CRUDE PALM OIL – OPIEJ

Improving the Price Forecast of Crude Palm Oil Futures Using Historical Return Variances

mpob_admin — Tue, 28 Aug 2018 04:35:57 +0000

This paper attempts to investigate the price relationship between the spot and futures prices of crude palm oil contracts traded in the Malaysian Derivatives Exchange. Using historical variances of spot and futures price returns, we applied a model for approximating the convenience yield developed by Longstaff (1995). This model was then tested on the actual crude palm oil prices for the spot-month and three month contracts from January 1988 to December 2002, to determine the forecasting accuracy of this model relative to the simple cost-of carry model. There was some improvement in the predictive ability of this approach which could be attributed to the inclusion of historical return variances. The improvement was also evident when tested against out-of-sample data, suggesting that the inclusion of historical return variances in the form of the convenience yield could provide a better forecast of crude palm oil futures prices.

Impacts of CPO-Export Tax on Several Aspects of Indonesian CPO Industry

mpob_admin — Tue, 28 Aug 2018 04:32:20 +0000

To control domestic supply and price of crude palm oil (CPO) and cooking oil, the government of Indonesia has imposed CPO-export tax since August 1994. As the CPO industry plays an important role in Indonesian economy, the imposition of the tax is expected to have substantial impacts on various aspects of the industry, such as on investment, production, trade, farm income and welfare distribution. The main objective of this study is to assess these impacts using an econometric model of the industry. The results of the study reveal that the export tax policy has inhibited the growth rate of investment, production, export and farm income. On the other hand, this policy has been an effective instrument to control domestic CPO and cooking oil price. Moreover, this policy has caused a substantial welfare transfer from producers to consumers and the government. To compromise these conflicting impacts, an alternative CPO tax formula is also proposed in this paper.