CME Group to introduce U.S. dollar-denominated palm oil swaps contract
Palm oil is produced all-year round in top growers Indonesia and Malaysia, exposing investors, refin…Palm oil is produced all-year round in top growers Indonesia and Malaysia, exposing investors, refiners and plantations to higher price risks compared to other food commodities that are harvested once or twice a year.
"(This ensures) the need for ongoing risk management against price swings associated with demand and supply fundamentals," said Nelson Low, Singapore-based executive director of commodity products for the CME.
The over-the-counter calendar swaps contract will be based on prices from the Bursa Malaysia Derivatives Exchange's crude palm oil futures , the global price benchmark for the tropical oil.
Traders said the move could benefit market participants who are looking for additional tools to manage risks. Bursa Malaysia launched options trading on palm futures last July.
"The market's generally getting more diversified, which isn't that bad," said a Singapore-based palm futures trader.
Benchmark palm oil prices have lost nearly 4 percent so far this year, weighed by ample stocks and global economic uncertainty.
