• According to Bloomberg, Indonesia projects its biodiesel consumption to rise to 4mil kilolitres (3.48mil tonnes) in 2018F. Biodiesel consumption is forecast to increase further to 6mil to 6.2mil kilolitres (5.2mil to 5.4mil tonnes) in 2019F. Indonesia will also widen a biofuel mandate to cover railways and power plants in September 2018. Railways and electricity generators will need to use B20 from 1 September 2018 onwards.

• Bloomberg cited a government official as saying that Indonesia is ready to buy more farm goods from the USA in return for access to exports of finished goods. Indonesia is ready to buy more surplus output of cotton, wheat and soybean from the USA. In return, Indonesia wants USA to increase its purchases of finished goods of commodities. Indonesia is seeking exemption from the USA on the implementation of higher import duties on its steel and aluminium products.

• Bloomberg also reported that Mexico is in talks to purchase yellow corn from Argentina as it seeks to diversify its source of imports. Currently, Mexico imports nearly all of its corn and wheat from the USA. Mexico imports about 14mil tonnes of yellow corn a year. Mexico and Canada are in talks to renegotiate the NAFTA agreement with the USA.

• Reuters reported that at least 20 factories, including two of China’s largest, have cut or suspended soybean output, capitulating to record stockpiles of soymeal and a slump in demand from farmers. In contrast, soybean processors in the US Midwest are enjoying a boom as sinking demand from China pushed soybean prices down. From Shandong in the east to Guangxi in the south, factories have struggled in the past year with falling demand for animal feed as pig farmers cull herds due to declining meat prices. Although seasonal cuts in production are common when stocks are high, industry players said the pace this time is quicker and lasting longer than before as crushers are sitting on record soymeal inventories.

• The Rio Times of Brazil quoted a Chinese official as saying that the country is willing to discuss the reduction or elimination of surcharges on some Brazilian products. While an agreement of lowering surcharges on Brazilian soybeans is likely to be achieved, surcharges on Brazilian poultry and sugar are more difficult to resolve. In May 2017, China placed a 40% surcharge on Brazil’s sugar imports, which resulted in a reduction of more than 86% of Brazil’s sugar exports to China.

• According to Indonesia Investments, a website that monitors and provides analysis on the Indonesian economy, Indonesia has postponed the mandatory national insurance for coal and CPO exports by another six months to 1 February 2019. Under the regulation, Indonesian coal and CPO must be transported using Indonesian ships and Indonesian insurance. The aim is to boost the Indonesian shipping industry. The regulation was supposed to be implemented in May 2018. However due to criticism from the coal industry, implementation of the regulation has been postponed. There are concerns as the domestic shipping capacity in Indonesia is still insufficient. In addition, an official with Indonesian Coal Mining Association said that Indonesian vessels are not as competitive as their foreign counterparts as local exporters have to pay higher fuel costs and premium for local shipping vessels.

Source: AmInvest Research - 6 Aug 2018