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Biofuels Update: Chicago Soybean Complex Dips With Crude Oil

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The Chicago soybean complex eased on Friday as crude oil prices dropped, but losses were limited by a forecast of above-normal temperatures in the US that could possibly stress crops.

The July soybean contract on the Chicago Board of Trade fell 0.49% to $11.22 per bushel, and was set to decline 0.07% over the week.

The July CBOT soybean oil contract dropped 0.37% to 70.55 cents per pound, but was on track for a 1.23% weekly gain.

Declining crude oil prices erode the competitiveness of biofuels, pressuring the price of feedstocks.

A potential heatwave, meanwhile, raised concerns over "the stress tolerance of shallow-rooted crops," according to price reporting agency MySteel.

In terms of demand, June 12-18 data from the US Department of Agriculture showed mixed trends, with net sales rising week over week by 7% to 455,400 metric tons, but with exports dropping to a marketing-year low of 217,000 mt.

In Brazil, trade association Anec projects June soybean exports to rise year over year to 15.2 million metric tons from 13.8 mmt, following a record crop.

US cargoes for July to August delivery are currently priced at a slight premium over Brazilian offers, according to ADM Investor Services, although price differentials shift to a slight discount for cargo delivering from September onward.

In Asia, Malaysian palm oil futures lost almost 2% over the week, as declining crude oil prices weighed on the market.

The Bursa Malaysia Derivatives' July crude palm oil contract lost 0.20% to 4,504 Malaysian ringgit ($1,085.04) per metric ton on Friday, and eased 1.96% over the week. The August crude palm oil contract was up slightly by 0.09% to 4,539 ringgit/mt, but posted a 1.80% weekly loss.

Futures dropped despite a recovery in exports, with cargo surveyors cited by Trading Economics estimating Malaysian shipments for the June 1-25 period to have risen between 10.6% and 11.1%.

Exports grew even though the Malaysian ringgit strengthened versus the US dollar by 1.16% this week, a trend that dampens the attractiveness of cargoes due to resulting higher costs for international buyers.

In Indonesia, the government looks set to begin the implementation of B50, a 50% palm-based biodiesel blend, on July 1 following positive road test results.

The government will give fuel retailers a three-month transition period to clear out existing B40 stocks, media outlets reported, citing renewable energy director general Eniya Listiani Dewi.

The new biofuel mandate is aimed at curbing diesel imports. President Prabowo Subianto, as cited by news agencies, projected that the country will achieve energy self-sufficiency in three to four years.

Meanwhile, July ethanol prices on the NYMEX rose by a further 2.19% to $1.87 per gallon on Thursday.

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