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Biofuels Update: Feedstock Futures Mixed; Soybean Oil, Palm Oil Diverge From Crude Oil

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-- Major biofuel feedstock futures were mixed on Monday, as Chicago soybean futures rose while Chicago soybean oil and Malaysian palm oil slipped despite higher crude oil prices.

The May soybean contract on the Chicago Board of Trade rose for a second straight session by 0.19% to $11.66 per bushel. The May soybean oil contract fell 0.21% to 71.76 cents per pound.

Soybean oil diverged from crude oil's upward movement over uncertainties surrounding what will come next for potential US-Iran peace talks.

Meanwhile, rainfall expected in parts of the US this week that could slow planting, provided a boost to soybean prices.

However, increasing global supply, with Brazil's record soybean harvest almost completed, weighed on the entire soybean complex.

"The fundamental outlook for bumper crops in South America remains unchanged, global soybean supply is expected to stay loose, and there is a lack of key bullish factors to drive a trending market in the short term," according to price reporting agency MySteel.

"Overall, US soybeans are seeing a balance between strong crush demand and supply pressure from South America, presenting a rangebound pattern with upside pressure and downside support," MySteel said.

Rangebound price movements and chart resistance will prevent July soybean futures from going above the $11.80 per bushel mark, Darren Frye of consulting firm Water Street Solutions told Ag Web.

Going forward, the market is expected to shift its attention to the US-China summit in mid-May, as traders await hints of additional demand from China, Mark Soderberg of ADM Investor Services said.

In Asia, Malaysian palm oil futures slipped more than 1% on Monday, pulling away from crude oil prices, due to weaker exports and a 0.36% strengthening in the Malaysian ringgit versus the US dollar.

The Bursa Malaysia Derivatives' May and June crude palm oil contracts closed at 4,465 Malaysian ringgit ($1,129.38) per metric ton and 4,505 ringgit/mt, respectively.

Malaysian shipments for the April 1-25 period reportedly declined 15.7% from a month earlier, according to cargo surveyors cited by Trading Economics.

This followed a 29.1% year-over-year rise in Q1 exports, as buyers advanced purchases due to the expected surge in shipping costs and as volumes of rival Indonesian cargoes softened due to higher export levies, according to the Malaysian Palm Oil Council.

Indonesia's move to raise its palm-based biodiesel blending to 50% from 40% beginning July 1 could lift Malaysian exports going forward.

The MPOC said Indonesia's B50 program could absorb an additional 3 million metric tons per year of palm oil.

Annual domestic consumption in Thailand could also increase by 350,000 metric tons as the country moves to B7 from B5, while demand in Malaysia could rise by 300,000 mt as the government raises its biodiesel blend to B15 from B10.

Increasing biofuel demand, elevated crude oil prices, and supply risks from the potential development of an El Nino weather trend will support palm oil prices, with the MPOC projecting them at around 4,500 ringgit/mt in the near term.

"However, further gains are likely to be capped by softer export demand amid inflation and weaker economic growth in key importing countries, alongside rising stocks as palm oil production gradually enters its seasonal peak," the MPOC said.

According to Jim Teh, senior palm oil trader at Interband Group of Co., as cited by Bernama, palm oil prices could trade between 4,200 ringgit/mt and 4,300 ringgit/mt this week due to profit taking.

In the US, the May-dated ethanol futures on the NYMEX jumped 1.95% to about $1.96 per gallon on Friday.

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