Grain Guide 2018

Grade differentials for wheat Table 1 contains the grade differentials for wheat during the 2017/2018 marketing year as announced by Safex. The differentials apply from 1 October 2017 to 30 September 2018. Market participants are reminded that the differentials apply to physical delivery only if futures are fulfilled to facilitate the standardisation of the wheat contract. Grade differentials in the cash market can therefore differ from these. Table 1: Grade differentials for wheat for the 2016/2017 and the 2017/2018 marketing years: The JSE is responsible for calculating the grade differentials for wheat. A set method, approved by the advisory committee, is used for this calculation. Luan van der Walt, economist, Grain SA Grade 2016/2017 R/ton 2017/2018 R/ton B1 B2 180 96 B3 360 192 Table 4: Hypothetical price calculation for a long hedging when prices change. A long hedging is typically used by a miller/purchaser who wants to protect himself against an increase in price. The miller will therefore sell futures on Safex at the forward price for a specific contract month and in that way he will secure his price at that level. With the use of long hedging it does not matter whether the physical price increases or falls during the term of the contract. The price at which the hedging took place stays unchanged. It is important to know that when you want to buy a product and you want to safeguard yourself against an increase in price, you have to do long hedging, in other words buy futures. (See the example in TABLE 4 .) Luan van der Walt, economist, Grain SA Basic calculation Price  Price  Forward price R2 500,00 R3 000,00 R2 000,00 Buy futures R2 500,00 R2 500,00 R2 500,00 Net Safex price R2 500,00 R2 500,00 R2 500,00 With the use of short hedging it does not matter whether the physical price increases or falls during the term of the contract. The price at which the hedging was implemented stays unchanged. It is important to remember that when you want to sell a product and you want to safeguard yourself against a fall in price, you have to do a short hedging, in other words sell futures. (See the example in TABLE 3 on page 107.) 107 Calculation of basic hedging possibilities 108 GRAIN GUIDE 2018 Storage & marketing