• Bloomberg reported that a revised regulation that delays the requirement for coal and palm oil exporters using only domestic vessels for shipments has been signed. The implementation of the shipping rule for coal and palm oil exporters has been delayed for two years in the revised rule. The government requires local insurance for exports and a threemonth transition period will be given to exporters.

• Reuters said that China is still watching for any impact from the 25% tariffs on US soybeans on its soybean supplies. So far, soybean supplies to China are normal, according to the Ministry of Agriculture and Rural Affairs. South America was China’s main soybean supplier in 1Q2018.

• In a related development, South China Morning Post cited the chairman of New Hope Group, which is one of the largest animal feed producers in China, as saying that the country’s animal feed industry can absorb the impact of the 25% tariff on US soybeans. New Hope Group and other players in the industry can import more soybeans from Brazil, Russia, India and Argentina if the tariff is imposed on US soybeans. Also, the Chinese feed industry can reduce the soy content and replace it with other ingredients. The chairman added that the likelihood of a major price hike in the cost of soybeans is not large. China has a lot of soybean inventory and the feed formula can be adjusted.

• Tempo reported that Indonesia’s trade minister has asked permission from the vice president to retaliate against countries that are barring the use of crude palm oil. The trade minister said that Indonesia has been purchasing airliners from Airbus and Boeing and it is possible that Indonesia would cease buying airplanes from both companies if their countries of origin (France and the US respectively) ban palm oil.

• According to the Solvent Extractors Association of India, inventory of edible oils at the ports and pipelines rose marginally from 2.195mil tonnes as at 1 February to 2.197mil tonnes as at 1 March 2018. Inventory of edible oils at the ports declined from 855,000 tonnes in February to 757,000 tonnes in March. However, inventory of edible oils at the pipelines rose from 1.34mil tonnes to 1.44mil tonnes.

• In China, palm inventory at the major ports has been rising. Palm inventory at the major ports in the country climbed from 602,200 tonnes in the beginning of the year to 704,100 tonnes as at 10 April 2018. Due to the huge increase of palm inventory in India and China, we believe that demand from the two countries would soften going forward.

• The USDA released its monthly demand and supply projections for vegetable oils last week. It did not make significant revisions to its estimates. The USDA reduced its forecast of US soybean inventory marginally from 555mil to 550mil bushels for 2017/2018F due to a weaker domestic usage. Comparing 2017/2018F against 2016/2017, US soybean inventory is expected to surge from 302mil to 550mil bushels as production increases from 4,296mil to 4,392mil bushels.

• Also, the USDA forecasts global soybean inventory to decline by 6.1% from 96.7mil tonnes in 2016/2017 to 90.8mil tonnes in 2017/2018F. The USDA has revised its forecast of soybean production in Argentina from 47mil to 40mil tonnes for 2017/2018F due to the drought in the country. Global soybean output is estimated to fall by 4.5% from 350.76mil tonnes in 2016/2017 to 334.8mil tonnes in 2017/2018F.

Source: AmInvest Research - 16 Apr 2018