- There were three interesting developments in the palm oil sector last week.

- They were (1) European Union’s (EU) cancellation of the anti-dumping duty on Indonesian biodiesel, (2) the week-on-week decline in palm oil inventory in China and (3) potentially dry weather in the mid-west of US, which may affect soybean and corn production.

- EU has dropped the anti-dumping duty on Indonesian biodiesel imports after initial investigations showed that the subsidies were minimal. The complete investigation will be tied with a decision, which will be announced next month.

- Musim Mas Group was supposed to be charged with a 2.8% duty while Wilmar’s subsidiaries in Indonesia were levied 9.6%.

- The cancellation of the anti-dumping duty means that Malaysian biodiesel producers will be facing competition from their Indonesian counterparts soon.

- Malaysia has been taking advantage of the anti-dumping duty imposed on the Indonesian producers to export more biodiesel to the EU.

- In the first half of the year, exports of Malaysian biodiesel surged 299.2% YoY to 72,591 tonnes.

- Bloomberg reported that palm oil inventory at the ports in China amounted to 1.06mil tonnes in the week ending 19 August 2013. This was 50,000 tonnes less than a week ago. Inventory was 680,000 tonnes at the same last year.

- Finally, soybean prices remained between the US$12.90/bushel and US$13.00/bushel level last week on the back of worries that the dry weather in US Midwest might affect production. Consequently, spot CPO price rose above RM2,400/tonne last week.

- Currently, USDA (US Department of Agriculture) is forecasting soybean output in the US to climb 13.4% YoY to 3.4bil bushels in 2013F/2014F.

- On the local front, independent cargo surveyors reported that palm oil shipments from Malaysia expanded 10% to 12% in the twenty days of August compared to the same period in July. Growth in palm oil shipments was driven mainly by China and India, which took in 49.2% to 69.2% more palm oil.

- In view of the downgrade in our recommendations for Kuala Lumpur Kepong, TSH Resources and TH Plantations, our stance on the plantation sector is now a NEUTRAL.

Source: AmeSecurities