BL:JSE adds foreign wheat to commodities portfolio
The JSE announced plans on Tuesday to introduce a foreign-referenced wheat contract to the portfolio of commodities that it offers under licence from the CME Group.
The new contract is based on soft red winter wheat of the Chicago Board of Trade and is of a different quality standard to locally produced wheat.
It will also provide local market participants with an alternative product should they see trading opportunities arising on this international benchmark.
The contract will be introduced for trading this morning and expiration dates are set for September 2011, December 2011 and March 2012. The product will reference pricing from the Chicago Board of Trade, which is operated by the CME Group.
Rod Gravelet-Blondin, senior general manager for commodities at the JSE, said: "Wheat is appealing as an investable asset for several reasons: as a staple crop it is an important component of everyday life across the globe and used in a variety of foodstuffs.
Our existing wheat contract is the JSE's second most liquid agricultural product, so it not surprising that we received several requests to include an internationally referenced, rand-settled contract on wheat."
Tim Andriesen, managing director of agricultural products and alternative investments for the CME Group, said: "It's important for global market participants to be able to manage both commodity and currency risk.
Supporting the JSE's work to develop rand-denominated products indexed to our benchmark futures provides an extremely effective hedging tool for producers, storage and shipping companies, and others in the agricultural supply chain."
With a contract size of 50 metric tons, the product mirrors the existing local wheat contract, including the same set of expiry months. "A recent trend indicates an uptake in wheat futures based on concerns that dry weather could reduce global output," said Gravelet-Blondin. Further demand from emerging markets could also drive the price of wheat higher. "With these increasingly volatile commodity prices, access to reliable risk management tools is essential," added Gravelet-Blondin.
CME Group and the JSE also have an existing licence agreement for gold, platinum, copper, silver and WTI crude oil.
