NSX hesitant on Beef futures
Namibia Stock Exchange (NSX), CEO, Tiaan Bazuin speaking to the Economist said this week that it will be a long while before beef producers will be able to trade on the recently launched Johannesburg Stock Exchange (JSX) Beef Futures Derivative Contract.
Bazuin said that the NSX has been in talks with the JSX prior to the announcement and will continue to do so until South Africa Stock Exchanges Control and listing requirements are met.
Meat Board Trade and Strategic Manager, Goliath Tujendapi, expressed the same sentiment adding that local prices will have to change to South African carcass prices.
Tujendapi said that with the small hedge mechanism, both the producer and processors will be able to lock in favourable prices and avoid the risk of a declining price by the time they sell.
“While producers are still feeding their cattle for the market, they can lock in these selling prices during the hedge months of February, June, August and November,” Tujendapi said.
The NSX will also have to implement an electronic system as current shareholders are issued with an actual share certificate. Bazuin said the migration from a paper system to a central security depositor will allow for direct settlement of trades.
The Central Security Deposition will also require that the derivative Beef Future product also be pegged to the South African price.
Furthermore, producers and processors will be able to sell their feeding cattle on the cash market at the price that they locked in instead of the prices that are on offer at the time of sale.
Tujendapi said this process ensures that both buyer and seller manage the price fluctuation risk. According to him, the average price difference observed in 2015 for A2 prices was N$2.26 while A3 prices had an average difference of N$ 2.59. This he said proves that the Namibian Beef carcasses will be able to compete with that of South Africa Beef futures market.
Meanwhile, Meatco is the only beef price maker which has price committees which decide on the prices based on various factors.