Weekly Highlights (27 June – 03 July)

Section I:  Weekly Highlight on Fundamentals

Higher Acreage in the US

USDA has revised estimates of actual plantings in 2012 as compared to the March planting intentions and also year-on-year increases in the estimated harvested areas of corn, wheat and barley as well as of soybeans and other oilseeds. However, this can only partly moderate the bullishness stemming from the actual and potential crop damage resulting from the unusually hot and dry conditions in many important US growing areas in the Midwest, the Delta and the Southeast.

Corn plantings were raised by 0.5 Mn acres from the intentions to 96.4 Mn acres (against 91.9 Mn acres last year). The June 1 total corn stocks in all positions were 3148 Mn bu (down from average expectations of 3182 and last year’s 3670 Mn bu), implying that corn usage exceeded expectations in March/May. The estimate of US soybean plantings was raised sizably by 2.2 Mn acres from the March intentions to 76.1 Mn acres, up 1.1 Mn acres from a year ago. Soybean stocks in all positions as of June 1 were 667 Mn bu, slightly above expectations of 640 and also above last year’s 619 Mn bu.

US cotton plantings were revised downward by 0.5 Mn acres from the March intentions and at 12.6 Mn acres are down 2.1 Mn acres from a year ago. Sizable year-on-year increases were confirmed in plantings of canola, sunflowers, peanuts and flaxseed

World Production Prospects Improved

Oil World has raised its estimate of world production of rapeseed & canola by 0.6 Mn T to 61.6 Mn T in 2012/13. This occurred all on account of Canada after the release of the larger than expected Canadian canola plantings this year (up even 1.0 Mn ha on top of last year’s record), making us raise our estimate of this year’s Canadian canola crop to a new high of 16.2 Mn T compared with our previous estimate of 15.6 Mn T and last year’s 14.5 Mn T. There are still a lot of weather uncertainties ahead and our new crop estimate reflects the average of our current range forecast.

Export of US soybeans will be up in June and July

US exports of soybeans will be up from last year in June and July as well as in the following months owing to the reduced South American supplies. This is already reflected in the recent increase in South American export prices, which is likely to shift new foreign demand to US origin. US soybean export inspections were a bit smaller than expected and reported at 9.2 Mn bu in the week to June 21, but this may be revised upward similar to what occurred in the preceding two weeks. US soybean export inspections reached 36.7 Mn bu in the three weeks to June 21 (up 72% from a year ago), of which China 18.1 Mn bu.

Section II: Other Weekly Highlights

1. Asia Pacific

a.      China

Debate on National Standard of Edible Blended Oil

According to the reports of China Business, Standardization Administration of China and State Administration of Grain will map out plans to revise the National Standard of Edible Vegetable Blended Oil in the second half year of 2012 after a series of scandals on edible oil quality this year. In China, blended oil occupied 40% small-packaged edible oil consumption.

The new standard will specify various vegetable oil items and proportion on the label. In fact, most manufactures never meet this requirement. Low cost vegetable oils, even animal fats and unhealthy oils are blended in edible oil in domestic market due to higher margins.

As a traditional feedstock of blended oil in China market, palm oil is disregarded as a factor for cardiovascular disease because of its high content of saturated fatty acid, which really raises concerns among common public.

Chinese State-owned grain company invested in Argentina soybean

Chongqing Grain Group Co Ltd, one of China’s largest State-owned grain companies, is in talks with Molino Canuelas SA, a major agribusiness group in Argentina, about joint investments totalling $10 million in a soybean farm and dairy farms in the South American country. This marks the beginning of a series of plans the Chinese group is about to carry out in Argentina.

It also follows its investment in a soybean production base in Brazil last year, as it steps up its effort to meet the country’s growing appetite for agricultural products through investments in South America.

Agreements on the investments in Argentina – split 50-50 between the two companies – are expected to be signed “within this year”, Claudio Canepa, industrial manager of the Argentine company, said in Buenos Aires.

The two companies plan to rent a 10,000-hectare soybean farm in central Argentina’s agricultural Cordoba province, with an expected annual output of more than 30,000 metric tons of soybeans, and ship all the beans back to China.

