Trump election would be ‘disastrous’ for US soyabean exports
September 23, 2016
The possible election of Donald Trump as US president in the country's November presidential elections is likely to result in a trade war between the USA and China and Mexico, which would be a disaster for US exports of soyabeans, Dorab Mistry, director of Godrej International, told the Globoil conference on 22-23 September.
It would, however, have a bullish effect on exports of palm oil and South American soyabeans and soya oil.
Mistry said the vegetable oil market had experienced massive turbulence in the past year, with an unprecedented drop in palm oil production of 6M tonnes in 2015/16 (October-September) compared with 2014/15 due to the drought effects of El Niño in 2015 and poor rainfall in the first quarter of this year. Total palm oil stocks also fell 5.5M tonnes.
"We had never seen such a dramatic drop in palm oil production."
However, he forecast a strong recovery in palm oil production of 6.5M tonnes in the next 12 months.
Mistry also said that China would begin releasing a further 2.5M tonnes of old rapeseed oil stocks from some 6M tonnes of reserves it had been holding for 10 years. This was a factor often overlooked by analysts.
He forecast that total world supply of edible oils would increase by 11M tonnes in 2016/17 against a fall of 5.4M tonnes in 2015/16.
This would not result in an overly bearish market as the increase in supply would go towards rebuilding stocks.
Mistry gave a price outlook of Bursa Malaysia crude palm oil (CPO) futures falling from 2,600 Ringitts to 2,200 Ringitts within the next eight weeks, assuming that Trump is not elected; Brent crude oil prices stay at US$40-50/barrel; currencies such as the Ringitt stay stable against the US dollar; and CPO prices do not rising beyond 60,000 rupees on the Multi Commodity Exchange of India (MCX), as Indian consumers were price sensitive and reduced consumption when prices rose.
"If CPO futures fall to 2,200 Ringitts, then soyabean oil – which is too expensive at the moment – will go to US$650 fob," he said.
Mistry said that if La Niña, which had not made an effect as expected following El Niño, were to develop, weather problems could affect the South American soyabean crop, "and the roller coaster ride will begin once again".