PricePulse Methodology

PricePulse Methodology

• Purpose

  Forest Economic Advisors (FEA) is dedicated to providing independent, reliable analysis for the wood products and timber sectors. Building on its long history of benchmarking reports that provide insight into regional and global competitiveness, FEA’s PricePulse report is based on actual pricing and other market information FEA collects from market participants. Despite the procompetitive benefits that PricePulse provides to the industry, including increased price transparency, FEA recognizes the sensitivity of the data it collects and therefore antitrust compliance and competition principles are fully integrated into its methodology. As described below, FEA aggregates and anonymizes the data it collects to create zone weighted-average prices for a wide range of products in the wood products and timber sectors in a manner that makes it impossible to determine the individual pricing of any specific market participant. PricePulse is designed to be a highly accurate pricing report with minimal to no potential for manipulation or anticompetitive impacts. PricePulse is available for purchase to everyone and brings both greater clarity and increased competitive potential to the wood products and timber sectors.

• Methodology

  FEA’s Transaction Price Division (TPD) only collects data regarding transactions that have occurred and only collects this data directly from Enterprise Resource Planning systems (ERPs) of market participants who are either buyers or sellers in such transactions. FEA’s TPD uses a computer algorithm to generate the weighted-average price. There is no human judgment involved in the collection of the prices or the calculation of the weighted-average price.

  The process of collecting prices is as follows:

  • A participating company (Participant) enters order data into the company’s ERP for the company’s accounting system as well as for storing, managing, analyzing, and interpreting of their own data.
  • Participants run reports from their ERPs which are uploaded via secure FTP directly to the FEA TPD’s secure server. Most Participants run these reports automatically.
  • Participants’ data is pulled into a secure database on a dedicated server and mapped to FEA price codes.
  • A computer algorithm creates a weighted average price of all Participants’ transactions for each reported product/grade.
  • The weighted average price is pulled from this database for publication in FEA’s PricePulse report and made available through FEA’s Data Center and via an API.
• PricePulse Advantages

  What sets FEA’s TPD’s system apart from editor-based price reporting models is that there is no human contact with the data after it is entered into a company’s ERP. There is no human judgment involved in “assessing” a price. FEA’s methodology only uses prices of actual transactions that have occurred and weights them based on each transaction’s share of the total transactions collected for each product/grade.

  Specifically:

  • FEA’s prices are weighted averages of actual completed transactions that took place the two days prior to publication. For some thinly traded products, FEA may include transactions from more than two days prior.
    • FEA’s algorithm weights the transactions by the volume of the order.
    • FEA’s algorithm only reports a price when a minimum number of five companies upload transactions for the reporting period.
    • FEA’s algorithm limits an individual company’s weight if the reported transactions from that company amount to more than 25% of the total reported transactions in a particular product category.
  • FEA’s algorithm only includes transactions that are “market indicative” per the following protocol.
    • FEA’s algorithm:
      • only includes orders on the open market;
      • only includes transactions between non-affiliated parties;
      • does not include contract or indexed orders;
      • does not include quotes or bids; and
      • does not include any intra-company transactions nor any employee purchase programs.
    • Transactions that are greater than three standard deviations away from the mean will be flagged for review for potential errors in submission. If a submitting company cannot confirm the accuracy of the flagged submission prior to publication and report back to FEA, the transaction will not be included.
    • FEA’s algorithm does not include transactions that have an estimated delivery date more than 6 weeks away.
  • Prices are collected from both buyers and sellers.
    • FEA’s algorithm compares transactions and eliminates duplicates when both buyers and sellers report the same transaction.
  • All company transactions are uploaded to the secure database. This ensures Participants do not skew the results by being selective in what they report.
  • FEA’s algorithm, methodology and process are regularly subject to verification by an independent firm to ensure compliance with FEA’s stated policies.

  All transaction data collected is highly confidential and will never be disclosed outside of FEA. FEA will never confirm or deny participation by any company providing transaction data.

• Data Confidentiality, Security, and Anonymity

  FEA’s TPD understands how critical it is to keep all data it collects secure and confidential. Data confidentiality, protection, and security—as well as company anonymity—are top priorities.

  To ensure the confidentiality and security of company data, FEA has implemented the following safeguards and policies:

  • FEA’s TPD protects company data during transfer: FEA uses a secure S/FTP that is SOC 2 Type 1/2 compliant, ISO 27001 certified and is compliant with the European Union’s General Data Protection Regulation (GDPR)
  • FEA’s TPD protects company data on a dedicated secure server: FEA’s main Data Center application is hosted on a dedicated server that uses a defense-in-depth layered approach to security. Access to the management network infrastructure is provided through multi-factor authentication points which restrict network-level access to infrastructure based on job function utilizing the principle of least privilege. All access to the ingress points is closely monitored and logged.
  • FEA’s TPD protects company data within FEA TPD: Only application administrators will have access to the non-aggregated data. FEA’s PricePulse editors will have access to a de-identified subset of the non-aggregated data to ensure quality and consistency. A subset of the data will be made available to an independent third party to verify compliance with the methodology and process. All logins will require two-factor authentication and/or SSH key.
  • Complete anonymity of data providers: FEA will never disclose whether any given market participant provides price and market data.
  • No individual company’s data can be deduced: Weighted average transaction prices are aggregated with a minimum of 5 Participants which will prevent any individual company’s prices from being calculated.
  • All FEA TPD staff understand the critical importance of confidentiality and data security: FEA requires all TPD staff to undergo annual training to ensure compliance with company policies.
  • FEA will conduct a regular compliance verification: FEA will regularly submit its data confidentiality and security as well as its methodology to an independent, external firm for verification to ensure compliance with FEA’s stated policies.