India's No.1 Commodity Exchange

A Financial Technologies Group Company

Multi Commodity Exchange of India Ltd (MCX) is a demutualised exchange with permanent recognition from the government of India. MCX offers futures trading in 56 commodities including bullion, energy, grains, plastics, metals, oil and oilseeds, fibres, spices, pulses, sugar, plantations and carbon credits as on March 31, 2008. The average daily turnover on the MCX platform was Rs. 102,827.60 million during fiscal 2007-08.

With a market share of 62%, MCX remains the no. 1 commodity exchange in


INTRODUCTION •••••••••••••••••••••••••••

Palm oil is obtained from fresh fruit bunches of oil palm cultivated in plantations. There are several commercial variants of palm oil, viz. crude palm oil (CPO), RBD (refined bleached deodorised) palm oil, RBD palmolein, and palm kernel oil. CPO, when subjected to refining, results in the other fractions.

APPLICATIONS •••••••••••••••••••••••••••

CPO and its derivatives are mostly used as edible oil. Due to cost-competitiveness, refined products of CPO are much preferred in confectionery, biscuit and bakery industries. After unprecedented upsurge in crude oil (petroleum) prices, use of CPO in bio-diesel has increased significantly. Environmental concerns have lately promoted the use of CPO in lubricants.

GLOBAL SCENARIO ••••••••••••••••••••••••••

Major Producers of CPO
(million tonnes):
Country 2006/07 2007/08*
Indonesia 16.60 18.30
Malaysia 15.29 17.70
Thailand 1.17 1.05
Colombia 0.77 0.83
Nigeria 0.81 0.82
Others 2.69 2.72 Major Importers of CPO
(million tonnes):
Country 2006/07 2007/08*
China 5.14 5.40
EU-27 3.64 3.75
India 3.80 4.35
Pakistan 2.21 2.42
Bangladesh 0.95 1.00
Others 10.88 12.04 Source: USDA estimates (September 2008)


Major Consumers of CPO (Million tonnes):

Country 2006/07 2007/08*
China 5.14 5.40
Indonesia 4.64 4.80
India 3.77 4.43
EU-27 3.57 3.61
Malaysia 3.20 3.37
Pakistan 2.21 2.42 Top Exporters of CPO
(million tonnes):
Country 2006/07 2007/08*
Malaysia 12.90 14.10
Indonesia 11.45 13.50
Papua New Guinea 0.36 0.38
Jordan 0.28 0.30
Thailand 0.23 0.30
Others 1.85 1.83 > India's annual consumption of edible oil is around 12 million tonnes, half of it met through imports and the rest through domestically produced oilseeds. India is dependent on palm oil imports for over 30% of its annual edible oil requirement and 65% of India's annual edible oil imports.

> Almost all palm oil and all its derivatives used in India are imported. Major ports for palm oil imports are Kandla, JNPT, Kakinada, Kolkata, Chennai, Mundra, Mangalore, Mumbai, and Cochin.

> According to estimates by Solvent Extractors' Association of India, India imported approximately 30 lakh tonnes between November 2006 and October 2007, and maintained its position as the world's thirdlargest importer of palm oil, next to China and EU-27.

For private circulation only

Globally, MCX ranks No. 1 in silver, No.2 in natural gas, and NO.3 in crude oil, gold, and copper in futures trading.

India is Third-largest Consumer of Palm Oil

Others 40%

Pakistan 6%

China 14%

Malaysia 8%


India 11%

Palm oil vis-a-vis other oil consumption in India:

Consumption trend in India is marked not just by rising overall consumption, but by changing patterns of consumption as well. Almost all vegetable oil consumed in India in the early 1970s was groundnut oil (53% of consumption in 1972/73-1974/75), rapeseed oil (25%), and cottonseed oil (9%). Palm, soya bean, and sunflower oil together accounted for less than 4% of the total. But recently, palm and soyabean oils have became major edible oils consumed in India, accounting for 36% and 18% of total consumption, respectively.

In 1994, India shifted from a restrictive state trading regime for oil to unrestricted imports, subject to tariffs and duty. Imported oils, mostly palm and soyabean oils, have accounted for most of the growth in consumption. Together, these non-traditional imported oils now account for about half the oil consumed in India, filling a gap arising from increasing demand and static domestic oilseed production.

Palm Oil Market Share in India

Sunflowerseed Oil 3%

Groundnu! Oil 13%

Cottonseed Oil 9%

Palm Oil 36%


Malaysia Indonesia Mumbai
CPO-C&F Mumbai 98.10% 98.50% 100.00%
CPO-FOB Indonesia 98.60% 100.00% 98.50%
CPO-Bursa Malaysia 100.00% 98.60% 98.10% MCX has strategic alliances with nine leading commodity exchanges of

the world.

