• Bloomberg reported that a draft law on biofuels in the EU is expected to deliver another blow to palm oil. On 8 February, the EU Commission submitted a delegated act that classifies palm oil as unsustainable and proposes that palm oil be excluded from the EU’s biofuel target. Any biofuel sources that result in an annual clearance of more than 10% of the tropical forests or high carbon stock land would not be counted towards the EU’s biofuel target. Bloomberg, quoting the EU report, said that palm oil accounts for 45% clearance of virgin forests and 18% clearance of high carbon stock land. Soybean clears only 8% of the tropical forests.
• In a related development, Reuters reported that under the EU’s draft law, the use of harmful biofuels will be capped at 2019’s levels until year 2023 and reduced to zero by year 2030. The silver lining is that there are several exemptions. Palm producers who can show that they have increased yields may be exempted. This is based on the argument that their crops cover demand for biofuel and food without needing expansion into non-agricultural land such as forests.
• Reuters reported that Indonesia’s two presidential candidates have pledged to achieve energy self-sufficiency by boosting the use of biofuels i.e. palm biodiesel. President Joko Widodo said that if he wins the second term, the government would implement B100 vs. B20 currently. Widodo’s opponent, Prabowo Subianto said that he would boost the use of palm oil, palm sugar, cassava and ethanol from sugar cane if he was elected. His campaign team has proposed using millions of hectares of degraded land to cultivate palm sugar to produce energy.

• According to Reuters also, soybean traders in China have shrugged off recent cancellations of orders as “old business”. This is in spite of concerns that China may be backtracking on its pledge to buy more US soybeans. A recent USDA report showed net cancellations of US soybeans for the week ended 3 January 2019. Among the cancellations were 807,000 tonnes of soybeans, which were supposed to be shipped to China. A trader said that the cancellations were for sales booked earlier than the recent pledge by China to buy more US soybeans.

• Bloomberg reported that soybean acres in Canada are expected to drop for the second straight year as farmers switch to more profitable crops. Planted areas of soybean in Canada could drop by 3% as farmers switch to canola. Weather problems have also discouraged farmers from planting soybean. Dry conditions in parts of Saskatchewan and Alberta in the past two seasons have reduced soybean yields.

• According to Bloomberg also, China has proposed to buy an additional US$30bil a year of agricultural products from the USA as part of a trade deal. The agricultural products include soybean, corn and wheat. The purchases would be on top of a pre-trade war levels and continue for the period covered by the memorandum of understanding.

Source: AmInvest Research - 25 Feb 2019