By Mei Mei Chu
KUALA LUMPUR, Might 24 (Reuters) – Malaysia plans to launch a brand new palm oil futures contract within the third quarter, permitting merchants within the nation’s two largest palm producing states better value discovery and a viable possibility for bodily supply.
The Bursa Malaysia Derivatives Trade manages Malaysia’s crude palm oil futures contract (FCPO) FCPOc3, which units the worldwide value benchmark for the world’s least expensive and most generally used edible oil.
“The (new) contract mirrors a lot of the FCPO specs, with enhancements made to profit East Malaysian palm oil gamers,” stated Samuel Ho, CEO of Bursa Malaysia Derivatives.
Situated within the East Malaysian island of Borneo, Sabah state and neighbouring Sarawak contributes 45% of Malaysia’s crude palm oil manufacturing. Malaysia is the world’s second-largest palm oil producer and exporter after Indonesia.
Palm oil merchants within the two states stated the present palm oil contract places them at an obstacle – East Malaysian crude palm oil is usually bought at a reduction to identify costs in peninsular Malaysia, whereas freight prices are greater because the designated supply factors are additionally within the peninsular. This makes bodily supply unfeasible.
The brand new contract – the East Malaysian Palm Oil Futures (FEPO) – will cater for bodily deliveries in East Malaysia by means of three designated ports, Ho stated.
The contract additionally offers better value discovery to the East Malaysian market and an avenue for merchants to hedge their value dangers, he added.
FEPO will begin buying and selling earlier at 9 a.m. (0100 GMT) to coincide with Chinese language buying and selling hours, Ho stated. The present FCPO contract begins buying and selling at 10:30 a.m.
Andrew Cheng, chief government of the Sarawak Oil Palm Plantation Homeowners Affiliation, stated producers within the two states lose greater than 1 billion ringgit ($241.7 million) a yr because of the value distinction and that the brand new contract can get rid of that.
Based mostly on Malaysian Palm Oil Board information, Sarawak’s crude palm oil value had been buying and selling at a reduction ranging between 13 ringgit ($3.14) and 198 ringgit ($47.86) a tonne throughout January 2020 to April 2021, he stated.
“It’s going to permit us to fetch a greater value, and with the financial savings we are able to broaden the downstream trade in Sarawak to be fully-integrated and mature,” he added.
($1 = 4.1380 ringgit)
(Enhancing by Jacqueline Wong)
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