• Reuters cited Abiove, a Brazilian soybean group, as saying that Brazil will surpass the USA as the largest producer of soybeans in 2018, taking over the top ranking for the first time in history. Brazil is expected to lead this year due to its ability to increase soybean planted areas while the Americans have already used the maximum area possible. According to Abiove also, Brazil benefited from yield enhancements underpinned by logistical improvements and gains from planting corn as a second rotation crop. Brazil is estimated to harvest 117mil tonnes of soybeans this year compared with the USA’s 116.48mil tonnes.

• Reuters also reported that an unexpected drop in China’s short-term purchases of Brazilian soybeans is denting Brazil’s exports. China’s agriculture ministry was quoted as saying that China will cut its soybean imports for the first time in 15 years in 2018F/2019F as demand for animal feed is faltering. Hog prices in China registered one of the sharpest declines in 1Q2018 and as such, hog prices are now below production cost. As a result, soybean processing plants in China are currently overstocked with meal and oil.

• Incidentally, Bloomberg said that China has tripled its soybean purchases from Russia amid the trade dispute with the USA. Russia sold about 850,000 tonnes of soybeans to China from July 2017 to May 2018 vs. 340,000 tonnes sold during the same period last year.

• According to various media sources, US and Chinese officials are working on a deal that would halt China’s ZTE Corp from US sanctions in exchange for China’s removal of the 25% tariff on US soybeans. The trade negotiations would also ease the path in China for Qualcomm Inc. to acquire NXP Semiconductors. China’s Commerce Ministry has pledged to immediately restart the review process of the proposed acquisition.

• The USDA (US Department of Agriculture) released its latest demand and supply projections for vegetable oils last week. The USDA has forecast US soybean inventory to fall by 21.7% from 530mil bushels in 2017/2018F to 415mil bushels in 2018F/2019F. Soybean output in the USA is estimated to decline by 2.6% to 4,280mil bushels in 2018F/2019F dragged by lower planted areas and yields. On the other hand, US soybean exports are forecast to improve by 10.9% from 2,065mil bushels in 2017/2018F to 2,290mil bushels in 2018F/2019F.

• Globally, soybean inventory is anticipated to decline by 5.9% from 92.16mil tonnes in 2017/2018F to 86.7mil tonnes in 2018F/2019F due to lower stockpiles in the USA. Although global soybean output is expected to rise by 5.3% in 2018F/2019F, soybean inventory is envisaged to fall boosted by higher exports and domestic crushing activities. World soybean exports are expected to improve by 7.0% to 161.82mil tonnes in 2018F/2019F while domestic crushing activities are anticipated to expand by 4.7%.

• Bloomberg reported that biodiesel consumption in Indonesia will probably top a government estimate and may climb to a record this year as a rally in crude oil spurs a switch to biodiesel. Biodiesel demand may reach 4mil kilolitres (3.5mil tonnes) this year, according to an official with the Indonesia Biofuel Producers Association. The government’s target for biodiesel consumption is 3.28mil to 3.54mil kilolitres (2.86mil tonnes to 3.08mil tonnes) for 2018F. We believe that Indonesia’s biodiesel consumption was 2.54mil kilolitres (2.2mil tonnes) in 2017.

• SGS said that Malaysia’s palm shipments fell by 13.7% in the first 15 days of May compared with the same period in April. Although Malaysia’s palm exports to China surged by 232.9%, this was offset by an 83.3% decline in shipments to India.

Source: AmInvest Research - 21 May 2018