-  Last week, India scrapped the 7.5% import duty on fatty acids, crude and refined palm stearin used in the manufacturing of soaps and oleochemicals. According to the Solvent Extractors Association of India, the country imports about 200,000 tonnes of such products each year.

-  We believe that the abolishment of the duty would encourage the oleochemical industry in India to import instead of buying the feedstock from local refiners. Palm kernel oil and palm stearin are the main raw materials used to produce oleochemicals.

-  We reckon that the action of the new India Government would intensify lobbying efforts by the Indian refiners as the scrapping of the import duty is expected to affect the competitiveness of the Indian refiners. Currently, they are lobbying for an increase in the import duty for refined palm oil, which stands at 10%.

-  Also, the American Soybean Association (ASA) urged its members to lobby the Environmental Protection Agency (EPA) and Congress to mandate the blending of 1.7bil gallons of biodiesel as part of the 2014 renewable fuel standard. In contrast, the EPA is proposing to require 1.28bil gallons of biodiesel blending only. The EPA is due to release the final number in spring. However, the release has been delayed.

-  It is not surprising that the ASA is lobbying for higher biodiesel mandates in view of the surge in the supply of soybean and soybean oil this year. Biodiesel is expected to absorb 21.8% of soybean oil supply in the US in 2014F/2015F.

-  Based on the latest USDA (US Department of Agriculture) report, which was released last Friday, ending inventory of US soybean oil is forecasted to increase 8% to 1.8bil pounds in 2014F/2015F due to a drop in demand. Production of US soybean oil is estimated to remain flat.

-  In the same report, USDA had also revised its forecast of US soybean production upwards by 4.5% to 3.8bil bushels in 2014F/2015F due to higher planting acreage. As a result, soybean production in US is anticipated to expand by 15.5% YoY in 2014F/2015F.

-  The US is expected to account for 33.9% of global soybean production in 2014F/2015F. Argentina and Brazil are estimated to account for another 47.6% of global soybean output. Ending inventory of global soybean is envisaged to climb 26.9% to 85.3mil tonnes in 2014F/2015F.

-  Finally, China sold 95,566 tonnes or 27% of the 354,363 tonnes of soybeans offered in an auction last week. The soybeans were sold at prices between 3,920 Yuan/tonne (US$635/tonne) and 4,080 Yuan/tonne (US$661/tonne).

Source: AmeSecurities