JSE lists sorghum derivatives contract

The product is aimed at larger agricultural traders, financiers and end processors with a contract size of 100 metric tons.

South Africa produces around 200 000 tons of sweet sorghum annually.

"We listed this contract in response to demand from various market participants.

"Due to limited local production of sorghum, we expect this to be a niche product serving the bigger players in the market," says Rod Gravelet-Blondin, Senior General Manager of Commodities at the JSE.

Sweet sorghum is primarily used as an animal feed in the dairy industry.

"The introduction of sweet sorghum futures and options contracts will give these market participants a facility that will assist them with price discovery and help them manage price risk.

"The contracts will also enable financing transactions as institutions are able to manage their price risk.

"This is in line with the fundamental purpose of a derivatives market," says Gravelet-Blondin.

The JSE has the support of four silo operators who will guarantee delivery of the physical product.

"In a market where no transparent cash market exists, it is crucial for the exchange to ensure it has a delivery mechanism in place that will ensure that the final settlement value is relevant and not open to any abuse," concludes Gravelet-Blondin.