KUALA LUMPUR: Bursa Malaysia's Crude Palm Oil Futures (FCPO) contracts continue to achieve new highs this year, Bursa Malaysia chairman Tan Sri Abdul Wahid Omar said.
Bursa Malaysia Derivatives (BMD) hit a record monthly trading volume of 1.66 million contracts and the highest daily trading volume of over 125 thousand contracts in March this year, Abdul Wahid said.
The total trading volume for FCPO reached a new historical all-time high of 12.0 million lots, surpassing the previous record of 11.91 million lots achieved in 2017.
On a year-to-date basis, this represented a 41 per cent increase from 8.49 million lots registered between January to October 2019.
Abdul Wahid said as of yesterday, 300 million tonnes of CPO was traded via the exchange, representing 20 times of Malaysia production as at September 2020.
The increase in volume was primarily due to the greater use of FCPO as a hedging tool against the price volatility caused by the Covid-19 pandemic, he said at Palm and Lauric Oils Price Outlook Conference and Exhibition 2020 yesterday.
FCPO had also become a well-balanced product with an equal 50-50 participation between institutional traders and other market participants, he added.
Abdul Wahid said as the world was going through an unprecedented healthcare crisis with more than one million deaths and 36 million cases to date, assessing the economic impact of Covid-19 remains challenging due to the extreme speed in which the crisis continues to unfold.
"Price volatility is no stranger to the market, yet this pandemic outbreak has shaken the commodities sector. Reduced demand due to the slowdown of economies around the world has led to falling prices as well as disruptions to the production and supply chain.
"Nonetheless, BMD remains committed to strengthening the palm complex suite to cater to the demand of market participants and provide a reliable hedging and arbitrage instrument against price volatility in the palm oil industry," he said.
Abdul Wahid is encouraged by the consistent growth and views this as a positive development that indicates the rising confidence in BMD's products to manage price risk exposures.
Since its launch in 1980, Bursa's FCPO continues to be the most successful commodity futures contract in Malaysia, positioning the country as the global price benchmark for the CPO market.
Abdul Wahid said to demonstrate the extensive usage of FCPO globally as a hedging instrument, some 268 million tonnes of palm oil, the underlying for FCPO, were traded in 2019, representing 3.5 times of world production.
Meanwhile, Plantation Industries and Commodities Minister Datuk Dr Mohd Khairuddin Aman Razali said the government, under the Penjana economic recovery plan, had announced a 100 per cent exemption on export duty on crude palm oil, crude palm kernel oil and processed palm kernel oil from July 1 to December 31 this year to boost exports.
He said in 2019, Malaysia had produced more than 19.9 million tonnes of crude palm oil (CPO) from a planted area of 5.9 million hectares.
This represents a total exports of palm oil and palm-based products of 27.9 million tonnes with export receipts of RM64.8 billion.
As of August 2020, preliminary data from the Malaysian Palm Oil Board showed that Malaysia produced 12.72 million tonnes of CPO, while total exports of palm oil and palm based products reached 16.9 million tonnes valued at RM45.19 billion.
He said this, however, was slightly lower as compared to RM45.59 billion during the same period in 2019 due to challenges brought upon by the Covid-19 pandemic.