The CME Group, the world's largest and most diverse derivatives exchange, has struck a deal with South Africa's JSE Limited to license CME's benchmark corn futures settlement prices, thereby creating a new class of JSE cash-settled corn futures contracts.
The contracts will be listed, traded and settled by the JSE's Safex Agricultural Products Division, alongside the existing successful South African grain contracts.
"[The] JSE is delighted to enter into this agreement with the CME Group, home of the widest range of commodity derivatives on any exchange in the world," JSE senior general manager Rod Gravelet-Blondin said in a statement this week.
"Its benchmark corn prices are the world standard, and as such will promoted deeper, more liquid markets in our domestic maize futures contracts, to the benefit of all market participants," Gravelet-Blondin said. "This represents a further step towards globalising South Africa's financial markets."
According to the JSE, corn futures provide a way for South Africans to:
* Effectively manage the price risk with a view either on the domestic market or to more easily access the international market via the corn contract which will be traded in the local currency.
* Hedge or gain exposure based on expectations of directional price, spread movement or volatility in corn either as an outright position or versus the domestic market.
* Realise arbitrage and spread opportunities between US corn and South African white maize and/or yellow maize through its dynamic electronic trading platform.
* More effectively evaluate both the current and future world supply and demand for corn.
* Identify short- and long-term cyclical price and volatility patterns for corn.
Commodity price volatility
CME Group products and services MD Rick Redding said that with the recent volatility of commodity prices becoming an increasing and important focus for many producers, exporters and consumers, access to transparent market prices and reliable risk management tools were essential.
"By developing a corn futures contract based on the price set on CME Group's global market, the JSE will create an additional tool for hedging price risk or to gain market exposure," he said.