Minister Khairuddin urges companies to hedge using FCPO contracts

by BERNAMA / pic by BERNAMA

PLANTATION Industries and Commodities Minister Datuk Dr Mohd Khairuddin Aman Razali (picture) has urged companies to hedge using Bursa Malaysia’s Crude Palm Oil Futures (FCPO) contracts and leverage the relevant market tools to remain globally competitive.

He said the FCPO provides companies with the platform to better hedge prices in this volatile environment.

“Palm oil prices like any other commodity prices are subject to price volatility and as such companies must effectively manage price risk through the hedging mechanism and leveraging FCPO.

“In view that FCPO contracts are the most liquid futures contract for the pricing of CPO, hedging would facilitate management of unfavourable price risks and will benefit companies in terms of profitability and sustainability,” he said in his speech at the Palm and Lauric Oils Price Outlook Conference & Exhibition 2020 today.

Mohd Khairuddin expressed confidence that Bursa Malaysia Derivatives will continue to look into launching new palm-related and other commodities derivatives products to help the industry better manage their portfolio risk.

He said it is also pertinent for the palm oil industry to continue to support the production of Certified Sustainable Palm Oil (CSPO) in line with world demand and to meet the stringent requirements of consumer markets.

“This commodity must be seen to be risk free for its buyers. It must be sustainable in every sense of the word and issues like biodiversity loss, land conflict, deforestation, forced labour, and food safety concerns must be given utmost priority.

“We are working hard to ensure that Malaysian CSPO remains the premium palm oil — God’s gift for the world,” he noted.

The palm oil industry continues to be the main driver and backbone of the agri commodity sector in Malaysia, contributing significantly to the gross domestic product (GDP), foreign exchange earnings, including generating employment opportunities and in uplifting the standard of living in the country.

Mohd Khairuddin said almost one million people, including 485,788 smallholders, are directly employed in the oil palm plantation sector.

As of August 2020, preliminary data from Malaysian Palm Oil Board (MPOB) showed that Malaysia produced 12.72 million metric tonnes of CPO, while total exports of palm oil and palm-based products reached 16.9 million metric tonnes valued at RM45.19 billion, slightly lower compared to RM45.59 billion in the same period in 2019.

Hence, to enhance exports, the government, under the National Economic Recovery Plan (PENJANA), waived export duty levy on CPO, Crude Palm Kernel Oil (CPKO) and Refined Bleached Deoderised Palm Kernel Oil (RBDPKO), effectively July 1-Dec 31, 2020.

“The government of Malaysia will continue to assist the industry through an effective ecosystem and fiscal incentives to spur growth of the palm oil industry, especially in creating niche products and downstream activities.

“It is my ardent hope that the industry share the same vision and will work hand-in-hand to support governmental initiatives in its aspiration of promoting shared prosperity among its people or ‘rakyat’,” Mohd Khairuddin said.