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Crude

Palm Oil

Domestic priceshighly correlated withInternational Prices –actively traded on

Bursa Malaysia

Manage Price Risk –

over 9 Million MT imports in India

Hedge yourPrice Risk on alledible oils on asingle futuresplatform

IncreasedEfficiencyin your hedgingoperations

in our Lives



Palm Oil is without doubt, an integral part of our lives. It is the most consumed vegetable oil in the

world and is widely viewed as an alternative to hydrogenated oils such as Soya and Sunflower oil. It is used

in a growing number of industrial processes and a wide variety of food and other household products

including processed foods, soaps, detergents, cosmetics and pharmaceuticals.

It is obtained from the fruit of the oil palm cultivated in plantations. There are several commercial variants of

Palm oil available viz., Crude Palm oil, Crude Palmolein, RBD (Refined Bleached Deoderised) Palm oil, RBD

Palmolien and Palm Kernel oil. Crude Palm oil when subjected to refining results in the other factions.

India, which is one of the largest importer and consumer of edible oils in the world, imports over 9 Mn MT of

Palm oil annually (mainly from Malaysia and Indonesia). With a total edible oil consumption of approximately

16 Mn MT, this implies that the country is dependent on Palm oil imports for over 55% of its annual edible

requirement. It has never had a production history in context of this oil, with domestic production at a very

meager at 0.7 lakh tons. India imports CPO mainly from Indonesia while from Malaysia it imports mostly

refined, bleached and deodorised (RBD) Palmolein. The dependence on the imported edible oils is expected

to increase in the future due to anticipated domestic supply constraints and the high cost competitiveness ofimported oils and increasing per capita consumption of edible oils. In such a scenario price risk management

is important for all the stake holders.

India-in the drivers seat

GLOBAL PRODUCTION MAJOR CONSUMERS

Country CountryProduction(2013-14) in MT

DomesticConsumption

(2013-14) in MT

Indonesia

Malaysia

ThailandColombia

Rest of the world

World Total

India

Indonesia

ChinaEuropean Union

Rest of the world

World Total

31.00

19.20

2.101.00

5.01

58.31

9.14

8.50

6.585.67

26.43

56.32

EXPORT IMPORTS

Country CountryExport(2013-14) in MT

9.00

6.60

5.802.45

18.55

52.30

Imports(2013-14) in MT

Indonesia

Malaysia

Papua New GuineaThailand

Rest of the world

World Total

21.30

17.20

0.640.52

3.31

42.97

India

China

European UnionPakistan

Rest of the world

World Total

Source : USDA



With increasing demand for Palm oil, price risk management for a consuming nation as India is very

important. Volatility in prices arising due to changing supply-demand scenario necessitates hedging to cover

price risk. NCDEX Crude Palm Oil futures are ideal to meet the price risk management needs of theprocessors, traders, physical participants and end users. They can hedge prices for the product that will be

purchased at a later date.

Need for Price Risk Management

ADVANTAGES OF TRADING

IN NCDEX CRUDE PALM OIL FUTURES

Fundamental Factors influencingPalm Oil Prices in India:

• Manage price risk – over 9 million MT imports in India• Domestic prices highly correlated with International Prices –

actively traded on Bursa Malaysia

• Hedge your price risk on all edible oils on a single futures platform

• Increased efficiency in your hedging operations

IMPORTERS:

Importers face the risk of falling at the time of arrival of their import shipments. With import price being

fixed, the importer faces a huge price risk. This can be mitigated by hedging on the NCDEX platform. The

importer can go short on the NCDEX Crude Palm Oil contract and hedge the risk of falling prices.

REFINERIES:

Refineries in India process Crude Palm Oil and sell it to consumer industries by processing it to RBD

Palmolein, Super Olein and other products. If refinery A has a supply order of 10000 MT of RBD Palmolein,

which it needs to deliver after 3 months, he faces the risk of Crude Palm Oil prices increasing after 3 months

when it is time for him to make delivery. Refinery A should hence buy appropriate quantity of NCDEX Crude

Palm Oil futures contract to hedge the risk of increasing prices and maintain its profitability.

REFINERIES WITH PLANTATIONS IN MALAYSIA/INDONESIA:

Industries which are in the end-to-end value chain system also face huge price risk. Not only have they made

investments in the plantation but they also face uncertainty over the demand in future. Going Short (Sell) on

NCDEX Crude Palm Oil futures hedge the risk of uncertain demand.

• Supply Scenario in producing countries such as Malaysia and Indonesia

• The supply-demand scenario of all oils and oil seeds in the consuming centers, viz., India, China

• The supply-demand and price scenario of competitive oils, viz., soy oil• The Government export-import policy

• The Palm oil production cycle: April - December is peak production period

• Import regulations imposed in the importing countries



Name of Commodity

Ticker Symbol

Basis

Unit of Trading

Delivery UnitQuotation/Base Value

Tick Size

Quality Specifications

Delivery Center

Delivery Logic

Due Date/Expiry Date

Price Limit

Position Limit

CRUDE PALM OIL

CPO

Ex-tank Kandla exclusive of Sales Tax/VAT

10 MT

10 MT ` per 10 kg

10 Paise

Moisture & Impurities

Refractive Index, 50°C

Specific Gravity, 42°C

Saponification Value

Iodine Value

Unsaponification Value

Melting Point, Capillary

Slip Method

FFA

Acid Value Kandla (within a radius of 50 km from the municipal limits)

Intention Matching

Last trading day of the month

If last day happens to be a trading holiday, a Saturday or a Sunday then the due date

shall be the immediately preceding trading day of the Exchange.

Daily price fluctuation limit is (+/-) 3%. If the trade hits the prescribed daily price limit

there will be a cooling off period for 15 minutes. Trade will be allowed during this

cooling off period within the price band. Thereafter the price band would be raised by

(+/-) 1% and trade will be resumed.

If the price hits the revised price band (4%) again during the day, trade will only be

allowed within the revised price band. No trade/order shall be permitted during the

day beyond the revised limit of (+/-) 4%.

Member level: Maximum 1,25,000 MT or 15% of Market Open position in the

Commodity, whichever is higher.

Client level: 25,000 MT

The above limits will not apply to bonafide hedgers. For bonafide hedgers, the

Exchange will, on a case-to-case basis, decide the hedge limits. Please refer to

Circular No. NCDEX/TRADING-100/2005/219 dated October 20, 2005.

Near month limit (Applicable from 1st of every month in which the contract is due to expire)

Member level: Maximum 40,000 MT or 15% of the total near month open-position in

the Commodity, whichever is higher.

Client level: 8,000 MT

0.25% Max

1.4491-1.4552

0.895-0.897

195-205

45-56

1.2% Max

37°C Max

5% Max

10% Max

NATIONAL COMMODITY & DERIVATIVES EXCHANGE LIMITED

Akruti Corporate Park, 1st Floor, Near G. E. Garden, L. B. S. Marg, Kanjurmarg (West), Mumbai - 400 078.

Tel : (+91-22) 66406609-13, Fax : (+91-22) 66406899, E-mail : [email protected], Website : www.ncdex.com

Contract Specifications:

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