Picture: ISTOCK
Picture: ISTOCK

Lamb carcass futures contracts can now be traded on the JSE’s commodity derivatives market, the bourse announced on Friday.

"The purpose of the contract is to allow farmers and abattoirs to protect themselves against the risk created through movements in the price of mutton," the JSE said in a statement.

To increase the liquidity of the contracts, only the main hedging months of March, June, September and December will be available for listing. The contracts were launched with June and September 2017 expiries available.

The new lamb carcass contracts are similar to the beef carcass contracts the JSE launched in December 2015.

"The size of the lamb carcass contracts are also 1,000kg of A2 and A3 graded carcasses and they are also cash-settled. The settlement price of the contracts are determined by the JSE and information from the Red Meat Abattoirs Association (RMAA). This partnership ensures that the cash-settled price of the contract accurately reflects the spot-market price of lamb," the JSE said.

"Over the past two decades the JSE has proven the value the commodity market can provide by helping farmers to protect themselves against price volatility. We have built a strong relationship with the agricultural community and are privileged to now be able to respond to the needs of the livestock sector in managing their price risks," JSE director of commodity derivatives Chris Sturgess said.

According to the JSE, the price of lamb can be very sensitive to consumer sentiment as mutton remains the most expensive meat consumed in SA.

"Futures contracts can help to provide farmers and abattoirs with greater certainty about the income they will receive for the meat they produce. This can help to support the mutton industry, which is well-positioned over the medium term to benefit from SA’s growing middle class," says Sturgess.

Farmers are making use of lower feed costs to rebuild their herds after last year’s drought and farmers slaughtered 11,5% less sheep in March 2017 compared with March 2016, Agricultural Business Chamber (Agbiz) head of research Wandile Sihlobo said.

This was likely to raise the price of red meat this year, he said.

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