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AmInvest Research Reports

Author: AmInvest   |   Latest post: Mon, 22 Apr 2019, 9:59 AM

 

Plantation Sector - News flow for week 18 – 22 March

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  • Bloomberg reported that the Indonesian government will review the continuation of talks on the comprehensive economic partnership agreement with the EU in response to the EU’s plan to propose stricter limits on palm oil. Also, Indonesia will challenge the measures of the EU in the WTO (World Trade Organisation). In addition, the strategic partnership between Asean and the EU is on hold, and Indonesia is examining bilateral relations with member states that have been supporting the EU’s discriminatory actions.
  • In a related development in Bloomberg, a US agricultural official said that the EU is using “non-science-based” and “backward-looking” trade protectionist measures when it comes to imports of farm products. The US has been pressing the EU to address agriculture in trade talks. Farm production in the EU is subsidised and measures such as controls on approvals of genetically modified products keep US products from entering the bloc.
  • Bloomberg also said that China has sold soybean oil from its state reserves for the first time since October 2018. The government sold 5,000 tonnes out of 28,445 tonnes offered from the state reserve a few weeks ago. We believe that there could be a shortage of soybean oil. China’s demand for soybean has been affected by the outbreak of the African swine disease. Soybean is crushed to make animal feedmeal. Soybean oil is the by-product from the crushing.
  • Bloomberg quoted an industry expert in the US as saying that “exceptionally wet” conditions from the Mississippi River Delta in Arkansas to North Carolina will slow down fieldwork and plantings of corn and soybeans. Rains will further hamper plantings in the south where farmers are among the first to plant crops in the spring. We believe that it is still too early to conclude that heavy rains will affect US soybean plantings this year. The USDA has predicted that US soybean production will increase by 5.8% from 340.47mil tonnes in 2017/2018 to 360.08mil tonnes in 2018/2019F.
  • According to Reuters, the recent sell-off in grain and oilseed futures and options has culminated in an all-time short speculation position across the market. Reuters said that it is very unusual for funds to be short when the US soybean and corn growing season is just around the corner. Net positions in the CBOT (Chicago Board of Trade) corn, wheat and soybeans were overall a net short of 504,070 futures and options contracts for the week ended 12 March 2019. That exceeded the previous record of 480,592 contracts in the week ended 16 January 2018.
  • The Jakarta Post reported that President Joko Widodo (Jokowi) has advised oil palm growers to grow durian trees as he believes that the commodity has good prospects. He said that palm oil is facing difficulties in market expansion as certain countries link it with environmental issues while others impose high tariffs. Jokowi added that China has good demand for durians. However, most of China’s durians are sourced from Malaysia. Indonesia has various kinds of durians. However, the commodity is poorly managed.

Source: AmInvest Research - 25 Mar 2019

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