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Alternative Market Briefing

Peak Soil Indexes aims to financialize farmland

Wednesday, September 20, 2017

Paul Kanitra
Benedicte Gravrand, Opalesque Geneva:

Peak Soil Indexes (PSI), an indexing boutique run by Paul Kanitra out of Greensboro, GA, has already established several core farmland indexes as benchmarks in the industry, and says it wants to "democratize farmland with responsible financial innovation".

Before founding PSI in early 2014, Kanitra spent 20 years as a fixed income trader and was actively involved in the release of many new trading instruments and structured products. He says that, as opposed to the available farmland valuations or indexes, which are mostly survey-based, his indexes are transactional derived.

"A survey always has to be treated as suspect," he tells Opalesque. "Opinions can be wrong, biased and even possibly abused if a party can economically benefit from their own input. You don't have to look too far other than to what occurred with LIBOR a number of years ago. A survey can certainly be accurate, but unfortunately, by their nature, they are not suitable for derivative development. They cannot identify as a benchmark or act as the foundation for financializing the commodity. They simply lack attributes needed for OTC and exchange traded product development."

He cites the example of the U.S. Department of Agriculture (USDA), which releases Land Values report every August, and asks us to consider the process for a state's average value per acre calculation.


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