• The USDA has released its monthly projections of demand and supply of global vegetable oils. US soybean prices were little changed after the release of the data as soybean inventory is still expected to be high. The USDA has reduced its forecast of US soybean stockpiles for 2018/2019F by 4.7% to 910mil bushels from 955mil. The downward revision was mainly due to a lower estimate of soybean production resulting from a weaker yield of 51.6 bushels per acre vs. 52.1 bushels per acre previously. Comparing 2019F against 2018 however, US soybean inventory is expected to be at a record level. US soybean inventory is anticipated to surge by 107.8% to 910mil bushels in 2018/2019F from 438mil bushels in 2017/2018.

• The USDA has also reduced its forecast of global inventory of soybeans for 2018/2019F to 106.7mil tonnes from 115.3mil. This is due to lower estimates of soybean stockpiles in the US and Argentina. Comparing 2019F against 2018, global inventory of soybeans is forecast to rise by 8.8% to 106.7mil tonnes from 98.1mil on the back of higher output in the US and Argentina. US soybean production is envisaged to increase by 3.0% to 123.7mil tonnes in 2018/2019F while in Argentina, soybean output is estimated to climb by 45.5% to 55mil tonnes. Soybean production in Argentina is expected to recover this year after being hit by the drought last year. Soybean production in Brazil is forecast to decline by 3.1% to 117mil tonnes in 2019F due to the dry weather.

• Reuters reported that farmers in Brazil have halted sales of soybeans due to the strengthening of the Brazilian reai and China’s switch to US soybeans. Also an industry player said that spot sales have slowed as farmers are waiting for better prices. Farmers have sold about 46.6% of Mato Grosso’s soybean production for this season compared with the five-year average of 49.9%. Another industry expert said that Brazilian farmers, who lack storage, may be forced to sell. He added that whatever that is left in storage will only be sold after the peak season in June.

• Financial Times reported that Elizabeth Warren, Bernie Sanders and other US senators have written to investment groups to urge them to disclose how they manage investments exposed to deforestation by palm oil. Eight senators signed the letters, which were sent to US financial companies such as BlackRock, JP Morgan and Fidelity Investments. The senators have asked the investment companies to respond by 1 March 2019 on whether they have a policy on deforestation-related investments or have plans to introduce one.

• Nikkei Asian Review reported that Aeon has pledged to source only sustainable palm oil for its private brand by year 2020F. Also, Chinese membership in the RSPO has risen in the past five years. A major incentive for Japanese companies to act is Tokyo’s hosting of the 2020 Summer Olympics. According to an official from Fuji Oils, international attention could lead to environmental groups putting pressure on Japanese snack makers like what happened to Nestle.

Source: AmInvest Research - 18 Feb 2019