Basis risk in palm oil market after Indonesia growth

Guessing game

Palms at a palm oil plantation

A little under 15 months ago, talk in the palm oil industry was of crude palm oil (CPO) prices breaching 4,000 ringgit/tonne ($1,270). CPO, used as a feedstock in everything from foodstuffs to cosmetics to biofuel, had been on an upward trend since September 2011 and nobody foresaw the China-led demand plunge that sent the price from over 3,500 ringgit/tonne in April to close to 2,000 ringgit/tonne during December.

Front month prices – the shortest duration contract that can be purchased in the

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