• The USDA (US Department of Agriculture) released its monthly projections recently. The USDA raised its forecast of 2017/2018F US soybean inventory by 12.8% from 470mil to 530mil bushels on weaker exports. Recall that China has been buying more soybeans from Brazil at the expense of the USA as US soybeans have lower protein levels. Comparing 2017/2018F against 2016/2017, US soybean inventory is forecast to increase from 302mil to 530mil bushels. US soybean production is expected to inch up by 2.2% from 4,296mil bushels in 2016/2017 to 4,392mil bushels in 2017/2018F.

• Globally, soybean production is expected to decline by 1.3% to 346.9mil tonnes in 2017/2018F due to lower output from Brazil and Argentina. The USDA has reduced its forecast of Argentina's soybean output from 56mil to 54mil tonnes due to a drought. Overall, soybean production in Brazil and Argentina is estimated to fall by 3.4% YoY to 166mil tonnes in 2017/2018F.

• Bloomberg reported that Indonesia may give incentives for use of biodiesel in the trains and mining sector. The Energy and Mineral Resources Ministry is still mulling over the value and formulation of the incentives. In January 2018, Indonesia said that it planned to expand biodiesel subsidy to other sectors to boost consumption to 3.5mil kiloliters (3.0mil tonnes) in 2018F (2017: 2.2mil tonnes).

• The Malaysian Reserve said that Malaysia does not plan to impose a blanket ban on goods from the EU as a retaliatory action against the EU's proposed ban on palm biodiesel. According to the International Trade and Industry Minister, a total trade ban on the EU would cause a massive disruption to the economy due to the sizeable number of companies from Germany, the Netherlands, Britain and Sweden in Malaysia. Approximately 200 companies from each of the four main EU countries have strong footprint in Malaysia.

• UKAgro Consult said that the EU's proposed ban on palm biodiesel threatens to end the possibility of Malaysia purchasing £5bil worth of defence supplies from the UK. The Sun newspaper was cited as saying that France, which wants to sell its Rafale fighter aircraft to Malaysia, was trying to outflank the UK by promising to oppose the the EU ban. The two countries are both bidding to sell fighter jets and other defence materials to Malaysia.

• According to Agricensus, about 455,000 tonnes of soybean exports to China from the USA were cancelled. Silver lining is that 314,000 tonnes of the cancelled volumes were subsequently shipped to other destinations. US trade relations with China have been under scrutiny recently after the US announced anti-dumping duties on washing machines and solar panels and China subsequently announced that it is investigating the USA's subsidies on sorghum.

• SGS reported that Malaysia's palm shipments rose by 10.6% in the first 10 days of February compared with the same period in January. Palm exports to the EU surged by 64.8% while India received 26% more shipments. On a negative note, palm shipments to China fell by 54.1%.

Source: AmInvest Research - 19 Feb 2018