A transporter can buy maize through a broker, and deliver it to another point where it is sold at a higher premium at the agreed date. The transporter pockets the difference as profit.
A salesman who sells maize that has yet to be planted sounds about as honest as a divorce lawyer. Yet this is exactly what the South African Futures Exchange sets out to do.
Safex agricultural division g.m John Wixley says selling goods forward presents a unique opportunity to transporters, by giving them the chance to buy goods and sell them at a healthy profit.
The system works by allowing the buyer to sell a product even before he has bought it. The time between buying and selling could be as long as a season or as little as a few weeks.
The price at which he sells the goods is fixed, payable at an arranged date in the future.
Wixley says futures are an established form of trade of items like gold, oil and even money. Maize has only been recently introduced following the deregulation of the industry.
He says a transporter can buy maize through a broker, and deliver it to another point where it is sold at a higher premium at the agreed date. The transporter pockets the difference as profit.
Futures presents a great opportunity for transporters, but they must wake up and become familiar with the system, he says.
Risk is almost non-existent. Because the deal is arranged through brokers and the futures exchange, it is legally binding. The purchaser has to buy the load at the arranged time for the arranged price, regardless of price fluctuations that occur in between.
Wixley says maize futures are particularly suited to transporters who have spare capacity. They can time their purchases to coincide with high capacity.
A vehicle would then pick up maize from a silo and tranport it to any one of more than 80 delivery points around the country.
For instance, he may buy maize at Bethal for R45 a ton and sell it at Carolina for R58 a ton. The transporter earns R13 a ton.
As the system is risk free, banks will loan money to cover the lag between purchases.
