Business

Wednesday November 11, 2009

Commodity is the pricing benchmark for most oils


KUALA LUMPUR: Malaysia’s game plan to internationalise crude palm oil (CPO) and its related products has enabled the local commodity to remain as the global pricing benchmark for palm oil trade and other international edible oils, says Bursa Malaysia Derivatives Bhd acting general manager Sree Kumar CK Nayar.

The game plan included increasing the capacity and capabilities of palm oil, efficient CPO infrastructure and global profilling as well as the internationalisation of Bursa Malaysia CPO futures, he told participants at the Malaysian Palm Oil Board (MPOB) International Palm Oil Congress yesterday.

Sree Kumar noted that the promotion of Bursa Malaysia’s new derivatives contracts on palm oil products and its by-products, together with the branding efforts by the Malaysian Palm Oil Council, had made Malaysia to be the premier palm oil centre in Asia to complement other oilseeds commodity exchanges.

Citing the recent Bursa Malaysia collaboration with US-based Chicago Merchantile Exchange Group (CME), he said: “The collaboration has enabled worldwide CPO futures (FCPO) trading on CME Globex trading platform.”

CME Globex has access in over 80 countries and connected via seven Globex hubs.

“There is also plan to set up a CME Globex hub in KL next year.

“In fact the signing of a licensing agreement with CME has allowed for the development of US dollar-denominated CPO futures contract to be listed on CME Globex,” he said, adding that this had facilitated healthy arbitrage activities between palm oil, crude oil and other edible oils.

Meanwhile, speakers from the world’s two largest importers of edible oils, China and India, concurred that there would be continued growth in the imports of palm oil by both countries.

Cheng Ghuoqiang, deputy director-general from the executive office of China Development Research Centre, said China would continue to be highly dependent on oilseeds and vegetable oil imports as the supply of its domestic vegetable oils could not keep up with local demand.

This is despite China’s growth in the production of domestic edible vegetable oils has increased to 10 million tonnes in 2008 from 7 million tonnes in 1990.

Cheng said consumption of palm oil and soyoil recorded the fastest growth among its vegetable oils consumption.

India-based National Oilseeds and Vegetable Oils Development Board executive director Dr MS Punia said India’s domestic vegetable oils production was about 7.2 million tonnes annually, which was not sufficient to meet domestic requirement since the local consumption was about 12.5 million tonnes.

Another speaker, CIMB Futures Sdn Bhd analyst GM Teoh, said the palm oil market was expected to remain choppy with prices ranging from RM2,150 to RM2,350 per tonne for the rest of this year.

“The choppy and mild-trending fluctuation will dominate next year with a potential downward support from levels of RM1,800 to RM1,900 per tonne in 2010 that can turn CPO prices lower at the RM1,500 to RM1,700 level,” he added.

Teoh does not expect extreme volatility in CPO price next year compared with the massive price swings of 2007 and 2008.


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