The group also announced plans early this year to invest $1.2 billion in Argentina to grow corn, cotton and soybeans, according to Chinese media reports.

b. Indonesia

Indonesia palm oil shipments hampered by dry weather

A recent Reuters report stated that crude palm oil shipments from Indonesia are being hit by dry weather conditions, with falling water levels on a river hampering transportation of the edible oil from West Kalimantan, an industry official said on Thursday. Shipments from West Kalimantan province had been halved from the usual 100,000 tonnes per month, Steaven Halim, an official at the Indonesian Palm Oil Association (GAPKI) told Reuters.

“Crude palm oil transportation has been affected by low water levels on the Kapuas river,” Halim said. “The dry season has caused the level of the river to drop and several areas of the river cannot be passed by ships carrying crude palm oil.” He added that transferring the crude palm oil to trucks was expensive and problematic because of a shortage of vehicles. “River transportation only costs a quarter of that by truck,” Halim said.

Data on Indonesia from GAPKI showed that January to May palm exports totalled 7.37 million tonnes, with May shipments 7 percent lower versus April at 1.4 million tonnes. This year total palm oil output from Indonesia is expected to be between 23 million and 25 million tonnes, up at least 7 percent, according to industry estimates.

According to Rabobank, 78 percent of Indonesian palm oil production comes from Sumatra, with Kalimantan output accounting for 18 percent.

Thailand: Higher Than Expected Palm Oil Exports

Palm oil exports were much higher than expected in Jan/May, reaching a record 183,000 tonnes. The European Union, Malaysia and Myanmar are the major destinations. Palm oil exports accelerated since July 2011 owing to higher domestic production and apparently also due to smaller than expected quantities used for domestic biofuel production. Exports increased to 41,000 tonnes in May 2012 compared with 11,000 tonnes a year ago. But a sharp decline is expected in exports in June following the increase in the export duty done by the government in an effort to raise domestic supplies.

2. Sub Continent

Pakistan: Sunflower growers demand increase in support price

The sunflower growers demanded the government to raise its support price to Rs 2,200 per kilogram (kg) in order to enhance edible oil production in the country. An apiculturist at Sindh Agriculture Forum said despite 22 percent increase in production during the last six months, the government has shut down a seed supply centre in Sindh, which was catering to growers by supplying more than 150,000 tonnes of sunflower seed on subsidised rates.

The federal government ensured the sunflower growers it would with the support of oil extracting companies announce increase in the sunflower support price from the existing Rs 1,600 to Rs 2,000 per 40 kgs.  The oil seed companies have assured the government that they would purchase sunflower from farmers at Rs 2,100 per 40 kgs, a spokesman of Sindh agriculture department said.

The enhancement in sunflower support price would not only help encourage balanced crop system but would also reduce dependence on the imports and thereby save billions of rupees. Pakistan has been importing edible oil worth more than $2.4 billion annually and the figure might go up to $2.6 billion owing to price fluctuations on rupee-dollar parity.

Sunflower seeds contain about 42 percent of high quality edible oil and this crop is grown on an area of 265,000 hectares in Pakistan with a production of 3,75,000 tonnes sunflower seed and 1,430 kgs per hectare yield. But the production is low as compared to major sunflower growing countries like China, United States and Argentina but our per acre production is better than the developing countries, he said. He said due to higher import cost, the manufacturers of vegetable ghee and cooking oil were unable to pass on the maximum benefit in case of any slight decline as they were facing multiple problems including power and gas load shedding and production loss.


Parliament Approved National Budget for FY 2012-2013

The National Budget for 2012 – 2013 fiscal has been approved by the Parliament on June 28, 2012. In the budget, import duty on bulk import of CPO, CPL, RBD PO/PL and CDSO by the refinery owners has been kept zero with 10% import VAT as in previous.

Bangladesh: Weekly Palm Oil Import

During the week June 27 – July 03 of 2012, a quantity of 8,500 tonnes of RBD PL arrived from Indonesia. Accordingly, during Jan. 01 to July 02 period of 2012, the import quantity of CPO, CPL, RBD PO/PL together stands at 490,884 tones, which is about 64% of total import of oils and fats imported in the country duri8ng the period and is about 27.30% higher than the quantity of CPO, CPL, RBD PO/PL imported in the country during the period.

The quantity of CPO, CPL, RBD PO/PL imported in bulk from Malaysia during the period was 106,729 tonnes i.e. about 22% of total palm oil import during the period and is about 109% higher compared to the quantity imported during the corresponding period of 2011. Import quantity of CPO, CPL, RBD PO/PL from Indonesia during the period was 381,716 tonnes.


