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The JSE has announced the adoption of a linear reference point for the derivatives contract for soya beans. This follows a proposal received by various role-players in the industry to consider multiple reference points rather than the traditional single reference point model.
This means that the reference to Randfontein as a single reference point will no longer apply to the soya bean derivatives contract. Furthermore, the distances will no longer be published as the model will rely on the linear programming model to determine the most effective location differentials.
Read more about China’s expected soya import figures here.
The proposed methodology aims to calculate the differentials as close as possible to the cash market by using multiple processing points as a reference. Given the South African market structure with many delivery points and the financial structure where more than 80% of the crop is produced under production finance, the proposed methodology provides the opportunity to have a marketing year starting point close to the realities of the physical market.
This is still very much theoretical and market sentiment and seasonality will continue to utilise premiums to facilitate preferences and trade.
Read more about the expected soya harvest figures for this year here.
The JSE is pleased with the approach this new model takes in trying to address several age-old arguments raised by various market participants. This new methodology will therefore move away from the reliance of a single reference point for the derivatives contract but rather consider all points of processing. – JSE Market Notice