Page 15 - MEX-Yearbook-2017

Africa and the region and so surpluses of white
maize bode well for food security for the next year.
Soybean production was also at a new record of
1.3 million tons, Sunflower seed was at average
production levels of 870,000 tons, sorghum at
150,000 tons and finally, groundnuts and dry beans
combined production was around 160,000 tons.
Wheat is expected this year to be just less than
1.6 million tons. The combined production of the
grains mentioned above for South Africa adds up
to just under 21 million tons.
The South African grain market was deregulated in
the mid-1990’s with the Government withdrawing
its active involvement in determining the
commodity prices and since then, the free market
principles whereby willing buyers and sellers
determine the value of the commodity. In 1995, the
South African Futures Exchange for Agricultural
Products was established under the brand SAFEX.
This exchange, over the years, has become the
price discovery and price risk management
platform for grain products in South Africa trading
the underlying crops in some instances 15 times
over. The exchange is an electronic marketplace
through which the registered member firms offer
access to clients to either trade through them or
through a member supplied trading system, they
are able to enter orders directly onto the exchange
platform. The SAFEX market, which was more
recently rebranded following the acquisition by
the Johannesburg Stock Exchange of the derivative
market to the JSE Commodities Market, has
through its ability to integrate with the range of
over 250 delivery silos/ delivery points, across
the country, ensure that price convergence of the
futures contract to that of the spot market is easily improve yields. The opportunities are huge for
achieved by making or taking physical delivery is
something that is easily executed. The market also
relies on electronic warehouse receipts to record
and reflect the transfer of ownership of grain in
the storage sites. Thanks to electronic receipts
and the JSE’s easy physical delivery system, we
find that financial institutions easily offer finance ZAMACE which refers to the Zambian Commodity
of warehouse receipts which millers, traders and
producers take advantage of whilst we also see
financial hedge funds getting more involved in the
physical delivery markets adding further liquidity
and competition to spread trades.
Although it has been a tough year for the JSE
Commodities Exchange, many of the market
participants still recovering from the severe drought Another country which has new hope is Zimbabwe,
from the previous year where there was significantly
less product to trade. The JSE members have
remained resilient and even though volumes traded
remained down from the previous year at just over
2.7 million contracts, the open interest is at a solid
76% up reflecting the larger crop that was harvested
across most grain types. Just like MEX, the JSE
Commodities area is fortunate that the growth of
the exchange business can be attributed to really
committed staff, member firms, clearing members
who guarantee the transactions and to storage
operators who issued warehouse or silo receipts
and guarantee these receipts. Without committed
people, efficient systems and technology and
underlying commodity, developing the exchange
business would have been very difficult.
As mentioned earlier, South Africa remains the
key production player in the region, but that
said Zambia also recorded excellent production
surpluses across its grain producing commodities.
Mainly focused on white maize production for its
stable food requirements, production was up to
record just over 4.2 million tons, whilst soybean
was around 160,000 tons, wheat is expected to
be around 350,000 to 400,000 tons this season.
Zambia is well positioned to become a major
producer in the region with available land that
could see total grain production increase to close
to 10 million tons in the coming years. In my
opinion, to achieve this, the country would like
to see consistent Government policy regards
the marketing of grain with no or very limited
intervention when it comes to pricing of the stable
food. This should encourage further private sector
investment into infrastructure development of
storage and also production techniques to further
Zambia and with the recent commitments from
the Government to allow the free market to take
its course, things are really looking positive for
Zambia, however, time can only tell if the policies
will remain consistent providing private sector the
confidence to commit for longer-term investments.
Exchange continues to play a crucial role as the
licensing authority for the issuing of warehouse
receipts under legislation in the country and also
has ambitions to develop a transparent spot market.
ZAMACE is also working with the JSE to roll out
a US Dollar traded and cleared derivatives contract
on white maize, wheat and soybeans.
previously a major grain producing nation.
The past season
(2016/2017)
saw a radical
turn around in
production levels
of most cereal
crops; following a
severe drought the
previous year
However, over the past 20 years, the country has
witnessed policies implemented that destroyed
the incentives to produce commodities. With the
change in presidency, there is renewed hope that
the new candidates will instil more investment
sound policies that will encourage the use of the
fertile land of Zimbabwe.
Finally, also to mention Mozambique who saw
ample rains this past season and produced enough
white maize to be self-sufficient this year. There
are a number of initiatives both from Government
and Private Sector that look very encouraging to
increase production of commodities in this country
by improving transparency of trade and better
storage of commodities.
So, for South Africa and the region, 2017 was a
year of surplus production especially for its stable
food of white maize, this did mean lower prices
for farmers but the benefit of cheaper food for the
majority people who rely on the stable food was
also achieved. We will continue to work hard to
ensure the price risk management tools through
futures and options contracts to work well not only
in South Africa but also how other regional players
can use them to remove the price volatility that
frequently impacts the commodity markets.
MEX NEPAL YEAR BOOK 2017 | 14