Major biofuel feedstock futures slipped on Thursday, tracking recent declines in crude oil prices, although strong Chinese demand for soybeans and prospects of tighter palm oil supply limited downside.
The September soybean contract on the Chicago Board of Trade retreated from contract-highs and fell 0.44% to $12.49 per bushel in early trade. The September soybean oil contract weakened for another session and dropped by a further 1.95% to 65.91 cents per pound.
Lower crude oil prices and a possible deadline extension for meeting US renewable fuel standard obligations weighed on soybean oil demand sentiment.
Meanwhile, sustained Chinese buying has capped soybean losses, with the US Department of Agriculture reporting another 333,000 metric tons of sales to China on Wednesday.
US soybean sales for the 2026/27 marketing year have totaled 1.7 million metric tons as of Aug. 13, with about 1.1 mmt sold to China, according to the USDA. The market is now awaiting this week's update for guidance.
China's current pace of buying is faster than normal, raising expectations that it will buy the full 25 mmt volume it has pledge to procure, according to DuWayne Bosse of Bolt Marketing, as cited by AgWeb.
The market may consider rationing supplies to prevent a tight inventory situation should China fulfil its soybean commitment, Bosse reportedly said.
In Asia, Malaysian palm oil futures closed lower on Thursday after a brief rally earlier in the session, as rival soybean oil declined and exports weakened.
The Bursa Malaysia Derivatives' September crude palm oil contract lost 0.80% to 4,593 Malaysian ringgit ($1,140.69) per metric ton. The October contract dipped 0.95% to 4,716 ringgit/mt. Both contracts fell for a third consecutive session.
Malaysian shipments for the Aug. 1-25 period have reportedly declined 11.4% to 20% from a month earlier. In Indonesia, June exports fell year over year by 9.2% to 3.3 mmt.
Meanwhile, near-term demand could be supported as buyers scale up purchases ahead of the full implementation of Indonesia's higher 50% biodiesel blend in October. Prospects for lower exportable supplies as the policy progresses will also underpin prices going forward.
Palm oil demand could also receive a boost from India's upcoming festive season and Black Sea disruptions curbing sunflower oil cargo arrivals.
On the supply side, rainfall in Malaysia's producing regions could help mitigate the potential impact of a strong El Nino weather phenomenon, according to Malaysian Palm Oil Council Chief Executive Belvinder Sron, as cited by Bernama.
In Indonesia, however, weather conditions have reportedly been drier since late June, aiding harvesting activities but posing bigger risks in terms of fresh fruit bunch production in the long term.
The MPOC projects prices will remain above 4,600 ringgit/mt in September due to expectations of tighter supply. SD Guthrie, as cited by The Edge Malaysia, said prices could reach up to 5,000 ringgit/mt through year-end.
Meanwhile, September ethanol prices on the NYMEX steadied at about $2.07 per gallon on Wednesday, as stocks rose slightly with higher production and exports.
The US Energy Information Administration reported that for the week ended Aug. 21, inventories stood at 25.2 million barrels, up from the previous week's 25.1 mmbbls.
At the same time, production increased to 1.11 million barrels per day from the prior week's 1.09 mmbbls/d, as exports grew to 162,000 barrels per day from 129,000 b/d.