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Biofuels Update: Lack of US-China Deal Drags Soybean Complex Lower

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The Chicago soybean complex inched down on Friday as the market reacted negatively to the lack of concrete deal details following the Trump-Xi summit.

In early trade, the July soybean contract on the Chicago Board of Trade fell 1.03% to $11.80 per bushel and was on track for a 2.3% weekly decline.

The July soybean oil contract dropped 0.11% to 73.58 cents per pound and was set to lose 1% over the week.

US Trade Representative Jamieson Greer reportedly said China may buy up to "double-digit billions" worth of US agricultural products over the next three years, but did not identify the farm goods and did not stipulate a commitment to any volume.

A European trader cited by Reuters said a $10 billion deal for all agricultural products would be "disappointing," but a $20 billion trade would be a different matter.

Some analysts believed that Greer was merely referring to the earlier agreement made in October that China would buy 25 million metric tons of US soybeans in the next three years.

US Treasury Secretary Scott Bessent told CNBC in an interview that soybeans are "all taken care of," dampening hopes for additional Chinese buying.

Also pressuring prices were expectations that the US soybean crush in April would be low due to seasonal plant maintenance. Analysts cited by ADM Investor Services estimated April figures to have dropped to 214 million bushels, versus March levels of 226 million bushels.

In Asia, Malaysian palm oil diverged from Chicago soybean oil, as stronger crude oil prices and a softer local currency lifted prices.

Crude palm oil futures on the Bursa Malaysia Derivatives exchange recovered from two-month lows. The June contract gained 0.64% to 4,390 Malaysian ringgit ($1,115.91) per metric ton, and the July contract rose 0.61% to 4,420 ringgit/mt.

However, weak fundamentals capped gains, with palm oil futures recording their third weekly loss of around 1.9% on Friday.

In April, Malaysian exports slumped 14.3% versus March shipments to 1.3 million metric tons, industry data showed. For the first 10 days of May, AmSpec Agri reportedly estimated a 10.8% month-over-month drop in shipments, while Intertek assessed growth of 8.5%.

On the supply front, April domestic palm oil output surged 18.4% to 1.6 mmt. Against the backdrop of higher supplies and lower exports, stocks rose 1.7% to 2.3 mmt, to approach a level much higher than the previous year's 1.9 mmt.

Among vegetable oils, palm oil led market declines this week, according to price reporting agency MySteel. This reversed a recent sharp uptrend in palm oil prices, largely due to crude oil strengthening and expanded biofuel programs in key Southeast Asian producers.

Once Malaysia and Indonesia implement higher biodiesel blend mandates in June and July, respectively, increased domestic consumption may lend support to palm oil prices.

Supply risks from the potential development of an El Nino weather phenomenon could also serve as a tailwind in the coming months.

In the US, June ethanol prices on the NYMEX ended a two-session rally, losing 1.64% to around $1.95 per gallon on Thursday.

The lack of a firm agricultural trade deal, particularly for corn, between China and the US weighed on prices, tempering positive demand sentiment from the potential implementation of E15, a gasoline grade containing 15% ethanol.

The US House on Wednesday approved HR 1346 bill, or the Nationwide Consumer and Fuel Retailer Choice Act, to allow fuel retailers to sell E15 year round.

The bill requires a Senate vote and approval by US President Donald Trump before enactment.

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