• Bloomberg reported that Indonesia plans to implement the B30 biodiesel policy in year 2019F instead of 2020F. B30 may increase the annual domestic biodiesel consumption to a range of 5.5mil to 6.0mil kilolitres (4.8mil to 5.2mil tonnes). The biodiesel consumption target for 2018F is 3.2mil kilolitres (2.8mil tonnes). Also, the Energy and Mineral Resources Ministry has not received the presidential decree to expand biodiesel incentives to the non-public sector such as mining and locomotives. We believe that this is marginally negative as it means that Indonesia may not be able to meet its biodiesel target of 2.8mil tonnes for 2018F. To recap in early 2018, Indonesia said that it plans to expand biodiesel subsidy to the railway and mining sectors to boost biodiesel consumption.

• According to Bloomberg also, the Solvent Extractors Association of India will collaborate with the Indonesian Palm Oil Board to promote the use of sustainable palm oil. The Indonesia government would like India to recognise the ISPO (Indonesia Sustainable Palm Oil) certification. In response, an Indian government official said that India and Indonesia can work towards that. We believe that currently, the most recognised certification is the RSPO (Roundtable for Sustainable Palm Oil). We reckon that Malaysia is also working towards getting its MSPO (Malaysia Sustainable Palm Oil) certification recognised by international buyers of palm oil.

• Reuters reported that India’s palm imports plunged 41% YoY to their lowest in nearly 4½ years in June 2018 as the impact of higher import taxes set in. However according to officials, palm imports are likely to recover in July as India has also raised the import duties on other vegetable oils such as sunflower and soybean oil. As the duty difference between palm oil and other vegetable oils narrows, demand for palm oil may increase while imports of other vegetable oils may soften in the coming months. India relies on imports for 70% of its edible oils consumption.

• Reuters cited an official from Sinograin as saying that China can fully meet the needs of its state soybean reserves without imports from the USA. The official added that China can import soybeans from South America and countries participating in China’s Belt and Road initiative for its state reserves. He said that there is currently ample inventory of soybeans in the state reserves. The size of China’s soybean reserves is not known.

• According to Reuters also, China’s import tariff of 25% on US soybeans has driven down soybean prices and triggered a wave of buying from other countries. Even Brazil is preparing for major purchases of US soybeans to feed its domestic processors as it diverts more of its own crops to China at premium prices. An industry player in Brazil said that Brazil may import up to one million tonnes of US soybeans with purchases likely to be ramped up in October 2018. Also, surging Brazilian soybean prices have pushed importers in Europe such as the Netherlands, Spain and Italy to switch to US soybeans.

Source: AmInvest Research - 23 Jul 2018