| - Reuters-CRB® Index (CCI): Background And History|
The Reuters-CRB Index (CCI) was first calculated by Commodity Research Bureau, Inc. in 1957 and made its inaugural appearance in the 1958 CRB Commodity Year Book.
The Index was originally comprised of 28 commodities, 26 of which were traded on exchanges in the U.S. and Canada, and two cash markets. It included barley and flaxseed from the Winnipeg exchange; cocoa, coffee "B", copper, cotton, cottonseed oil, grease wool, hides, lead, potatoes, rubber, sugar #4, sugar #6, wool tops and zinc from New York exchanges; and corn, eggs, lard, oats, onions, rye, soybeans, soybean meal, soybean oil and wheat from Chicago exchanges. In addition to those 26 markets, the Index also included the spot New Orleans cotton and Minneapolis wheat markets which were added to balance some commodities repeated in the Index as by-products of other commodities.
The original base period was 1947-49, the same as the Bureau of Labor Statistics Spot Market Index.¹This was purposely done to facilitate easy comparison of both spot and futures indexes.
Like the Bureau of Labor Statistics spot index, the Reuters-CRB Index (CCI) is calculated to produce an unweighted geometric mean of the individual commodity price relatives. In other words, a ratio of the current price to the base year average price.
The Reuters-CRB Index (CCI) was originally designed to provide dynamic representation of broad trends in overall commodity prices. In order to ensure that it continued to fulfill that role, its components and formula have been periodically adjusted to reflect changes in market structure and activity.
In the original calculation, all future deliveries up to a year ahead were averaged to calculate the current price. In 1987, the calculation was changed to only include deliveries nine months forward. In 1989, all non-cycle months were excluded from the calculation.
The 1995 revision lowers the number of forward deliveries included to those within six months of the current date, up to a maximum of five delivery months per commodity. However, a minimum of two delivery months must be used to calculate the current price, even if the second contract is outside of the six month window.
There has also been a continuous adjustment of the individual components used in calculating the Index since the original 28 were chosen in 1957. All of these changes have been part of the continuing effort of Reuters (CRB) to keep the Reuters-CRB Index (CCI) "current," and to ensure that its value provides accurate representation of broad commodity price trends.
Since 1957, there have been nine revisions to Index components. The first was on April 3, 1961, and the latest on December 6, 1995.
|Figure 1: Monthly history of the Reuters-CRB Index (CCI)
¹1957 Bureau of Labor Statistics Spot Market Index components: burlap, butter, cocoa beans, copper scrap, corn, cotton, cottonseed oil, hides, hogs, lard, lead scrap, print cloth, rosin, rubber, steel scrap, steers, sugar, tallow, tin, wheat, wool tops, and zinc.