Global insights into palm oil

HIGH food prices have excited edible oil traders from all over the world and this week, the Palm and Lauric Oils Conference & Exhibition Price Outlook (POC) 2011, is set to have a record attendance.

It is estimated that close to 2,000 delegates are flying into Kuala Lumpur for the conference, which carries the theme "Weathering Challenges, Maximising Opportunities". Among notable speakers are CME Group vice chairman Charles Carey and China's Dalian Commodity Exchange executive vice-president Li Jun.

For more than 20 years, the POC series has been able to attract top executives from major companies, traders and even foreign government officials to converge in Kuala Lumpur to get a feel of where the palm oil price is heading.

Following last year's seal of partnership between CME Group and Bursa Malaysia, traders were introduced to palm oil contracts on CME Globex, the same electronic trading platform as CME Group's existing suite of agricultural products.

Apart from a bigger delegation from the US, traders from China are also expected to dominate the hall. This is because as early as three months ago, some 500 delegates from the Middle Kingdom had already block-booked their hotel rooms in Kuala Lumpur.

China's robust economy, which has overtaken Japan as the world's second biggest after the US, is fuelling a bigger appetite for commodities like palm oil which is mainly made into cooking oil, baking fats, soaps, shampoos, moisturisers, biodegradable laundry detergents, and even health supplements.

In view of higher global consumption of palm oil in the years ahead, Malaysian Futures Brokers Association (MFBA) president Ng Chin Leng anticipates growing interest among downstream businesses to manage their risk by hedging on the palm oil futures market.

"Such fundamental developments will encourage entry of new market participants, fuel more hedging activities and contribute to higher liquidity in the market. It'll be a situation of volume begets volume," he said in a telephone interview yesterday.

Currently, there are 19 licensed futures brokerage facilitating palm oil trading on the Bursa Malaysia Derivatives market.

Celebrity-status palm oil analysts Thomas Mielke, Dorab Mistry and Dr James Fry arrived in Kuala Lumpur yesterday. They are due to give their forecast of palm oil prices on Wednesday. Last Friday, the third month palm oil futures on the Malaysian Derivatives Exchange closed RM60 higher at RM3,660 per tonne.

In a separate interview, Malaysian Palm Oil Association chief executive officer Datuk Mamat Salleh said while weather extremities like La Nina has started to ease in Southeast Asia, the political weather in the Middle East and the deliberate weakening of the US dollar by the US government to pull their economy out of recession, is set to keep commodity prices buoyant.

"We think palm oil prices, like all other edible oils, will continue to trade at buoyant levels in the immediate term," he said.

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