Milk futures contract investigated

On 14 November 2016 the Johannesburg Stock Exchange (JSE) held an exploratory workshop to investigate the possibility of listing a milk futures contract on the Exchange’s commodities market for derivatives. A variety of grain futures contracts are traded on this commodity market, which was formerly known as Safex. Safex was purchased by the JSE and now functions as one of its divisions. In the meantime a number of products have been added to the commodities futures exchange. These include gold, copper, platinum, brent crude oil, diesel and sugar. The futures market can be regarded as a price discovery mechanism capable of giving buyers and sellers of listed products an opportunity to hedge against price risks.

The workshop was presented by the Director of Commodities: Futures Contracts of the JSE and was attended by Clover SA, milk producers,  producers who are involved in the processing and distribution of dairy products, Samelko and the MPO. The aim of the workshop was to test the market for possible opportunities to introduce a milk futures contract. Discussions at the workshop were constructive, with input from all the parties concerned. The practical implications of the perishability of milk and the geographical distribution of milk production were discussed, with detailed input from all the parties. A notable feature of the workshop was that the JSE had no preconceived ideas and that proposals and ideas took shape as the discussion progressed. By the end of the workshop it had been agreed that there were possibilities for milk on the futures market and that the JSE could continue to develop the product and test it on a wider basis.