KUALA LUMPUR: Palm oil companies and smallholders are encouraged to hedge on Bursa Malaysia Derivatives crude palm oil (CPO) futures market as one of the means to stabilise CPO prices, said Minister of Plantation Industries and Commodities, Datuk Seri Mah Siew Keong.
Mah said hedging would help them manage palm oil price risks, as Bursa Malaysia Derivatives CPO futures contract was the most liquid futures contract for the pricing of CPO and was the global benchmark for palm oil and other edible oils.
“Last year, Bursa Malaysia Derivatives CPO futures market recorded trading activities of almost 300 million tonnes, lending credence to the depth of its liquidity,” he told reporters after officiating the annual Palm and Lauric Oils Conference and Exhibition, Price Outlook 2018/2019 (POC 2018) yesterday.
Mah said palm oil prices, like any other commodities, would continue to be volatile.
He said companies should actively take steps to manage the price risk, as those which had benefited from the implementation of price risk management could transfer the benefits to their customers by ensuring competitively-priced products.
“At the end of the day, consumers want a good bargain and companies that can provide that will benefit accordingly,” said Mah, adding that companies should look into implementing the necessary risk management tools in order to remain globally competitive.
On another note, he said, the extension of trading tenure allowed companies to hedge using Bursa Malaysia Derivatives CPO futures market more dynamically to protect against the risk of future price uncertainty.
“Producers and consumers can now hedge their prices up to three years forward compared to two previously, and with the first year of 12 consecutive contract months from only six consecutive contract months, with alternate contract months in the first year,” he said.
The three-day POC 2018, starting today, is organised by Bursa Malaysia Bhd, It attracted 1,700 participants.
POC 2018 is a leading international platform in the palm and lauric oils industry which gathers various stakeholders from the oils and fats fraternity. — Bernama