Indonesia plans CPO futures launch in April

JAKARTA: Indonesia's new commodities exchange yesterday said it plans to launch a crude palm oil (CPO) futures contract in April, marking the second attempt to create a local benchmark price in the world's top grower.

PT Bursa Komoditi & Derivatif Indonesia, the new commodities and derivatives exchange (ICDX), said it hopes to succeed after rival Jakarta Future Exchange, known as BBJ, struggled to attract planters to trade CPO.

Instead, the industry uses Malaysian palm oil futures and the Europe spot price in Rotterdam as benchmarks.Indonesia wants a local benchmark which it feels will provide a better reflection of local supply and demand, and will eliminate currency risk factors.

Laren Tan, chief operating officer of ICDX, said in an interview that recruiting as many members as possible for the exchange was the key to boosting trade. He said companies that have already agreed to trade on the new exchange included the local unit of Wilmar International, Sinar Mas Agro Resources Tbk, Sampoerna Agro, Duta Palm, and Palm Mas Asri.Brokerage firm Millenium Penata Futures, and Sinarmas Futures have also joined, he said, while Indonesia's biggest listed plantation firm, PT Astra Agro Lestari, has said that it may join.

"A lot of people have shown interest at different levels. Based on our meetings, most of them are positive about the plan," said Tan, who is a former executive director at Bursa Malaysia Derivatives Exchange, the Malaysia exchange where palm oil futures are traded.

BBJ launched physical palm oil trading in June 2009, hoping that Indonesia's state firms will commit to selling 500,000 tonnes of their output via the exchange, a level set by the state enterprises minister at that time. But it failed to set a benchmark as it got only a poor response from palm oil producers, resulting in poor liquidity.

BBJ's president director, Hasan Zein Mahmud, said that after six months, only 29,000 tonnes of palm oil were traded at BBJ, just a fraction of Indonesia's palm oil production of about 21 million tonnes in 2009.

The exchange will introduce spot and futures contracts for one to 12 month, and each of the four quarters of the following year. Members would have to pay security deposits of two billion rupiah (100 rupiah = RM0.04). Indonesia is also a leading supplier of other commodities including coal, tin, cocoa and coffee but plays almost no role as an exchange for these products, so traders have always used contracts traded outside the country as the benchmark for prices. - Reuters

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