• Bloomberg quoted the Plantations Industries and Commodities Minister as saying that Malaysia is prepared to retaliate if the EU follows through with a vote to exclude palm oil from its biofuel mix. Within the next two weeks, the EU Council may be voting to exclude palm oil from its biofuel mix and renewable energy requirements. Malaysia is in the midst of negotiating a free trade agreement with the EU, and palm oil is on the top of the agenda.

• Reuters cited industry players as saying that the drought affecting Argentina's soybean belt is expected to worsen, pushing farmers to plant later. This may result in the beans facing the risk of frosts in May. A few weeks ago, the Buenos Aires Grains Exchange said that the drought in Buenos Aires has raised the risk that some of the 18.1mil hectares expected to be sown with soybean this season will go unplanted.

• In a related development, www.agriculture.com said that the drought in Argentina is continuing in several regions and has caused a delay in plantings for the 2017/2018F season. The plantings of soybeans in Argentina covered just 72% of the 44.7mil acres estimated for the crop. In our view, the delay in soybean plantings in Argentina may result in lower-than-expected global production of soybean. This may help support soybean prices. Argentina is estimated to account for 16.4% of global soybean production. Currently, soybean output in Argentina is forecast to edge down by 1.3% from 57.8mil tonnes in 2016/2017 to 57.0mil tonnes in 2017F/2018F.

• UKAgroConsult reported that China replaced Algeria as the top importer of Russian soybean oil in the current 2017/2018F season. China's share of the market was 45% in the first three months of the season while Algeria's market share dropped to 37%. Russia exported 114.9 kilo metric tonnes of soybean oil in the first three months of the season vs. 126.4 kilo metric tonnes in the same period last season.

• According to www.biodieselmagazine.com, Germany saw a sharp rise in biodiesel exports in 9M2017. German biodiesel exports climbed by 11% YoY to 1.16mil tonnes in 9M2017. Roughly 94% were shipped to EU countries. The biggest recipient of German biodiesel was the Netherlands with imports rising by 1.5% YoY in 9M2017.

• The Guardian reported that Coca-Cola will be using smaller bottles, which will be sold at higher prices instead of changing its sugar recipe in the drink. This is part of preparations for the sugar tax, which will take effect in the UK in April 2018. From April 2018, soft drinks manufacturers will be taxed at 18 pence per litre on drinks containing 5g of sugar or more per 100ml or 24 pence per litre on drinks containing 8g of sugar or more per 100ml. The sugar tax aims to reduce child obesity in the UK. In our view, if Malaysia imposes a sugar tax, this would affect the demand for sugar and hit MSM Malaysia's revenue. Sales volume of MSM Malaysia's sugar products (ex-molasses) slid by 0.8% in FY16.

• Intertek reported that Malaysia's palm shipments inched down by 1.35% in the first 10 days of January compared with the same period in December. On the other hand, SGS said that Malaysia's palm shipments rose by 12.2%. SGS added that palm exports to India climbed by 38.6% in the first 10 days of January compared with the same period in December while shipments to China fell by 24%. According to Intertek, RBD palm olein made up 40.2% of the palm shipments while "others" accounted for another 22.9%. We believe that "others" consist mainly of biodiesel products.

Source: AmInvest Research - 15 Jan 2018