• Two headwinds in the global biodiesel industry. First, the US Commerce Department has set preliminary dumping duties of up to 70.05% on Argentine biodiesel imports and up to 50.71% on Indonesian biodiesel imports. The Commerce Department is expected to announce if the duties are finalised, on 7 November 2017. Second, the European Parliament's environment committee has voted to phase out vegetable oilbased biodiesel in year 2030 and terminate the use of palm-based biodiesel as early as year 2021.

• These are negative for palm oil as demand for palm oil may drop. Almost half of the palm imports are used in the biodiesel industry in the EU. Only about a third of palm oil are in used in the food industry. The EU accounted for 12.8% of Malaysia's palm exports and 17.4% of Indonesia's palm exports in 2016. Also, the USA's dumping duties on Indonesian biodiesel products are expected to affect the industry, which is already suffering from poor domestic demand. Domestic use of biodiesel in Indonesia is anticipated to be weak this year due to insufficient subsidies and competition from fossil fuel.

• Incidentally, Bloomberg reported that Indonesia has issued biodiesel quotas to Pertamina and AKR Corporindo of up to 1.4mil kl (1.2mil tonnes). Pertamina and AKR Corporindo will tender for the biodiesel from 20 suppliers from November 2017 to April 2018. Wilmar International is expected to be the main beneficiary of the biodiesel tender. Pertamina forecasts its biodiesel consumption at 3mil kl (2.6mil tonnes) in 2017F. Biodiesel consumption was 1.57mil kl (1.37mil tonnes) in 8M2017. Indonesia's biodiesel consumption were 2.9mil tonnes in 2016.

• It was also reported that China's palm imports rose by 43.1% YoY in September 2017 vs. a 12.7% increase for soybean imports. China's imports of soybean oil climbed by 115.3% YoY in September 2017. In 9M2017, China's palm imports improved by 13.1% YoY compared with a 15.5% rise in soybean imports. We estimate Malaysia's share of China's palm imports to be 40% in September 2017.

• www.agriculture.com reported that Brazil farmers are frustrated with soybean planting delays. While the southern region of Brazil is raining, the central-west region is suffering from irregular rainfall. As a result, soybean plantings only reached 20% of the areas forecast for 2017F/2018F compared with 29% last year and 19% in the past five years. In Mato Grosso, plantings were delayed. In spite of some rains during the weekend, farmers were still reluctant to plant due to inconsistent rainfall.

• Incidentally, Bloomberg quoted an industry expert as saying that the concentration of plantings in a short period of time and delays in some regions in Brazil may create conditions for high incidence of fungus including Asian rust. Bayer's fungicide director said that plantings in some areas may coincide with seedings in Paraguay and Bolivia, increasing the risk for the fungus to spread.

• SGS and Intertek said that Malaysia's palm oil shipments rose by 8.3% and 8.6% respectively in the first 25 days of October compared with the same period in September. According to SGS, Malaysia's palm exports to China increased by 6.8% while the EU received 45.0% more shipments. On a negative note, the USA's imports of Malaysian palm oil fell by 18.0%. Intertek said that RBD palm olein accounted for 35.4% of the country's palm exports in the first 25 days of October while crude palm oil made up another 17.3%.

Source: AmInvest Research - 30 Oct 2017