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A Stock Market Big Enough to Stretch Across the Atlantic

April 13th, 2011 at 02:05pm Under Economy Report

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This is the VOA Special English Economics Report.

A ten-billion-dollar deal aims to create the world’s largest exchange company. The plan would combine the operators of the New York Stock Exchange and Germany’s Frankfurt Stock Exchange.

The two companies, NYSE Euronext and Deutsche Borse, announced the agreement Tuesday. Deutsche Borse shareholders would own about sixty percent of the combined group. One thing it still needs is a name. The new company would have headquarters in Frankfurt and New York.

The New York Stock Exchange is the world’s most famous stock market and a symbol of American capitalism. Treasury Secretary Tim Geithner says New York will remain at the heart of the world’s financial system for a long time to come.

But the exchange business has changed in these days of high-speed trading by computers in a globally connected economy. The Big Board now has to compete with smaller exchanges. Where stocks are traded has become less important than how much those trades cost.

NYSE Euronext and Deutsche Borse had profits of almost four and a half billion dollars last year. They expect to save four hundred million dollars a year by combining their operations.

These savings could lower the cost of stock orders. But the size of the company could raise concerns about competition in the exchange industry. The new company would also have trading operations in Britain, France and other European countries.

Stock trading and other financial services would remain important to the combined company. But much of its income is expected to come from trading complex financial products called derivatives.

The deal requires approval by American and European officials and by shareholders. Other exchange operators, like the CME Group, could try to offer a higher price for NYSE Euronext. The CME Group, operator of the Chicago Mercantile Exchange, is one of the world’s largest traders of derivatives.

Duncan Niederauer, chief executive of NYSE Euronext, is expected to keep that job in the new company. He says combining with Deutsche Borse will make the company more competitive.

DUNCAN NIEDERAUER: “This not only creates the world’s premier exchange group, but there’s a word we all want you to focus on today, and that is diversified. This will position us to compete on what is increasing a global landscape in a very competitive industry.”

Last week the operators of the London and Toronto stock exchanges announced a deal to combine their companies. And the Singapore Exchange offered in October to merge with Australia’s exchange.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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Looking for Answers to Rising Coffee Prices

March 21st, 2011 at 09:00am Under Economy Report

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This is the VOA Special English Economics Report.

Food prices are at their highest level since the United Nations Food and Agriculture Organization began keeping records in nineteen ninety. The causes include bad weather and growing demand. Some experts also blame the use of food crops to make fuel.

But higher food prices are not always the result of limited supplies.

Coffee prices have jumped almost fifty percent in six months. Prices have reached a thirteen-year high. Yet growers expect their current crop to be almost ten percent bigger than the last one.

JM Smucker is an American company known for its jellies and fruit spreads. But Smucker also owns Folgers, America’s top-selling packaged coffee. And it owns Dunkin’ Donuts, which sells coffee to wash down the doughnuts at its stores.

On Tuesday, Smucker said it would raise the prices of its coffee products by an average of ten percent. It said the increase is driven by the higher prices for coffee beans.

Experts say coffee prices are rising mainly because people are willing to pay more. Coffee sellers like Mark Warmuth say tastes are changing and more people want a good cup of coffee.

MARK WARMUTH: “There’s no right or wrong answer with regard to ‘What’s a good cup of coffee?’ A lot of it has to do with personal preference or taste.”

Mark Warmuth owns the M.E. Swing Coffee Company in Alexandria, Virginia, near Washington. He says big coffee sellers like Starbucks help his business by building a base of customers who want something better.

MARK WARMUTH: “They’re seeking something that would be better than what they can buy at Starbucks. They’re seeking out smaller, boutique, artisan, craft coffee roasters, which I consider us to be, a boutique coffee roasting company. What we can do is source better quality beans and supply them at a fresher level because we’re smaller and we can cater to the smaller metro area. That helps us compete with bigger companies.”

Yet Mr. Warmuth can thank those bigger companies like Starbucks for spreading the idea of coffee as an affordable luxury. The thinking goes that during hard times, people might not go on a trip but they might be willing to pay extra for good coffee.

The company supplies restaurants and other businesses, but also has a store in Washington near the White House.  Customers pay thirteen dollars for less than half a kilogram of beans — about double the price of other brands.

Greater demand for high-quality coffee has helped drive coffee prices higher. That includes greater demand among Brazilians. Brazil is the world’s largest exporter of coffee.

People in India are also drinking more coffee. Starbucks just announced plans to enter that market in a deal with India’s Tata Coffee company.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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