August 17, 2015
A Weekly Snapshot of Southeast Asia Commodities News and Commentary
EL NINO PICKING UP STEAM, TO PEAK IN LAST QUARTER
OF 2015
By Cristina Pastor, SACD Staffer
The El Nino weather pattern in the Pacific Ocean is garnering strength and will hit its peak by
the last quarter of the year, putting pressure on crops in countries such as Indonesia and the
Philippines.
“At this time, the forecaster consensus unanimously favors a strong El Nino,” the monthly
update of the U.S. Climate Prediction Center said last week.
This was echoed by the Philippine governments’ official Pagasa weather bureau.
“Leading climate models suggest that it may intensify from moderate to a strong El Nino in the
coming months (last quarter of 2015) and may last until early 2016,” Pagasa said in a monthly El
Nino advisory for August.
Pagasa said that rains in July were near to above normal in the main rice growing areas on Luzon
island and the sugar areas of Negros island, but “the rest of the country experienced below to
way below normal rainfall conditions.”
A meeting of the Indonesia Coordinating Ministry of Marine Affairs has reported that sea surface
temperatures, wind patterns and ocean currents strongly indicate the El Nino “will be of the same
intensity” as the one in 1997, the strongest in recorded history.
The Badan Meteorologi, Klimatologi dan Geofisika (BMKG) of Indonesia (Meteorology,
Climatology and Geophysics Agency) said El Nino will peak in October/November and run
through February 2016.
El Nino is an abnormal warming of waters in the equatorial Pacific and strong ones often result
in drought striking countries like Indonesia, the Philippines and large swathes of Southeast Asia.
The U.S. agriculture attaché in Jakarta has said in a that if the forecasts are accurate, El Nino
would be “running through Indonesia’s largest food cycle.”
“Therefore, there is a possibility that Indonesia may suffer great food crop production losses
because of the prolonged and severe drought, similar to the 1997 El Nino,” it said.
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August 17, 2015
Page 2
But the attaché cautioned though that production losses in Indonesian palm plantations in the
record 1997/98 El Nino “are a worst case scenario, and that there are several mitigating factors
that may offset this.”
Indonesia is the world’s top producer and exporter of palm oil.
For a look at historic crop yields changes due to El Nino in Indonesia, the report released the
chart below:
Any significant losses in Indonesia though would be cushioned by the presence of hefty stocks
and the fact that palm oil could be supplanted by record production of soybeans in the U.S. and
South America, the main competitors to palm in the vegetable oil market.
Thailand is already in the grip of a searing drought, forcing the government to again cut the
discharge of water for its rice farmers which could hit rice exports in 2016.
The Thai Meteorological Department said total rainfall is still 24 percent below the norm in July
and that even assuming normal rains arrive between August and October, the level in reservoirs
will be even lower in the next dry season rice crop in 2016.
The government in Bangkok is now planning to limit water discharges in the lower northern
region and central plains of Thailand to 30 million cubic meters per day, which is “half” of the
normal discharge rate.
“This will negatively affect Thai rice exports in the second half of 2015 and into 2016,” a report
by the U.S. agriculture attaché in Bangkok said.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 3
“Thai rice exports are likely to decline to 9 million tonnes in 2015 and the export forecast for
2016 has been lowered to 9.5 million tonnes,” it added.
The U.S. Agriculture Department had forecast rice exports by Thailand in 2015 at 10 million
tonnes, rising to 10.2 million tonnes.
Dry season crops in Myanmar, Laos and Cambodia are also seen getting hit late this year if the
El Nino strengthens as expected.
PALM OIL OUTLOOK: RISING INVENTORIES, BUMPER
SUPPLIES TO KEEP PRICES WEAK
By Jack Scoville, The Price Futures Group
Palm oil has seen better demand in Malaysia when compared to last month, but overall the
market remains bearish.
Palm oil is still fighting the trends in the soybeans complex in Chicago, and one of the trends has
been to see soybean oil prices drop due to big supplies.
Palm oil is cheaper when compared to soybean oil so far this month on a spread basis, but still is
following Chicago.
Production in Malaysia was shown by the official Malaysia Palm Oil Board (MPOB) to be very
large and it was bigger than the trade estimates. (See table below for January to June production
table)
Supplies appear to be very good, and strong supplies are expected to continue as there is a
seasonal tendency for strong production at this time of year.
Production conditions are called good in both Malaysia and Indonesia right now. Both countries
have seen drier than normal weather conditions, but this has not been a problem for palm oil as
overall soil moisture supplies are adequate.
Weaker soybean oil and soy complex prices will pressure palm oil, as will ideas of less demand
from major buyers such as the EU and now China after the devaluation of the yuan currency
early last week.
The devaluations caused many to rethink demand ideas as prices will increase in terms of the
Chinese currency. China will continue to buy as the demand for oils of all kinds will not change,
but the industrial demand could drop slightly in the near term as industry adjusts to the new
currency values.
The MPOB said in a report for the week ending August 11 that prices will remain under pressure
from rising palm oil production and falling export demand from major importing countries.
Weaker soybean oil prices in Chicago and China’s Dalian commodity exchange would also be
negative for palm oil values, MPOB stated.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 4
On a fundamental basis, palm oil production in Indonesia, the world’s biggest producer of the
edible oil, is seen hitting 35 million tonnes in 2015/16 from 33 million tonnes in 2014/15 as
increased maturation of plants and an increase in planted acreage further boosted output.
