Sumitomo Mitsui Financial Group Inc. is in talks with Barclays PLC on an alliance to offer commodity derivatives for companies to hedge against rising raw materials costs, the bank's commodity chief said.

Sumitomo Mitsui, Japan's third-largest bank by market value, plans to sell products developed by London-based Barclays and to eventually offer customers more of its own commodity derivatives, Shinichi Fujita, head of the Sumitomo Mitsui Banking Corp. commodities group, said. Japanese banks are developing commodities as a business area alongside lending and foreign exchange after prices rose to all-time highs. The UBS Bloomberg Constant Maturity Commodity Index reached a record 1,723.109 on July 3 before dropping 16 percent to Thursday's close. Volatility on the index gained to 31 percent on Aug. 22, the highest in more than four months on a 30-day basis.

"Commodities are an important business, in spite of uncertainties in the outlook for prices," said Shinichi Ina, an analyst at Credit Suisse in Tokyo. "Banks will devote more resources to this field as corporate fee revenue drops."

The Financial Services Agency in June agreed to rescind this year restrictions that prevent banks from trading commodities for immediate delivery.

Sumitomo Mitsui invested £500 million ($914 million) in July to take a 2.1 percent stake in Barclays as part of moves to expand its private banking and asset management business, and to tap the commodities experience of Britain's third-largest bank.

"We're discussing with Barclays activities that will be mutually beneficial," Fujita said. Sumitomo Mitsui in April started a group in Tokyo with a staff of five to strengthen its commodity derivatives business.

Yu Sakakibara, associate director of corporate communications at Barclays Capital in Tokyo, said Thursday he could not comment.

A drop in oil, metals and grains from record highs may increase demand among Japanese firms to hedge their risks, Bob Takai, general manager of financial services at Sumitomo Corp., said Aug. 22.

Sumitomo Mitsui last month sold derivatives to Melodian Co., allowing the coffee cream maker to hedge against increases in the price of palm oil, a key ingredient. The Osaka-based company last October raised product prices by as much as 20 percent, the first increase in 16 years.

Palm oil futures, which rose to a record 4,486 ringgit ($1,325) a ton on March 4, closed at 2,470 ringgit Thursday on the Malaysia Derivatives Exchange.

Mitsubishi UFJ Financial Group Inc., the nation's biggest banking group by market value, doubled the number of commodity sales staff at its Bank of Tokyo-Mitsubishi UFJ unit to six last year.

Seminars on commodities hosted by BTMU last month in Tokyo, Osaka and Nagoya drew attendees from almost 400 companies, twice the number of last year.