• Indofood Agri Resources and PT Dharma Satya Nusantara released their quarterly results recently. Both companies reported YoY declines in FFB production in 1QFY18. PT Dharma Satya’s nucleus FFB production plunged by 24.9% YoY in 1QFY18 while Indofood Agri’s nucleus FFB output slid by 6%. We believe that the production trend may not be reflective of all Indonesian companies as First Resources’ nucleus FFB output rose by 13.1% YoY in 1QFY18.

• Indofood Agri’s core net profit fell by 76% YoY in 1QFY18 as average CPO price shrank by 11% and nucleus FFB production declined by 6%. We understand that Indofood Agri’s FFB production in 1QFY18 was affected by heavy rainfall in South Sumatra and Kalimantan and replanting activities in Riau. Currently, the group is still guiding for a 5% to 10% increase in nucleus FFB production in FY18F.

• Bloomberg quoted Bunge’s CEO as saying that China has stopped buying US soybeans amid the trade war. Instead, China is buying soybeans from Canada and Brazil. China is deliberately not buying anything from the USA. In the two weeks ended 19 April, China cancelled a net 62,690 tonnes of US soybean purchases for the marketing year ending 31 August 2018. Bunge has been able to meet Chinese demand by filling shipments with soybeans from other countries.

• An official with the US Soybean Export Council said that Chinese importers are not purchasing US soybeans due to the perceived risk of placing orders and then having the 25% duties applied. The official added that he does not know how long the lull will last.

• Reflecting the demand trends, the China Customs General Administration said that China’s imports of US soybean dropped by 26.6% YoY in March and 20.5% YoY in 1Q2018. On the other hand, China’s imports of Brazilian soybean surged by 33.3% YoY in March and 128.7% YoY in 1Q2018.

• Bloomberg cited Archer Daniels Midland Co as saying that the heydays of fat profits from buying, storing and selling crops may be over. An oversupply of crops including soybeans, corn and wheat has curbed the price volatility that historically generated trading opportunities. Also, farmers have added their own storage capacities and technology has offered real-time data that can help them determine when to sell the crops. Archer Daniels added that it would see a “negative impact” of US$30mil in the current quarter due to China’s tariffs on American sorghum.

• Reuters quoted an Indonesian conservation organisation as saying that buyers are wrong to remove palm oil from their products and should instead focus on working with sustainability schemes and smallholder farmers. The managing director of Iceland supermarket chain, which removed palm oil from its products had said that the company did not believe that sustainable palm oil was available to retailers.

• UCA News reported that the Vatican has resolved to help Indonesia persuade the European Union to rethink its move to impose a ban on palm-based biodiesel. As part of the effort, the Vatican plans to host a seminar to raise the issue with the EU soon. An Indonesian minister met Pope Francis and Vatican officials to discuss the issue a few weeks ago.

• SGS said that Malaysia’s palm shipments edged down by 4.5% MoM in April mainly due to a 38.7% plunge in shipments to India. On a positive note, Malaysia’s palm exports to China rose by 15.3% MoM in April.

Source: AmInvest Research - 7 May 2018