Analysts forecast that if El Nino strikes, production would be at 33 million tonnes, unchanged
from the level of 2014/15.
Indonesia’s palm oil plantings are seen rising to 10.8 million hectares in 2015/16, from 10.6
million in 2014/15. Harvested area is at 8.9 million hectares in 2015/16 versus 8.5 million in
2014/15.
China and India are the leading importers of Indonesia and Malaysian palm oil, as the two
Southeast Asian producers enjoy a significant freight advantage over rivals in South America.
MONTHLY PRODUCTION OF OIL
SUMMARY
FOR
THE
MONTH
2014 & 2015 (TONNES) - MPOB
Months
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
TOTAL
PALM PRODUCTS
OF
JULY
2015,
Crude Palm Oil
Palm Kernel
Crude Palm Kernel Oil
Palm Kernel Cake
2014
2015
2014
2015
2014
2015
2014
2015
1,508,980
1,160,687 387,348
291,989 182,902
145,686 203,051
161,956
1,275,812
1,121,628 322,104
279,309 164,034
115,040 180,782
128,551
1,497,142
1,495,151 386,648
379,309 170,828
176,111 188,887
193,936
1,555,777
1,693,425 389,028
432,422 177,074
182,114 195,163
201,278
1,656,957
1,810,709 399,244
449,426 186,543
218,638 207,431
241,631
1,569,684
1,763,928 357,295
413,561 174,726
197,602 192,966
219,113
1,665,661
1,815,631 406,098
430,988 171,352
183,287 188,908
202,498
10,730,013
10,861,159 2,647,765
2,677,004 1,227,459
1,218,478 1,357,188
1,348,963
MONTHLY CLOSING STOCK OF OIL PALM PRODUCTS FOR
THE MONTH OF JULY 2015, 2014 & 2015 (TONNES)
Months
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AVERAGE
Palm Oil
Palm Kernel
Palm Kernel Oil
Palm Kernel Cake
2014
2015
2014
2015
2014
2015
2014
2015
1,935,215
1,770,022 144,989
105,980 274,523
258,841 311,899
297,205
1,656,931
1,743,311 109,829
135,504 251,610
215,186 229,680
257,657
1,688,093
1,865,927 130,532
136,178 259,764
239,823 236,291
230,703
1,766,190
2,189,479 139,529
173,583 273,228
255,768 253,781
278,712
1,841,341
2,248,578 142,238
150,648 274,099
303,174 309,040
346,216
1,656,756
2,151,744 124,597
136,753 313,045
289,118 290,464
380,959
1,684,756
2,265,494 164,619
168,822 290,899
278,631 256,462
314,424
1,747,040
2,033,508 136,619
143,924 276,738
262,934 269,660
300,839
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 5
PALM OIL EXPORTS TO CHINA, INDONESIA AND THE EU BY
MALAYSIA IN TONNES FOR JANUARY TO JUNE 2015–MPOB
January
China 216,253
India 160,170
EU
172,269
February
64,765
222,162
136,510
March
April
132,722 262,713
297,549 87,391
94,369 130,520
May
359,660
342,859
267,245
June 2015
2014
243,932 1,280,044 1,493,251
435,833 1,545,963 1,156,308
216,678 1,036,160 1,141,072
INDONESIA PALM EXPORT LEVY WILL HAVE SERIOUS
IMPLICATIONS FOR INDUSTRY
A levy on palm oil exports by Indonesia is aimed at providing a steady source of funding for its
biofuel industry, which could help trim palm oil stocks in the world’s biggest producer of the
vegetable oil.
The levy will be collected at a rate of US$5 per tonne of crude palm oil and $20-$30 per tonne of
processed palm oil products.
The fund will be managed by a public agency which will be appointed by the Finance Ministry.
“If the levy generates sufficient revenue to bridge the gap between fossil fuels and biodiesel
prices…the levy will have significant implications for the Indonesian palm oil and biodiesel
industries,” the U.S. agricultural attaché in Jakarta said in a report.
Indonesian crude palm oil production in 2014/15 is estimated at 33 million tonnes and had been
projected to rise in 2015/16, but an El Nino weather anomaly could cause a dry spell and cut
output as a result.
A thriving biodiesel program in Indonesia though would create another industry which would be
dependent on palm for its feed stock.
“As a result, crude palm oil stocks are expected to moderate,” the attaché said.
On the flip side though, the Indonesian Palm Oil Association (GAPKI) said crude palm oil
exports could “soften slightly” because of higher FOB export prices resulting from the levy.
Indonesia biofuel sources said the industry has struggled with hitting their blending targets, some
supply shortages, infrastructure shortfalls and of course funding for subsidies.
The funding from the levy will allow the industry to remain competitive despite low fuel prices
in the world.
The industry “is hopeful that B-15 biodiesel should become common in Indonesia’s major
population centers including Java, Sumatera, Kalimantan and Sulawesi over the next two years,”
the attaché report said.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 6
INDONESIA PALM OIL PRODUCTION AND EXPORTS FROM
JANUARY TO MAY
2015 – INDONESIA PALM OIL
ASSOCIATION
ASIAN RICE OUTLOOK: PRICES WEAKEN
SUPPLIES RUN INTO SOFTER DEMAND
AS
AMPLE
By Jack Scoville, The Price Futures Group and Cristina Pastor, SACD Staffer
The U.S. Agriculture Department released new world supply and demand data last Wednesday,
and the month to month ending stocks estimates showed an increase.
The increased supplies come from less demand. World production was 478.7 million tonnes, a
record, but 1.7 million tonnes less than last month.
