• The USDA released its monthly demand and supply projections for vegetable oils last week. There were no major revisions in the report. The USDA kept its forecast of US soybean inventory at 155.0mil bushels for 2021E/2022F. Comparing 2021E/2022F against 2020/2021E, US soybean inventory is expected to increase to 155.0mil bushels from 135.0mil bushels. The increase in inventory levels in 2021E/2022F is mainly due to a 6.5% expansion in soybean production. US soybean output is envisaged to climb by 6.5% to 4,405.0mil bushels in 2021E/2022F on the back of higher planted areas and yields.

• World soybean inventory is anticipated to inch up by 3.3% to 94.5mil tonnes in 2021E/2022F from 91.5mil tonnes in 2020/2021E underpinned by increases in soybean production in the USA, Brazil and Argentina. Soybean output in Brazil is estimated to rise to 144.0mil tonnes in 2021E/2022F from 137.0mil tonnes in 2020/2021E while in Argentina, soybean production is envisaged to improve to 52.0mil tonnes from 46.5mil tonnes.

• Bloomberg reported that Indian vegetable oil processors have urged the government to reimpose restrictions on various grades of refined palm oil to protect farmers as well as refiners. The Solvent Extractors Association of India said that allowing imports of refined palm oil will not bring down prices. Instead, it will kill the domestic industry.

• In a related development, Bloomberg quoted an industry expert as saying that India’s palm imports may increase by about 9% in July from a month earlier, supported by the government’s move to cut duties and remove restrictions on refined varieties. Inbound shipments may rise to 650,000 tonnes in July from an estimated 595,000 tonnes in June, which was the lowest since March 2021. Purchases in August are seen to be 700,000 tonnes. Soybean oil imports are likely to be 300,000 tonnes each in July and August compared with 225,000 tonnes in June.

• The National Post of Canada cited the Rosario Grains Exchange as saying that the shallowness of the Parana River in Argentina is threatening to cost the country’s grains farmers and exporters almost US$315mil over a six-month period through August. Lack of rains in Brazil, where the river originates, has brought water levels down in Argentina, forcing cargo ships to reduce the amount of grains that are loaded for exports.

• In a related development, S&P Global Platts reported that the Argentina-Brazil FOB soybean meal basis spread has widened to a record as weakening export demand and a shallow Parana River put pressure on Argentina’s premium for nearby loadings. Argentina’s FOB up River cargo market usually trades at lower basis levels compared with Brazil’s Paranagua paper market because of logistical limitations. Around 80% of Argentina’s agricultural markets are exported via Rosario, which larger vessels cannot access as it is a hydro-port in the Parana River. In comparison, Brazil ships most of its goods from sea-based terminals.

• Reuters reported the European Commission as saying that the EU’s imports of biofuel are expected to drop by a quarter this year as the region draws on large inventories to meet growing demand after the easing of coronavirus restrictions. Due to abundant unused stocks, imports of biofuel are expected to decline in 2021E by about 25% to 3.0bil litres for biodiesel and 1.0bil litres for ethanol. However, imports of used cooking oil from China and other Asian countries for producing biodiesel increased by over 30% last year and the share of this feedstock is expected to continue growing in 2021E.

Source: AmInvest Research - 19 Jul 2021