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Agricultural Commodity Futures Markets In South Africa

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  • Frank, Deon

Abstract

The introduction of an agricultural commodity futures market in South Africa is considered. A futures market can be used by both buyers and sellers of a commodity to significantly reduce price uncertainty. Theoretical arguments are used to show that the futures and cash prices should be very close, if not equal, at expiration and that the current futures price should be a good forecast of the cash price at expiration. Speculators play an important role by providing liquidity to the futures market, but it is possible that they can distort prices. For a futures market to be a success in South Africa there needs to be a free cash market, adequate liquidity and well informed traders. A computer-based trading system is an improvement on the traditional floor trading system mainly because prices are more likely to reflect the underlying supply and demand conditions

Suggested Citation

  • Frank, Deon, 1992. "Agricultural Commodity Futures Markets In South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 31(4), December.
    • Handle: RePEc:ags:agreko:267556
    DOI: 10.22004/ag.econ.267556
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    References listed on IDEAS

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    1. van der Merwe, G. P., 1990. "Research Note: Organised Futures Trading," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 29(01), February.
    2. Phil L. Colling & Scott H. Irwin, 1990. "The Reaction of Live Hog Futures Prices to USDA Hogs and Pigs Reports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(1), pages 84-94.
    3. Larry S. Karp, 1987. "Methods for Selecting the Optimal Dynamic Hedge When Production is Stochastic," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 647-657.
    4. Karp, Larry, 1986. "Methods for Selecting the Optimal Dynamic Hedge When Production is Stochastic," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5jp9q454, Department of Agricultural & Resource Economics, UC Berkeley.
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    Cited by:

    1. van der Vyver, Andre, 1994. "Viewpoint: Futures Contracts For Agricultural Commodities - Is The Time Ripe For South Africa?," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 33(01), March.
    2. Bown, A.N. & Ortmann, G.F. & Darroch, M.A.G., 1999. "Use Of Maize Marketing Alternatives And Price Risk Management Tools By Commercial Maize Farmers In South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 38(3).

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    Keywords

    Agricultural and Food Policy; Marketing;

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