• Bloomberg cited a government agency in China as saying that the government's plan to reduce the value-added tax (VAT) on farm products from 11% to 10% from 1 May 2018 onwards will lower the costs of importing agricultural products including soybeans. Last year, some Chinese buyers delayed their soybean purchases until the government reduces the VAT on agricultural goods this year. After the reduction of the VAT, the cost of soybean imports from Brazil will decline by 30 yuan/tonne to 3,330 yuan/tonne. ?
• In a related development, Bloomberg quoted researchers from Purdue University as saying that if China imposes a 30% tariff on US soybeans, US soybean exports to China would fall by 71%. This would result in a 40% decline in overall US soybean exports. A 10% tariff would result in US soybean exports to China declining by a third. Annual economic loss would range from US$1.7bil to US$3.3bil. ?
• According to customs data, China's palm imports rose by 9.9% YoY in February 2018 after falling by 12.5% YoY in January. In 2M2018, China's palm imports declined by 3.8% YoY in contrast to a 5.4% YoY increase for soybean imports. China's imports of soybean oil plunged by 61.3% YoY in 2M2018.

• We are not surprised by the fall in China's imports of palm oil in 2M2018 as the country has ample inventory of the vegetable oil currently. In addition, we believe that China has an excess supply of soybean oil due to the crushing of the huge amount of soybeans coming into the country. Palm inventory at the major ports in China stood at 642,300 tonnes as at 22 March 2018 compared with 579,800 tonnes a year ago.

• In a related development, Reuters said that China's soybean imports from the USA fell by 24.4% YoY to 3.35mil tonnes in February 2018 while soybean shipments from Brazil surged by 154% to 1.75mil tonnes. Although Chin's soybean imports from the USA have been declining, China's purchases of corn-based ethanol have been rising. China bought 197,652 cubic metres of ethanol in February 2018, which was the highest since May 2016. Out of the 197,652 cubic metres of ethanol, about 189,035 cubic metres came from the USA. In February 2017, China imported only 9 cubic metres from the USA. ?
• Reuters reported that Indonesia's CPO exports may have declined in February 2018 compared with January as the hike in import duties in India reduced demand. Palm exports may have fallen by 9.5% from 2.74mil tonnes in January to 2.48mil tonnes in February 2018 while production may have slid from 3.59mil tonnes to 3.49mil tonnes. Recall that India raised the import duties on refined palm oil from 40% to 54% in early March 2018. Import duty on crude palm oil was increased from 30% to 44%. ?
• According to Reuters, price of carbon credits must rise drastically if they are to help protect Southeast Asia's tropical forests against rubber plantation expansion. Researchers found that credits bought and sold on international markets need to increase US$5 – US$13/tonne of carbon dioxide to US$30 – US$51/tonne if they are to safeguard the forests from rubber. At current prices, carbon credits cannot compete with profits made from felling forests and developing rubber plantations. ?
• SGS said that Malaysia's palm oil shipments rose by 10.6% in the first 25 days of March compared with the same period in February. Shipments to India surged by 41.7% while China's imports of Malaysia's palm oil climbed by 60.3%. These helped compensate for a 23.4% fall in shipments to the EU.

Source: AmInvest Research - 2 Apr 2018