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CHAPTER 3
THE FIRST MAIZE
CONTRACTS WERE TRADED
ON SAFEX IN THE FIRST
QUARTER OF 1996 – A
TOTAL OF 485 CONTRACTS,
OR 48 500 TONS. IN
JULY 2015 AN AVERAGE
OF 1 080 JULY 2015-
MAIZE CONTRACTS
(1 080 000 TON) AND
3 057 DECEMBER 2015
MAIZE CONTRACTS
(3 057 000 TON) PER
DAY TRADED.
It was not always a simple matter to use market instruments to hedge risks,
particularly in the wheat market where market share was vested in a relatively
small number of role-players, with roughly four organisations that almost to-
tally dominated the market.
However it appears that producers in general did quite soon start utilising the pricing
mechanisms offered by Safex (the South African Futures Exchange), and in the
1998/1999 season about 47,1% of the grain producers were already using them.
Safex
The development of a futures market for beef commenced in 1994, with the inten-
tion being to expand it to grain later when it was functioning successfully. As the
Maize Board had already started hedging the exporting of maize in the Chicago
Board of Trade (CBOT) against unfavourable price fluctuations in the early 1980s
and therefore knew how the futures markets worked, it became actively involved in
the development of a futures market for agricultural commodities.
The interest in this increased to such an extent in anticipation of the deregulation of
the agricultural sector that the Agricultural Markets Division (AMD) was established
as an independent section of Safex in 1995. Safex has functioned in the financial
markets since the 1980s, and when the AMD was established it therefore had the
necessary knowledge and administrative systems to enable it to trade the first maize
contracts as soon as the first quarter of 1996.
At the time the Marketing Act of 1968 was replaced by the 1996 Act, Safex was
already established and white and yellow maize, as well as wheat, were traded. It
was later expanded to other products like grade 2 maize, sunflower and soybeans.
Initially only forward contracts were traded on Safex, but in due course the variety
of available contracts and market instruments was expanded and Safex developed
into a fully fledged futures market. Safex became the platform on which the prices
of listed agricultural products in South Africa were determined and contracts for
these were traded, in contrast to the previous dispensation, where the price was
determined by the only buyer and seller of wheat.
In 2001 Safex became part of the Johannesburg Stock Exchange (JSE) and was
known as the Agricultural Products Division (APD) of the JSE. Its vision was to
provide a safe and effective market for the trading of derivatives in South Africa.
One of the first adverts which appeared to introduce Safex.