In the late 1980s, a London ship-broker named Howard Snaith began assembling the daily-rate panel reports of his colleagues at the Baltic Exchange into the first systematic dry-bulk freight index — the predecessor of what became, in 1985, the Baltic Freight Index, and in 1999, the Baltic Dry Index covered in lesson sl1_l3. The original purpose of the index was descriptive: shipowners and cargo owners wanted a public reference number for current dry-bulk rates so contract negotiations could anchor on a shared baseline. But within months of the index becoming reliable, a more interesting use emerged.

Cargo owners — Cargill, Bunge, Glencore, the major commodity traders — began approaching shipowners with offers to lock in a forward freight rate referenced to the index, hedging against the risk that spot rates would rise between the date the cargo was contracted and the date it actually shipped.