• Bloomberg reported that the Solvent Extractors Association of India is lobbying for an import duty of 45% on refined palm oil vs. 40% currently to help the domestic processors. The higher duty will widen the duty differential between refined and crude palm oil from 10 to 15 percentage points. The Indian government will be presenting the federal budget to lawmakers on 1 February 2018. A higher import duty would be negative for demand for refined palm oil. India was the largest buyer of Malaysia's palm oil in 2017, accounting for 12.2% of exports. India raised import duties on palm products twice in 2017.

• Bloomberg cited the China National Grain and Oils Information Center as saying that inventory of China's soybean imports rose to 6.71mil tonnes two weeks ago. Soybean stockpiles increased by 380,000 tonnes week-on-week and 760,000 tonnes YoY after the arrival of overseas shipments. Although soybean crushing margins are falling in China, they are still profitable. In a related development, an industry player said that China has shifted to soybeans from Brazil as the cold weather has pushed up prices in the US.

• Bloomberg reported that Indonesia consumed 2.54mil kiloliters (2.2mil tonnes) of biodiesel in 2017. This was 24.1% lower than the 2.9mil tonnes of biodiesel consumed in 2016. We believe that Indonesia's biodiesel consumption fell short of expectations in 2017 due to the lack of demand and subsidies. Out of the 2.54mil kiloliters consumed in 2017, about 2.33mil kiloliters (2.03mil tonnes) were used in the transportation sector and power plants. Also out of the 2.54mil kiloliters, roughly 204,000 kiloliters (177,700 tonnes) were non-subsidised.

• The USDA (US Department of Agriculture) released its monthly demand and supply projections for vegetable oils recently. The USDA raised its estimate of 2017/2018F US soybean inventory by 5.6% from 445mil to 470mil bushels due to lower exports. USA's soybean exports are expected to be weaker in 2017/2018F due to competition from Brazil. Comparing 2017/2018F against 2016/2017, US soybean inventory is expected to climb from 302mil to 470mil bushels as production is forecast to expand from 4.296bil to 4.392bil bushels. Global soybean output is anticipated to decline from 351.32mil in 2016/2017 to 348.57mil tonnes in 2017/2018F dragged by lower production in Brazil and Argentina. In spite of this, global soybean stockpiles are estimated to inch up from 96.49mil tonnes in 2016/2017 to 98.57mil tonnes in 2017/2018F on higher inventory carried over from the previous season.

• According to www.agriculture.com, Brazil's soybean harvest has started in Mato Grosso. Harvesting has reached 0.3% of total planted areas. A soybean producer said that rains have been good for the development of soybeans. Despite the delay of 15 days at the beginning of the planting, soybean crops in the region are in excellent conditions currently. CONAB, Brazil's agriculture supply agency, is forecasting Brazil's soybean production to be 110.4mil tonnes this season while the USDA is estimating 110mil tonnes (2016/2017: 114.1mil tonnes).

• SGS and Intertek reported that Malaysia's palm shipments slid by 2.8% and 7.4% in the first 15 days of January compared with the same period in December. SGS said that palm exports to India climbed by 52.1% while shipments to China fell by 35.1%. The European Union's imports of Malaysia's palm products declined by 41.7% in the first 15 days of January compared with the same period in December. According to Intertek, RBD palm olein made up 43.8% of the palm shipments while "others" accounted for another 18.3%. We believe that "others" consist mainly of biodiesel products.

Source: AmInvest Research - 24 Jan 2018