• The USDA (US Department of Agriculture) released its latest projections for vegetable oils last week. The USDA raised its forecast of US soybean inventory by 7.7% to 1,045mil bushels for 2019E/2020F from 970mil bushels (2018/2019E: 1,070mil bushels) due to higher carry-over inventory from the previous year. The USDA kept its estimate of US soybean production of 4,150mil bushels for 2019E/2020F. Comparing 2019E/2020F against 2018/2019E, US soybean output is forecast to fall by 8.7% to 4,150mil bushels due to lower planted areas and yields. US soybean prices were little changed after the release of the USDA report.

• Bernama reported that the Malaysian government is ready to give additional incentives to smallholders to help them achieve the MSPO (Malaysia Sustainable Palm Oil) certification. As at end-April 2019, only about 32% out of 5.85mil hectares of oil palm plantations and 39% out of 451 palm oil mills in the country have secured the MSPO certification. The deadline for companies and smallholders in the country to be MSPO-certified is 31 December 2019. Currently, the incentive for independent smallholders is RM135/ha while the incentive for organised smallholders e.g. those under the Felda scheme, is RM10/ha.

• Reuters reported that US soybean exporters may struggle to meet the US government’s export forecast of 48.3mil tonnes for the current marketing year, which will end on 31 August. In the first eight months of the marketing year, US soybean exports amounted to 33.5mil tonnes, which were 25% YoY lower. The drop in exports was due to the trade war with China and reduced feed demand from China resulting from the African swine fever outbreak.

• In a related development, Reuters reported that US soybean exporters are facing their busiest and most logistically challenging summer due to the floods in the Midwest and backlog of soybeans purchased by China. Some seven million tonnes of US soybeans bought by China before the trade talks broke down last month, still need to be delivered in the coming months. Chinese importers and US exporters could try to renegotiate contracts for delivery after September as the next US harvest gets under way. Otherwise, US exporters facing floodrelated delays may seek to declare force majeure. Delaying shipments to China would also increase US soybean inventories and push down soybean prices.

• Successful Farming said that corn production in South America is ramping up. Brazilian farmers had a new source of income in the 1980s when they started planting corn as the second crop in winter after soybean. INTL FCStone forecasts corn production in Brazil to be 96.8mil tonnes in 2018/2019F. In comparison, Brazil’s soybean production is estimated by the USDA to be 123mil tonnes in 2019E/2020F.

• The Borneo Post reported that the Ministry of Domestic Trade and Consumer Affairs has issued eight permits to food and beverage companies in Sarawak for the import of sugar. Deputy Minister Saifuddin Nasution said that the permits were issued to help reduce the cost of doing business for companies in Sarawak. Compared with their counterparts in Peninsular Malaysia, food and beverage companies in Sarawak do not enjoy competitive prices due to the logistics cost and smaller volume of sugar purchased. The ministry has set a 60:40 ratio for local F&B companies to comply with when importing sugar. This implies that F&B companies in Sarawak are allowed to import about 60% of their sugar requirements annually while the remaining 40% are sourced from local sugar refiners

Source: AmInvest Research - 17 Jun 2019