• Bloomberg reported that Indonesia’s palm oil export volumes may drop by 5% in 2018F. An official with the Indonesian Palm Oil Association said that import tax and regulation in several countries are hampering exports. A bright spot is biodiesel. The official said that the Indonesia government’s biodiesel mandate would push demand for CPO by one million tonnes per year and increase palm oil price by at least US$50/tonne.

• Reuters reported that a tiny company that has never turned a profit is poised to beat the world’s biggest agriculture firms to market the next breakthrough in genetic engineering – a crop with “edited” DNA. Calyxt Inc, an eight-year old firm co-founded by a genetics professor, alters the genes of a soybean plant to produce healthier oil using the editing technique instead of conventional genetic modification.

• Gene-editing involves targeting specific genes in a single organism and disrupting those linked to undesirable characteristics or altering them to make a positive change. Traditional genetic modification by contrast involves transferring a gene from one kind of organism to another. Gene-editing could result in bigger harvests of crops. Calyxt plans to sell the oil from its soybeans to food companies.

• The USDA has released its latest demand and supply projections for vegetable oils. The USDA has raised its forecast of US soybean production by 4.4% from 4,310mil to 4,586mil bushels for 2018E/2019F to account for a higher soybean yield. Comparing 2018E/2019F against 2017/2018E, US soybean production is now expected to increase by 4.4%. As a result, US soybean inventory is now projected to surge by 82.6% from 430mil bushels in 2017/2018E to a record 785mil bushels in 2018E/2019F.

• Due to the upward revision in US soybean production, global soybean production is now estimated to rise by 9% from 336.7mil tonnes in 2017/2018E to 367.1mil tonnes in 2018E/2019F. Brazil’s soybean production is envisaged to be flat at 120.5mil tonnes in 2018E/2019F while in Argentina, soybean output is expected to rebound by 54.1%. Global soybean inventory is estimated to expand by 10.8% from 95.6mil tonnes in 2017/2018E to 105.9mil tonnes in 2018E/2019F.

• According to Reuters, large grain transport ships using Argentina’s port of Rosario had to reduce their cargoes by 3,200 and 4,300 tonnes because of unusually low water levels in the Parana River. The Parana River is used to transport about 80% of Argentina’s agricultural and agro-industrial exports to international markets. However, a drought in southern Brazil has caused its water levels to drop by half a metre. The silver lining is that rains are expected in southern Brazil soon, which should alleviate the situation. The reduced cargoes affected freight rates and forced ships to top up their cargoes in areas where merchandise is more expensive.

Source: AmInvest Research - 20 Aug 2018