- Bloomberg cited industry experts as saying that the outlook for the potash market is expected to worsen next year. Potash prices are anticipated to decline in 2016F on the back of new capacity, poor demand and depreciating currencies in the buyers’ countries.

- Mosaic Co sees potash prices averaging at the low-end of the price range of US$260/tonne to US$280/tonne in 3Q2015. The company said that it would be cutting production of potash and phosphate due to low prices. Mosaic Co said that delayed purchases from Brazil and North America have contributed to the weak potash market since 8 August 2015. An industry expert forecasts potash prices averaging at US$254/tonne in 2016F from US$300/tonne currently. Another industry expert said that China’s negotiations for their potash requirements in 2016F are expected to start this month and it would be difficult to lock in at prices that are above US$300/tonne.

- Lower potash prices are expected to benefit plantation companies in South East Asia. However, this may be negated if the Ringgit falls more than the decline in potash price. At the current exchange rate, we estimate that the slide in potash prices would benefit plantation companies.

- Last Friday, soybean price edged up as USDA lowered its forecast of 2015/2016F US soybean production by 1.2% to 3.9bil bushels. As a result, the soybean harvest for 2015/2016F is no longer the highest ever production in record. The downward revision was mainly due to a 1.3% reduction in the forecast of soybean areas harvested. Comparing 2015/2016F against 2014/2015, US soybean output is expected to inch down by 1% while ending inventory is estimated to climb by 122.5% to 425mil bushels due to high carry-over reserves.

- Reuters reported that the Indonesian government has asked major palm oil companies to claw back on their “No Deforestation” pledge made last year. The Indonesian government has asked the plantation companies to exempt smallholders because they are not ready to practise the same level of sustainable forest practices as the big players. An official at one of the plantation companies said that the companies have received guidance notes from the authorities. Indonesia also said that although the disbursement of loans should always consider the impact on the environment, there would be no restrictions on lending to plantation companies or smallholders if the fires are caused by natural disaster.

- It was also reported that Malaysia would be developing its own drought resistance oil palm that can withstand several seasons of dry spell including El Nino, in 10 years’ time. The International Society for Oil Palm Breeders said that the research process is in the initial stages. The society has just started looking at the genetic material of the tree. Previously, Malaysia imported drought resistance breeds from Africa and Central America.

Source: AmeSecurities Research - 12 Oct 2015