ABSTRACT:
The difference between cash and futures prices is known as basis. It represents the local demand and supply situation as well as the risk factors associated with the physical commodity trade. Forecast basis can be used with the futures prices to predict the cash price of palm oil. In addition, using the expected trends in basis can improve hedging by both buyers and sellers. Forecasts for other crops using basis from simple historical averages compare favourably with the results from more complex forecasting models. This work investigated the behaviour of crude palm oil (CPO) basis and compared practical methods of forecasting CPO basis by regions in Malaysia using multi-year historical averages.
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