Low Precipitation in North-western India

The delayed progress of the monsoon has kept precipitation much below normal this week, primarily in the north-western half of the country, including the important oilseed producing states Madhya Pradesh, Maharashtra and Gujarat. Nationwide rainfall was 18% below normal in the week to June 27, resulting in a cumulative deficit of 23% since June 1. The state of Gujarat received only 20–30 mm so far, against 70–100 mm normally for this time of the year. Plantings of oilseeds started only slowly owing to insufficient rainfall and were 17% below last year as of June 28. The planting progress was reported at 1.1 Mn ha, equalling about 6% of the area normally sown to kharif oilseeds. However, plantings of soybeans were ahead of last year at 0.63 Mn ha (0.46) while those of groundnuts were behind schedule at 0.32 Mn ha (0.64).

The South West monsoon has lived up to its proverbial vagaries in June, with the total precipitation at the all India level falling short of the long period average of 163.5 mms by a whopping 29%.

The erratic and ill distributed rain has affected as much as 86% of the geographical area of the country; numerically, 27 meteorological divisions have suffered from the deficient or scanty rains.

Palm oil exports from Indonesia set to advance

Palm oil shipments from Indonesia, the world’s largest producer, may climb 9.5% in June on sustained demand before Ramadan. Exports are set to climb to 1.5 million tonne from 1.37 million tonnes in May, while output will probably be little changed at 2.1 million tonnes, according to the median of five plantation and refining company executives.

Olive oil imports up 52% despite weak rupee

The country’s olive oil imports increased over 52% in 2011-12 fiscal on rise in consumption. This growth is despite the weakening of the rupee that has made imports costlier. Olive oil imports touched 6.485 tonnes against 4,261 tonnes in the previous year.

3. Europe

Ukraine May Switch on Biodiesel Plan

Ukrainian driver may lose pure gasoline completely, if the president of Ukraine signs a law that provides mandatory addition of ethanol starting from 2014

Parliament has introduced a mandatory rule of 5% ethanol in gasoline from 2014 and 7% from 2016. The main purpose is to stimulate alternative fuels development in Ukraine and increase energy independence of the country. The Ministry of Agriculture has signed the right to produce bioethanol, 16 distilleries have been approved in April 2011. Theoretically, plants in Kremenchug and Lisichansk can produce bioethanol of a good quality. But the problem is that Ukraine is not equipped with the technology and experience. Innovation is aimed at encouraging the alcohol industry. However, even a qualitative bioethanol won’t help because 80-90% out of all cars in Ukraine has been produced before year 2008. There is a danger that the new fuel will damage a vehicle.

Russia: WTO Accession Will Increase Imports of Agricultural Products for Almost $200 millions.

Easing of import regime will boost import of agricultural and food products by almost $ 200 million, said Director of the Eurasian Center for Food Safety Sergey Kiselev, speaking at the international conference “Russia in the WTO: the impact on agriculture”. The import of agricultural products to Russia could rise by 0.6-0.7% ($11.9 million), imports of food products by 2.3-2.4% ($182-$190 million).

Tax incentives, safeguards, antidumping and countervailing duties will be used as protective measures. The advantages of WTO are seen in opportunities, arising from WTO. Promotion of Russian goods on foreign markets, bringing the legislation in line with international standards, improvement of investment climate, ability to use the dispute resolution mechanism, and this is not the full list of those advantages coming from WTO, said Kisilev.

Oil and Fat Union of the Russian Federation Seeks Opportunities in Malaysia

Russian Oil and Fat Union have sent a letter to the HQ of MPOC offering collaboration between two bodies.

“As you are aware, this year, Russia has joined WTO. In terms of competitive market, domestic companies are interested in improving quality of Russian products. In order to meet highest standards the Union proposes to talk over possible ways of supplies of palm oil complying with the high quality standards. On behalf of the Union we express readiness to cooperate in all ways, we’re looking forward to receiving your proposals in this concern.” – Stated Mr Morose, CEO OFU of the RF, expressing the deepest interest in cooperation.

4. Americas

Brazil: Farmers reclaiming $7.5 Billion Payout from Monsanto

Monsanto, the largest seed corporation in the world, is on the verge of losing genetically-modified (GM) soya royalties to five million Brazilian soy farmers. The farmers have been engaged in a legal battle trying to recover payments to the company over the past decade. Previously, Monsanto dealt severe legal sanctions against farmers suspected of “pirating” its seed. In April, a Rio Grande De Sul judge ruled that Monsanto’s fees were illegal as the seed patent expired and was ordered to return all payments since 2004, amounting to $2 billion. An appeal by Monsanto to the Brazil Supreme Court resulted in a unanimous extension for the Rio de Grande Do Sul courts’ ruling to be applied nationwide, multiplying the number of plaintiffs to five million and total royalties to $7.5 billion.

