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Biofuels Update: Major Feedstocks Retreat on Dampening Demand Sentiment

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Major biofuel feedstocks edged lower on Thursday as demand sentiment softened, following a drop in crude oil prices driven by a ceasefire deal between Israel and Lebanon.

The July soybean contract on the Chicago Board of Trade hovered at multi-month lows after easing for a fifth straight session by 0.41% to $11.49 per bushel. The soybean oil contract lost 0.53% to 78.29 cents per pound in early trade.

Favorable weather conditions in the US Midwest, supporting planting due to improved moisture conditions, also weighed on soybean prices.

"The market is watching whether lower soybean prices will stimulate export demand, awaiting the US Department of Agriculture's weekly export sales report to be released on Thursday," price porting agency MySteel said.

The Chicago market is awaiting signs for improved Chinese buying, following the mid-May summit between the US and China.

However, MySteel noted that soybean port inventories in China are rising due to bulk cargo arrival from Brazil, which had just concluded a record crop harvest.

Malaysian palm oil moved in tandem with soybean oil on Thursday, declining from two-week highs due to weaker crude oil prices and profit-taking.

Bearish exports and inventory estimates also weighed on sentiment. The Bursa Malaysia Derivatives' July and August crude palm oil contracts edged lower by 1.6% to 4,566 Malaysian ringgit ($1,145.77) per metric ton and 4,601 ringgit/mt, respectively.

Fundamentals appeared weak after a survey by Reuters showed an 8.8% to 15.5% month-over-month drop in May exports. This offset the impact of lower output, resulting in inventory buildup for a second straight month.

In top importer India, palm oil imports rose to 551,000 metric tons in May from 513,403 mt in April, according to dealers cited by the news agency, but volumes remained below average levels.

Indian refiners reportedly turned to rival soybean oil due to reduced economics for palm oil. As such, soybean oil purchases jumped 38% month-over-month to 497,000 mt in May, the highest in five months.

In Indonesia, the impact of the new single-gate export system, implemented on June 1, remains unknown, Jakarta Globe reported, citing Pudji Ismartini, a deputy at the Central Statistics Agency.

Ismartini reportedly said that the agency had not calculated the impact of the new policy on exports, which would have to wait for the availability of June data.

Indonesia's shipments of crude palm oil and its derivatives from January through April totaled 7.72 million tons, up 20.38% versus year-ago levels of 6.41 mmt.

On the NYMEX, July ethanol prices fell for a fourth consecutive session by 1.27% to $1.95 per gallon on Wednesday.

The US Energy Information Administration released industry data for the week ended May 29, showing an increase in domestic production to 1.11 million barrels per day from the prior week's 1.09 mmbbls/d.

Exports rebounded to 135,000 barrels per day versus the previous week's 102,000 b/d, while local stocks decreased to 24.6 million barrels from 25.0 mmbbls.

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