• Bloomberg cited Indonesia’s President Joko Widodo as saying that the country wants to process more crude palm oil domestically. This means that Indonesia will export less palm oil in crude form. Although the president did not say he was a considering a ban on shipments of crude palm oil like the one imposed on nickel, the prospects of increased domestic processing and potentially lower exports will be felt far and wide. Indian refiners may be hurt as they rely on supplies of crude palm oil from Indonesia.

• Bloomberg reported that China has given new tariff waivers for imports of US soybeans. State and private crushers have received waivers to buy 2mil tonnes of US soybeans for deliveries from October to December 2019. Chinese companies such as COFCO and Sinograin received the first round of waivers for 2–3mil tonnes of US soybeans a few weeks ago.

• As China is slowly coming back to the US soybean market, we think that China’s palm imports may soften in the coming months. China’s palm purchases have been robust this year as reflected in the 44% YoY jump in imports in 8M2019.

• Reuters reported that an investigation by Rainforest Action Network showed Asia-based companies, Golden Agri Resources (GAR) and Musim Mas Group bought CPO from two mills that sourced palm fruits from a private plantation on the Sumatra island. The private plantation is located inside the Rawa Singkil Wildlife Reserve, which is dubbed the “orangutan capital of the world”. In response to the allegations, GAR said that it is engaging with the two palm oil mills and sending grievance teams to conduct onsite verification.

• US corn and soybean prices rose last week on a positive USDA report and concerns that the wet weather in the US Midwest may delay harvesting. The USDA announced inventories of US corn and soybean, which were below expectations. Corn stockpiles in the USA amounted to 2.11bil bushels as at 1 September 2019 compared with 2.14bil bushels a year ago. Soybean stockpiles in the USA stood at 913mil bushels as at 1 September 2019 vs. 438mil bushels a year ago.

• Jakarta Post reported that the EU has granted US$16.4mil or Rp232bil to Indonesia through a programme called ARISE+. The grant was given amid trade tensions between the EU and Indonesia. Recall that the EU has proposed phasing out palm biofuels from year 2025 onwards. The grant will be used to provide technical support and help Indonesia’s Investment Coordination Board conduct a study on how to prioritize sectors for investments.

• Reuters reported that Wilmar International was the sole buyer of about 175,000 tonnes of raw sugar to be delivered against the US futures contract, which expired last Monday. This was the smallest physical delivery of raw sugar against the October contract since 2011. Traders said that the raw sugar originated from Central America. A trader said that the absence of sugar supply from Brazil is supportive to sugar prices. Cane millers in Brazil have been focusing on producing ethanol instead of raw sugar due to ethanol’s higher selling prices. We believe that an increase in the price of raw sugar is negative for sugar refiners in Malaysia. Raw sugar accounts for more than 80% of a sugar refiner’s production cost.

Source: AmInvest Research - 7 Oct 2019