BURSA CHIEF WARNS OF VOLATILE YEAR
Planters urged to adopt a more robust price risk management tool
THE palm oil industry has been warned to expect another uncertain year despite the crude palm oil (CPO) price having hit RM4,247.50 per tonne early last week — its highest in 13 years.
Bursa Malaysia Bhd chief executive officer Datuk Muhammad Umar Swift told participants at an international palm oil seminar yesterday that it was crucial for companies to look into adopting a more robust price risk management tool to mitigate against fluctuating commodity prices and remain competitive.
“The Covid-19 pandemic has affected the global economy in three main ways. It directly affected production and demand, created supply chain and market disruptions, and caused financial impact on firms and financial markets.
“Palm oil producers were forced to adapt to labour shortages that resulted in an overall 3.6 per cent decline in CPO production last year compared to 2019,” he said at the Palm and Lauric Oils Price Outlook Conference
and Exhibition.
The industry also saw higher CPO exports in the second half of last year due to the tax exemption by the government, he added.
“With these major events, the price of CPO saw an increase of 29 per cent year-on-year owing to lower inventories, higher demand and the higher price of soyabean oil,” said Umar, who is also Bursa Malaysia Derivatives (BMD) chairman.
Bloomberg recently reported that the CPO price was expected to record its best performance in a decade as the pandemic had not
shown any sign of abating.
Benchmark futures for the tropical oil, used in everything from cooking oil to shampoo, would average RM3,200 per tonne this year, according to the median of 23 estimates in a Bloomberg survey of analysts, traders and plantation executives.
The Malaysian Palm Oil Board data showed that the commodity had been registering an average price of RM3,895.50 per tonne over the past month.
The same data showed the highest CPO price last year was
RM3,788 per tonne.
Meanwhile, Umar said BMD would continue to develop a sustainable marketplace by improving its ecosystem and enhancing its products as a reliable hedging instrument against price volatility.
“We remain committed to fostering sustainable development and promoting responsible growth for the industry. From April 1, we will require only Malaysian Palm Oil Certification Council-certified CPO to be physically delivered in our crude palm oil futures contract.”