• Bloomberg reported that biodiesel producers in Europe are struggling to compete with cheap imports from Argentina. Some biodiesel plants have already halted production and more cutbacks could curb demand for rapeseed oil in Europe. An official with the European Biodiesel Board said that most biodiesel plants are either producing at a loss, slowing down or stopping production. Some companies have already gone bankrupt. About two thirds of rapeseed in Europe are used to make biodiesel.

• Reuters reported that China is open to increasing its import quota of Indonesian palm oil by at least 500,000 tonnes. Chinese Premier Li Keqiang said that by boosting palm oil imports, China would be able to help smallholder farmers in Indonesia. Li also called for more imports of tropical fruits and coffee from Indonesia.

• Also, Bloomberg reported that farmers in Heilongjiang, which is China’s top soybean producing area, are unable to increase soybean areas this year as notices on soybean subsidies came too late. Farmers are now planning to plant corn and they have already purchased seeds. Recently, the north-eastern provinces of Heilongjiang and Jilin released emergency notices asking farmers to increase soybean plantings as a political priority. This came in light of China’s proposed tariff of 25% on US soybeans.

• The Express Tribune of Pakistan said that cooking oil in Pakistan will be more expensive if the proposed 30% hike in customs duty on palm oil is approved. In the 2018/2019 Budget, the country’s Federal Board of Revenue has proposed to increase the customs duty on refined palm oil from Rs10,200 to Rs13,200 per tonne. The customs duty on soybean oil may be raised from Rs9,050 to Rs12,000 per tonne.

• Based on India’s experience, we believe that the hike in customs duty may not have an impact on a country’s demand for palm oil if there is a shortage of domestic supplies. India’s imports of Malaysia’s palm oil surged by 104.9% YoY in 1Q2018 in spite of the hike in import duty on refined palm oil from 40% to 54%in January 2018.

• Reuters reported that China’s soybean imports fell by 13.7% YoY to 6.9mil tonnes in April 2018. This was below market expectations and ahead of possible tariffs on US soybean. An industry expert said that imports may have declined due to increased import inspectionsthat have delayed the clearing of cargoes through ports to more than a month. Trade sources were also cited as saying that the threat of extra duties has effectively frozen future purchases from the USA. Nevertheless, China’s soybean imports are expected to be huge this quarter as buyers rush to stock up soybeans from Brazil and benefit from positive domestic crushing margins.

Source: AmInvest Research - 14 May 2018