• Soybean price inched up last week as the USDA report was less bearish than expected. The USDA released its monthly demand and supply projections for vegetable oils last week. Estimate of US soybean inventory for 2018E/2019F has been raised from 845mil to 885mil bushels. The upward adjustment was mainly due to a revision in the carry-over inventory from 395mil to 438mil bushels. In terms of production, the USDA reduced its forecast of US soybean output for 2018E/2019F marginally from 4,693mil bushels to 4,690mil bushels. Due to the higher US soybean inventory, forecast of global soybean inventory for 2018E/2019F has been raised from 108.26mil tonnes to 110.04mil tonnes. There were no revisions for forecasts of soybean production in Brazil and Argentina.

• Bloomberg quoted an industry official as saying that Indonesia’s implementation of the B20 biodiesel mandate may create spillover demand for Malaysian refiners. The chairman of Palm Oil Refiners Association of Malaysia said that Indonesia may have a tighter refining capacity due to higher demand from the biodiesel segment and this would help Malaysia. Refining margin in Malaysia is US$20/tonne currently vs. US$50/tonne in Indonesia. Refining margin in Malaysia was US$10/tonne between May and July 2018.

• The Star reported that Malaysia has agreed to appoint experts to be part of the European Commission’s panel, which will look into indirect land use. The decision of the panel could affect future of palm oil as part of the biofuel mix in the EU. An expert panel from the European Commission will be visiting Malaysia at the end of October 2018 to hold discussions with Malaysian experts on these issues. A government official said that it was extremely important for the EU expert panel to get a first-hand account of Malaysia’s palm oil cultivation and processing activities.

• According to www.bakeryandsnacks.com, Nestle and PepsiCo have severed ties with Indofood Group due to alleged human rights abuses. Nestle announced that it has ended its joint venture with the Indofood Group last month while PepsiCo reiterated its stance not to source palm oil from Indofood Group’s subsidiaries. Indofood Group is one of the largest plantation and consumer companies in Indonesia. A popular product manufactured by Indofood Group is the Indomie instant noodles.

• According to Reuters, the USA’s new pact with Mexico and Canada may offer some hope for a similar outcome with China. The next interaction between the USA and China may come at the G20 summit in Buenos Aires on 30 November 2018 although US economic adviser Larry Kudlow said that a pact with Beijing is not imminent. According to the Reuters article, industry experts are not clear on China’s soybean inventory situation. Chinese buyers could remain sidelined throughout the USA’s main export season of October and November 2018. Top supplier Brazil could start shipping larger volumes of soybeans to China as early as February 2019 if the harvest is large enough.

• Wilmar International announced that it has launched a new and ambitious plan of obtaining a 100% compliant supply chain by year 2020F. Wilmar’s supply chain will comply with the policy of “No Deforestation, No Peat and No Exploitation” by year 2020F. Wilmar’s plans include using real-time satellite monitoring and providing independent verification of land use change. However, Greenpeace said that Wilmar’s policy does not go far enough to address deforestation. Greenpeace added that Wilmar’s plans will not work as its suppliers are not mandated to supply maps of their concessions.

Source: AmInvest Research - 15 Oct 2018