USDA noted less production in Argentina, Cambodia, and Iraq. Also expected to produce less
are Thailand, South Korea, and the United States.
Thai production is now estimated at 18 million tonnes, down 1.0 million tonnes due to the
drought. Thai exports are now estimated at 9.0 million tonnes, down 1.0 million tonnes, as sales
have been slow this year.
World demand in general looks to be weaker and ending stocks were 90.8 million tonnes, from
90.5 million last month.
USDA left Vietnamese production estimates unchanged at 28.20 million tonnes and increased
exports slightly to 7.00 million tonnes to produce a slight reduction in ending stocks.
No changes were made for the Philippines or Indonesia.
Rice prices were generally flat to weaker in Southeast Asia last week.
The Thai Rice Exporters Association said the price of Thai white rice 100 percent Grade B was
at US$385 per tonne FOB on August 13, from $386 per tonne FOB on August 5.
The price of 5 percent broken Thai white rice was at $377 per tonne FOB on August 13,
unchanged from the level on August 5.
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Southeast Asia Commodity Digest
August 17, 2015
Page 7
Thai white rice 25 percent broken was at $366 per tonne FOB on August 13, from $365 per
tonne on August 5.
Quotes for Thai rivals Vietnam and India mostly were running at a discount to Thai grain.
Vietnam is the leading rival to Thai rice in the regional export market.
Vietnamese 5 percent broken rice was quoted at $350 per tonne on August 13, a discount of $27
to the same rice coming from Thailand.
India 5 percent rice was quoted at $385 per tonne and an $8 premium to Thai rice.
Vietnam 25 percent broken rice was quoted at $330 per tonne FOB on August 13 and a $36
discount to Thai rice.
Indian rice of the same variety was quoted at $350 per tonne and a discount of $16 to the Thai
grain.
The USDA’s lower numbers on Thailand essentially adopted the estimates of their agricultural
attaché in Bangkok who had cut the estimate on Thai rice exports.
Late last month, the Thai Ministry of Agriculture’s Disaster Center said around 1.5 million rai of
main crop rice will be adversely impacted by the drought, especially in the lower northern region
and central plains where water discharges have been cut back.
Thailand’s Royal Irrigation Department has been reducing the water discharge for agriculture
due to worries about possible water shortages the rest of the year.
If the current drought is linked to El Nino, the situation could well take a turn for the worse. If El
Nino peaks in the second half of 2015 as expected, dry season rice and corn crops are believed
under threat in Southeast Asian countries such as Myanmar, Cambodia, and Laos.
Between 1980 and 2013, there have been 3 strong, 5 moderate and 2 weak El Ninos, according to
data from the U.S. National Oceanic Atmospheric Administration (NOAA).
PHILIPPINE DOMESTIC RICE PRICES HOVER AT HIGHEST IN
3-1/2 MONTHS, GOVERNMENT CUTS 2015 RICE OUTPUT
By Cristina Pastor, SACD Staffer
Rice prices in the Philippines were not updated in the last week but remain at levels that are the
highest in almost 4 months, while the government trimmed forecasts for output in a sign that a
dry spell caused by the El Nino weather pattern is taking its toll.
Unmilled rice production for calendar 2015 is now expected to reach 18.86 million tonnes, from
18.97 million tonnes in 2014. The government had pegged output at 20.08 million tonnes.
Imports of the staple food of the country’s 107 million people have already reached 750,000
tonnes and the lower production raises the chance that more imports will have to be ordered.
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Southeast Asia Commodity Digest
August 17, 2015
Page 8
The country normally imports rice from Southeast Asian neighbors Thailand, which is now
wracked by drought in its rice farms itself, and Vietnam.
As for domestic rice prices, the Bureau of Agricultural Statistics (BAS) said the price of well
milled retail rice, the most popular variety for consumers, stood at 41.58 pesos/kg for the week
ending July 21.
That is the highest level for that variety of grain since April 7 when the price was at 41.65 pesos.
Updates were not immediately available but the price of that variety of rice has been trending
upwards for weeks.
Wholesale well milled retail rice was at 38.30 pesos/kg for the week ending July 21, also the
loftiest since April 7 when it hit 38.41 pesos.
The price of regular milled retail rice was at 37.31 pesos/kg and regular milled wholesale rice
was at 34.60 pesos/kg in the week ending July 21.
The Philippines has been importing rice just as the government is preparing for the threat of
drought posed by an El Nino weather pattern this year.
The official National Food Authority has given authorization to import another 350,000 tonnes.
The Philippines is allowing private traders to import over 800,000 tonnes of rice.
Private sources believe unofficial imports, a euphemism for smuggling, would bring in another
500,000 tonnes due to high internal prices.
The U.S. agricultural attaché in Manila believes imports will be around 1.8 million tonnes in
2015/16 (July/June).
The SACD has forecast total rice imports by the Philippines to eventually hit 2.5 to 2.7 million
tonnes from 1.8 million tonnes imported in 2014.
The reason for the SACD number is the high probability the combination of typhoons or drought
in the Philippines will inflict further damage on rice production in the second half of the year and
force rice imports ranging from a minimum of 100,000 to as high as 500,000 tonnes.
Philippine rice production forecasts have been trimmed by the government.
The Philippines’ main rice crop is harvested in the last quarter of the year, but storms have struck
the past three years during that period.
