• The USDA (US Department of Agriculture) has released its monthly demand and supply projections for vegetable oils. The USDA reduced its forecast of 2019E/2020F US soybean inventory by 5.0% to 755mil from 795mil bushels. The downward revision was mainly due to a 4.3% fall in soybean production resulting from smaller planted areas. Comparing 2019E/2020F against 2018/2019E, US soybean inventory is expected to decline by 29.4% to 755mil bushels from 1,070mil bushels.

• Due to the revision in US soybean stockpiles, the USDA reduced its forecast of global soybean inventory by 2.7% to 101.74mil tonnes from 104.53mil tonnes. Overall, global soybean production is envisaged to slide by 5.8% to 341.83mil tonnes in 2019E/2020F from 362.85mil tonnes in 2018/2019E.

• Bloomberg reported that Indonesia’s President Joko Widodo has signed a presidential instruction banning the issuance of new permits for land conversion in primary forests and peatlands. The ban, which has no deadline, may exempt certain areas, which have already been granted approvals for strategic projects. This came after forest fires were reported in Indonesia again. According to Channel News Asia, Indonesia has detected 975 hotspots so far this year with 135,000 hectares of land burning across 18 provinces.

• Bloomberg also said that Indonesia plans to implement B50 by the end of 2020F. Indonesia plans to implement B100 in year 2021F. Consistent use of B20 has resulted in savings in fuel imports of US$5.5bil per year. Indonesia’s biodiesel consumption was 3.49mil KL (3.0mil tonnes) in 7M2019. This was slightly below the target of 6.2mil KL (5.4mil tonnes) for 2019E.

• Reuters reported that the price of Brazil’s soybeans in local currency has reached the highest level in two months driven by a spike in port premiums for soybeans and a weaker currency. The latter two resulted from the trade dispute between China and the USA. According to an industry expert, soybean price in Sorriso, Mato Grosso, which is one of the major soybean producing areas in Brazil, closed at 62.31 reais per bag a few weeks ago. This was the highest price since June 2018. Producers association Aprosoja said that Brazilian farmers are taking the opportunity to sell old soybean crops and clinch some deals to sell next year’s crop, which will be planted in September.

• In a related development, Reuters also said that COFCO plans to increase investments in Brazilian operations as the business environment in the country is likely to improve after the approval of economic reforms. COFCO’s chairman said that the group is looking at investments such as new warehouses and transportation systems in Brazil.

• Caixin Global said that Chinese farmers are going to Russia to grow soybeans for sale in China as China increases imports amid a worsening trade dispute with the USA. A total of 20 Chinese soybean companies have made investments in Russia according to a report published in November 2018 by the agriculture ministry’s Foreign Economic Cooperation Center. There are two types of investments i.e. small and midsize companies that are involved in farming and basic processing and large state-owned companies that focus on infrastructure such as piers and warehouses. According to a Chinese farmer, who is growing soybeans in Russia, even though land is cheaper in Russia, the farmers have to bring their own agricultural machinery and staff due to different growing conditions.

Source: AmInvest Research - 19 Aug 2019