• Bloomberg reported that Argentina will impose a new tax on crop exports as the country seeks to rein in its fiscal deficit. All shipments of primary exports will be levied at four pesos per dollar, which means that payments will depend on commodity prices and the exchange rate. For soybeans, soymeal and soybean oil, the announcement means an increase in the tax rate. The new export tax for soybean products will reach about 28.5%. Recall that Argentina was supposed to cut its export tax on soybean by half a percentage point every month for two years until the end of 2019F.

• We believe that this development is negative as there is less incentive for Argentine farmers to export their soybean products. This may reduce global supply of soybean products in a period where Chinese companies are looking to soybean products from South America to replenish its supply. To recap, China has imposed a 25% import tariff on US soybeans.

• In a related development, Bloomberg said that China bought Argentine soybean oil for the first time in three years, last month. The three cargoes of soybean oil are expected to amount to 90,000 tonnes in total. The USDA (US Department of Agriculture) estimates that China will import about 450,000 tonnes of soybean oil in the 12 months ending 30 September with purchases rising to 700,000 tonnes in the following season. Argentine’s soybean supplies are cheap as its currency has devalued.

• Reuters cited an official from an industry association in Indonesia as saying that the country’s CPO production is expected to climb by four to six million tonnes to 40-42mil tonnes in 2018F. The vice-chairman of the Indonesian Palm Oil Association said that CPO output in Indonesia will be better this year due to improved yields from mature areas, which were replanted in previous years.

• Bloomberg reported that Indonesia will implement B30 as soon as all the testing has been completed and technicalities have been resolved. Although the target is to implement B30 in year 2020F, B30 could be implemented sooner in 2H2019. Road testing for vehicles is expected to be carried out at the end of this year.

• According to Reuters, an annual US soybean conference wrapped up a few weeks ago without any known sales to Chinese buyers. In contrast, billions of dollars of sales contracts of US soybean were usually signed during the soybean conference in previous years. According to an industry player, China’s soybean imports for 2018F/2019F could fall to 86mil tonnes from the current season if the trade war persists. The trade war between the USA and China has halted bilateral trade of soybean, and US farmers are concerned that soybean demand would fall this season.

• SGS said that Malaysia’s palm shipments inched up 0.4% in August compared with July. Malaysia’s palm exports fell by 25.8% MoM to the EU and slid by 15.3% MoM to China in August. Compensating for the declines in exports to the EU and China was a 16.8% increase in shipments to India.

Source: AmInvest Research - 12 Sept 2018