Zambian Non-GMO grain futures contracts ready to roll out

The Johannesburg Stock Exchange (JSE) director of derivatives, Chris Sturgess, said Zambia has the opportunity to become the regional hub for price discovery and price risk management of non-GM crops, with the new Zambian futures contracts.

The JSE, the Zambian Commodity Exchange (ZAMACE) and various other role players met last week, in Lusaka and Mkushi, to finalise grain contracts for Zambian white maize, wheat and soya beans.

“We hope to roll out these derivatives contracts soon, and to start building confidence in the market structures so that the government can see the value these instruments bring to the agricultural sector,” said Sturgess.

Policy challenges

Policy consistency in the grain market is one of the biggest challenges in the implementation of these grain futures, said Precious Muzhiwo, ZAMACE’s compliance officer at ZAMACE.

The regional movement of grain needed more structured policies from the Zambian government, Sturgess said. “One of our major concerns is the ability of the Zambian Government to open and close borders at short notice. For the markets to function more efficiently, we require predicable policies.”

“The key success factor of the derivative instruments will be how we build liquidity for the contract and this, no doubt, will be easier if we can include regional participants relying on the contracts for regional hedging,” Sturgess said.

He explained that this does not mean exports should not be halted at times when the country’s stocks were low, but there should be a clearly defined, and understandable, policy in place.

Sturgess said an example of a workable policy, would be a government decision to keep 500 000 tons of maize back as a supply safety net, held by the private sector or by reserve agencies. Should stocks fall below this level, no export permits would be issued. This type of policy would allow the market to operate in a more clearly defined framework.

Systems up

“Farmers are keen to get these instruments working immediately,” said Muzhiwo.

The contracts are in the final stage before launching. Sturgess said they needed to get Zambian clients and South African corporate participants approved by the South African Reserve Bank. It would be a good thing to conclude sign-up as soon as possible to get the bids, make the price offers and start matching willing-buyer with willing-seller.

How does it work?

A futures contract allows a farmer to sell his commodity at a predetermined price at a specified time in the future. It provides a means for farmers, grain buyers and millers to protect themselves from unfavourable price movements in future physical markets or spot markets.

Additionally, co-operatives, traders and financial institutions rely on the contracts to extend fixed prices to their clients, or to finance physical grain on warehouse receipts.

These contracts would be traded in dollars, with one contract equal to 10 tons, or 20 of the 50kg bags.

Because small scale farmers do not produce these large amounts, a buyer can act as a middleman and acquire the harvest yield from several farmers to get the 10 tons.

The JSE and ZAMACE was accompanied by a South African party consisting of Vanguard Derivatives, NWK Limited, Farmwise Grains, RMD Financial Services and Zambian stakeholders, Musika, the Zambian National Farmers Union and representatives from the banks, traders and millers.

For more information, contact ZAMACE: +260 96 043 2266 or or JSE: +270 11 520 7000 or

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