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Biofuels Update: Feedstock Futures Rise on Stronger Crude Oil, Tightening Supply

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Major biofuel feedstock futures firmed on Wednesday, tracking crude oil gains and amid prospects of lower supply.

The September soybean contract on the Chicago Board of Trade rose 0.98% to $12.12 per bushel in early trade. The September CBOT soybean oil gained 1.15% to 70.49 cents per pound.

The Chicago soybean market focused on the results of the annual, week-long ProFarmer Crop Tour that began on Monday, to assess yield potential across key US Midwest states.

First-day data reportedly showed that South Dakota pod count declined 20.4% year over year, while that in Ohio dropped 7.0%. Second-day data also indicated declines in Indiana and Nebraska by 4.2% and 9.5%, respectively.

The results followed lower crop ratings by the US Department of Agriculture, raising concerns about the soybean yield outlook despite forecasts of rainfall through September.

At the same time, demand from China provided an upward momentum, with private exporters reporting another 136,000 metric tons of soybean sales for delivery during the 2026/27 marketing year, the USDA said on Tuesday.

"In the near term, US soybeans are supported by the crop tour findings and Chinese purchasing activity, keeping prices firm," price reporting agency MySteel said.

In Asia, Malaysian palm oil futures closed higher on Wednesday, reaching their 20-week high, as rival soybean oil and crude oil firmed.

The Bursa Malaysia Derivatives' September crude palm oil contract rose for a third consecutive session by a further 0.82% to 4,654 Malaysian ringgit ($1,143.21) per metric ton. The October contract climbed 0.84% to 4,794 ringgit/mt.

Biofuel economics is improving due to elevated fossil fuel prices, and the discount of palm oil to gas oil is steepening to boost demand for palm oil, according to Sunvin commodity research head Anilkumar Bagani, as cited by Malaysian financial news platform BernamaBiz.

"Biodiesel economics have also remained broadly supportive relative to vegetable oils since the start of the West Asia conflict in February, supporting biodiesel blending demand and margins," the Malaysian Palm Oil Council said.

"This is particularly the case in Indonesia, where domestic crude palm oil prices are trading well below gasoil prices."

Palm oil futures extended gains despite mixed trends for Malaysia's Aug. 1-15 exports. AmSpec Agri Malaysia reportedly estimated a 3.2% increase in shipments from a month earlier, while Intertek Testing Services assessed a 7.9% drop.

Black Sea disruptions due to escalating tension between Russia and Ukraine will impact exports of sunflower oil cargoes in the next one to two months, subsequently supporting palm oil demand, according to MPOC.

The council expects crude palm oil prices to remain firm above 4,600 ringgit/mt in September, "supported by tightening supply fundamentals and continued geopolitical disruptions to global trade flows."

In the longer term, El Nino-related supply risks and expanding biofuel policy in Indonesia are expected to support prices. The three-month transition period for Indonesia's higher 50% biodiesel blend is set to end in September.

Indonesia is also reportedly planning to launch an exchange for mineral and strategic commodities, which will likely include palm oil, nickel, and coal. The move will allow the nation to set its own reference prices for several products.

In the US, September ethanol prices on the NYMEX rose for a third straight session by a further 0.25% to $2.04 per gallon on Tuesday, as global energy prices remained elevated.

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