• Bloomberg reported that the worst fears of a prolonged drought in Argentina were confirmed as the Buenos Aires Grain Exchange slashed its soybean production estimate to the lowest in 14 years. Analysts at the Exchange chopped the forecast to 33.5mil tonnes, down 12% from 38mil tonnes previously and warned that they could cut it even further after dryness was compounded by heat waves in some areas and early-season frosts in others. Bouts of rainfall over the past few weeks had handed hope to the farmers but the rains have not been enough to mitigate a drought that is the worst in 60 years.

• According to Bloomberg also, China’s soybean importers are replacing Argentine supplies with crops from Brazil where prices have fallen faster due to a record harvest. Purchases amounting to at least 500,000 tonnes of Argentine soybeans were switched to Brazil, with a source pegging the volume to be as high as 1mil tonnes. By switching to Brazil, China’s importers can save US$50/tonne given the price differential for March delivery.

• S&P Global Platts cited sources as saying that China is likely to buy more-than-usual volumes of soybeans from the US Gulf in February and March as harvest delays in Brazil and a severe drought in Argentina affect supplies. Sinograin bought 5 US Gulf cargoes in midFebruary including one for February shipment and the rest for March, China-based traders said. The soybeans were bought to augment national strategic reserves. Typically in 1Q of the calendar year, China ramps up its soybean purchases from Brazil, which peak by midyear.

• Reuters reported that Brazil’s National Energy Policy Council will decide on the country’s mandatory blend of biodiesel at a meeting in March. The current 10% mandatory blend will remain in force in March and the percentage from April onwards will be decided at the meeting.

• Jakarta Globe quoted an industry player as saying that B35 could increase domestic demand for palm oil by 2mil tonnes. Santosa, the CEO of Astra Agro Lestari said that domestic palm oil demand rises between 3 and 3.5mil tonnes every time the government increases the biodiesel blend by 10 pp. Santosa added that it is best to stop at B40. Indonesia should allocate most of its palm oil for exports to provide subsidies for biofuel.

• Bloomberg cited 2 of the world’s biggest fertiliser companies as saying that fertiliser demand will rebound despite dour market views that there will be a pullback in fertiliser prices and demand. CH Industries Holdings expects “substantial agriculture demand will emerge, supporting global nitrogen prices”. Nutrien Ltd forecasts constrained fertiliser supplies. Inventories of potash are at a record, according to data from the Fertiliser Institute. Retailers and distributors in Europe and North America have been reluctant to buy and are holding off in anticipation of even lower prices.

Source: AmInvest Research - 6 Mar 2023