Major biofuel feedstock futures extended their rally on Thursday as biofuel economics continued to improve on rising crude oil prices, while prospects of lower soybean and palm oil supply provided further support.
The September soybean contract on the Chicago Board of Trade rose by a further 0.22% to $12.25 per bushel in early trade, to reach their highest in almost a month. The September CBOT soybean oil gained 0.54% to 70.24 cents per pound.
Geopolitical tensions have lifted global fossil fuel prices and boosted demand for alternatives, such as biofuels.
In China, US soybean purchases continued this week, despite high domestic soybean oil inventories. Data monitored by market intelligence provider SunSirs showed that China's soybean oil stocks as of Aug. 19 were up 2% from a month earlier and 5% from a year ago.
Amid a robust demand environment, prospects of lower soybean yield in the US following "underwhelming" results of ProFarmer's crop tour in the Midwest further supported prices, analysts said.
Data have so far reportedly showed year-over-year declines in pod count in South Dakota, Ohio, Indiana, and Nebraska. In Illinois, aside from lower pod count, disease concerns were also emerging, according to crop scout Dustin Guy, as cited by AgWeb.
The crop tour results are in line with the crop ratings by the US Department of Agriculture, which have shown a weakening from week-ago and year-ago levels.
"In the near term, US soybeans are poised to trade on a firmer footing, supported by crop tour signals pointing to lower yields and robust demand fundamentals," price reporting agency MySteel said.
In Asia, Malaysian palm oil continuous futures rose for a fourth consecutive session on Thursday, to reach their highest since December 2024, driven by higher soybean oil and crude oil, and tight supply outlook.
The Bursa Malaysia Derivatives' September crude palm oil contract jumped 1.72% to 4,734 Malaysian ringgit ($1,161.88) per metric ton. The October contract climbed 1.63% to 4,872 ringgit/mt. Both contracts reached new contract highs during the session.
Prices continued to rally amid improving biofuel economics and widening discount of palm oil to gas oil.
Market sentiment remained largely positive despite higher inventories in Malaysia, which have risen 3.3% month over month to 2.6 million metric tons in July, the highest in five months, according to Malaysian Palm Oil Board data.
Nonetheless, the Malaysian Palm Oil Council said that the current stock levels are "not excessive" and "not a major concern," considering higher biodiesel demand and front-loading of cargoes in Indonesia.
In southern Malaysia, palm oil production during the Aug. 1-15 period fell by 3.4% from a month earlier, according to data cited by SunSirs.
This "reflects a temporary tightening of supply, providing bullish support for palm oil prices," SunSirs said.
The El Nino weather phenomenon is expected to negatively impact palm oil yields in Indonesia and Malaysia toward the end of the year through 2027.
Adding to supply concerns is Indonesia's B50 blending mandate, which is set to run fully from Oct. 1 following a three-month transition period.
These factors are triggering "speculative buying," Bloomberg reported, citing Budiman Suwardi, head of treasury and markets at Prime EcoHarvest Commodities.
Meanwhile, a strengthening local currency and narrowing price differentials between palm oil and soybean oil could weigh on palm oil demand, potentially capping price gains.
In the US, September ethanol prices on the NYMEX steadied at $2.04 per gallon on Wednesday, following a three-session rally.
Ethanol production dropped to 1.09 million barrels per day in the week ended Aug. 14, relative to the previous week's 1.12 mmbbls/d, data from the US Energy Information Administration showed.
Although exports grew week over week to 129,000 barrels per day from 109,000 b/d, stocks were up to 25.1 million barrels from 24.8 mmbbls.