The second agricultural futures contract introduced this year opened yesterday on the Dalian Commodity Exchange (DCE) with a bang.

Five out of six palm oil futures contracts surged to the daily allowable limits on the first trading day on the DCE.

Contracts for delivery in January, February, March and September soared to the daily allowable limit of 8 percent to 8,424 yuan per ton from their opening prices in the early hours of trading and stayed there for the rest of the day.

Contracts for delivery in April rose 7.95 percent, just below the limit, to close at 8,420 yuan per ton.

The combined turnover of all the six contracts totaled 340 million yuan. Analysts said the trading would have been more active if the prices of the contracts were not artificially capped by the daily limits.

They said traders' anticipation of an upward trend of palm oil prices in the spot market helped the futures market perform well in the first day of trading. What's more, the new tool for hedging against fluctuating prices of a major commodity used in a wide variety of processed foods has apparently attracted the interest of many traders and food processors, analysts said.

The spot price of palm oil quoted yesterday on the Huangpu seaport in Guangzhou, the main entry point for palm oil imports from Malaysia and other producers in Southeast Asia, reached 8,350 yuan per ton, up 4.3 percent from last week.

Industry experts said the continuous rise of other edible oil prices in the domestic market also helps support the futures prices of palm oil. The most actively traded soybean oil futures contract on the DCE for delivery in May 2008 yesterday climbed 1.84 percent, or 162 yuan, to 8,944 yuan per ton.

On Zhengzhou Commodity Exchange, the most actively traded rapeseed oil futures contract for delivery in January 2008 climbed 1.23 percent, or 120 yuan, to close at 9,880 yuan per ton.

Lin Hui, an analyst at a futures company of Orient Securities, said: "As one of the major edible oil products, palm oil futures will attract a large number of traders to hedge against potential risks resulting from the price fluctuation of palm oil.

The price of palm oil in the domestic market in the first six months of 2007 rose 50.4 percent to between 7,000 and 8,200 yuan per ton from the same period last year.

(China Daily October 30, 2007)