Typhoon Bopha hit in 2012, the record breaking typhoon Haiyan came into Leyte in 2013 and a
total of five typhoons and storms struck from early December 2014 to the middle of January
2015.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
PHILIPPINES BUYS
ORDERS SOYBEANS
Page 9
WHEAT
AND
MEAL,
INDONESIA
By Cristina Pastor, SACD Staffer
The Philippines booked a large order of U.S. wheat and soybean cake and meal, with Indonesia
buying a large amount of soybeans and Thailand purchasing a cargo of soybean cake and meal in
Southeast Asia’s grains and oilseeds market.
The Philippines bought 110,000 tonnes of U.S. wheat in the week ending August 6.
Wheat imports by the Philippines are expected to increase significantly in the coming years as
steady economic growth and an expanding, increasingly affluent middle class consume more
wheat products.
The Philippines’ accumulated imports of wheat from the U.S. near the end of the 2014/15 season
on May 28 reached 2.318 million tonnes, up 15.18 percent from 2.013 million tonnes imported
by this time last year.
The Philippines does not grow wheat and must import all supplies of the grain.
The country was forecast to import over 4 million tonnes in the 2014/15 marketing year and
those imports are seen rising to 4.4 million tonnes in 2015/16.
The country is the 4th largest U.S. wheat market globally in 2014, with sales value up 11 percent
to US$698 million. Wheat is the top U.S. agricultural export to the Philippines in 2014.
Aside from wheat, Manila also bought a combined 102,000 tonnes of soybean cake and meal.
The purchase was divided into 22,000 tonnes for the 2014/15 season ending on September 30,
and 80,000 tonnes of the material for the 2015/16 season. The country is also awaiting a
shipment of 27,500 tonnes of meal.
The Philippines’ accumulated imports of meal from the U.S. stood at 1.272 million tonnes as of
August 6, up 5.1 percent from the 1.211 million tonnes imported by this time a year ago.
Indonesia, for its part, bought 94,600 tonnes of soybeans from the U.S. and is awaiting a
shipment of 101,900 tonnes of soybeans.
Indonesia is forecast to import about 2.1 to 2.2 million tonnes of soybeans in 2014/15
(September/August), of which 1.8 million tonnes is expected to come from the United States.
That forecast has already been reached because as of August 6, Indonesia’s accumulated imports
of U.S. soybeans in the 2014/15 season stood at 1.808 million tonnes, down 20.11 percent from
the 2.26 million tonnes imported by this time a year ago.
The soybean season ends on August 31.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 10
Indonesia is the biggest importer of grains and soybeans in Southeast Asia. It uses the soybeans
primarily for popular foods like tempeh and tofu. On another note, Indonesia called off the
purchase of 15,000 tonnes of wheat from the United States.
Separately, Thailand bought 45,000 tonnes of meal from the U.S. Accumulated imports of
soybean cake and meal by Thailand from the U.S. as of August 6 stood at 700,300 tonnes, up
90.09 percent from the 386,400 tonnes it had imported by this time a year ago.
Cash wheat values for nearby delivery for buyers of U.S. wheat in Southeast Asia were
practically flat for soft white, hard red winter, winter wheat and northern spring/dark northern
spring wheat on August 14, industry sources said.
U.S. soft white wheat was quoted for nearby delivery out of the U.S. Pacific Northwest was seen
at US$220 to $288 per tonne FOB (free on board) on August 14, from the $220 to $285 per
tonne seen on August 7, trading sources said.
Hard red winter wheat quotes for nearby shipment were seen at $217 to $230 per tonne FOB on
August 14, from $214 to $233 per tonne on August 7, the sources said.
Northern spring/dark northern spring wheat was quoted at $229 to $236 per tonne FOB on
August 14, from $228 to $237 per tonne on August 7, they said.
Winter wheat was quoted at $254 to $263 per tonne FOB on August 14, from $250 to $257 per
tonne seen on August 7, they added.
Shipping rates for Handymax vessels from the U.S. Pacific Northwest (PNW) going to Southeast
Asia were flat from the previous week at $35 per tonne FOB as of August 14, shipping sources
said.
Rates for Panamax vessels from the U.S. PNW were seen at $34 per tonne FOB on August 14,
also steady from a week ago, shipping sources said.
VIETNAM BUYS U.S. UPLAND COTTON AS NEW SEASON
GETS STARTED
By Cristina Pastor, SACD Staffer and Jack Scoville, The Price Futures Group
Vietnam started the 2015/16 cotton season the same way it ended the 2014/15 season, buying
U.S. upland cotton in an otherwise quiet Southeast Asian market.
Vietnam bought 21,900 running bales (RBs, 500-lbs each) of upland cotton and is awaiting a
combined shipment of 27,900 RBs.
The shipments are divided into 7,500 RBs for the 2014/15 season which ended on July 31 and
20,400 RBs for the period August 1 to 6.
Accumulated imports by Vietnam of U.S. upland cotton as of July 30 stood at 1.666 million RBs,
62.35 percent higher than the 1.026 million RBs it had imported by this time last year.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 11
Vietnam has vastly exceeded the amount of upland cotton it imported from the U.S. in 2013/14.
At the end of the 2013/14 season on July 31, 2014, Vietnam’s total accumulated imports of U.S.
upland cotton, the most widely grown and commonly used variety, stood at 1.026 million RBs,
up 28.72 percent from the 797,500 RBs imported by the end of the preceding season.
Vietnam has become a major buyer of cotton due to its booming textile and apparel industry.
The country’s total cotton imports in 2013/14 were estimated to have hit a total of 3.17 million
(480-lb) bales, with the United States accounting for about a third of the total.
