A new palm oil futures contract (FCPO) is being launched by Bursa Malaysia for East Malaysian palm oil producers, The Edge Markets reported on 24 May.
“The [new] contract mirrors most of the FCPO specifications, with enhancements made to benefit East Malaysian palm oil players,” Bursa Malaysia Derivatives CEO Samuel Ho said.
Located in the East Malaysian island of Borneo, Sabah state and neighbouring Sarawak contribute 45% of Malaysia's crude palm oil (CPO) production, The Edge Markets wrote.
Palm oil traders in the two states have said the current palm oil contract puts them at a disadvantage — East Malaysian crude palm oil is typically sold at a discount to spot prices in Peninsular Malaysia, while freight costs are higher as the designated delivery points are also in the peninsula making physical delivery unfeasible, according to the report.
The new contract — the East Malaysian Palm Oil Futures (FEPO) — would cater for physical deliveries in East Malaysia through three designated ports, while helping traders hedge their price risks, Ho said.
“With the launch of FEPO, we are also integrating Malaysian Sustainable Palm Oil (MSPO)-certified CPO from East Malaysia into the derivatives market delivery process,” Bursa Malaysia added.
While the current FCPO contract started trading at 10.30am, the FEPO would start at 9am (01:00 GMT) to coincide with Chinese trading hours.
Bursa Malaysia’s FCPO contract sets the global price benchmark for palm oil.