• Bloomberg quoted Malaysia’s Primary Industries Minister as saying that a plan by the European Union (EU) to define palm oil as “high risk” in a Delegated Act due to be released this month, will risk its relationship with Asean. The Malaysian government may impose retaliatory measures on European products like luxury brands. Also, Malaysia will not support Asean’s upgrade in its relationship with the EU until the latter provides palm oil producing countries the same deal that it has given the American soybean industry.

• In a related development, Reuters reported that Indonesia intends to challenge an EU directive on renewable energy at the WTO by arguing that the proposal unfairly targets palm oil. The EU directive will halt the use of palm oil in transportation biofuel by year 2030F. Indonesia will challenge the EU directive and the proposal to label palm oil as “high risk” at the WTO’s dispute settlement body after the proposals have been issued.

• Bloomberg cited Dorab Mistry as saying that CPO prices may climb to RM2,400/tonne by the end of March 2019 based on the current USD/MYR exchange rate. Palm inventory in Malaysia and Indonesia may decline to about 6mil tonnes by April or May 2019. After March 2019, CPO futures may invert or fall again.

• Incidentally, the Indonesian Palm Oil Association said that palm inventory in Indonesia may have fallen by 16% MoM to 3.26mil tonnes in December 2018 due to an estimated 12% decline in palm production. The palm stockpile of 3.26mil tonnes would be the smallest level since September 2017. The association added that CPO production in Indonesia rose by 13% to 43mil tonnes in 2018.

• The Wall Street Journal reported that China has agreed to buy five million tonnes of soybeans from the USA. This would be double the monthly average quantity of China’s purchases in 2016 and 2017. However, US soybean prices were little changed as traders said that China’s purchases need to be larger to reduce the record soybean stockpile in the US. The USDA has forecast US soybean stockpiles to be a record 955mil bushels in 2018/2019F.

• According to www.foodingredientsfirst.com, Cargill has launched a new palm shortening line for bakeries. PalmAgility is positioned as a superior-performing and easy-to-use palm shortening for use in pies, doughnuts and cookies. According to a company official, a common concern from customers is that palm-based alternatives react to changes in temperature resulting from transportation and storage. PalmAgility reduces the brittleness across a wider range of temperatures. As such, customers can store PalmAgility easily without sacrificing the texture or workability.

• Bloomberg reported that Nutrien Ltd, which is the world’s largest fertiliser producer, has been hoarding a key raw material from China in case the trade war between the USA and China worsens. The company’s CEO said that trade uncertainty is pressuring global crop prices and the stockpile of the raw material will act as a buffer and help the company avoid hiking the price of the fertiliser it charges to the farmers. The name of the raw material was not disclosed.

Source: AmInvest Research - 11 Feb 2019