06/04/2006 (Food Nevigator.com) - Dalian Commodity Exchange, China’s largest futures exchange by volume, is considering introducing palm oil futures, allowing food processors to hedge risks on the increasingly used ingredient.

The exchange, based in the north-eastern town of China, yesterday signed a memorandum of understanding with the Malaysian futures market Bursa Malaysia, the largest palm oil futures market in the world.
Under the agreement, the two will co-operate in developing joint derivative products and exchange information, training and educational efforts. As part of the new collaboration, the Malaysian exchange will help the Chinese set up palm oil futures.

"The signing of the MOU with Bursa Malaysia indicates that Dalian Commodity Exchange is accelerating its work on the palm oil futures product," the exchange said in a statement.

Palm oil is increasingly being used by food makers in the west as an alternative to partially hydrogenated fats (trans fats), believed to contribute to the risk of heart disease, although the largest consumers remain in Asia - India, China, Malaysia and Pakistan account for about 60 per cent of the world's total consumption.

China imported about 4 million tons of the oil last year although this is expected to surge this year following its removal of the import quota in line with WTO commitments.

This could make a futures exchange for the oil valuable for food ingredient buyers.

Worldwide around 28 million tons of palm oil are produced every year, with almost 90 per cent of this coming from Malaysia and Indonesia. It is the second largest oil crop after soy.

Dalian Commodity Exchange already trades corn, soybeans, soymeal and soy oil futures