In other action, Indonesia is awaiting a combined shipment of 14,100 RBs of upland and pima
cotton.
This would be comprised of 4,800 RBs of upland cotton for 2014/15, 9,200 RBs of upland cotton
for the period of August 1 to 6, and 100 RBs of pima cotton.
Indonesia is the second biggest buyer of U.S. cotton in Southeast Asia.
As of July 30, accumulated imports by Indonesia of U.S. upland cotton was at 905,000 RBs, up
45.07 percent from the 623,800 RBs imported by this time a year ago.
Indonesia has also surpassed the amount of U.S. upland cotton it imported in 2013/14.
The country’s accumulated imports of U.S. upland cotton reached 623,800 RBs by the end of the
2013/14 season on July 31 last year, up 43.46 percent from 434,800 RBs in 2012/13.
Brazil has overtaken the United States as the largest cotton supplier to Indonesia with a total
market share of 45 percent.
The South American country was followed by the United States and Australia with a market
share of 22 and 13 percent respectively.
On the part of Thailand, the third leading buyer of U.S. cotton in Southeast Asia, it did not buy
any cotton from the U.S. and is awaiting a shipment of 3,200 RBs of upland cotton from the
2014/15 season.
Its accumulated imports of U.S. upland cotton as of July 30 was at 462,100 RBs, down 0.21
percent from the 463,100 RBs imported by this time last year.
But if the 3,200 RBs are added to the imports, total Thai cotton imports from the U.S. in 2014/15
would reach 465,300 RBs, up 0.47 percent from the previous season.
A few weeks ago, it seemed all but certain that cotton imports by Thailand from the U.S. would
fall short of last year’s pace.
Thailand’s accumulated imports of U.S. upland cotton in 2013/14 stood at 463,100 RBs by July
31, 2014, up 16.73 percent from the 396,700 RBs it had ordered the previous season.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 12
Cotton prices moved higher in the U.S. and world markets last week. Most of the rally was in
response to less than expected production estimates from USDA.
USDA said that U.S. production should be near 13.08 million (480-lb) bales. Traders had
expected production between 14.4 and 15.0 million bales.
USDA cut export demand by 800,000 bales to 10.0 million, and also cut domestic demand as
well to lead to an overall cut in U.S. ending stocks estimates at 3.10 million bales, from 4.20
million last month.
World data also showed the potential for less production in Central Asia and India.
Southern hemisphere production is expected to increase. World supplies will be less at 105.19
million bales this month, from 108.14 million bales next month.
Chinese ending stocks estimates for this year are now estimated at 64.58 million bales, from
65.08 million last month as the government there gets out of the storage business.
Southeast Asia is also expected to import less cotton as Indonesian imports are now estimated at
3.40 million bales, down 100,000 bales from last month, and Thai imports are estimated
unchanged at 1.55 million bales.
Vietnamese imports are now estimated at 4.85 million bales, from 5.00 million last month. Less
imports should lead to cuts in ending stocks as domestic use in Southeast Asia is expected to
remain stable for the most part. Only Vietnam domestic use is rated lower, at 4.85 million bales,
from 5.00 million last month.
COCOA PRICES WEAKEN FURTHER DUE TO
DEMAND, S.E. ASIAN PROCESSERS LOSING MONEY
SOFT
By Jack Scoville, The Price Futures Group
Cocoa prices remain in a downward trend as the market continues to factor less demand into a
market with less supply.
All is good for production in Southeast Asia. Some areas, especially in Indonesia, are too dry so
some production might be lost unless timely rains are seen soon. Conditions seem good enough
for now.
The big problem for the market in Southeast Asia and around the world remains demand.
Demand in Europe and North America is down, but can rebound if chocolate prices work lower.
But demand needs to increase in China and in Southeast Asia for prices to improve and for
producers to make a profit.
The producers are not able to make much money due to the weak demand, but the processors
have a big problem.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 13
Many new processing facilities were built in the last couple of years in both Malaysia and
Indonesia in anticipation of increased Asian demand, and that demand has not been seen. Some
plants have been closed, and the rest are probably losing money.
Coffee prices closed higher for the week in New York and London. The main reason for the
higher prices is smaller Brazil production.
More private and government production estimates were released last week, and the ideas are
that production in the country is no more than 45 to 47 million bags.
Estimates had been as high or higher than 50 million bags by some in the industry. The threat of
less production and increased demand from roasters has provided the support for futures.
Roasters, at least those in the U.S., seem to finally have worked through the supplies they bought
at higher values, mostly at or above US$1.40 per pound basis New York futures, and are now
buying fresh supplies.
Demand for Arabica in Central and South America has increased. The New York market
appears to have made a low, but there is still coffee around so the upside might not be too
exciting for now.
Meanwhile, demand for Robusta from Southeast Asia has held constant but is not all that strong.
Differentials seem to be holding stable this week at about 60 over London futures.
Demand is best from EU roasters as U.S. roasters have turned to Brazil Conillon due to much
cheaper prices in Brazil.
But drought in Espiritu Santo in Brazil will most likely cut production there and raise prices for
robusta in all parts of the world as Brazil producers will have to withdraw and wait for higher
prices to try for profits from the reduced production potential.
In sugar, the market remains soft as traders look for a reason to rally futures.
New York futures have been weaker than London as Brazil continues to offer sugar and Brazil’s
Real currency continues to weaken.
