A sobering POC 2009

The impact of the global financial crises was felt at POC 2009. The turn out was a moderate 1,200 paid delegates compared to last year's 1,800.

Perhaps it was the expensive fees and lack of lead time for the event manager. This year, delegates pay RM2,300 per head, 20 per cent more than previously.

While the turn out was not as grand as before, traders from China and Russia benefitted from the real time translation provided by the organiser Bursa Malaysia. Considering that the POC series is the world's leading vegetable oils event, a whole hall of dining spread was dedicated to vegetarian connoiseurs.

There were more computers at the media room this year. Yay! Good for reporters like me.

This year, Oil World trade magazine editor Thomas Mielke is not in Kuala Lumpur but he will appear in digital format tomorrow. He sent a DVD presentation of his price outlook.

While vegetable oils price analysts have yet to present their forecast, many traders do not expect prices to leap or plunge too much in the next few months. Since the start of the year, the palm oil futures has pretty much stabilised at around RM1,900 per tonne. This is good for downstream businesses like oleochemicals and specialty fats but unexciting and boring for scalpers or hedge funds.

Last year, there was much buzz and talk of the launch of US-dollared palm oil contracts at POC 2008. This year, we witnessed a sobering tale of the ill-fated FUPO.

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Bursa to work harder on marketing FUPO

BURSA Malaysia Bhd will step up efforts on market-making, having seen thin trade of the US dollar-denominated crude palm oil futures, known as FUPO, since its launch six months ago.

"We will put right the mistakes that led to the FUPO not taking off," Bursa Malaysia chief operating officer Omar Merican said yesterday.

He admitted that Bursa Malaysia had underestimated the scale of the global financial crisis when FUPO was launched on September 5 last year. It only saw five lots traded on its first trading day.

"It was not such a smart move in the timing of the launch and we had underestimated the scale of meltdown that saw many commodity funds shrinking.

"This is our first non-ringgit instrument and we did not do well in marketing it to the global investing world. We will have to work harder on market-making," Omar said.

He was responding to a query on the dismal performance of FUPO while addressing an audience of more than 1,200 delegates at the Palm and Lauric Oils Conference & Exhibition: Price Outlook 2009/10 in Kuala Lumpur.

Market-makers are usually brokerages and banks that accept risks by quoting both buy and sell prices in futures contracts, hoping to make aprofit on the turn or the bid/offer spread. Each market-maker aims to narrow the spread between buyer and seller. Once an order is matched, the market-maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.

There are currently 18 licensed futures brokerage facilitating palm oil trading on the Bursa Malaysia Derivatives market.

When met at the conference, Malaysian Futures Brokers Association (MFBA) president Steven Lai Choon Lim told Business Times that a handful of futures brokers were in talks with the stock exchange to help generate liquidity in the FUPO market.

Asked how soon this move would materialise, he replied: "The response to market-maker schemes will depend on the incentives Bursa Malaysia has to offer."

Potential traders of FUPO are biofuel producers and users, shipping and freight companies, oleochemical producers, food manufacturers and restaurant chains, and commercial banks.

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