The Macroeconomic Factors on Malaysia’s Future Crude Palm Oil (FCPO)

Abstract

Over the past few years, there has been much interest regarding the Futures Crude Palm Oil (FCPO) in Malaysia. Its volatility in particular, has drawn a lot of concern and has become the focus of discussion in several studies. This study attempts to contribute to the research by examining the macroeconomic variables on Malaysia’s Crude Palm Oil from the year 1990 to 2021. It is crucial to identify the factors in order to have a better control regarding the FCPO price uncertainties. The primary question that is being addressed here is whether the macroeconomic variables affect the price of FCPO. Moreover, a selection of independent variables was chosen in this study, namely Gross Domestic Product (GDP), Interest Rate (IR) and Inflation Rate (CPI). Meanwhile the dependent variable would be FCPO price. All data were sourced from The World Bank and Trading Economics. For analysis, this study employed the methods of Descriptive Analysis, Regression Analysis, Normality Test and Correlation Analysis. Overall, the results found that GDP and IR have a significant and positive relationship with the price of FCPO, with IR as the most significant variable. The study also revealed that CPI has no significant relationship with the price of FCPO and, in fact, negatively affected it. The results of this research may assist the Malaysian government, as well as private and palm oil sectors to take better initiatives to control the volatility of FCPO and boost the growth of CPO in Malaysia.