AmInvest Research Reports

Plantation - News flow for week 27 Jun–1 Jul

Publish date: Mon, 04 Jul 2022, 09:46 AM
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  • Bloomberg quoted a government official as saying that Indonesia expects palm exports to return to normal in the next 1 to 2 weeks. As of 28 June, the government had issued export permits for 1.9mil tonnes of palm oil. Permits for 1.1mil tonnes of palm oil were based on the domestic market obligation (DMO) while 806,000 tonnes were exempted from the DMO by paying a special tax. In another development, Indonesia is considering a plan to raise the biodiesel mandate to B35 from B30 to cut fuel import costs. The plan is being discussed by the related ministries, biodiesel producers and automakers. Indonesia is also planning to start road tests for B40 at the end of July. Implementation of B40 will depend on the outcome of the road tests.
  • Reuters reported that Indonesian farmers want authorities to scrap a requirement for exporters to sell a portion of their palm oil domestically, a move that would boost shipments and result in palm oil mills paying more for FFB. The domestic ruling meant that palm oil mills had not been able to sell inventories built up during the export ban in May. An industry player estimates that out of Indonesia’s 1,118 palm oil mills, 58 had stopped buying FFBs while 114 had limited purchases. FFB prices are trading in a 1,150 rupiah to 2,010 rupiah per kg range currently vs. the farmers’ ideal price of 4,500 rupiah.
  • The Star quoted Malaysia’s Human Resources Minister as saying that more Indonesian workers will be arriving in the next 2 months. About 17,987 Indonesian workers are expected to join the 19,043 foreign workers, who have already entered Malaysia. Malaysia is also considering hiring workers from Cambodia and Nepal to help address the labour shortage.
  • The Economic Times quoted India’s Food Secretary as saying that the country has exported 1.8mil tonnes of wheat to a dozen countries including Afghanistan and Bangladesh since the ban on wheat took place on 13 May. About 33,000 tonnes of wheat as humanitarian assistance were supplied to Afghanistan compared with the commitment of 50,000 tonnes. India exported a record 7mil tonnes of wheat in 2021/2022E. Typically, the country exports around 2mil tonnes, which is 7% of global wheat trade.
  • According to Bloomberg also, corn is stacking up outside Brazilian silos at the fastest rate in years after the country’s biggest producing region harvested a bumper crop. Warehouses are still full of soybeans currently, which were reaped only a few months before corn. In Mato Grosso, soybean production was huge this season but sales have been slower than usual, leaving warehouses with no room to receive the corn, according to an industry player. The pileup threatens to add further pressure to corn and soybean prices, which are already slumping.
  • S&P Global Platts reported that South American FOB soybean oil prices have fallen by nearly 30% from all-time highs to pre-Russia-Ukraine war levels as demand has been weak. Also, the global vegetable oil market is experiencing worsening macroeconomic conditions. Both the Argentinian FOB Up River and Brazilian FOB Paranagua soybean oil prices for August were US$1,391/tonne on 23 June, which was the lowest for front-month loading since 24 January. Demand from key buyers namely India and China has been tepid in recent weeks. Indian buyers are well covered for nearby requirements while Chinese traders are struggling with local Covid-19 lockdowns.

Source: AmInvest Research - 4 Jul 2022

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