New JSE silo contract with a Guaranteed Grade (GG)

The Johannesburg Stock Exchange (JSE) Approved Storage Operator supports the issuing of JSE Guaranteed Grade (GG) wheat certificates.

New JSE silo contract with a Guaranteed Grade (GG)
- Advertisement -

The GG will minimise the risk of upgrading or downgrading of the quality of the grain for the buyer when taking delivery of the wheat, said JSE commodity derivatives director Chris Sturgess at the recent Wheat Indaba held in Pretoria.

This will not detract from the storage operator’s current obligations to guarantee quantity and quality of wheat, but will rather provide additional assurance to the buyer.

The GG contract/certificate allows clients storing wheat to complete the essential elements of the agreement, including cost, volume constraints, application procedure, duration, transferability and grade in line with their own preference.

- Advertisement -

“The client storing wheat will have to approach the storing operator to request a GG JSE electronic silo receipt,” said Sturgess.

“The receipt is issued for three months with a further one month to out-load.

“By issuing a GG receipt, the storage operator undertakes to guarantee out-loading of the specific grade. In the unlikely event, a better grade is only available, no grade adjustment is made. The storage operator will not be allowed to out-load lower grade wheat.

“Once the three months validity has expired,” continued Sturgess, “the receipt cannot be traded on the JSE and the owner has one month to out-load. If the receipt is not out-loaded within the one month, the receipt is cancelled and stock will revert back to folio with the possibility to move one grade up or down.”

The GG receipt can be traded via the JSE spot basis platform or in the open market.

“No new JSE deliverable wheat contract will be added, the delivery process is simply enhanced,” said Sturgess.

Based on market update and demand, the concept will be assessed at the end of the 2017/2018 marketing season.

The participation of buyers and sellers will drive the success.

The concept will be rolled out in March through the JSE market notice.

Digital editor for South Africa's oldest and most read farming magazine.