• Bloomberg reported that soybean premiums in Brazil jumped in the month of May as growing trade tensions between China and the US fuelled speculation that Brazil will garner market share from the US. Price premium for soybeans loading at the Brazilian port of Paranagua in September rose 46% during the month to US$1.33/bushel at the end of May. China usually buys US soybeans in September when the US harvesting season starts. However in May, China bought at least 10 cargoes of Brazilian soybeans for delivery in August and September 2020.

• Bloomberg also reported that this year, China may not meet its target of US$36.5bil worth of agricultural purchases under Phase 1 of the trade deal with the US. China bought just US$3.35bil worth of American agricultural products in the first three months of the year, which is the lowest for the period since 2007. China is behind its purchase target due to the outbreak of Covid-19. Although China has been stepping up its purchases of agricultural products recently, an industry expert said that it is unlikely that the country will meet the US$36.5bil target this year.

• South China Morning Post reported that China is facing a dilemma, balancing Phase 1 of the trade deal with the US with self-reliance. There are growing concerns on China’s food security as its relationship with the US becomes more volatile. Since the start of the trade war in 2018, China has been reinforcing self-reliance on its industries including manufacturing and food production. A government official said that China’s north-eastern region should find new sources to replace soybeans and reduce the reliance on imports. The north-eastern region of China, comprising the provinces of Heilongjiang, Jilin, Liaoning and Inner Mongolia produces 26% of China’s soybean. Another government official suggested chufa or tiger nut as an alternative to soybeans.

• Indonesia will keep its export tax for palm oil at zero for the month of June. The reference price for CPO is US$568.94/tonne for June vs. US$635.15/tonne for May. However, the CPO export levy has been raised to US$55/tonne in June from US$50/tonne in May. This is to support the country’s biodiesel programme.

• Bloomberg reported that China has ended its 95% import tariff on sugar. However, it is still keeping a firm grip on sugar imports. China is bound by its agreement with the World Trade Organization to allow sugar imports of 1.95mil tonnes per year under a low tariff sugar quota. For shipments exceeding 1.95mil tonnes, China issues import permits that are subjected to a 50% tax and in the past three years, China imposed an additional 35% to 45% import duty. Although the additional 35% to 45% import duty has expired, the 50% tariffs remained. So far, China is keeping its import quota for sugar at 1.35mil tonnes for this year.

Source: AmInvest Research - 9 Jun 2020