• The USDA has released its monthly demand and supply projections for vegetable oils. The USDA has reduced its forecast of 2022/2023F soybean inventory to 210mil from 220mil bushels due to lower production. US soybean yield is now estimated to be 49.5 bushels per acre vs. 50.2 bushels per acre previously. Soybean yields are expected to be affected by dry weather conditions in 2022/2023F. Comparing 2022/2023F against 2021/2022, US soybean inventory is envisaged to fall by 22% to 210mil bushels while soybean production is anticipated to decline by 4% to 4,276mil bushels.

• In contrast to the downward revision in US soybean numbers, the USDA has raised its forecast of global soybean inventory to 103.5mil tonnes from 102.7mil tonnes. This was due to higher soybean production and inventory in Brazil. Soybean output in Brazil is anticipated to increase by 18% to 153mil tonnes in 2022/2023F in the absence of drought. Comparing 2022/2023F against 2021/2022, world soybean inventory is forecast to increase by 5% to 103.5mil tonnes from 98.2mil tonnes.

• Bloomberg reported that India will stop duty-free imports of soybean oil from 1 April 2023 onwards. However, duty-free imports of sunflower oil will still continue. Currently, India allows annual duty-free imports of 2mil tonnes of crude soybean oil and sunflower oil for 2022/2023F and 2023F/2024F.

• Kompas quoted an official with Indonesia Palm Oil Association (GAPKI) as saying that the country’s CPO and PKO production may fall to 49mil tonnes in 2023F, below the 3-year annual average of 52mil tonnes. The lower output is due to higher costs of fertiliser and replanting of ageing oil palm trees.

• S&P Global Platts cited traders as saying that weather vagaries that have hit soybean crop plantings in Argentina and Brazil’s higher biodiesel blending mandate could squeeze global soybean derivatives supply in 2023F. Market participants are worried that the USDA’s initial soybean crushing estimate of 39.8mil tonnes and production of 49.5mil tonnes for Argentina in 2022/2023F may be too high. Crushing may drop due to La Nina for the third consecutive year. According to Rosario Grains Exchange, soybean plantings were about 60.6% completed as at 21 December, 12.6 pp lower YoY.

• Biofuels International quoted an industry expert as saying that in the most recent IEA (International Energy Agency) report, total global biofuel demand is estimated to increase more than 20% between 2020 and 2027F. According to IEA, ethanol consumption in Europe is expected to remain steady at 2021 levels. The most significant growth will take place in the UK where consumption is projected to expand by more than 50% to meet the Renewable Transport Fuel Obligation and E10 blending. IEA projects biofuel demand in Brazil to expand by 40% between 2022 and 2027F with ethanol accounting for 70% of the change. This is attributed to Brazil’s ethanol mandate, discretionary blending, RenovaBio programme and increasing gasoline demand.

• Hindustan Times reported that ghee and cooking oil are short in supply in Pakistan. If the government does not take corrective measures, most goods will be costlier ahead of the holy month of Ramadan. The Pakistan Vanaspati Manufacturers Association said that palm oil rate in Pakistan has already gone up by 7.7%, which means that there will be a jump in the prices of ghee and cooking oil as well.

Source: AmInvest Research - 16 Jan 2023