Agricultural commodity derivatives were first introduced in South Africa in 1996 after the deregulation of the former marketing system. In the context of its proposed functions, namely price discovery and risk management, the question arose as to whether the futures market developed over time to performed its role efficiently. According to the Efficient Markets Hypothesis (EMH) an efficient market is one that accurately incorporates all information available at any point in time. The purpose of the research was to address the issue of price discovery efficiency, firstly, focusing on the weak-form methodology. Secondly, considering the behaviour of futures prices over time, the study addressed the concern of anomalies in daily returns – phenomena contradictory to the EMH by implication. Thirdly, as a means of defining the sources of inefficiency, the role of scheduled public information and its impact on futures prices was examined. Therefore, the primary objective of the research was to investigate and identify the main components of agricultural futures market inefficiency within the unique price formation structure of South African grain markets. The assessment of this problem is important in terms of evaluating the growth and development of the futures market for different grain commodities to date. The Exchange needs to review rules and regulations on a frequent basis in order to ensure proper functioning at all times especially in the case of a relatively new and fast growing market. The study contributed to the knowledge of understanding the price adjustment process and its implications for market efficiency in the context of the three grain markets considered. The weak-form efficiency was tested using a co-integration based model. Analysing daily spot and futures prices of white maize, yellow maize, and wheat, results indicated that all three markets were efficient and unbiased. Non-parametric tests revealed the significant presence of day-of-the-week and turn-of-the-month effects in the futures returns of the three commodities. Further non-parametric analyses suggested a high degree of uncertainty in futures returns around scheduled agricultural and macroeconomic information release dates also contributing significantly to the identified anomalies. It was concluded that (1) the markets’ ability to anticipate the contents of future information to be released, (2) the current skewed size distribution of broking members, (3) the significant role of the R/$ exchange rate in the price formation process of South African grains and, therefore, (4) the relationship to and influence of the broader economy enhanced the return effects (anomalies) creating opportunity for profitable arbitrage. This conclusion was mainly attributed to South Africa’s status as a price-taker in the world grain complex as well as the relatively short existence of the local agricultural futures markets.

This study analyses and investigates the impact of crude oil price vitality on unemployment in South Africa. This is done by firstly surveying theoretical and empirical literature on the crude oil price-unemployment relationship before relating it to South Africa. Secondly, crude oil and unemployment trends with their causes are overviewed. The study employs a Johansen co-integration technique based on VAR to model unemployment against crude oil prices, real effective exchange rate, real interest rates and real gross domestic product. Using quarterly data for the period 1990-2010, econometric results show that crude oil prices are positively related to unemployment in the long run while the opposite is true in the short run. Parameter estimates and variables are statistically significant; hence there are also policy recommendations which are related to both empirical and theoretical literature. Lastly, impulse response functions show that unemployment returns to equilibrium in the long run when crude oil price changes whereas real interest rates followed by crude oil prices explain most of unemployment changes compared to other variables in the long run.

Agriculture is of inestimable value to South Africa because it is a major source of job creation and plays a key role in earning foreign exchange. The most significant contribution of agriculture, and in particular maize, is its ability to provide food for the nation. For a number of decades government legislation determined prices, and as such the trade of grains on the futures exchange requires market participants to adapt to a volatile environment. The research focuses on the ability of market participants to effectively mitigate price volatility on the futures exchange through the use of derivative instruments, and the possibility of developing risk management strategies that will outperform the return offered by the market. The study shows that market participants are unable to use derivative instruments in such a way that price volatility is minimised. The findings of the study also indicate that the development of derivative risk management strategies could result in better returns than those offered by the market, mainly by exploiting trends on the futures market. / Financial Accounting / M. Comm. (Business Management)

Agriculture is of inestimable value to South Africa because it is a major source of job creation and plays a key role in earning foreign exchange. The most significant contribution of agriculture, and in particular maize, is its ability to provide food for the nation. For a number of decades government legislation determined prices, and as such the trade of grains on the futures exchange requires market participants to adapt to a volatile environment. The research focuses on the ability of market participants to effectively mitigate price volatility on the futures exchange through the use of derivative instruments, and the possibility of developing risk management strategies that will outperform the return offered by the market. The study shows that market participants are unable to use derivative instruments in such a way that price volatility is minimised. The findings of the study also indicate that the development of derivative risk management strategies could result in better returns than those offered by the market, mainly by exploiting trends on the futures market. / Financial Accounting / M. Comm. (Business Management)

The agricultural sector plays an important role in the South African economy through job creation and earning foreign exchange. The role of agricultural co-operatives increased substantially over the last few decades. The research focuses firstly on the identification of derivative instruments in the market and their applicability to mitigate financial risks co-operatives experience. Secondly, research is conducted about the extent to which co-operatives use these derivatives to hedge financial risks. The research shows that most co-operatives are exposed to financial risks through different activities. It is, however, evident that although the derivative instruments are available, not all co-operatives make use of these instruments. Recommendations for further research include the development of a risk management framework and determining the different economic factors that have an influence on the use of derivatives by South African agricultural co-operatives. / Business Management / M.Comm.

The agricultural sector plays an important role in the South African economy through job creation and earning foreign exchange. The role of agricultural co-operatives increased substantially over the last few decades. The research focuses firstly on the identification of derivative instruments in the market and their applicability to mitigate financial risks co-operatives experience. Secondly, research is conducted about the extent to which co-operatives use these derivatives to hedge financial risks. The research shows that most co-operatives are exposed to financial risks through different activities. It is, however, evident that although the derivative instruments are available, not all co-operatives make use of these instruments. Recommendations for further research include the development of a risk management framework and determining the different economic factors that have an influence on the use of derivatives by South African agricultural co-operatives. / Business Management / M.Comm.