JSE: Suspend the single soybean reference point decision and conduct a transparent review

Petition addressed to: The Board of Directors of JSE Limited, together with the JSE Group Chief Executive Officer and the relevant Commodities Market decision-making structures

Petition to the JSE Board of Directors

We, the undersigned producers, market participants and concerned South Africans, call on the JSE to suspend the implementation of the proposed single soybean reference point and complete a transparent, evidence-based review of the soybean Multiple Reference Points model before any new methodology is implemented.

The JSE Commodity Derivatives Market plays an important role in transparent price discovery and price-risk management for the grain market in South and Southern Africa. For that reason, the soybean location-differential methodology must be trusted by all participants, including producers, processors, traders, brokers and end-users.

We recognise that the JSE must ensure that any futures-contract specification is transparent, auditable, replicable, operationally practical and consistent with its role as a licensed exchange.

However, we are concerned that the decision to discontinue the MRP model and move to a single reference point has, amongst other factors, not yet been supported by a sufficiently transparent, criterion-by-criterion public explanation against the evaluation framework established for the pilot. The pilot criteria included trading volumes and open interest, active market participation, stock build-up in zero-differential areas, redelivery of JSE silo receipts, and formal market-participant feedback.

The JSE acknowledged that trading volumes, open interest and physical deliveries improved during the pilot period, but concluded that these improvements were caused by external market conditions and not by the MRP model. Grain SA has requested disclosure of the quantitative analysis, methodology, data and weighting used to reach that conclusion. A decision with long-term implications for price discovery, producer income and market confidence should be supported by clear evidence that affected participants can understand and interrogate.

We therefore call on the JSE to:

1. Suspend the implementation of the proposed single reference point pending a transparent review.
2. Publish or provide to affected stakeholders the quantitative assessment used to evaluate the MRP pilot against each of the original criteria.
3. Explain the methodology used to distinguish the effect of the MRP model from external market conditions.
4. Reconvene the appropriate technical process with Grain SA, soybean producers, technical experts and relevant market participants before final implementation.
5. Investigate data-governance solutions that would allow confidential, aggregated or independently verified supply, demand and crushing information to be used without disclosing commercially sensitive company-level data.
6. Assess the regional financial impact of the proposed single reference point on producers across all soybean-producing areas before implementation.
7. Consider a modified MRP or hybrid model that directly addresses the JSE’s concerns about transparency, replicability, auditability, simplicity and market confidence.

This petition does not ask the JSE to regulate the cash market or to grant preferential treatment to producers. The JSE has stated that its decisions are limited to the regulation of its exchange and have no force or effect in the cash market. Our request is that the JSE’s own soybean futures-contract methodology should be developed through a fair, transparent and evidence-based process that reflects physical-market realities as far as reasonably possible.

A single reference point may be simpler, but simplicity alone should not be the only test. A credible methodology should also reflect actual grain flows, regional supply and demand, delivery economics and the realities of a geographically diverse soybean industry. Grain SA has raised the concern that a single-reference-point methodology will impose deductions disconnected from physical-market realities and will create regional distortions where producers near active crushing or consumption areas are still priced against a distant national reference point.

We support a soybean price-discovery system that is transparent, credible, technically defensible, auditable, practical and fair to all market participants. By signing this petition, we support Grain SA’s call for the JSE to suspend implementation, complete the agreed evidence-based review and adopt a methodology that improves market confidence, market efficiency and long-term sustainability.