Indonesia plans to start physical trade in crude palm oil (CPO) via an exchange in the second half of 2009, a move that will give the world’s top producer its own benchmark price, a Jakarta Futures Exchange official said on Monday.
Indonesia is a leading supplier of other commodities including cocoa and coffee but plays almost no role as an exchange for these products.
As a result, traders have always used contracts traded outside the country as the benchmark for prices.
“As the world’s biggest CPO producer, Indonesia does not have a benchmark price in the local market. This is ironic,” Hasan Zein Mahmud. “We hope we can start the physical trade for CPO in the second half of 2009,” he said.
Indonesia uses the spot price in Rotterdam, Europe’s vegetable oils market, to determine the CPO export tax rate.
The Southeast Asian country also does not have a futures market in CPO and producers use Malaysian futures prices traded on the the Bursa Malaysia Derivatives Exchange.
The plan to create a physical market has received support from state plantations, which account for about 15 percent of the country’s CPO output, Mahmud said.
He said state plantations, which produce a combined output of 2.25-2.50 million tonnes per annum, had pledged to sell 20 percent of their production through the exchange.
State plantations normally sell palm oil via the Jakarta-based state marketing centre, with the centre functioning as a single seller.
Mahmud said unlike the state marketing centre, the exchange would treat each state plantation as an independent seller in the same way as private producers.
The exchange planned to use an electronic trading system so that sellers and buyers could trade online, he added.
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