Palm oil prices moved higher in March, driven by the U.S.-Iran war, which pushed crude oil prices sharply up. While palm did not rise as much as crude, it was still significantly impacted. 

The USD Malaysian Crude Palm Oil Calendar futures contract (CPO) gained 13.5% in March 2026, its strongest monthly gain since April 2022.

The rally was further supported by Indonesia signaling a potential B50 biodiesel mandate, raising concerns over reduced export supply.

In contrast, India stepped back from the market. Weak refining margins and a softer rupee led to imports falling 18.7% month on month to a three-month low, as buyers avoided elevated prices.

As shown in the chart, although both contracts track palm oil, their price paths tend to vary. Before breaking this down, it is important to understand how the South Asia Crude Palm Oil (Fastmarkets) futures contract (IPF) works.

The South Asia Crude Palm Oil (Fastmarkets) futures contract tracks the price of crude palm oil delivered into India, based on the Fastmarkets CFR India assessment derived from physical market assessments. Priced on a CFR (Cost and Freight) basis, it reflects the full landed cost excluding duties and insurance, making it directly relevant to Indian importers.

As suppliers from origins such as Malaysia, Indonesia and Thailand compete for market share, the benchmark naturally reflects the most competitive delivered price at any given time. This makes it a dynamic, market-driven reference and the same price that appears on an importer’s purchase contract.

Launched by CME Group in partnership with Fastmarkets, the contract is designed to align hedging with actual import costs. It is priced in USD per metric ton, with each contract representing 10 metric tons, and is cash-settled, allowing participants to hedge price risk without physical delivery.

More detailed information can be found in the CME–Fastmarkets South Asian Vegetable Oil Futures white paper.

One of the key features of this contract is its averaging settlement mechanism. Rather than referencing a single day’s price, settlement is based on the arithmetic average of daily Fastmarkets CFR India CPO assessments over the calendar month, with the final value rounded to the nearest USD 0.25.

This ensures that the final price reflects the overall market trend rather than short-term volatility. As the month progresses, each new price has less impact on the average, making the settlement more stable and less sensitive to late price swings.

For importers, this closely mirrors how physical cargoes are priced over a period rather than a single day, making the hedge better aligned with actual procurement.

The South Asia Crude Palm Oil (Fastmarkets) futures contract was introduced to address a key mismatch faced by Indian importers. While their actual exposure is based on CFR India pricing, which includes freight and reflects regional demand, hedging has historically relied on FOB-based benchmarks like FCPO that exclude these components.

This creates basis risk, where the hedge and the actual cost do not move in perfect sync. Differences in freight, origin dynamics, and local demand can cause the two to diverge, leaving the importer partially exposed.

Currency adds another layer to this mismatch. Contracts like FCPO are priced in Malaysian Ringgit, meaning the hedge is also affected by MYR/USD movements, introducing volatility unrelated to palm oil prices.

The IPF contract addresses both issues. By tracking the CFR India benchmark in USD, it aligns directly with the importer’s actual cost structure. The result is a cleaner, more accurate hedge that moves in line with real exposure, rather than approximating it.

The IPF contract is primarily accessed through the over-the-counter (OTC) market. While it is listed on CME Group infrastructure, most trades are privately negotiated and then submitted for clearing via ClearPort.

In practice, the most common route is through an inter-dealer broker (IDB) such as ICAP.

The process is fairly simple. An Indian importer reaches out to a broker, who connects them with a counterparty willing to take the other side of the trade. Both parties agree on the price, volume, and contract month. This is known as a block trade. The minimum size is 10 contracts, or 100 metric tons, and the price must reflect current market levels. Once agreed, the trade is reported to ClearPort within 15 minutes.

After this, CME Clearing steps in as the middleman between both parties. This means the buyer and seller no longer face each other directly. Instead, CME Clearing guarantees the trade, manages the margin, and handles daily profit and loss settlements. This setup makes the process both flexible and secure for participants.

For full details on block trades, position limits, the approved IDB list and margin requirements, visit our South Asia Vegetable Oil (Fastmarkets) Futures FAQ.

When comparing prices in USD terms, South Asia CPO futures (IPF) and Bursa Malaysia Crude Palm Oil futures (FCPO) show that IPF trades at higher levels than FCPO.

