• Bloomberg reported that the Indonesian National Shipowners Association is seeking to postpone the implementation of the B20 biodiesel programme in the shipping industry. The association has sent four letters to government agencies in respect of this. An official with the association said that palm biodiesel has lower mileage than regular gasoil. Also, biodiesel will increase maintenance costs as fuel filters must be replaced frequently.

• Bloomberg also said that El Nino is favouring China in its trade war with the USA. Due to El Nino, Brazil may be able to supply more soybeans than usual to China in January 2019. Weather conditions were favourable in early plantings in Mato Grosso, which is Brazil’s top soybean producing region. The outlook also bodes well for the second half of December 2018, when early harvesting for some soybeans start. During El Nino, the US and countries in the South America experience heavy rains in contrast to the dry weather in Asia. In a related development, Brazil’s crop agency was quoted as saying that the country may ship 76mil tonnes of soybeans in 2018E/2019F (2017/2018E: 76mil tonnes). There is potential for shipments to exceed expectations as China’s demand is expected to increase due to the trade war with the USA.

• Although Japan’s weather agency said that El Nino is here, weather agencies in the USA and Australia have said to wait a bit longer for confirmation. Japan’s weather agency said that the El Nino weather pattern has formed and there was a 70% chance that El Nino will continue to the spring season in the northern hemisphere in 2019F. The weather agency in Australia said that although sea surface temperatures have reached El Nino levels in the past weeks, atmospheric indicators are still normal. In the USA, the Climate Prediction Center said that there is an 80% chance of El Nino in winter and 55% to 60% chance of El Nino in spring. The weather agency forecasts the formation of a weak El Nino.

• The US Department of Agriculture (USDA) has released its monthly demand and supply projections for vegetable oils. The agency raised its forecast of the ending inventory for US soybeans by 7.9% from 885mil tonnes to 955mil tonnes for 2018E/2019F due to lower export estimates. Exports of US soybeans are expected to fall by 10.8% from 2,129mil bushels in 2017/2018E to 1,900mil bushels in 2018E/2019F dragged by a drop in demand from China.

• Due to the higher US soybean inventory, the USDA has raised its estimate of global soybean inventory for 2018E/2019F from 110.04mil tonnes to 112.08mil tonnes. Comparing 2018E/2019F against 2017/2018E, soybean production in Argentina is expected to climb by 46.8% from 37.8mil tonnes to 55.5mil tonnes while in Brazil, soybean output is forecast to inch up from 119.8mil tonnes to 120.5mil tonnes. In the USA, soybean production is estimated to increase by 4.3% from 120.04mil tonnes in 2017/2018E to 125.18mil tonnes in 2018E/2019F.

Source: AmInvest Research - 19 Nov 2018