Bursa Malaysia to launch soybean oil futures contract on March 18

Bursa Malaysia Derivatives Exchange -- the world's leading exchange for crude palm oil futures -- will launch a soybean oil futures contract on March 18, to facilitate the arbitrage between soybean oil and palm oil contracts, BMD's chairperson said at an industry conference on March 5.

This would be the first non-palm-based edible oil futures to be listed on the BMD, Bursa Malaysia chairperson Abdul Wahid Omar said, after an agreement with the Dalian Commodity Exchange, or DCE.

"Soybean oil contract will enable market participants to seamlessly arbitrage between soybean oil and palm oil prices on the same platform," Omar said at the 35th Annual Palm & Lauric Oils Price Outlook Conference & Exhibition.

The BMD plans to determine the settlement price for its upcoming US dollar-denominated soybean oil futures by referencing the settlement price of the soybean oil futures contract on the DCE, according to BMD chairperson.

This pricing approach is influenced by the interconnected price movements in palm oil, soybean oil, sunflower oil and rapeseed oil, which are contingent on the trends observed in other competitive edible oils, Omar said.

At present, traders and refiners manage their risk exposure across various edible oils using diverse exchange platforms. Notably, the Chicago Mercantile Exchange, following its merger with the Chicago Board of Trade, currently provides one of the most liquid soybean oil futures contracts, widely recognized as an industry benchmark.

The BMD and DCE signed a licensing agreement for the settlement price of soybean oil futures on Nov. 2 on the sidelines of 17th China International Oils and Oilseeds conference.

While soybean oil futures launched by DCE in 2006 is widely used as a price reference for China's spot soybean oil trades, Bursa Malaysia Derivatives offers the world's most liquid crude palm oil futures contract and is established as the global center for crude palm oil price discovery.

Platts, part of S&P Global Commodity Insights, assessed BMD crude palm oil at $852.14/mt March 5, up $8.44/mt on the day.