Crude palm oil is an edible oil derived from pulp of oil palms. It is naturally reddish in colour as it contains high amounts of beta-carotene. Palm oil is used for cooking largely in South East Asia. Besides cooking purposes and food products, palm oil and derivatives known as fractions of the oil are used in the manufacture of pre-packaged food, cosmetics, cleaning products, hair care, soaps and personal care items. Indonesia and Malaysia are the major producing and exporting nations of palm oil. 85% of the world’s crude palm oil comes from Malaysia and Indonesia.

Adverse weather conditions for palm output have an effect on the prices. Wide fluctuations in the currencies of Malaysia and Indonesia also affect palm prices. During periods of dry spells or heavy rainfall resulting in draughts and floods, palm oil production would be affected and subsequently prices as well. Palm oil producers such as plantations, refiners and manufacturers will enter into the derivatives market to manage the uncertainty of the crude palm oil prices. Non-producers such as speculators, arbitrageurs and financial traders are also attracted to the derivatives market which, give them the opportunity to profit from the volatility of the palm oil prices. The largest derivatives market for palm oil is Bursa Malaysian Derivatives.

Most popular palm oil derivatives contract traded on Bursa Malaysia Derivatives is the Crude Palm Oil Futures (FCPO). FCPO is a Ringgit Malaysia denominated futures contract providing market participants a global price benchmark for the Crude Palm Oil Market since October 1980. For over 30 years, FCPO is actively used by edible oils and fats industry players as a risk management solution, as well as by fund managers and financial institutions for managing price fluctuations in the market. 

Derivatives Trading for the Palm Oil Industry - Recorded Webinar

Speaker: Michael Sim

Date: 23/3/2022

Source: SIDC

Click  here  link to open resource

Derivatives Trading for the Palm Oil Industry - Recorded Webinar

Speaker: Michael Sim

Date: 12/4/2021

Source: SIDC

Click  here  link to open resource