• Bloomberg reported that there are signs that China’s buyers are already reacting to the 25% tariff on US soybeans, which will take effect from 6 July. An industry player said that there has been higher demand for Brazil’s soybeans for delivery in August, September and October. This is significant because international buyers usually buy soybeans from South America in the first half of the year and not second half. Brazil harvests its soybean crops in the first half of the year. Another industry player said that China will need to tap countries such as Canada and Paraguay for soybeans as domestic production and imports from Brazil will not be enough.

• Reuters reported that the price premium of Brazil’s soybeans over US soybeans has jumped on renewed demand from Chinese buyers and logistic hurdles in Brazil. Brazilian producers and grain merchants are pushing for higher prices for soybean and corn due to a rise in transportation costs from the grain belt in centre-west Brazil to the ports in the south i.e. Santos and Paranagua. Transportation costs are expected to increase as a new legislation has raised truck freight prices. An industry expert said that the premium of Paranagua’s soybeans for August delivery surged to US$1.30/bushel over US soybeans. For September delivery, the premium was US$1.40/bushel over US soybeans.

• Express of the UK said that the EU’s proposed ban on palm biodiesel will hit the United Kingdom (UK). The UK exports about £3.3bil worth of goods to Malaysia, Indonesia and Thailand every year and 34,000 jobs in the UK are dependent on those sales. If the proposed ban is enforced, Malaysia, Indonesia and Thailand may retaliate against the UK. This would cut the UK’s exports by £170mil a year and cost 2,000 jobs. The UK government is currently deciding on whether to support the ban.

• UKAgroConsult reported that due to the drought, which has hit production, crushers in Argentina have imported 245,000 tonnes of Brazilian soybeans so far this year. This was more than the last seven years combined. Argentina imported about 209,000 tonnes of soybeans from Brazil in the past seven years. In addition to Brazil, Argentina has also been buying soybeans from the USA. To keep plants running and meet contractual commitments to sell soymeal and soybean oil, Argentina’s crushers have bought almost 500,000 tonnes of soybeans from the USA. We believe that Argentina’s imports would help mitigate the fall in China’s demand for US soybeans in the short-term.

• According to the Solvent Extractors Association of India, stocks of edible oils at the ports and pipelines have increased from 2.1mil tonnes as at 1 April to 2.3mil tonnes as at 1 May. Although inventory of edible oils at the pipelines dropped from 1.3mil to 1.27mil tonnes, stockpiles at the ports rose by 38.7% from 770,000 tonnes to 1.07mil tonnes. Due to the high level of inventory, we believe that India has bought enough palm oil for the Deepavali festivities in November. As such, India’s demand for palm oil may soften going forward.

• SGS said that Malaysia’s palm shipments fell by 10.0% in the first 20 days of June compared with the same period in May. The EU’s demand for Malaysian palm oil contracted by 11.8% while exports to China declined by 24.7%. On a positive note, Malaysia’s palm exports to India surged by 115.2% in the first 20 days of June compared with the same period in May.

Source: AmInvest Research - 25 Jun 2018