FCPO pricing is largely based on FOB market assessments. It represents the price of crude palm oil at the Malaysian port, with shipping costs borne by the buyer. Freight, typically USD 80 to 110 per MT, is not included.

IPF, on the other hand, is based on CFR West Coast India pricing. Freight is already included, so it reflects the full landed cost for an Indian importer.

This creates a mismatch when hedging with FCPO, as it excludes freight costs, causing a gap between the hedge and the importer’s actual landed cost.

Let us assume that on 16 April, an Indian importer orders 100 MT of crude palm oil at USD 1,237.50 per MT, giving a total exposure of USD 123,750.

As shown in the table, using FCPO to hedge CFR India prices leaves a structural portion of the exposure unhedged, as FOB prices do not reflect the full landed cost embedded in CFR pricing.

The FCPO does not capture movements in freight rates, leaving the importer exposed to a key, often volatile driver of landed cost.

This can materially impact total procurement even when origin prices remain stable.

To illustrate how an Indian buyer can use futures, assume Swift Traders Private Limited (ST) wants to import 100 MT of crude palm oil, with the cargo price linked to the Fastmarkets CFR West Coast India benchmark.

On 5 March, the price is USD 1,174.25/MT. They lock in this price, with delivery scheduled for 31 March.

Now, the following example will show what happens to ST’s purchase when they hedge and when they do not. 

As shown in the chart below, between  5 March and 31 March, prices gained 8.9%. The seller, citing geopolitical uncertainty, refuses to honour the earlier price and seeks higher offers.

The table below shows that if unhedged, Swift Traders would have incurred a loss of USD 10,500 due to higher prices. However, when hedged, they paid the same price as on  5 March, as the loss was offset by gains in the futures market.

The table also illustrates outcomes under hypothetical scenarios where prices fall by 8.9% and remain unchanged.

Even when prices fall, the hedge ensures the final purchase price remains unchanged.

The example above does not account for margin requirements. In practice, trading futures requires posting margin with CME Clearing, which acts as a performance bond. 

Initial margin is the amount deposited when the position is opened. For Swift Traders, this is USD 476 per contract. For 10 contracts, the initial margin will be USD 4,760. This is not a cost but collateral that is fully returned upon closing the position.

Maintenance margin is the minimum balance required in the account. For this contract, the amount is USD 433 per contract, so for 10,it will be USD 4,330. If the balance falls below this level, a margin call is triggered.

Variation margin reflects daily mark-to-market. Gains are credited, and losses are debited each day based on price movements.

If losses push the account below USD 4,330, a margin call is issued to restore it to USD 4,760. This must be paid in USD, usually within hours. If not met, the position may be closed, leaving the importer unhedged at a critical time.

A margin call occurs only when prices fall.

If prices fall to USD 1,069.25 per MT, the futures position loses USD 10,500. This is debited from the margin account, pushing it below the maintenance level of USD 4,330. A margin call is issued, and Swift Traders must add funds to restore the balance to USD 4,760.

If prices remain flat, there is no loss, and the margin account stays at USD 4,760. No margin call.

If prices rise, the account is credited with USD 10,500, increasing to USD 15,260. No margin call, and excess funds can be withdrawn.

Using CFR India CPO futures allows importers to hedge what they actually pay, the full landed cost, rather than just the origin price. This makes the hedge far more stable and aligned with real procurement.

By using this contract, importers can lock in prices and protect themselves from market volatility, whether driven by crude oil, freight, import tariffs, currency volatility or supply disruptions. It removes uncertainty and allows for better planning and pricing decisions.

The key advantage is that this protection comes at a relatively low cost. By posting margin, importers can secure their cargo price without paying the full value upfront. This makes hedging both efficient and practical.

Exchange traded derivatives and cleared over-the-counter (“OTC”) derivatives are not suitable for all investors and involve the risk of loss. Exchange traded and OTC derivatives are leveraged instruments and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money initially deposited. This communication does not (within the meaning of any applicable legislation) constitute a Prospectus or a public offering of securities; nor is it a recommendation, offer, invitation or solicitation to buy, sell or retain any specific investment or service.

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