Major biofuel feedstock futures edged higher on Wednesday, driven by a rise in crude oil prices and weather-related supply risks.
The May soybean contract on the Chicago Board of Trade gained another 0.38% to $11.79 per bushel. It reached an almost six-week high earlier in the session, as the possibility of rain in the US Midwest toward the end of this week buoyed market sentiment.
Progress in soybean planting in the US reached 12% as of April 19, faster than the previous season's 7% and the five-year average of 5%, agriculture data showed.
In South America, the Brazilian harvest was almost complete, but progress in Argentina was hindered by weather conditions, according to Trading Economics.
Similarly, the May soybean oil futures contract inched up by 0.47% to 72.48 cents per pound in early trade, supported by strong energy markets and rising biofuel demand.
In the US, demand for soybean oil, used in biofuel production could increase by 2.5 million pounds this year, according to agriculture data provider DTN.
In terms of prices, "results of peace talks could dictate the future direction, as will the US-China meeting in May," DTN said in reference to the Iran war, adding that strong crush margins would also provide further upside.
Globally, soybean demand is expected to remain robust, with soybean processing in the current marketing year likely to reach a record 100.3 million metric tons, according to forecasting firm Oil World, as cited by analytical agency OleoScope.
In Asia, Malaysian palm oil futures extended gains for a third straight session on Wednesday, driven by a rise in soybean oil prices, an advancing B50 biodiesel program in Indonesia, and potential output cuts due to the El Nino weather phenomenon.
The Bursa Malaysia Derivatives' May crude palm oil contract climbed 1.29% to 4,549 Malaysian ringgit ($1,150.63) per metric ton. The June contract was up 1.41% to 4,599 ringgit/mt.
In Indonesia, use of palm-oil based biodiesel will be expanded by implementing a higher blending ratio of 50%, versus the current 40%, beginning July 1.
Preliminary results of B50 testing showed that the fuel was meeting required specifications, local news agency Antara reported, citing Energy and Mineral Resources Ministry Director General Eniya Listiani Dewi.
Road tests and engine inspections for the transportation sector are expected to be completed by June.
Indonesia's imports of conventional diesel will reportedly discontinue with the B50 implementation, reducing fossil fuel consumption by about 4 million kiloliters per year. The current B40 program has curbed diesel purchases by 3.3 million kiloliters, according to Dewi.
Higher biofuel demand in Indonesia will reduce exportable supplies of palm oil, potentially boosting Malaysia's export market.
Cargo surveyors reportedly estimated a 25.6% to 25.8% month-over-month drop in Malaysian shipments for the first 20 days of April.
In the first half of April, exports fell from a month earlier by 324,724 metric tons to 580,018 mt, primarily due to a 114,650 mt decline in shipments to the Middle East, according to an analysis by price reporting agency Fastmarkets.
The geopolitical tension has weighed on Malaysia's export market, particularly with weaker demand from Iran, The Edge Malaysia reported, citing Malaysia External Trade Development Corp. chairman Reezal Merican Naina Merican.
Merican reportedly said that shipments of palm oil and palm-based products to Iran slumped 86.1% year over year to 90 million ringgit in Q1.
Iran did not import any palm oil from Malaysia in the first half of April, according to Fastmarkets.
Going forward, palm oil price movements will be driven by developments in the energy market and supply fundamentals, according to BMI Research, as cited by Business Today.
While production may rise following a seasonal low, El Nino conditions emerging between May and October pose a key upside risk.
BMI reportedly projects palm oil prices to ease to around 4,200 ringgit/mt in Q2, assuming de-escalation in the Middle East conflict, and it expects prices to average at 4,300 ringgit/mt for the year.
In the US, the May-dated ethanol futures on the NYMEX rose by another 0.26% to $1.90 per gallon on Tuesday, with the market awaiting release of weekly production, inventories, and export data, due Wednesday.