Accurate price discovery — finding the price where supply meets demand — is key to the development of an efficient market. Without a centralized marketplace, price discovery can be a challenging task. Sales and procurement teams must be in constant contact with many counterparts, and for volatile markets, be constantly reassessing the price. But even in some marketplaces, commodity products with drastic differences in quality and other specifications, discovering an exact price of a product can be difficult.
Using our commodity market expertise, PanXchange creates index and benchmark prices adhering to IOSCO principles for Financial Benchmarks, utilizing inputs from our trading system as well as confirmed and recorded pricing reports. Stakeholders in the respective commodity markets use these index prices in negotiations, term contract settling, and financial modeling.
So what’s the difference between a hemp index, a hemp assessed price, and a hemp benchmark? Here’s a quick reference on the difference between these terminologies.
An Assessed price is a human-based judgment of a number. An assessed price can come from both a submitting agent who is buying or selling, as well as a reporting agency who takes prices, the review and cleanse these prices to create either index, reference, or benchmark prices.
An Index Price a formula-based price calculation, applied after input data is reviewed and cleansed. PanXchange uses IOSCO principles to work with the members on the exchange who both trade and provide additional pricing measures to derive index prices. You can find the PanXchange hemp index prices here.
A Reference Price is either an Index or an assessment, that a specific industry uses as reference, though it may not be priced into contracts. In the hemp markets, the main hubs are in the 2019 crop year are Colorado, Oregon, and Kentucky, so these price indices are used as reference when negotiating or contracting for hemp in Washington, North Carolina, Montana, etc.
A Benchmark Price is the index or assessment is used in contracts pricing. Benchmarks prices can be either physical – settling physically delivered product – or financial, underlying a derivative contract like a futures contract or swap contract. To technically be a benchmark, either you or another entity has to use that price to settle a contract.
In reality, many people both within and outside of the industry use these terms incorrectly, and most prices available today and actually just indices.