• Bloomberg reported that Indonesia may increase the palm oil export levy. The government will hold a meeting on the levy this week. The levy may increase the difference between gasoil and palm oil. Currently, the export levy is US$50/tonne.

• According to Bloomberg also, US President Donald Trump’s trade truce with China is expected to push American soybean inventory to the lowest since the trade war began. However, corn inventory is going in the opposite direction. US soybean stockpiles are expected to fall to 320mil bushels at the end of the 2020F/2021F season compared with consensus estimates of 328mil to 825mil bushels. In contrast, the USDA has forecast corn inventories to jump 29% to 2.367bil bushels in 2020F/2021F. The USDA said that corn plantings would likely climb to the highest level in four years.

• According to Reuters, the palm oil industry is bracing for another hit to its business. The issue is machinery lubricants seeping into palm oil during processing. In recent months, food companies such as Nestle have asked palm producers in Malaysia and Indonesia to reduce the amount of mineral oil hydrocarbons found in palm oil.

• The solution is to use food-grade lubricants in machines but such lubricants can cost 8x to 10x more. Nestle said that it is actively monitoring its supply chain. Nestle is reinforcing its controls by working with suppliers on acceptable levels of mineral oil saturated hydrocarbons and mineral oil aromatic hydrocarbons in agricultural raw materials. Indonesian producer Musim Mas said it has already switched to food-grade lubricants and made other changes in the processing of palm oil to address buyer concerns on the contaminants.

• Bloomberg reported that Malaysia expects to complete the implementation of the B20 biodiesel mandate in the transportation sector by mid-2021F. B20 will be supplied in stages to more than 3,400 petrol stations in the country. B20 in the transportation sector and B7 in the industrial sector are expected to absorb about 1.3mil tonnes of palm oil from the system. We believe that CPO production is estimated to be 20mil to 20.5mil tonnes in 2020F. The mandates will contribute towards greenhouse gas savings of 3.8mil tonnes of carbon dioxide annually.

• Reuters quoted an industry consultant as saying that intense rains in Brazil have limited the progress of the soybean harvest over the past few days while also delaying exports. Agribusiness consultancy Arc Mercosul said that Brazil’s 2019/2020F soybean harvest had reached 34.2% of the planted areas as of 21 February. While the pace of the harvesting is in line with historical average, it is below last year’s level of 46.3%. Rains have also disrupted soybean shipments as waiting time for vessels at Paranagua, a key grain exporting port, widened to 11 days two weeks ago from nine days earlier in the month.

• Bloomberg reported that Indonesia plans to implement the B40 biodiesel mandate in July 2021. B40 will be implemented on all vehicles including those in the public sector, according to Coordinating Minister for Economic Affairs Airlangga Hartarto.

Source: AmInvest Research - 2 Mar 2020