"The main driver [for futures contracts traded] was on the back of the anticipated bumper crop, but we are starting to see an uptick in open interest, which translates to market participants starting to build up their positions," said the head of commodities at the JSE, Raphael Karuaihe.
Karuaihe said the excess maize supply would not exert a negative influence on the market but would ensure a sustainable derivatives market.
At the end of June 2017, 522,234 white maize futures contracts were traded, 31.5% less than those traded by June 2016. For yellow maize, volumes traded were 302,777, which was down by 2.68%.
Maize futures contract prices also peaked during the drought.
A white maize September-future contract traded at R2,597 a ton in January 2017 but was down to R1,929 at Wednesday's close. A yellow maize September-future contract traded at R2,540 a ton in January 2017 but closed at R2,058 on Wednesday.
Favourable weather patterns allowed farmers to raise maize production and recover from the severe drought caused by the 2015-16 El Niño effect.
In its fifth production forecast, the crop estimates committee said the revised forecast for commercial maize for June remained unchanged at 15,631m tonnes, making it the largest locally produced crop on record.
Karuaihe said supply and demand dynamics in the commodities market played an essential role in price determination, which resulted in grain prices, "particularly maize, also hitting all-time highs and would result in the surplus production exerting a downward pressure on grain prices."
Independent analyst Andrew Fletcher said the way forward for maize prices was largely dependent on what happened in the US market. He said July was a critical pollination period for US grain and was the market driver. "If their prices go up, ours will also go up a little bit, because we can't really be cheaper relative to world markets."
Weather conditions during the pollination of maize are critical to the developmental stage of the crop and can set the stage for the yield. In its latest weather report, the US agriculture department said thunderstorms around its summer-grains belt helped ease short-term dryness and provided beneficial moisture for maize and soybean crops.
Source: BDpro
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