According to Reuters reports, a new palm oil futures contract is set to be signed in Malaysia during the third quarter which will lead to greater price discovery well as offer a feasible option for physical delivery. This will greatly benefit Malaysia’s two largest palm producing states.

Samuel Ho, CEO of Bursa Malaysia Derivatives said, “The (new) contract mirrors most of the FCPO specifications, with enhancements made to benefit East Malaysian palm oil players.” 

Malaysia’s crude palm oil futures contract (FCPO) FCPOc3 is managed by the Bursa Malaysia Derivatives Exchange. It then gives the edible oil a global price benchmark. 

Malaysia is the world’s second-largest palm oil producer and exporter, with Indonesia taking the top spot. 45% of Malaysia’s crude palm oil production is contributed by the East Malaysian island of Borneo, Sabah state and neighbouring Sarawak. 

Chief executive of the Sarawak Oil Palm Plantation Owners Association, Andrew Cheng noted that, “It will allow us to fetch a better price, and with the savings we can expand the downstream industry in Sarawak to be fully-integrated and mature.”

He continued to point out that the producers in the two states lose money, over 1 billion ringgit annually because of price difference.

Ho also said that the new contract will provide physical deliveries in East Malaysia through three designated ports.