• Bloomberg reported that the premium of Brazil’s soybean over US soybeans has fallen to levels before the US-China trade war started. The premium has dropped from a high of 140 US cents per bushel in September/October 2018 to 38 US cents per bushel currently. The premium increased last year as China imposed a 25% import tariff on US soybeans. This resulted in Chinese companies buying soybeans from Brazil instead of the US.

• Bloomberg also said that Indonesia’s domestic biodiesel consumption amounted to 4.02mil KL (3.5mil tonnes) in 2018 compared with 2.54mil KL (2.21mil tonnes) in 2017. The target was a consumption of 3.9mil KL (3.4mil tonnes) for 2018. Based on previous reports, Indonesia is expecting a biodiesel consumption of 6.2mil KL (5.4mil tonnes) for 2019F. This is expected to be driven by use of biodiesel in the mining and railway sectors. Also, Indonesia is said to be mulling the implementation of B25 in the transportation sector. Currently, the country is implementing B20.

• Reuters cited a grain growers group in Brazil as saying that soybean farmers in the country are facing the prospect of crop failures due to a drought. The head of the grain growers group said that some regions in Brazil have not seen a drop of water for some 30 days. In major soybean producing regions such as Parana and Mato Grosso, crop losses are known while in other regions, crop losses have not been estimated. Consultancy firm INTL FCStone has slashed its output projection by four million tonnes to 116.25mil tonnes for 2019F.

• In contrast to Brazil, Argentina is facing heavy rains. Reuters quoted the Buenos Aires Grains Exchange as saying that rain and hail storms have slowed soybean plantings in Argentina. The exchange said that if the current wet weather continues, excessive moisture could compromise the development of soybean crops in the region. So far, although some fields were lost to heavy storms, hail and abundant rainfall, the weather is favourable in the high soybean producing regions. To date, about 89.7% of 17.9mil hectares of land have been planted with soybeans.

• According to Bloomberg, Indonesia sees its biodiesel production at 7.37mil KL (6.4mil tonnes) for 2019F compared with 6mil KL (5.2mil tonnes) in 2018. Renewable energy investments in the country amounted to US$1.6bil in 2018, which was below the target of US$2.01bil.

• Bloomberg quoted a government official as saying that domestic consumption of biodiesel may rise from 6mil KL (5.2mil tonnes) in 2019F to 9mil to 10mil KL (7.8mil to 8.7mil tonnes) in 2020F due to the implementation of the B30 biodiesel policy. The Indonesian government is planning to conduct tests on B30 in March 2019. There is an additional demand of 3.2mil tonnes for palm oil if the state power company, Perusahaan Listrik Negara, can convert its 2000MW coal-fired power plant to use palm oil.

Source: AmInvest Research - 14 Jan 2019