoko Ghana Commodity Index-Wholesale (EGCI-W). I wanted to share a bit about how to create a commodity index that informs the general public, as well as policy makers, about market trends in your country.
1) First, determine which markets and commodities should be used in the construction of the index. Consider the geographic importance of the markets, the size and the commodities traded in them. Also consider the importance of the commodities to be used, bearing in mind that staple foods or commodities that form a large component of the country’s consumer price index are the most interesting.
2) So now, you need market prices–how are you going to gather prices from these markets? Setup an enumeration process and procedures that ensure price collection on a regular basis, and on time. At Esoko we have trained enumerators who cover 34 markets in the country, collecting prices regularly and feeding them on to our platform using their mobile phones. You may setup a private system like ours, or you may leverage other networks that already collect data. Just make sure it is good, and consistent.
3) Before moving on, you have to determine what weights and measures you’re going to use for the commodities covered, remembering that you cannot just compare apples and grapes. As you would expect, there should be some level of standardization. We use standard measures of kilos and liters for most of the commodities we cover.
4) But what is the story behind these figures? Go beyond just collecting the prices and data to actually understand the market dynamics (what is accounting for the price movements?) Look at not only exceptions, but also normalities. In effect–editorialize it. Give the numbers a story.
5) Now you have to distribute the index. The first step is to make sure you get buy-in into the concept. No editor would except data from an organization that they cannot trust. So ensure that the index is launched as a media event, inviting media houses, getting the support of industry participants and practitioners, and making sure that you have the background information prepared about the construction of the index and what informs the details. Once that is done, you’ve got your list of media people who are ready, willing and prepared to distribute the index.
And there you go! Feel free to contact me and Esoko to find out more about setting up a Commodity Index in your country.