• Bloomberg reported that apart from the US-China trade war, US farmers are now contending with a new problem. The selling prices of their soybeans could drop as the quality has been affected by heavy rains. Cargill, Louis Dreyfus and Archer-Daniels-Midland Co have tightened guidelines on the quality of beans accepted at the grain elevators in the lower Mississippi River Delta region. In one case, farmers could face rejection if the damage is above 3%, down from 10% previously. The criteria for determining the discount for the damaged soybeansare complex, with charts showing different deductions depending on the percentage of the defects.

• Bloomberg also said that Chinese companies have been increasing purchases of palm oil as the fall in overseas CPO prices makes imports attractive. The China National Grain and Oils Information Center was quoted as saying that the price of Indonesia palm olein for January 2018 is US$505/tonne or 4,340 yuan/tonne after tariff. There are arbitrage opportunities as the May 2019 contact on the Dalian Commodity Exchange is 4,560 yuan/tonne.

• Reuters quoted traders as saying that India’s palm oil imports are unlikely to increase over the November 2018 to January 2019 period even though CPO prices are languishing. This is due to ample local supply of oilseeds and a liquidity crunch among buyers. A palm importer said that banks have cut lending to refiners and traders. Reuters said that a mountain of bad debt in India’s banking system has led to a prolonged credit crunch on small and mediumsized companies.

• There is a change in global soybean trade flows. Bloomberg reported that Argentina is making major purchases of US soybeans. Argentina’s domestic crushing industry has been turning to soybean imports as a drought early this year affected crops. In the week ended 8 November 2018, about 249,278 tonnes of US soybeans were earmarked for Argentina. That was the highest since year 1983. Bloomberg also reported that more US soybeans are heading to Canada. Domestic processors in Canada are buying US soybeans to be crushed and then exporting locally grown soybeans to China.

• Ary News of Pakistan reported that Indonesia is set to confirm a trade deal with Pakistan to protect its US$1.5bil worth of palm exports to the country. According to the chairman of the Pakistan Edible Oil Refiners Association, although Indonesia is the largest exporter of palm oil in the world, it has been losing market share to Malaysia. It is projected this year that Pakistan will purchase 70% of its palm oil requirements from Indonesia compared with 80% in the past two years. Malaysia has a free trade agreement with Pakistan currently, which allows for lower import duties of palm oil.

Source: AmInvest Research - 26 Nov 2018