GroCapital’s Broking division offers clients (individuals or companies) a facility to hedge price risk of agricultural commodities on the JSE Commodity Derivative Market (SAFEX) and currency risk on the JSE Currency Derivative Market (Yield-X), by making use of futures and options transactions.
JSE Commodity Derivative Market (SAFEX)
GroCapital Broking offers you the peace of mind to know that you can hedge your commodities against price risk movements in a highly volatile market. Commodities that can be hedged include various local and international grains, metals, oil as well as local diesel.
Our futures and options product range related to commodities include white and yellow maize, sunflower, wheat, soybeans, sorghum, Chicago Mercantile Exchange (previously known as CBOT) corn, soybeans, soybean oil, soybean meal and soft red wheat as well as Kansas Board of Trade (KBOT) hard red wheat. Also included are NYMEX Crude-oil, COMEX Copper, COMEX Silver, NYMEX Platinum, COMEX Gold and local Rand based Diesel, based on the European gasoil contract.
JSE Currency Derivative Market (Yield-X)
The JSE Currency Derivative Market offers individuals or companies the opportunity to enter into futures and options contracts such as currencies, bonds and other interest rate derivatives. Currencies include the US dollar, Euro, British pound, Australian dollar, Japanese yen, Canadian dollar, and Swiss franc against the Rand. African currencies listed against the Rand are the Zambian Kwacha, Kenyan Shilling and Nigerian Naira.
Our clients have access to the following added services:
- Daily market prices per SMS
- Daily market report (local and international)
- Portfolios are managed with our live Greek Program
- Live commodity prices viewing system supplied on request for PC or mobile
At GroCapital we are able to assist farmers through the various steps when considering hedging a commodity. It is not nearly as complicated as it may seem and our traders, with vast commodity trading experience, will be able to take you through the process and put the hedge in place for you.
The farmer makes the necessary financial commitments in terms of seed, pesticides, insurance and other input costs to produce a grain crop.
PRICE FLUCTUATIONS ARE A CONCERN FOR BOTH PRODUCER AND CONSUMER
The farmer’s concern is that the grain price will be lower at harvest time. The miller (consumer) is concerned that the price will be higher during harvest time when he needs to buy grain.
ESTABLISHING A HEDGE
Taking his input costs and the grain futures price into consideration, the farmer decides to put a hedge in place by selling his crop through his GroCapital Broker on the JSE Commodities Exchange (SAFEX). The miller does the opposite.
TRADING THE PHYSICAL GRAIN
The producer and consumer (or grain trader) agree on a purchase contract for the physical grain. The parties agree on terms such as delivery date, grade, quantity, delivery point and the method and time that will be used to price the grain.
As seller, the hedge will result in a positive cash flow to the farmer if the grain price is lower at harvest time, which offsets the loss on the lower cash price received for his physical grain. In case of a higher grain price, the hedge will provide the miller with a positive cash flow, offsetting the higher price he has to pay for physical grain.