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Biofuels Update: Feedstock Futures Decline as Lower Crude Oil Impacts Economics

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Sharp declines in crude oil prices dragged biofuel feedstocks lower on Monday to maintain their competitiveness, although robust exports limited losses.

The September soybean contract on the Chicago Board of Trade slipped 0.66% to $11.63 per bushel in early trade. The September CBOT soybean oil contract dropped 0.10% to 67.19 cents per pound.

Improved weather conditions, potentially supporting crop growing conditions, also weighed on prices.

Recent soybean sales to China have helped limit price declines. About 3.0 million metric tons of US soybeans were sold to China this year following renewed buying interest last month, S&P Global Energy reported, citing data from the US Department of Agriculture.

Price reporting agency MySteel said that 2.7 mmt of US soybeans were sold to China and unknown destinations since July 8, "providing underlying support for US soybean demand."

China's soybean imports have picked up, with arrivals exceeding 10 mmt in July and August, according to market intelligence provider SunSirs. Domestic soybean inventories have reached a 10-year high as a result, "ensuring an extremely abundant supply of raw materials."

However, high prices are limiting Chinese buying, with importers still preferring Brazilian soybeans, according to market participants cited by S&P Global Energy.

In Asia, Malaysian palm oil futures closed lower on Monday, tracking declines in crude oil prices, although strong July exports and a potential demand recovery in India limited price downside.

Extending the previous week's losses, the Bursa Malaysia Derivatives' September crude palm oil contract fell 0.33% to 4,589 Malaysian ringgit ($1,120.64) per metric ton. The October contract dropped 0.30% to 4,629 ringgit/mt.

Palm oil losses were limited as Malaysia's shipments in July reportedly jumped between 12.1% and 19.5% from a month earlier, according to cargo surveyors. This followed a 5.7% month-over-month rise in June.

The Malaysian Palm Oil Board will release July industry data on Aug. 10.

In Indonesia, the trade ministry reportedly lowered crude palm oil reference price to $996.52 per metric ton in August, compared with July's $1,000.90/mt, due to weaker global demand and softer crude oil prices. Export levies will also be reduced accordingly.

Top palm oil exporters Indonesia and Malaysia expect demand from India to pick up between July and October as buyers stock up ahead of festivities.

Progressing higher biodiesel blending in Indonesia and El Nino-related supply risks are also expected to support the market going forward.

However, in the near term, market bearishness may persist, with futures likely to "maintain a weak and volatile trend," MySteel said.

September ethanol prices on the NYMEX eased 0.26% to $1.95 per gallon on Friday, as global energy prices weakened.

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