JAKARTA: Indonesia, the world’s biggest palm oil exporter, will launch its crude palm oil (CPO) futures exchange on Friday, but it will not make trading via the exchange mandatory, its chief regulator told Reuters on Wednesday.
Authorities in the Southeast Asian country had previously planned to make it mandatory for all CPO exports to go through the exchange, in order to drive global palm oil prices and create benchmarks similar to those in Kuala Lumpur and Rotterdam.
“This future exchange will hopefully create the CPO price reference for Indonesia, so we can have data and create better policies related to the industry,” Didid Noordiatmoko, head of the regulator BAPPEBTI, said in a phone interview.
The Indonesia Commodity and Derivatives Exchange (ICDX) has been appointed as the exchange, and transactions will be quoted in the rupiah currency, Didid said. Indonesia’s Palm Oil Association and analysts were lukewarm on the introduction of the exchange.
Head of Indonesia’s Palm Oil Association (GAPKI) said that as long as it was not mandatory, the futures exchange would not be a problem. “However, it would be interesting, if it could be used for hedging,” Eddy Martono said. Most Indonesian palm oil exporters currently conduct sales directly with buyers without going through an exchange, while auctions held by state trading company KPB Nusantara only offers physical palm oil and not futures contracts.
Although 12 companies have listed in the exchange, Didid said the exchange may not see any transactions immediately after the launch, adding that training will be conducted afterwards.
“Indonesia launching its CPO futures exchange may not have a significant importance at least for the near term time frame at first, the participation is going to be voluntary in contrast to the earlier talks of mandatory for exporters and secondly, the denomination will be in Indonesian rupiah and not in US Dollar,” Anilkumar Bagani, Research Head of Sunvin Group India said.