• The USDA has released its monthly demand and supply projections for vegetable oils. The USDA has reduced its forecast of US soybean inventory for 2018F/2019F from 415mil to 385mil bushels. This is due to a lower estimate of the carry-over inventory from 2017/2018F. The USDA is now assuming a carry-over inventory of 505mil instead of 530mil bushels previously.

• Globally, the USDA is forecasting soybean production to increase by 5.5% from 336.7mil tonnes in 2017/2018F to 355.24mil tonnes in 2018F/2019F on the back of a recovery in Argentina’s output. After being affected by drought this year, soybean production in Argentina is anticipated to surge by 51.4% from 37mil tonnes in 2017/2018F to 56mil tonnes in 2018F/2019F.

• In spite of the USDA report, which showed that US soybean inventory may drop next year, soybean prices fell last week as rains across the US Midwest boosted production outlook. According to Reuters, trade tensions between the USA and partners like China and Mexico also weighed down grain prices. Currently, the USDA is forecasting US soybean production to be 116.48mil tonnes in 2018F/2019F vs. 119.52mil tonnes in 2017/2018F.

• UKAgroConsult reported that Brazil’s soybean exports to China hit a monthly record in May. Brazil exported about 9.76mil tonnes of soybeans to China in May 2018. This was more than 1.4mil tonnes higher than the previous record set in April 2017. China accounted for 80% of Brazil’s soybean exports in terms of volume in May 2018. China’s threat to impose tariffs on US soybeans has resulted in Chinese crushers snapping up supply from Brazil as the Brazilian season is expected to end soon. The US season is anticipated to start in September 2018.

• Bloomberg reported that French farmers started blocking the refineries and fuel depots of Total SA a few weeks ago to protest the company’s decision to import palm oil for a biorefinery. Total has invested €275mil to transform a refinery in southern France into a plant that can make 500,000 tonnes of biodiesel per year. Total has said that no more than 50% of the raw materials will be palm oil and all palm oil suppliers will be certified by the RSPO (Roundtable for Sustainable Palm Oil).

• Incidentally, Reuters cited a French junior minister as saying that France wants to cap and progressively cut palm oil imports and will propose to do so at the EU level. Another junior minister added that France wants to stop the increase in use of palm oil and soybean oil. The cap on palm oil would be revised depending on the conditions of the forests. A strategy would also be developed to fight deforestation.

• According to Bloomberg, China has cut import tariffs on 43 food products from Argentina. The cut in tariff is applicable from 1 July 2018 onwards. The food products include ice cream, pasta, olives, peanuts and fish.

• SGS said that Malaysia’s palm shipments fell by 18.2% in the first 10 days of June compared with the same period in May. The EU’s imports of Malaysian palm oil plunged by 49.5% while exports to China declined by 46.8%. On a positive note, demand from India is still healthy as reflected in the increase of 24.5% in palm exports to the country in the first 10 days of June compared with the same period in May.

Source: AmInvest Research - 18 Jun 2018