TLU SA supports Grain SA’s objection to the Johannesburg Stock Exchange’s decision to discontinue the multiple reference point model for calculating soybean location differentials and to revert to a single reference point model.
The multiple reference point model was tested over two marketing seasons on the JSE’s deliverable soybean futures contract. The model was developed to better account for the geographical distribution of soybean production and processing, while linking supply and demand in a fairer and more representative manner.
On 20 July 2026, the JSE announced that the model would not be retained. According to the JSE, although improvements were recorded in trading volumes, open positions and physical deliveries during the trial period, these improvements could not be directly attributed to the new model. The JSE also raised concerns regarding the availability of reliable processing data, the use of historical information and the ability of market participants to independently verify the calculations.
Grain SA, however, argues that the decision was not adequately justified against the five predetermined evaluation criteria. The organisation also believes that the available quantitative information and the recommendations of the technical committee were not sufficiently reflected in the final decision.
“TLU SA represents many grain producers as members. This matter affects the entire grain industry. Grain SA has the technical expertise and industry representation to lead this process on behalf of producers, and TLU SA therefore stands firmly behind them,” says Bennie van Zyl, General Manager of TLU SA.
TLU SA acknowledges that location differences play a role in grain price formation. The key question, however, is whether the methodology used accurately reflects the actual distribution of production, processing and demand, and whether the outcome is transparent and fair to all producers.
TLU SA is particularly concerned about the extent of the financial impact that location differentials can have on producers’ profitability. For example, where a differential amounts to R350 per tonne and a producer achieves an average soybean yield of 3 tonnes per hectare, this represents a reduction of R1,050 per hectare in gross income. In the case of maize, with a yield of 8 tonnes per hectare, the same differential amounts to R2,800 per hectare. For producers, this is not a minor adjustment but an amount that can make a significant difference to profit margins. Many grain producers were therefore hopeful that a fairer, more market-related model would eventually also be considered for other crops such as maize and wheat. Producers deserve a system in which the calculation, application and financial impact are fully transparent, particularly when such substantial amounts of their income are affected.
When a producer receives thousands of rand less per hectare as a result of a calculation model, they should at the very least be able to see exactly how that amount was determined. Transparency is not a luxury; it is a necessity.
“A location differential is not simply a reflection of actual transport, diesel or rail costs. It is a calculated adjustment linked to the location where grain may be delivered under a futures contract. When the reference point or calculation method does not properly reflect actual commercial grain movements, producers in certain regions may be unfairly disadvantaged,” says Van Zyl.
TLU SA is further concerned when local buyers deduct the full location differential from producers, even where the grain is delivered and processed locally. Although the JSE indicates that its contract rules do not regulate the cash market, the Safex price and the associated differentials may still be used as a reference point in commercial transactions. Their application should therefore be carefully examined and clearly explained to producers. The JSE itself confirms that its formal authority is limited to the exchange and listed futures contracts.
The deterioration of South Africa’s rail transport system further exacerbates the problem by making both producers and buyers increasingly dependent on more expensive road transport. This does not, however, mean that any calculated location differential should be accepted without transparent data and a proper assessment.
The JSE has proposed that, from the marketing season commencing on 1 March 2027, Driefontein should replace Randfontein as the single soybean reference point. Interested parties have until 14 August 2026 to submit comments on the proposal.
“Before a new single reference point is implemented, the financial implications for producers in every soybean-producing region must be fully and transparently assessed. Producers cannot reasonably be expected to accept a system where the calculations, data and regional impact have not been properly set out,” says Van Zyl.
TLU SA supports Grain SA’s call for a methodology that is evidence-based, repeatable, transparent and fair to all market participants. TLU SA will also support the ongoing process and any available industry, procedural or legal avenues aimed at protecting the interests of producers.