Brazil continues to process more for ethanol than sugar, but the market still feels that sugar is
available. The London white sugar futures have held better and have been trying to turn short
term chart trends to up for prices.
Part of the reason that London is holding better is less sugar beets production in the EU because
of the weaker prices and because of a hot and dry summer that hurt production potential.
But some of the recent rally is demand related as well as North Africa and Middle East countries
have had to restock with the fasting month of Ramadan coming to a close.
The Ramadan buying should be about over and the market is now looking ahead to the next crop.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 14
Brazil production and processing remains strong, but just about all analysts of the market are
now looking at supply deficits against production for the coming year.
The deficit seems to be estimated at 2.5 to 2.7 million tonnes less production against demand.
That alone is not enough to send the market higher, but less production should mean that prices
start to hold steady somewhere in the near future.
Southeast Asian production ideas are stable right now as the weather is currently good enough to
support solid production.
DAILY COCOA BEAN PRICES IN MALAYSIA RINGGIT/TONNE
ON AUGUST 14, 2015 FROM MALAYSIA COCOA BOARD:
8/14/2015
8/07/2015
Tawau (Sabah)
8,400
7,950
Raub (Pahang)
8,050
8,350
Jerantut (Pahang) Kuching (Sarawak)
7,200
8,400
7,300
7,950
WEEKLY COFFEE PRICES FROM DAKLAK INVESTMENT
EXPORT IMPORT CORP. IN VIETNAMESE DONG/KG:
August 13, 2015
Giá Inexim (VNĐ/kg) (HKB)
Tại Daklak:
Net
RNL
37.200
R2 5%
- 200
(so với
R1 2%
+ 1.000
R2 5%)
Tại Kho
Bình Dương:
+400
August 6, 2015
Giá Inexim (VNĐ/kg) (HKB)
Tại Daklak:
Net
RNL
36.700
R2 5%
- 200
(so với
R1 2%
+ 1.100
R2 5%)
Tại Kho
Bình Dương:
+400
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 15
NEW ZEALAND STARTS TO RAMP UP DAIRY PRODUCTION
AS EXPORT DEMAND SHOWS SIGN OF COMING TO LIFE
By Jack Scoville, The Price Futures Group
Dairy production conditions remain generally difficult in New Zealand and milk production is a
little lower there.
However, producers and processors are trying to ramp up production now amid signs of
increased export demand.
Some buyers are now restocking and are looking to buy in New Zealand, a key supplier of dairy
goods to Southeast Asia.
Australian production is up slightly from last year.
In its latest auction on August 4, Fonterra daily cooperative in New Zealand said the average
price for all contracts fell by another 9.3 percent to US$1,815 per tonne, with world dairy prices
hovering at its lowest level in over a decade.
One of the biggest declines was in the average weighted price of whole milk powder (WMP)
which dropped by double digits again, falling 10.3 percent to $1,590 per tonne.
Skim milk powder (SMP) prices dropped 14.4 percent to an average weighted price at $1,419
per tonne.
The next auction is set for August 18.
The twice monthly Fonterra auction in New Zealand is a global benchmark which sets the tone
for world dairy prices.
Dairy prices were stable last week in the U.S. as production of milk starts to seasonally slow and
as demand from schools and institutions ramps up.
Supplies of cheese and butter are strong. Cheese production remains very strong, but a shortage
of cream has made for a more mixed tone in butter production.
Much of the cream demand has been going to frozen products like ice cream. However, butter
demand is starting to pick up as some manufacturers are getting ready for Labor Day and other
holidays that will be coming soon.
Exports have not been strong, so US prices have had to work lower to cut down on imports as
well as encourage more export potential.
EU production is also higher than year ago levels despite drought and hot weather in many
areas. Overall EU production is up 0.7 percent from last year.
UK and Ireland reported the strongest increases, while the continent was mostly slightly lower
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 16
due to the bad weather. Eastern Europe production is rebounding after the hot and dry Summer.
Poland is leading the way with a year on year increase of 1.4 percent.
In the livestock market, cattle prices are turning higher in the U.S. amid tighter supplies ideas
and for seasonal considerations. Ideas are that the market has found a seasonal low.
Reports of stronger wholesale beef prices after the recent move lower are providing support.
The trade expects increased domestic consumer demand and noted strong June exports as reason
for demand to increase.
Consumers are seeing lower prices in the supermarket and are buying more beef. Packers paid
about $2.00 per hundredweight more for Live Cattle late last week.
Cattle producers have been working to expand herds in the past year. The increased cattle
production along with increased imports of beef and cattle are starting impacting the market.
The better weather is allowing producers to keep cattle on grass longer and to allow for better
herd expansion potential.
Hogs are weaker as supplies inside the U.S. remain large. Cash markets for hogs have been
weak.
Pork prices continue under pressure as well and exports remain poor. We look for hogs to show
more weakness as well.
Conditions in parts of Australia are still dry, and producers are doing all they can to lower feed
and forage costs.
The country has seen drought conditions that forced herd liquidation, and more drought is
possible with El Nino.
The herd liquidation seems to have come to an end, but it is unclear if producers are working
now to start to expand herds again. Recovery of production will take a long time.
Both the U.S. and Australia are key suppliers of beef and pork products to Southeast Asia.
