JSE beef carcass contract still in low demand

“Trading the beef futures carcass contract as a registered client on the JSE means that a transaction is guaranteed by local banks [acting]as clearing members,” said Chris Sturgess, director for commodities and key client management for capital matters at the JSE, at the recent Limpopo RPO annual congress.

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The beef futures carcass contract had been launched recently, but had not attracted much interest so far, he said.

The futures contract was for chilled beef carcasses consisting of two sides per carcass, graded A2/A3 and having a conformation of 2, 3, 4 or 5, with a damage class of not more than 1 on either the buttock, loin or forequarters, and no measles, in terms of the national health guidelines.

Although there was currently not a great deal of interest in the contract, the JSE had not placed a limit on how long it would wait to see if the contract was successful or not, said Sturgess, adding that the JSE had taken many years to make maize contracts a success.

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He gave the example of a farmer who had bought live calves at R18,50/ kg and then hedged his delivery price at around R42,50/ kg and eventually sold the calves that he had fed for slaughter at R38,80/kg on the JSE.

Upon expiry, settlement for a contract took place in cash. The settlement price would be determined by the JSE by incorporating volume-weighted average weekly selling prices of A2 and A3 carcasses over two weeks preceding the last trading day.

A number of abattoirs throughout South Africa were used as price reference. This was different to maize, where price was determined by the Randfontein price, said Sturgess. A R15/contract booking fee was taken by the JSE.

Sturgess pointed out that the beef price always spiked in March/April and November/December, and that there had been an upward trend in prices over the past years.

To access the JSE beef contract, those interested had to register as a JSE commodity derivatives member, which required opening a client account and bank account for settlement purposes.