Major biofuel feedstocks firmed in price on Friday, driven by expanding biofuel use to mitigate rising crude oil prices.
The July soybean contract on the Chicago Board of Trade edged higher by 0.36% to $11.98 per bushel in early trade, and was on track for a 1.85% weekly rise.
The July soybean oil contract inched up 0.68% to 74.37 cents per pound, to end three sessions of losses. It was set to gain over the week by the same 0.68% amount.
Increasing biofuel production has lifted US soybean crush margins to near record highs, rising another $0.08 per bushel to $3.41 per bushel, ADM Investor Services said.
This has supported prices, which also saw upside from the potential return of Chinese demand.
Agriculture data provider DTN said "traders are waiting for any sign of flash sales to China," while the country has yet to confirm the $17 billion agriculture trade agreement as stated by the White House in a fact sheet.
Meanwhile, favorable weather in the US Midwest, supporting soybean planting, capped price gains.
Ample supply availability in South America also pressured prices.
In Brazil, vegetable oil industry association Abiove reportedly projects the country's soybean crop for the current season to hit a record of 180.1 million metric tons, lifting ending stocks to their highest level in nine years.
In Argentina, the Buenos Aires Grain Exchange reportedly raised its production outlook to 50.1 mmt, from the previous 48.6 mmt, as harvest reaches 74.7% completion.
ADM analyst Mark Soderberg said the premium on US soybeans over Brazilian cargoes decreased to $0.35 per bushel for September delivery, but remained more than $1 per bushel higher than Argentine offers.
In Asia, Malaysian palm oil futures tracked higher crude oil and rival soybean oil prices, and received some support from a weakening local currency, with weekly gains reaching about 1% on Friday.
The Bursa Malaysia Derivatives' June and July crude palm oil contracts closed the week higher at 4,430 Malaysian ringgit ($1,113.54) per metric ton and 4,463 ringgit/mt, respectively, following three straight weekly losses.
The Malaysian ringgit has been easing against the US dollar since the second week of May, and lost about 0.5% this week.
By making exports cheaper and more attractive to foreign buyers, a weaker currency could support Malaysian export demand, which has so far declined between 13.9% and 20.5% in the first 20 days of May, according to cargo surveyor estimates, cited by Trading Economics.
Malaysian cargoes may gain competitiveness once Indonesia moves ahead with its plan to impose state control over its exports of key commodities, including palm oil.
The government's plan has pressured Indonesian palm oil prices in recent days, with bidders withdrawing from tenders and sellers cutting prices to clear supplies prior to the enactment of the new rule, Bloomberg reported, citing traders.
Malaysian industry officials cited by Reuters said the move could cause temporary disruption in the market, as participants adjust to new procedures during the transition period.
Coupled with Indonesia's expanded biofuel mandate that will take effect from July, the country's exportable supplies may shrink, further supporting Malaysia's export-driven palm oil industry, analysts said.
Southeast Asian supplies may also decrease if an El Nino weather phenomenon, potentially developing in the region toward the second half of this year, impacts productivity of palm trees.
The Malaysian Palm Oil Council expects prices to remain supported at around 4,400 ringgit/mt, largely due to weather-related supply risks.
In the US, ethanol prices also rose, with June contract on the NYMEX up 1% to $2.02 per gallon on Thursday.