Brazil July exports were down 23 percent from the year earlier and are now down 17 percent for
2015.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 17
NEW ZEALAND SKIM MILK POWDER EXPORTS BY
COUNTRY IN SOUTHEAST ASIA: QUANTITY IN METRIC
TONNES AND AVERAGE PRICE IN U.S. DOLLARS FOB PER
TONNE (GLOBAL TRADE ATLAS)
Malaysia
Philippines
Indonesia
Singapore
Thailand
2012
Q
PRICE
34,593
$3,472
30,738
$3,229
37,413
$3,180
21,269
$3,169
22,545
$2,995
2013
Q PRICE
36,106 $4,195
34,958 $4,179
33,780 $4,083
23,575 $3,920
15,816 $4,086
2014
Q
PRICE
33,376
$4,280
30,591
$4,273
26,918
$4,321
29,049
$3,873
20,580
$4,044
AUSTRALIA SKIM MILK POWDER EXPORTS BY COUNTRY
IN SOUTHEAST ASIA IN METRIC TONNES – GLOBAL TRADE
ATLAS
Country
2011
2012
2013
2014
Indonesia
Malaysia
Singapore
Philippines
Thailand
24,182
7,792
17,192
7,914
9,611
22,687
15,860
20,267
14,287
13,836
20,929
9,716
13,370
6,793
8,839
33,464
14,975
14,338
9,721
8,313
AVERAGE WEEKLY NATURAL RUBBER PRICES COMPILED
BY THE ASSOCIATION OF NATURAL RUBBER PRODUCING
COUNTRIES (ANRPC):
Average weekly natural rubber prices compiled by the ANRPC were lower in its latest update
across the board.
The price of SMR20 rubber from Malaysia was at $139.51/100 kg or $1.3951/kg in the week
ending August 1, from $145.64/100 kg or $1.4564/kg in the week ending July 25.
The price of Thai STR20 rubber hit an average of US$146.34/100 kg or $1.4634/kg in the week
ending August 1, versus $148.11/100 kg or $1.4811/kg in the week ending July 25.
Thai RSS3 rubber was at an average of $161.46/100 kg or $1.6146/kg in the week of August 1,
from $167.45/100 kg or $1.6745/kg in the week of July 25.
The top three natural rubber producers are Southeast Asian countries Thailand, Indonesia and
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 18
Malaysia.
Rubber is used in most industries, primarily as tires in the automobile industry. The material is
also used in a variety of industrial and personal products, such as condoms.
WORLD GRAINS OUTLOOK:
USDA UPS S.E ASIA WHEAT IMPORTS; CORN REACTS
NEGATIVELY
By Jack Scoville, The Price Futures Group
The USDA released its latest U.S. and world data last Wednesday.
No real changes were made for Southeast Asia in the reports, but import demand is now 19.10
million tonnes, from 18.8 million last month and 19.90 million last year.
Southeast Asian ending stocks are now estimated at 4.23 million tonnes, from 3.88 million last
month and 4.24 million last year.
USDA is showing that prices should remain sideways to lower as world supplies will be more
than needed.
U.S. production and supply and demand data was about in line with trade expectations and not
really a price mover.
USDA cut U.S. exports as the U.S. dollar and U.S. prices remain too high. USDA raised global
wheat supplies by 2.2 million tonnes on increased production in Russia and Turkey.
World wheat production is expected to be a record this year, with increased production expected
in Russia, Kazakhstan, and Ukraine, but less in Canada and Argentina.
Exports should be less from the U.S., Canada, and Argentina, and demand should be less from
Iran and Morocco.
Ending stocks are expected to be record large at 221.5 million tonnes.
In corn, prices in Chicago moved sharply lower in reaction to the USDA reports that showed
higher than anticipated yields and production potential for the U.S.
Most in the trade had expected less yield due to the wet weather, but wet summers in the U.S.
normally produce the biggest crops, and USDA seems to think that will happen again this year.
Ending stocks estimates were also higher. USDA also said Brazil, Argentina, and Mexico will
produce more corn and it expects increased imports from China, the EU, South Korea, and
Mexico.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 19
Global ending stocks should also be higher.
Southeast Asian coarse grain production and demand is expected to remain stable, but domestic
feed demand is expected slightly lower so ending stocks are now estimated 4.60 million tonnes,
from 4.30 million last month and 4.67 million tons last year.
The weather in the U.S. remains good for crop development, but big questions about EU
production are being raised due to the hot and dry summer there.
Most sources in the EU are now dropping production estimates, and some are dropping the
production in a big way.
The price action in response to the reports was very negative and the moves implied that even
lower prices are coming.
We still expect the market to trade as low as US$3.30 per bushel prior to or at the U.S. harvest
and expect selling to surface on rally attempts into the fall.
In soybeans and soybean meal, USDA estimated U.S. yields and production potential for the
new crop at much higher levels than anticipated by the trade, and futures prices moved sharply
lower in response.
The higher production along with somewhat less export demand left ending stocks estimates
very high and implied that there will be no shortage of supplies.
In addition, USDA raised South American production and demand. The demand growth in
South America is directly related to prices and the U.S. dollar.
The increased demand profile for the product in South America along with increased Chinese
demand did lower world ending stocks estimates to 86.9 million tonnes.
Ending stocks ideas might be less, but that will still be a record. So USDA is signaling that the
buyer’s market in world oilseeds will continue.
Chart patterns suggest that futures will test and eventually take out the contract lows at about
US$8.95 basis November.
A move to $8.50 per bushel at harvest time is not out of the question, and some of the more
bearish traders think prices will go even lower than that level. USDA made no changes to the
soybean meal data for Southeast Asia on Wednesday.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 20
WEATHER OUTLOOK FOR SELECT COUNTRIES IN S.E.
