The following announcement was made by the Johannesburg Stock Exchange (JSE) on 29 January 2016: “The JSE is proud to relaunch the Beef Carcass Futures Contract, which provides a cash-settled beef contract to the South African market. Now farmers, feedlot operators, abattoirs and beef wholesalers can use future and option instruments to manage price risks ahead of time. We are confident this product will only assist in further developing the South African beef market.
We have partnered with the Red Meat Abattoir Association (RMAA) and its members to access actual transactional data in order to cash settle the futures contract. We will collect and potentially audit and verify the transactional data to assure market participants of its accuracy, since this becomes the settlement price for all futures contracts, thereby ensuring the important price convergence with the cash market.
Abattoirs can employ a short hedge to lock in a selling price while buyers or wholesalers interested in locking in a purchase price can use a long hedge to guarantee the purchase price. The product is naturally focused on hedgers. However, those participants that have a view or opinion of beef prices going forward, could also participate in the contract.
To start your hedging process, it is as simple as calling one of our registered commodity brokers and they will guide you every step of the way. For a list of approved brokers or additional information, contact +27 11 520 7039 or email commodities@jse.co.za or visit www.jse.co.za/beef ”
The main difference between the earlier version of the Beef Carcass Futures Contract and the new version is that the previous contract was physically settled at two abattoirs while the new contract will be cash settled only. This should increase liquidity in the market. The transactional data that will be used to determine spot market prices also differ from the previous contract in that a large number of the members of the Red Meat Abattoir Association (RMAA) will provide transactional data.
Published on Monday, 15th February 2016 - 09:15
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