An efficient futures market should provide a forecast of the future spot (cash) price which reflects all publicly available information; ideally, for effective price discovery, such forecasts would also be unbiased The trading of yellow maize futures contracts began in South Africa in mid-J996 after the power of the Maize Board to set maize producer prices was abolished Cointegration analysis shows that (I) there is a long-run relationship between South African yellow maize futuresand spot prices, and (2) the futures price was cm unbiased predictor of spot prices for the three-month 1997 contract and annual 1998 contract, but a biased predictor for the three-month 1998 contract. Overall, this means that South African maize farmers can use price information derived from recently introduced yellow maize futures contracts to forecast "local" yellow maize cash prices. This information can help them in their planting decisions, in negotiating yellow maize cash prices with traders and millers, and in deciding whether, and what portion of their crop, to hedge against price risk by using futures contracts.
efficient.