ASIA THROUGH AUGUST 21, 2015 COMPILED FROM
GOVERNMENT WEATHER SERVICES:
The Badan Meteorologi, Klimatologi dan Geofisika (BMKG) of Indonesia (Meteorology,
Climatology and Geophysics Agency) said Sumatra should be generally cloudy with some light
rain, particularly in Aceh and North Sumatra. The same conditions should prevail in Kalimantan
and Sulawesi. Papua and Java are seen as generally clear with some cloudy conditions. Those
regions cover the main growing areas for palm oil, cocoa and coffee. Indonesia is the world’s
top producer of palm oil, the No. 3 producer/exporter of cocoa and one of the top five producers
of mainly robusta coffee.
The Philippine Atmospheric, Geophysical and Astronomical Services Administration (Pagasa)
said in its outlook through August 21 that monsoon rains may be sucked in with the approach of
a weather disturbance to the country. The main island of Luzon, the top rice growing area in the
country, will get occasional rains during the period. The Philippines is the world’s leading
producer of coconut oil, and is a major importer of rice, wheat and other food products. Farmers
are tending to crops such as corn, sugar and bananas among others.
The Thai Meteorological Department said in its 7-day forecast said the weak monsoon will be
the main feature in the country with only isolated rain in the north and upper northeast of the
country. The Southeast Asian nation is the world’s No. 2 exporter of sugar, which is planted in
the north, northeast and central parts of Thailand. The north and northeast region accounts for
nearly 80 percent of rice grown in the country. Thailand is the world’s top exporter of rice.
The National Hydro-Meteorological Service in Vietnam said the mainly robusta coffee
producing area around Dak Lak and nearby provinces should see a combination of rain and clear
days throughout this week. The northern coffee areas around Son La, which grows a large crop
of arabica coffee beans, will also see sunny conditions with some light showers during this
period. Warm weather with some rain will be seen in the main rice growing areas in the southern
part of the country. Vietnam is a leading exporter of rice and rivals Thailand in exports of the
grain, a staple food of large parts of Asia. It is the No. 2 coffee producer in the world.
The Malaysian Meteorological Department said the 7-day outlook in the state of Sabah should
see isolated rain and steadier showers in the week through August 20. It said Sarawak should get
isolated rain but that Selangor will see isolated rain early and then slightly heavier rain this
week. The state of Johor will likely get isolated showers before the rain increases very late
during the period. All four areas are the leading regions where palm plants are sown in the
country, the No. 2 producer of the vegetable oil in the world. The country is also a major
producer of cocoa.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
SHORT
BITES:
SOUTHEAST ASIA
Page 21
COMMODITY
FUNDAMENTALS
IN
INDONESIA CORN IMPORTS IN 2014/15 AND 2015/16
Corn accounts for 80 percent of Indonesian feed needs, especially in its poultry industry.
Indonesia corn imports are seen at 3.5 million tonnes in 2014/15 and 3 million tonnes in
2015/16. According to the Global Trade Atlas, some 48 percent of corn imports are from
Argentina, around 45 percent from Brazil, 5 percent from India, and 2 percent from the U.S.
VIETNAM COFFEE PRODUCTION, EXPORTS IN 2015/16
Coffee production for the 2015/16 season should hit 28.6 million bags, up around 1.8 percent
from the 2014/15 season, the USDA forecast.
Exports are forecast at 27.04 million bags or 1.62 million tonnes, up 2.3 percent, according to
estimates by the U.S. agriculture attaché in Vietnam.
INDONESIAN 2015/16 COFFEE PRODUCTION
Coffee production in Indonesia is seen rising some 24 percent to 11 million bags in 2015/16
(April/March), according to the USDA.
Of the total, some 9.3 million are robusta beans. Indonesia is expected to produce 1.7 million
bags of arabica coffee, the key ingredient for gourmet and high-end coffee.
Coffee exports are seen at 9.05 million bags in 2015/16. Coffee planted area in Indonesia
remains steady at around 1.2 million hectares.
INDONESIA SUGAR IMPORTS
Raw sugar imports by Indonesia are seen increasing in 2015/16 to 3.1 million tonnes on the back
of a rising population and rising consumption by the country’s food industry.
Sugar consumption in 2014/15 is forecast at 5.5 million tonnes and it is expected to edge up to
5.55 million tonnes in 2015/16. The island of Java’s 48 sugar mills accounted for 63 percent of
Indonesian white sugar production in 2013/14.
Copyright © 2015 by Informa Economics, Inc.
Southeast Asia Commodity Digest
August 17, 2015
Page 22
THAILAND SUGAR EXPORTS
Thai sugar exports are tipped to increase 10 percent to 8.8 million tonnes in 2015/16 because
tariff rates in the 10-member Association of Southeast Asian Nations (ASEAN) will be cut to
nearly zero by December 31.
Thai 2015/16 sugar production is expected to increase to 11.4 million tonnes, from 11 million in
2014/15 due to an expansion in cane plantings by 32,000 hectares.
PHILIPPINE COCONUT OIL EXPORTS
Coconut oil exports in 2013/14 stood at 866,000 tonnes, according to the Global Trade Atlas
(GTA). In 2014/15, they fell to 800,000 tonnes, and would stay at this level for 2015/16.
Coconut oil production was estimated at 1.48 million tonnes in 2013/14, seen slipping to 1.45
million tonnes in 2014/15 and go up slightly to 1.49 million tonnes in 2015/16. The Philippines
is the world’s top coconut producer.
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August 17, 2015
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