Major biofuel feedstock futures slipped on Tuesday and were on track for monthly losses, driven by a weakening crude oil market following the US-Iran interim deal.
The July soybean contract on the Chicago Board of Trade eased 0.11% to $11.07 per bushel in early trade. It was set to lose 6.68% over the month.
The July CBOT soybean oil contract retreated 0.81% to 68.51 cents per pound, and was headed for an 11.85% monthly decline.
The soybean market is keenly eyeing the US Department of Agriculture's annual acreage report and quarterly grain stocks report due on Tuesday.
The agency, on Monday, reported that soybeans inspected for export in the week ended June 25 totaled 419,124 metric tons, up from the prior week's 272,141 mt and the previous year's 237,179 mt.
Export inspections for the current marketing year stood at 37.3 million metric tons, still lower than the previous season's 45.9 mmt.
Separately, the USDA said private exporters sold 136,000 mt of soybeans to unknown destinations, for delivery during the next marketing year.
As of June 28, planted soybeans in good-to-excellent condition averaged 65% across 18 US states, down versus the 66% recorded last week and a year earlier, USDA data showed.
Elevated temperatures in the Midwest continued to raise concerns over crop condition in the region, providing some price upside.
In Asia, Malaysian palm oil futures dropped around 1% on Tuesday and posted monthly declines, as rival soybean oil weakened and as biofuel economics dampened on falling crude oil prices.
The Bursa Malaysia Derivatives' July crude palm oil contract settled at 4,474 Malaysian ringgit ($1,101.10) per metric ton, having eased 0.64% over the month. The August crude palm oil contract closed at 4,518 ringgit/mt and recorded a 0.37% monthly loss.
Despite declining biofuel viability, palm-based biodiesel blending in Indonesia is set to expand to 50% from July 1, up from the current 40%, to help increase domestic energy supplies.
The move, which could limit the country's dependence on imported diesel especially during supply chain disruptions such as the one caused by the US-Iran war, faces opposition from biofuel producers and farmers.
The higher mandate will be difficult to meet without biofuel plant capacity expansion, Bloomberg reported, citing Catra de Thouars, vice chairman of the Indonesian Biofuel Producer Association.
Thouars reportedly said that the country's biofuel plants should run at around 90% without unplanned outages just to produce B50.
Palm oil smallholder association, Popsi, meanwhile, argued that a rushed implementation of the new policy may weigh on the profits of farmers, the Jakarta Globe reported.
It reportedly highlighted that prices for fresh fruit bunches, which follow levy-deducted crude palm oil prices, may decline due to higher export levies imposed to subsidize biofuel policies.
Popsi proposed to implement B30 as the base blend, with flexibilities to raise to B40 and B50 subject to production capacity, global prices, and domestic demand, the report said.
In Malaysia, palm oil shipments remained robust, following cargo surveyor estimates that exports for the June 1-25 period have risen between 10.6% and 11.1% from a month earlier.
The supply and demand balance may be affected as palm oil yields could drop, with the El Nino conditions likely to develop from July through early 2027, Focus Malaysia reported, citing the Malaysian Meteorological Department.
Fresh fruit bunch yields could decline year over year by 12% to 22% if the anticipated strong El Nino this season mirrors the 1997/98 and 2015/16 episodes, the news agency said.
Meanwhile, July ethanol prices on the NYMEX ended a three-session rally and fell 1.05% to $1.88 per gallon on Monday.