• Bloomberg reported that US officials will impose stricter quality controls on exports of soybean to China in response to a request by the Beijing government. This move may curb some American shipments. Shipments with impurity levels below 1%, which is half of the current level, will receive priority while shipments of soybeans above 1% will be held back for cleaning. An industry player said that American shippers will have to pay a premium for supplies, which meet the higher standards. Presently, there are no such requirements for Brazil's soybeans.

• Reuters reported that demand for palm oil may stay weak in December in spite of a fall in CPO price. Exports may pick up in January 2018 as China stocks up ahead of Chinese New Year. Also, an industry player in Malaysia said that the duty increase in India has slowed the country's purchases. Hence, there is a possibility that palm inventory in Malaysia may reach 2.7mil tonnes in December 2017. According to the MPOB, the highest palm inventory level in Malaysia was 2.91mil tonnes in November 2015.

• In a Bloomberg report, an industry expert said that soybean harvest in Mato Grosso, which is the main soybean producing area in Brazil, may be delayed by as much as four weeks this season. Dry weather had impeded plantings earlier. Currently, the Brazilian government is forecasting a soybean production of 109.2mil tonnes in 2017F/2018F. The USDA is expecting Brazil's soybean output to be 108mil tonnes in 2017F/2018F vs. 114.1mil tonnes in 2016/2017F.

• Also, India's palm imports fell for the first time in 10 months in November due to higher import duties. Bloomberg quoted Solvent Extractors Association of India as saying that palm imports declined by 11% YoY to 716,968 tonnes in November 2017. In contrast, India's imports of soybean oil surged by 67% YoY to 273,928 tonnes in November 2017.
• Argentina has imposed an 8% export tariff on biodiesel products with effect from 1 January 2018. Argentina said that a "harmonization is necessary between the export rights of biodiesel and that of its main raw material, soybean oil". Exports of soybean oil are taxed at 27%. We are unable to understand this statement. We think that the export tax was imposed so that the US government would reduce the import duties on Argentine biodiesel products. Recently, the US imposed import duties of up to 72% on Argentine biodiesel products for five years. This was in response to claims that Argentine biodiesel products are sold below their cost of production in the US.
• In its latest monthly report, the USDA raised its forecast of US soybean inventory by 4.7% to 445mil bushels for 2017F/2018F due to lower exports. Comparing 2017F/2018F against 2016/2017F, US soybean inventory is expected to climb from 301mil to 445mil bushels. Global soybean inventory is estimated to rise by 1.8% from 96.6mil tonnes in 2016/2017F to 98.3mil tonnes in 2017F/2018F dragged by higher production in the US. Soybean output in the US is estimated to be 120.4mil tonnes in 2017F/2018F against 116.9mil tonnes in 2016/2017F while in Argentina, soybean production is anticipated to inch down from 57.8mil to 57mil tonnes. Soybean output in Brazil is forecast to decline from 114.1mil tonnes in 2016/2017F to 108mil tonnes in 2017F/2018F due to lower yields.

• SGS and Intertek said that Malaysia's palm shipments fell by 2.0% in the first 20 days of December compared with the same period in November. SGS reported that Malaysia's palm exports toIndia plunged by 32.6% while China's palm imports slid by 9.5%. On a positive note, exports to the EU improved by 48.7%. According to Intertek, RBD palm olein accounted for 34.3% of Malaysia's palm shipments while crude palm oil made up another 12.6%.

Source: AmInvest Research - 26 Dec 2017