Fundamental factors influencing CPO prices in India

> Supply scenario in producing countries such as Malaysia and Indonesia. > Crude oil (petroleum) prices due to use of CPO for bio-diesel production > Demand in major consuming countries, e.g., China, India, and EU.

> Price-based substitution between soyabean oil and palm oil.

> Changes in import duty and tariff value.

MCX CPO FUTURES ••••••••••••••••••••••••••

MCX CPO Continuous Price Chart
•. , •••• I ....... _. a ••• _._ Open
500 ... • •• 1 .......
~ 450 00- 0
TI •
, . High
~ 400 1101
0 ••• 16 ' •• ,
,50 • ',.' laot·, .,
~ 350 0·.
';: '.1 Low
250 ClOSE
6.Jun·08 24·Jun·0812·Jul·08 30·Jul·0817·Aug·084·Sep·08
Date MCX and BMD CPO Correlation: Very strong correlation observed between BMD-based CPO contract and MCX-based CPO contract.

BMD MCX CPO Price Correlation

I- 4000
ii2 3500
::a; 3000
0 2500
c 2000
6/6/2008 7/6/2008 8/6/2008
Date 550 CI
500 Q
450 "iii
400 0
350 0..
300 ><
9/6/2008 -BMDClose


BMD-MCX CPO Correlation
Price Correlation 99.5%
Return Correlation 87.0% The average daily turnover of MCX is US$ 1.9 billion.



MCX CPO Daily Volume and Open Interest:

MCX CPO Volume and Open Interest

rJJ 25000
0 20000
.;: 15000
2 10000
6/6/08 7/6/08

Date 8/6/08


I c:::JVolume ---- 01 I


> Volatility in prices arising due to changing supply-demand scenario necessitates hedging to cover price risk.

> Indian price (Kandla) is taken for final settlement, which provides risk cover against changing tariff, import

duty, and volatile currencies as well.

> Increasing volume and open interest provides good liquidity and depth to trade. > Initial margin as low as 5% and spread margin benefit is 75% of normal margin

> Simple average of last three days spot market price is taken for final settlement which minimises effect of last day uncertainty in spot market (if any).

IMPORTANTWEBSITES ••••••••••••••••••••••••

MCX now reaches out to over 380 cities and towns with

the help of 7,269 terminals




Symbol Description




July contract With effect from the date of approval up to 31st July of the contract yea r

1st April to 31st August of the contract year

1st May to 30th September of the contract year 1st June to 31st October of the contract year

1st July to 30th November of the contract year 1st August to 31st December of the contract year

August contract September contract October contract November contract December Contract


Trading period Mondays through Saturdays

Trading session Monday to Friday: 10.00 am to 5.00 pm

Saturdays: 10.00 am to 2.00 pm

Trading unit 10 MT

Quotation/Base Value Rs.j10 Kg

Price quote Ex- Kandla, exclusive of Sales taxi VAT

Tick size (minimum price movement) 10 paise

Daily price limits Daily price fluctuation limit is (+/-) 2%. If the trade hits the prescribed daily price limit there will be a cooling off period of 15 minutes. Trade will be allowed during this cooling off period within the price band. Thereafter the price band would be raised by another (+/-) 2% 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%.

5% Maximum allowable open positionFor individual clients: 20000 MT

Initial margin

For a member collectively for all clients: 25 % of the open market position

MCX Comdex is India's first composite commodity

futures price index.


Delivery unit

10 MT (with tolerance limit of 250 Kgs) which means that if the seller delivers any quantity between 9.75 MT to 10.25 MT, it will be construed as adequate discharge of his delivery obligation of 10 MT, though he will get the value only for actually quantity delivered by him.


Within Kandla municipal limits

Crude Palm Oil of good merchantable quality in bulk and unbleached.

1.4491 to 1.4552 Specific gravity @ 42 C 0.895 to 0.897 45 - 56

195 - 205

Delivery period margin Delivery centre(s) Quality specifications

Refractive index at 50 C Iodine value (Wij's method) Saponification value Unsaponifiable matter

FFA by wt.


Not more than 1.2% Not more than 5.0% Not More than 0.25%

Note: Please refer to the exchange circulars for the latest contract specifications and delivery and settlement procedures.

For Customer Support: +91-22-66494040

To get the latest futures price of a commodity, sms "MCX <Commodity Name>" to 55454


Exchange Square, CTS No. 255, Suren Road, Andheri East, Mumbai - 400093, India.

Tel. No. 91-22-67318888 • •

India's No.1 Commodity Exchange

Disclaimer: The information provided here is not guaranteed for its accuracy or completeness. It is solely meant for information dissemination and knowledge sharing.

Neither Multi Commodity Exchange of India Ltd. (MCX) nor its employees accepts any liability, whatsoever, for any trading decision and loss incurred or arising from the use of this publication. MCX or any of its affiliates makes no warranties as to the accuracy of information or results to be obtained from its use.

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