• Bloomberg reported that the Indonesian Palm Oil Association (GAPKI) has proposed to the government to temporarily reduce the CPO export levy by US$20/tonne from US$50/tonne to US$30/tonne until CPO prices reach US$700/tonne (RM2,919/tonne). Cooking oil producers and other related groups met with the government ta few weeks ago to discuss the proposal. According to GAPKI, a temporary cut in the export levy would help increase the price of FFB for smallholders.

• According to Bloomberg also, the Trump administration has no plans to extend aid to farmers in 2019F as the administration is assuming that the soybean market will recover even if the trade war with China persists. Recall that in July 2018, the administration announced that it would deliver aid of US$12bil to farmers caught in the trade war with China. US farmers were able to apply for the first round of aid amounting to US$4.7bil in September 2018.

• Reuters quoted a government official in China as saying that the country has ample supplies of soybean and as such, price fluctuations are unlikely. The official said that domestic soybean planting acreage has increased and China is set for a bumper harvest supported by government subsidies and crop rotation policies. In 8M2018, Brazil accounted for almost 70% of China’s soybean imports. Traders said that China’s soybean imports are expected to fall by 25% YoY in 4Q2018 due to the trade war with the USA and ample domestic supplies.

• According to Wallaces Farmer of the USA, Iowa farmers are sceptical over the USDA’s projections that US soybean production would be at record levels for 2018E/2019F. Instead, an industry expert expects the USDA to reduce soybean production numbers in future reports after a review of harvest and field conditions. In Iowa, there have been reports of pod splitting, flooding and disease due to the heavy rains.

• According to Indonesia Investments, the Indonesian government plans to raise provincial minimum wages by 8.03% in 2019F. Provincial governors have up to 1 November 2019 to officially determine the local minimum wage for 2019F. The annual provincial minimum wage growth in Indonesia is determined by a formula, which includes the annual inflation rate and GDP rate.

• In a related development, Jakarta Post reported that the manpower minister has proposed an 8.13% rise in the provincial minimum wage for 2019F based on an inflation rate of 2.88% and economic growth of 5.15%. The Indonesian Workers Confederation has rejected the minister’s proposal. The union is demanding for the minimum wage to be raised by 20% to 25%.

• Bloomberg cited a government official as saying that Indonesia consumed 437,980 kiloliters (381,516 tonnes) of biodiesel in September and October 2018. The government is keeping its target of a biodiesel consumption of 3.9mil to 4mil kiloliters (3.4mil to 3.5mil tonnes) for the country in 2018E.

• According to Metro of the UK, a new sugar tax is on the way and this time, it will target chocolates. The proposal was announced by Public Health England, an executive agency of the Department of Health and Social Care, at an annual chocolate conference and is expected to be implemented in year 2020F. The new sugar tax will be announced by spring in 2019F. The sugar levy on soft drinks came into force on 6 April this year.

• According to SGS, Malaysia’s palm shipments fell by 16.7% in the first 20 days of October compared with the same period in September. Palm shipments to India plunged by 49.6% while exports to the EU slipped by 26.3%. On a positive note, Malaysia’s palm exports to China surged by 18% in the first 20 days of October compared with the same period in September.

Source: AmInvest Research - 29 Oct 2018