W9.1_HWB_Soybean in Gold Equivalent Value


1. Problem Definition

Indonesia is still importing 75% of the domestic soybean demand of 2.5 million tons. The high dependence on imported soybeans make the government was powerless when soybean prices rose due to the weakening of the rupiah against the U.S. dollar (U.S.).[1] As we know that soybean is the basic ingredients for tofu and tempe which are the most popular food here. Now I try to made 12 months future cost estimation of imported soybean price and use a new alternative currency reference with gold that consider as stable currency.

2. Development of Feasible Alternatives

The predicted price will estimate by trendline from soybean price in oz gold value and by analyze SPC (Statistical Process Control)[2].

3. Development Outcomes for Alternative

Below are the historical data of the average price of gold, exchange rate and soybean per month from Jan 2011 to Oct 2013:[3][4][5]


4. Selection of Criteria

Convert the soybean price (USD/gram) into gold equivalent (oz or troy-ounce), so that soybean price will refer to gold price. The historical data and its 12 months trendline of monthly average price of soybean in gold equivalent (gram soybean/oz Gold) from Jan 2011 to October 2013 (actual data above) is presented in below.


Selected model which close to describe the forecast is polynomial order 5th with R-squared = 0.8529. The formula obtained is:

 y = -5E-05x5 + 0.007x4 – 0.340x3 + 4.280x2 + 15.51x + 1459.

5. Analysis of the Alternatives

SPC analysis for data from the formula selected as below :


So thus obtained control chart graph as below :

From control chart above, we can accept since all the data are within UCL and LCL [6].

6. Selection of Preferred Alternative

Predicted value of gram soybean in 1 oz gold is : (x=46 ; 12 months from oct 2013) 1879.95 gram/oz gold (still within range UCL and LCL). From blog W8.2, the predicted average price for gold in 2014 from moderate formula is 1948.26 USD/oz gold.[7] So, the predicted price of soybean 12 months onward or in oct 2014 is:

 1948.26/1879.95 = 1.04 USD/gram

7. Performance Monitoring & Post Evaluation of Results

At this time, the value of the Rupiah continues to fall against the USD, make soybean import prices go up. If the price of imported soybean based on the price of gold the price of soybeans will be relatively more stable. Control chart analysis could be made better by predict the price range in the coming months with daily data.

References:

[1] Pemerintah Tak Berdaya Hadapi Lonjakan Harga Kedelai. (n.d.). Retrieved from http://bisnis.liputan6.com/read/696045/pemerintah-tak-berdaya-hadapi-lonjakan-harga-kedelai

[2] Brassard, M., Ritter, D., & GOAL/QPC (2010). The memory jogger 2: Tools for continuous improvement and effective planning. Salem, N.H: Goal/QPC.

[3] London Fix Historical gold – result. (n.d.). Retrieved from http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx

[4] default – Bank Sentral Republik Indonesia. (n.d.). Retrieved from http://www.bi.go.id/biweb/Templates/Moneter/Default_Kurs_ID.aspx?NRMODE=Published&NRNODEGUID=%7b3CE4C8F3-8793-458B-BC5B-A7DC189EF644%7d&NRORIGINALURL=%2fweb%2fid%2fMoneter%2fKurs%2bBank%2bIndonesia%2fKurs%2bTransaksi%2f&NRCACHEHINT=Guest

[5] Kementerian Perdagangan Republik Indonesia | Profil Ekonomi | Harga | Tabel Harga Kebutuhan Pokok Nasional. (n.d.). Retrieved from http://www.kemendag.go.id/id/economic-profile/prices/national-price-table?year=2013&month=10

[6] Asmoro, T. H., (2013). Exploring Gold Equivalency for Forecasting Steel Prices on Pipeline Projects. Retrieved from http://pmworldjournal.net/wp-content/uploads/2013/05/pmwj10-may2013-asmoro-gold-equivalency-for-forecasting-steel-prices-FeaturedPaper.pdf

[7] W8.2_HWB_Forecast of Construction Cost with Gold Price | Simatupang AACE 2014. (n.d.). Retrieved from https://simatupangaace2014.wordpress.com/2013/10/23/w8-2_hwb_forecast-of-construction-cost-with-gold-price/

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1 Comment

Filed under Hari W, Week 09

One response to “W9.1_HWB_Soybean in Gold Equivalent Value

  1. Hi Hari,
    Sorry, while you are getting better, you STILL aren’t there yet…….

    There are TWO killer issues you haven’t addressed-
    The first is the analysis of your SPC is not close to correct. Yes, the readings are falling within the upper and lower control limits which means no outliers but what about the process itself? Is it out of control or in control? Go back and review your Memory Jogger 2 section on SPC and tell us what that pattern means? And if the PROCESS is out of control what does that mean in terms of your ability to use it for cost projections into the future?

    Also I still don’t see your PERT Analysis showing us what the P75, PP85 and P90 values are for the price of Soybeans in Ounces of gold is going to be in 2014 based on the three curves you generated. (R2 = 0.8338 is the BEST case; R2 = 0.8526 is the WORST case and R2 = 0.8529 = Most Likely case?) (Be CAREFUL here in how you set up your calculations as the trend is CLEARLY DOWN- NEGATIVE correlation…….).

    You REALLY need to read over Hari and Trian’s paper and ask for some help…… It is clear that you understand PARTS of how to do this but not fully how to do it….

    Suggest that BEFORE you post your W9.2 blog, that you seek out help and advice from Arif or some of the other members of your team who have also posted problems like this? Pak Arif struggled with it and I think he has a pretty good understanding now….

    BR,
    Dr. PDG, Kuala Lumpur, Malaysia..

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