Feed manufacturers face unpredictable costs due to global soymeal price swings. Dr Lucius Phaleng, a trade advisor at the Animal Feed Manufacturers Association (AFMA), explains why AFMA’s proposal to list soymeal futures on the JSE could change that, bringing transparency, risk management, and stability to South Africa’s growing feed-to-food sector.
The listing of soymeal futures on the Johannesburg Stock Exchange (JSE) has become a strategic priority for the Animal Feed Manufacturers Association (AFMA), as it seeks greater price transparency, cost certainty, and improved risk management capability.
As the industry benchmark protein ingredient, soymeal plays a significant role in feed formulation, with its price having a direct impact on feed production costs, competitiveness, and food security across the value chain. Globally, soymeal accounts for two-thirds of total protein meal output used in animal feed, highlighting its importance to livestock production systems.
Beyond its global importance, soymeal also holds growing strategic significance within the South African agricultural landscape, where both soybean production capacity and domestic soymeal demand have expanded rapidly in recent years.
Bridging the gap in feed costs
While most soybeans produced and imported are destined for animal feed, soybean meal is also used in food products such as tofu, soy milk, and plant-based meat alternatives, as well as limited industrial applications. Soymeal is derived from crushing whole soybeans, producing both meal and oil.
According to the Oilseeds and Proteins Development Trust (OPDT), South Africa’s soybean production has increased significantly from around one million tonnes in 2015 to approximately 2.7 million tonnes in recent years, driven by favourable economic conditions, improved yields, and rising domestic demand. This growth has the potential to enhance local crushing margins and strengthen the resilience of the animal feed industry.
Despite these positive developments in local production and crushing capacity, the industry remains constrained by the absence of a transparent, locally traded pricing and risk management instrument for soymeal, which continues to expose feed manufacturers to price volatility and external market shocks.
A JSE-listed soymeal futures contract would address this gap by offering a credible price discovery mechanism that reflects local market fundamentals. Importantly, it would also enable effective risk management through hedging, allowing industry role players to better manage feed input cost uncertainty.
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How are soymeal prices determined?
This vulnerability is further compounded by the way soymeal prices are determined in the domestic market. In South Africa, soymeal prices are currently derived using an import parity pricing mechanism. This means domestic prices are based on the cost of importing soymeal adjusted for logistics and tariffs, including a 4.95% duty on imports from Mercosur countries, rather than being driven primarily by local supply-and-demand dynamics.
As a result, feed manufacturers remain exposed to international price movements and exchange rate volatility.
Against this background, AFMA, representing animal feed manufacturers, has identified the absence of a locally traded soymeal price discovery and risk management instrument as a critical structural gap within the market.
As an industry body focused on improving cost transparency, market efficiency, and long-term sector sustainability, AFMA has therefore initiated and supported discussions around the potential listing of a soymeal futures contract on the Johannesburg Stock Exchange, informed by global best practice and the evolving dynamics of the domestic oilseed and feed markets.
This initiative is driven by the need to improve price discovery aligned to local market fundamentals, to provide effective hedging tools for feed manufacturers, and to reduce unnecessary exposure to international price and currency volatility in a market with growing domestic production and crushing capacity.
Why a soymeal futures contract on the JSE is important
Importantly, the lack of a soymeal futures contract does not reflect a limitation in local market infrastructure, but rather a gap within an otherwise well-established and functional commodity derivatives framework.
The JSE commodity derivatives market already offers a range of physically settled agricultural contracts designed to support hedging and price risk management in the domestic and regional grain markets. These include white maize, yellow maize, wheat, sunflower seed, and soybeans.
However, despite soymeal being one of the most widely traded agricultural commodities globally with active futures markets in major producing and consuming countries such as the United States, Brazil, Argentina, and China, it remains absent from the South African derivatives landscape.
Against this backdrop, the introduction of a soymeal futures contract on the JSE emerges as both a practical and necessary market intervention. By enhancing price transparency and pricing certainty, improving market efficiency, and strengthening risk management capabilities, such an instrument would support the long-term sustainability and resilience of South Africa’s animal feed and livestock sectors.
Taken together, these factors make a compelling case for why a JSE-listed soymeal futures contract is not only desirable but essential to the effective functioning of the feed-to-food value chain.
- Dr Lucius Phaleng is a trade advisor at the Animal Feed Manufacturers Association (AFMA). The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of Food For Mzansi.
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