- An official with the Indonesia Estate Crop Fund said that the country’s CPO production is estimated at 32mil tonnes in 2015F and between 30.6mil and 32.3mil tonnes in 2016F. Indonesia’s palm oil output is expected to decline in 2016F due to El Nino and implementation of the biodiesel policy. The official said that CPO prices may rise to the range of US$550/tonne (RM2,382/tonne) to US$700/tonne (RM3,031/tonne) in 2016F.

- James Fry said that world palm oil production would contract by 6% to 7% in 2016F due to El Nino. Also, CPO prices will climb to US$600/tonne (RM2,574/tonne) by the end of 1Q2016 and US$700/tonne (RM3,003/tonne) by mid-2016F.

- Bloomberg cited Olam International as saying that palm oil production in Indonesia may decline by 500,000 tonnes in 2016F, while in Malaysia, CPO output may fall by one million tonnes. Olam said although El Nino is unlikely to be as severe as the one in 1997/1998, it will be reasonably strong.

- Bloomberg quoted Oil World as saying that although the election in Argentina is expected to be bearish for soybean prices in the short-term, they may be supportive in the longer-term. This is because Argentine farmers may switch from planting soybean to corn. The presidential candidates in Argentina have proposed to end export taxes for grains immediately. However, for soybean, the export taxes would only be lowered gradually.

- Oil World has forecast soybean areas in Argentina to decline by one to two million hectares in the next two to three years. This may cut soybean production by 5.5mil tonnes. In the short-term, Argentine farmers may release soybean from their stockpiles, which is expected to be bearish for prices. The farmers have been hoarding soybean as a protest against the export tax of 35%. Oil World also said that Brazil’s main soybean areas of Mato Grosso, Minais Gerais, Goias and Bahia are experiencing a lack of rain. If the rainfall is below average in November, soybean plantings would be delayed in Brazil. As at mid-November, soybean plantings in Brazil were 60% completed versus the five-year average of 71%.

- After El Nino this year, it was reported that La Nina may cause havoc. A weather expert in US said that La Nina would come in summer after El Nino. La Nina could bring hot and dry weather to the US Midwest, which would be negative for corn and soybean production.

- Reuters reported that miners are looking to boost sales of specialty products due to the poor outlook for potash. Israel Chemicals is increasing production of polysulphate and developing sulphate of potash (SOP) for fruits instead of using the more common MOP (muriate of potash). Also, Indian importers have demanded for discounts for this year’s sales although the sellers have balked. Additionally, dealers in US have been reluctant to stock up on potash. In a related development, China has begun an antitrust probe into Uralkali before the two parties start negotiations to lock in the price for potash in 2016F. China may impose a fine of US$70mil on Uralkali. According to industry experts, China is likely to lock in potash at US$275/tonne in 2016F compared with US$315/tonne in 2015.

Source: AmeSecurities Research - 23 Nov 2015