This article first appeared in The Edge Financial Daily on March 7, 2018

KUALA LUMPUR: Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong is encouraging oil palm players to be more active in hedging their produce with crude palm oil (CPO) futures contracts on Bursa Malaysia.

“I hope there will be more liquidity to help the players of the industry,” said Mah.

“I would like to encourage companies to consider managing your palm oil price risk by hedging using futures and options contracts on Bursa,” said Mah.

He highlighted that Bursa Malaysia Derivatives CPO Futures (FCPO) recorded trading activities of almost 300 million tonnes last year.

Mah was speaking at the press conference at the sideline of 29th Palm and Lauric Oils Price Outlook Conference & Exhibition, themed Price Disruption — Take Control, Manage Volatility, yesterday.

“Producers and consumers can now hedge their prices up to three years forward compared with two years previously and with the first year of 12 consecutive contract months instead of only six consecutive contract months with alternate contract months in the first year,” said Mah.

In 2017, FCPO recorded a volume of 11.9 million contracts versus 11.4 million contracts in 2016, while open positions were at a record high in November at around 259,000 contracts.

Four new enhancements have been made to strengthen FCPO contracts, which have been effective since Feb 26.

Last month, Bursa Malaysia already announced that FCPO deliveries are to be traceable up to the palm oil mill, enabling easier tracking of CPO origins and tracing Malaysian Sustainable Palm Oil certification for CPO buyers.

In his opening address Bursa Malaysia chairman Tan Sri Amirsham A Aziz said position limits for the FCPO market have been raised to allow traders to increase their exposures without the need to seek additional exemptions.

Additionally, traders will have an additional 30 minutes for trading and hedging activities, and are allowed to lengthen their hedging capabilities of their current palm oil exposure by having additional tradeable contract months.