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The Importance of Commodity Hedging

  

OPF to Hold FREE Seminar on Commodity Hedging

Kuala Lumpur, May 9, 2011 – Crude Palm Oil, commonly referred as CPO, is one valuable and natural resource found in Malaysia. The multi-functions of the palm oil, after processed from their fruit, range extensively from domestic consumption in edible oleins to the commercial greases in stearates. As the Crude oil prices fluctuated widely from a historical high USD147 per barrel in 2008 right to the bottom USD29 during financial crisis, henceforth back to above USD110 now, CPO has been following the trend of energy prices despite of its unique property as a non-corrosive agent.

Though CPO is never a fuel-based product, it has always been the major media topic in times of high Crude prices, for the fact again of its versatile conversion into biomass energies. As a secondary energy source, CPO always proven to be in limelight of speculators when the major Crude instruments are overly-hedged by inflationary pressures around the world.

Today, Malaysia is the world’s second largest producer of CPO. Due to the blessings of our fertile soil and humid weather, nowhere on earth is a better place to cultivate this agricultural wealth with superb quality as in Malaysia. By statistics, there 4.5 million hectares of land used for growing local Palm trees plantations and estimated 18 million tons of palm oil is produced annually in Malaysia with an employment opportunity soaring to near 600,000 workers.

While the weakening of U.S. dollar has pushed the global commodity prices to highs and many new highs, the interest of developing and research of making bio-fuels and bio-diesels has rekindled in many developed countries. Beside this, spiraling demands from emerging markets have definitely put an upward throttle onto CPO prices to satisfy both human consumption as well as making commercial lubrications.

In the 2008 financial crisis, CPO prices plunged from RM4486 per ton to RM1331 but now quickly reversed back to RM3300. Compared to the other major Crude instruments, CPO prices are still relatively cheap now but might soon jump up once the flight of funds move into this market. Currently, there are other CPO Futures market operating in Indonesia and U.S. Exchanges. However, Malaysia is proud to have the largest liquidity and participation in our local Exchange with an average daily volume estimated at 20,000 contracts or more during peak seasons. Needless to say, many speculators have benefitted with huge monetary rewards from its surging prices over last 2 years.

On the other hand, universal growing demands and stoking inflation might have bitten sizable profits from the invoices of CPO producers and exporters unknowingly. As most physical delivery is delivered over 90 days, the run-up prices will effectively incur potential losses to sellers.

On coming 14 May, Oriental Pacific Futures (OPF) Sdn Bhd will host a free seminar in Kuching, Sarawak entitled . This is the first-time-ever that such event will be held in East Malaysia in collaboration with The Borneo Post as media sponsor. The objectives of the seminar serve to educate the CPO producers and exporters on hedging against fluctuating risk and to maximize sales profits.

OPF is a licensed trading member of Bursa Malaysia that is eligible to facilitate e-trading or desk-dealing for their approved customers in Malaysia’s Futures instruments including CPO Futures. This session will be structured as a special 3 –hour seminar to be conducted by the renowned financial trainer – DAR Wong, who is also the popular columnist in The Borneo Post. In order to cater to the special needs of CPO traders and sellers in Malaysia industry, this seminar will entertain guests-by-invitations only. Those who wish to register for attendance need to produce identity of company and personal designation.

For more details, log on to http://www.opf.com.my/hedge for more information and registration.

Source: The Borneo Post

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About Oriental Pacific Futures
Oriental Pacific Futures is a Malaysia-based brokerage authorized to provide futures broking services to institution and private clients since 2007. Oriental Pacific Futures is a registered trading participant of Bursa Malaysia Derivatives Berhad and licensed clearing member of the Bursa Malaysia Derivatives Clearing Berhad. OPF specializes in futures broking, particularly Crude Palm Oil futures (FCPO) traded on Bursa Malaysia Kuala Lumpur. In 2010, OPF was one of the nine Malaysian futures brokers to receive recognition by the National Futures Association to solicit and accept orders and customer funds directly from US customers as permitted by the United States Commodity Futures Trading Commission through the Chicago Mercantile Exchange. Visit http://www.opf.com.my