• The USDA (US Department of Agriculture) has released its monthly demand and supply projections. The USDA has tweaked its forecast of 2020E/2021F US soybean inventory downwards by 2.5% to 395mil from 405mil bushels as domestic usage is expected to be slightly higher. US soybean production is estimated to be 4,125mil bushels in 2020E/2021F, 16.1% YoY stronger. The increase in US soybean production in 2020E/2021F is envisaged to be driven by expansions in planted areas and improvement in yield.

• On the back of lower US soybean inventory, the USDA has forecast world soybean inventory to be 96.3mil tonnes in 2020E/2021F vs. 99.2mil tonnes in 2019/2020E. Although world soybean production is anticipated to climb by 8.2% in 2020E/2021F, soybean stockpiles are expected to ease in 2020E/2021F due to higher exports and domestic crushing.

• Bloomberg reported that the Indonesia government has requested for an establishment of a panel at the World Trade Organization (WTO) to settle the dispute on the EU’s policy on biofuels. The request will be submitted during the dispute settlement body’s virtual meeting on 29 June. Although the Indonesia government has sent a delegation to Geneva for consultation with the EU on the issue, the parties did not reach mutually agreed solutions.

• According to Reuters, Malaysian palm refiners have told the government that the new food safety regulations imposed by the EU should not be imposed on the whole industry in light of the Covid-19 pandemic. The EU has imposed a limit for glycidyl esters and will soon set a limit for 3-MCPD esters, both of which are formed during the refining process and are health concerns. The Palm Oil Refiners Association of Malaysia (Poram) said that the industry-wide conditions did not make sense as Europe was the only consumer implementing the limit on the contaminants. Poram added that with higher costs and minimal offtake, this will have an adverse impact on the exports of refined palm oil from Malaysia.

• In another development, Reuters quoted government officials as saying that India is considering raising import taxes on edible oils as the country seeks to become self-reliant by boosting oilseed production with the help of tax revenues. The tax hike could curb India’s purchases and weigh on Malaysia’s palm price. An industry source said that the tax could be raised by 5 percentage points but a decision has not been taken yet. Currently, India imposed import levies of 37.5% on crude palm oil and 45% on refined palm oil. The import duty on crude soybean oil and crude sunflower oil is 35% each.

• Bloomberg reported that China’s soybean imports rose by 27% YoY in May 2020 after crushers increased purchases from Brazil. China received soybean shipments of 9.4mil in May 2020 compared with 7.4mil tonnes in April 2020 and 6.7mil tonnes in May 2019. China’s soybean imports increased by 6.8% YoY to 33.9mil tonnes in 5M2020. China’s soybean imports could stay close to record levels until July 2020 as crushers buy aggressively from Brazil due to a bumper harvest and depreciation of the Brazilian Real.

• According to Bloomberg also, Indonesia has cut the cost assumption of converting CPO into biodiesel by 20% to US$80/tonne. The revision, which is effective this month, is needed to ensure that B30 continues even as the price gap between gasoil and biodiesel widens. The Energy and Mineral Resources Ministry has reduced the biodiesel market price index to Rp6,941/litre in June from Rp8,352/litre in May to lower the price gap with gasoil.

Source: AmInvest Research - 15 Jun 2020