Soyoil prices could gain 20% from US duties on Argentine, Indonesian biofuel

05.05.2017

US soyoil prices may gain 15-20% if Washington backs industry demand for curbs on $1.5bn imports of from Argentina and Indonesia – although the move would be a setback for values of soymeal, as well as global palm oil.

Washington trade watchdogs are due by Monday to rule on whether Argentina and Indonesia have, as some industry leaders claim, been "dumping" biodiesel on the US – ie, thanks to "unfair subsidisation", exporting it at levels deemed below fair value

Should the US International Trade Commission and Department of Commerce back the dumping claims, Washington is likely to impose "significant" import tariffs on biodiesel imports from Argentina and Indonesia, Rabobank said.

The EU in 2013, after a similar probe, imposed anti-dumping duties of 19% on imports of Indonesian biodiesel, and 25% on Argentine supplies.

The move would - in cutting imports from origins which exported 1.85m tonnes of biodiesel, worth $1.47bn, to the US last year – open up a large hole in US biodiesel supplies, of which there is a mandated minimum on consumption, and of the vegetable oils from which the biofuel is made.

'Significant impact on prices'

Rabobank estimated the void as equivalent to 4.06bn pounds of soyoil, the main vegetable oil produced in the US itself, adding 18% to annual use, although thanks to imports, and used of rival feedstocks such as corn oil, the gap may be "well below" that.

Nonetheless, the bank forecast that extra domestic consumption would be sufficient to cut US soyoil inventories by 500m pounds, "which would reduce 2017-18 US ending stocks to some of their lowest levels in 20 years".

And - with tighter inventories implying higher values as buyers are forced to pay up to secure supplies – "US soyoil prices could increase by 15-20%.

"The impact of import duties from both Indonesia and Argentina could have a significant impact on US soyoil prices".

Bearish for palm oil, soymeal

US tariffs may affect too prices of palm oil, the vegetable oil that Indonesia uses to make its biodiesel -- although the impact here would be negative, the bank said.

The US accounts for 90-93% of Indonesian biodiesel exports.

"Any duty imposed on US biodiesel imports from Indonesia… could prove slightly bearish to global palm oil prices."

Tariffs may also put pressure on values of soymeal, which is also produced from soybean crushing, and would see its supplies boosted as a result of the clamour for soyoil.

"The resulting increased US soybean crush could be bearish for US soymeal prices, and would likely require higher US soymeal exports."

'Big thing'

The forecasts follow comments earlier this week from Soren Schroder, chief executive of Bunge, the global agribusiness giant which has soy crushing operations in both the US and Argentina, that the imposition of the tariffs would be a big thing.

It "will create an enormous demand for vegetable oil, both of soybean oil and canola oil, which will be very positive to crushing margins in both Canada and the US," Mr Schroder told investors.

"So that part would be a big boost to North American crushing margins, both in softseeds and in soy crush."

While in Argentina the duties would mean that "biodiesel margins… won't be there and the industry won't run", the curbs would overall be a "sizeable net positive" for Bunge, he said.


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