• Bloomberg reported that the US Environmental Protection Agency (EPA) has issued a notice seeking public input on a potential reduction in annual renewable fuel quotas including mandates for biomassbased diesel in 2018F and 2019F. The EPA notice was in response to the heavy lobbying by oil companies to reduce annual biofuel targets and the Commerce Department's decision to impose antidumping duties on Argentine and Indonesian biodiesel.

• The EPA is getting public feedback on whether it would be appropriate to reduce the mandate by as much as 15% or allow refiners and importers to reduce individual quotas by an amount pegged to the production and imports level within a 60-day period. We believe that this is negative for the biodiesel industry as it would increase the supply of soybean oil in the US. The USDA estimates that about 28.4% of soybean oil would be used in the US biodiesel industry in 2017F/2018F.

• China's palm oil imports rose by 3.8% YoY in August after falling by 40.5% YoY and 8.5% YoY in July and June respectively. The country's imports of soybean increased by 10.1% YoY in August. China's palm imports improved by 7.5% YoY in 8M2017 compared with a 15.9% expansion for soybean imports. We believe that the improvement in palm oil demand is due to the low inventory levels at the major ports and the Mid-Autumn Festival, which will take place in early October.

• China sold 215,469 tonnes out of 300,057 tonnes of soybeans from its state reserves last week. According to Bloomberg, this was the first sale since the government stopped reserve sales in October 2016. The soybeans offered for sale are from the 2010 to 2013 crops.

• Jakarta Post reported that the Indonesian government is preparing to kick off its ethanol programme, which will run concurrently with the campaign to boost use of electric vehicles. Indonesia plans to ban sale of conventional fossil-fuel cars by year 2020F.

• We believe that the increased use of ethanol and electric vehicles at the expense of biodiesel is negative for palm oil demand. Biodiesel is estimated to absorb more than two million tonnes of palm oil from the system annually. The biodiesel industry in Indonesia has been facing challenges this year due to insufficient subsidies and a lack of demand.

• Antara news said that Indonesia is capable of supplying up to eight million tonnes of palm oil to the European Union (EU) annually upon the condition that the EU accepts the ISPO (Indonesia Sustainable Palm Oil) certification. A government official said that accepting the ISPO means recognising the Indonesia government's credibility as it is a compulsory standard imposed by the country.

• SGS and Intertek said that Malaysia's palm oil shipments rose by 15.6% and 16.1% respectively in the first 25 days of September compared with the same period in August. According to SGS, Malaysia's palm exports to China climbed by 62.0%, which helped offset a 25.2% fall in shipments to India. Intertek said that RBD palm olein accounted for 43.3% of the country's palm exports in the first 25 days of September while crude palm oil made up another 17.5%.

Source: AmInvest Research - 2 Oct 2017