CME Group to launch palm oil futures

By Nicholas Zeman | February 23, 2010
Posted March 10, 2010

On May 23, the Chicago Mercantile Exchange Group will launch a palm oil futures contract. Palm oil is the most abundant and widely consumed edible oil in the world and has strong ties to the biodiesel industry. Each contract will be equivalent to 25 metric tons of crude palm oil.

Crude palm oil is contained in a multitude of diverse products, and is a major feedstock for biodiesel production in Asia. Settlement prices at expiration of the new electronically traded futures contract will be based on Bursa Malaysia Derivatives Berhad Crude Palm Oil futures, the global benchmark for crude palm oil pricing that is traded in Malaysian ringgit (one ringgit equals 0.30 U.S. dollars). The use of the settlement prices is part of an agreement between CME and Bursa that includes a provision for CME Globex electronic trading services and an equity investment in Bursa Malaysia by CME Group.

"This opportunity to work with our Bursa Malaysia partners enables us to offer a contract that meets the growing customer demand for trading crude palm oil, one of the world's most widely used commodities, on CME Globex, the same electronic trading platform as CME Group's existing suite of agricultural products," said Tim Andriesen, CME Group managing director of agricultural products and services. "Food processers, commercial firms and other multinational companies that use crude palm oil and trade in U.S. currency now have an alternative for hedging that risk."
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