Once implemented, fears also arise of funding cuts for biotech research in the country, particularly for the Brazilian Agricultural Research Corporation. Cutbacks of $5 million to $10 million are at risk for the Ministry of Agriculture affiliate, due to a research partnership with Monsanto.

Argentina: Economic accords with China

The governments of Argentina and China signed agreements last week covering agriculture, among other areas, during a state visit by Chinese Premier Wen Jiabao. The agriculture ministers from both countries signed treaties to promote cooperation in transgenic seeds, biotechnology, and bilateral farm investments. The Asian powerhouse is Argentina’s biggest taker of agricultural products and its second largest trading partner. Trade between the two states totalled $14.8 billion in 2011, $8 billion in China’s favour. The two countries have been in talks for more than a year to settle the shipment of Argentina’s transgenic-corn varieties to China. A major part of the economic cooperation included a US$2.1 billion Chinese loan to modernize Argentina’s 1,500 kilometres of railway network, to speed up agricultural shipments in the future.

Section III: Weekly Data

Palm Oil Prices

  • Average CPO prices recovered this week and traded higher by RM21.40 to RM3,010.7 against RM2,989.3 attained the previous week. Crude palm oil futures on Malaysia’s derivatives exchange rose Monday reflecting optimism on demand prospects for palm oil as well worries that dry weather in the U.S. may damage its soybean crop. The benchmark September contract on Bursa Malaysia Derivatives rose as much as 3.6% to RM3,059.0 a metric ton, the highest level since June 1, before ending at MYR3,030/ton, up 2.6% from Friday’s close.
  • Malaysian crude palm oil futures touched the highest in five weeks on Tuesday, as a U.S. crop report cutting soybean crop condition ratings cemented market views of a tighter global oilseed supply.
  • Benchmark September palm oil futures on the Bursa Malaysia Derivatives Exchange gained 1.2 percent to close at 3,124 ringgit ($992) per tonne. Prices earlier went as high as 3,130 ringgit, a level not seen since May 30. Traded volumes stood at 34,976 lots of 25 tonnes each, much higher than the usual 25,000 lots.
  • Malaysia’s palm oil demand climbed in June compared to a month ago according to cargo surveyor data, as festival demand ahead of Ramadan spurred last-minute buying. Higher exports could pile further pressure on Malaysia’s stocks level, which is already at a 13-month low in May.
  • Oil rose to $99 a barrel on Tuesday as investors bet on further policy action to support global economic growth and tension over Iran and a strike in Norway kept oil supply concerns in focus.


a. International Prices

  • U.S. grain and soybean futures surge Tuesday, fuelled by concerns stressful U.S. Midwest heat and dryness are robbing corn and soybean crop’s yield potential.
    Traders continue to factor in the risk of yield losses, as the hot, dry weather forecasts for the Midwest are seen as a detriment to yield potential.
  • July corn futures rallied to nearly 10-month highs and July soybeans surged to their highest level since July 2008 on continuation chart. Traders are extremely nervous about U.S. crop yields being compromised by summer heat
  • The USDA said in a report on Friday that U.S. farmers planted far more soybeans than they originally planned but it failed to ease concerns over a Midwest drought that has damaged soybean crop.
  • The U.S. Department of Agriculture Friday raised its estimate of planted soybean acreage in the U.S. to 76.1 million acres, up from its March forecast of 73.9 million acres. But investors have mostly brushed aside this bearish news, as ongoing drought-like conditions in the Midwest will likely hurt yields and erode output, limiting export availability, a Kuala Lumpur-based trader said.
  • A lower soybean crop for crushing into soybean oil could mean more demand shifting to competing palm oil, which is already trading at a discount.
  • On the CBOT corn futures rallied by 20-24 cents in all positions until September 2013. The September 2012 contract closed at US$6.52 up by 27% from June 1.
  • Soybean prices are following the corn rally at a distance. Yesterday’s further uptrend of soybean futures prices was fuelled by large export sale of 1.19 million tonnes of new-crop soybeans reported by USDA to China.

Buy cheap Viagra online