Global Perspective | US biodiesel duties could hit grain market

US biodiesel duties could hit grain market


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Over recent years, 90 per cent of Argentina’s biodiesel (produced with soybean as feedstock) and 90 per cent of Indonesia’s biodiesel (produced with palm oil as feedstock) has been purchased by the US.

Over recent years, 90 per cent of Argentina’s biodiesel (produced with soybean as feedstock) and 90 per cent of Indonesia’s biodiesel (produced with palm oil as feedstock) has been purchased by the US.

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Last month the US confirmed plans to apply anti-dumping duties on biodiesel imports from Argentina and Indonesia.

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LAST month the US confirmed plans to apply anti-dumping duties on biodiesel imports from Argentina and Indonesia. 

At proposed rates of about 50 per cent (imposed on exporters on a case-by-case cost determination), biodiesel from Indonesia and Argentina will no longer be competitive in the US.  

The effect of these duties might, however, be wider than we think. 

After re-affirming, and marginally increasing its mandate for biodiesel earlier this year, the effect of the anti-dumping duty in the US will be to create demand for home-grown biodiesel and, with it, expanded soybean demand and soybean production. 

The likely effect internationally is less straightforward but could affect soy, palm and canola, and even wheat and feed grain markets. 

Over recent years, 90 per cent of Argentina’s biodiesel (produced with soybean as feedstock) and 90 per cent of Indonesia’s biodiesel (produced with palm oil as feedstock) has been purchased by the US. 

The increased international availability of biodiesel and its feedstocks will put palm and soy prices under pressure at already low levels. 

This could also pressure prices on offer for canola and other edible oilseeds, even in the face of forecast sustained growth in demand for edible oils from China.  

Looking ahead, wheat and feed grain markets might also share the effect of the anti-dumping duty on biodiesel.  

Argentina is a wheat producer hitting it straps again in the international market following the removal of domestic wheat export taxes in late 2015 and the devaluation of the Argentinian peso in recent years (following the unpegging of the peso from the US dollar). 

Argentinian wheat production this year is forecast to be up 45 per cent compared with their average for the five years 2011-12 to 2015-16. 

Decreased demand for soybean based-biodiesel production in Argentina would prompt substitution of soybean hectares with cereal hectares, including wheat, only adding to their recent re-emergence into the global game. 

This is just the opposite of what is required in a world already awash with wheat.

Meanwhile, increased availability of soymeal (as a by-product of the extra soybean crush required to meet domestic US biodiesel demand) for livestock feed in the US, will increase the availability of corn, dried-distillers grain and soymeal in the export arena. 

This would of course put downward pressure on international prices for cereals and feed grains. 

The US anti-dumping duty on biodiesel is not positive for the soybean market, but the edible oil, wheat, and feed grain markets will all be dragged through some reorganisation as a result. 

The instatement of the duties will no doubt be challenged at the World Trade Organisation (WTO). 

These processes take time however and, as shown by precedent in WTO cases, time enough to alter the pricing of biodiesel, biodiesel feedstocks and grain and oilseed production decisions in the US and Argentina. 

The question now, is will it be long enough to alter decisions outside of the US and Argentina. 

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