• The USDA (US Department of Agriculture) has released its monthly demand and supply projections for vegetable oils. The USDA raised its forecast of 2017/2018F US soybean inventory by 4.7% from 530mil to 555mil bushels due to lower exports. Recall that China has been buying more soybeans from Brazil instead of the US due to their higher protein and oil content. After the revision, US soybean inventory is estimated to surge from 302mil bushels in 2016/2017 to 555mil bushels in 2017/2018F. Soybean production in the US is forecast to improve by 2.2% to 4,392mil bushels in 2017/2018F on the back of an 8% rise in planted areas.

• Also, the USDA has reduced its forecast of global soybean inventory by 3.8% from 98.1mil to 94.4mil tonnes due to a 13.0% downward revision in soybean production in Argentina. Due to the drought in Argentina, the country's soybean output is estimated to fall from 57.8mil tonnes in 2016/2017 to 47mil tonnes in 2017/2018F. Comparing 2017/2018F against 2016/2017, global soybean inventory is expected to inch down from 96.65mil tonnes to 94.4mil tonnes.

• In a related development, Bloomberg cited a grains broker in Japan as saying that China may be reducing its soybean imports from the US in the coming months as it is more interested in buying from Brazil. Chinese crushers have been favouring soybeans from Brazil as they contain more oil than US soybeans. Improvements in infrastructure for transporting soybeans from the farms to the ports in Brazil have also encouraged buyers in Asia to buy from Brazil.

• Incidentally, www.agriculture.com reported that soybean harvesting in Brazil is half completed. Brazilian producers have harvested 48% of the total areas planted with soybeans. According to AgRural's survey, the harvest is slower than last year's rate of completion of 56% but in line with the five-year average of 46%. In Mato Grosso, which is the largest soybean producing state, soybean harvest has reached 85% of the areas planted. With soybeans in Brazil coming on-stream, we reckon that there would be more pressure on US soybean prices as China buyers switch to Brazil supplies. Brazil is also expected to be a beneficiary of any trade restriction on US soybeans if China retaliates against the USA's tariffs on steel and aluminium products.

• According to Reuters, the soybean season in Argentina is over as there is no hope for a recovery in yields, which have been hit hard by the drought. An industry expert said that upcoming rains will not help corn or soybean. Instead, they would improve the planting conditions for wheat, which are being sowed in May. Due to the lower soybean supply from Argentina, China's soymeal exports are set to double to two million tonnes in 2017/2018F. China buys soybeans to be crushed into feedmeal for its cattle and hog industry. Asian countries such as Japan and South Korea are key importers of soymeal products.

• SGS reported that Malaysia's palm shipments fell by 19.3% in the first 10 days of March compared with the same period in February. The decline in shipments was mainly due to a 35.6% contraction in exports to the EU. On a positive note, palm shipments to China rose by 10.7% while India's demand increased by 12.7%.

Source: AmInvest Research - 19 Mar 2018