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Biofuels Update: Major Feedstocks Rise as China Commits to Buy More US Farm Goods

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Major biofuel feedstock futures mostly climbed on Monday after the White House confirmed that China will buy at least $17 billion worth of US agricultural products annually through 2028, on top of the soybean commitments it made in October.

In early trade, the July soybean contract on the Chicago Board of Trade gained 1.87% to $11.99 per bushel, and the corresponding soybean oil contract rose 1.26% to 74.81 cents per pound.

Following the Trump-Xi summit last week, the White House released a fact sheet on Sunday stating the increase in China's annual purchases of US farm products. This lifted demand sentiment for the soybean complex and erased earlier market disappointment over the initial results of the trade discussion.

China, in October, made a long-term commitment to buy 25 million metric tons of soybeans per year from 2026 through 2028.

The White House, however, did not specify the additional farm goods that China will purchase.

A Beijing-based analyst cited by Reuters said China may boost imports of US corn, wheat, and sorghum, but did not mention about soybeans.

Gains in soybean prices were capped by weaker fundamentals, given the low US soybean crush volume in April and a record crop from Brazil, according to price reporting agency MySteel.

US soybean crush volume reportedly dropped to its lowest since September at 211.9 million bushels last month.

In Asia, Malaysian palm oil futures inched up on Monday, tracking higher crude oil and rival soybean oil prices, despite signs of slowing export demand.

The June crude palm oil contract on the Bursa Malaysia Derivatives exchange was up 2.30% to 4,491 Malaysian ringgit ($1,128.87) per metric ton. The July contract rose 2.31% to 4,522 ringgit/mt.

The biofuels market continued to find support from rising energy prices, as the US and Iran war drags on. Improving economics of biodiesel versus gas oil supports Indonesia's and Malaysia's plan to increase blending of palm oil in biodiesel, as a move to boost domestic fuel supply.

On Monday, the Malaysian ringgit eased by a further 0.7% against the US dollar, making exports cheaper and more attractive to foreign buyers. This further supported the palm oil market, which has been recently pressured by weakening exports.

Cargo surveyor AmSpec Agri Malaysia, as cited by Trading Economics, estimated Malaysia's shipments in the first half of May to have declined from a month earlier by 16.5%.

This followed a 14.3% month-over-month drop in April, largely due to a reported decline in shipments to the Middle East and softer Indian demand.

In China, import cargoes were offered at profitable margins, but "consumption remained relatively weak," MySteel said.

On the supply front, Malaysian production is expected to rise in the coming months following a seasonal low in Q1, providing a boost to the plantation sector, according to Affin Hwang Investment Bank, as cited by The Star.

April domestic palm oil output has already seen a recovery, surging 18.4% from a month earlier to 1.6 million metric tons.

Palm oil prices will find support from biodiesel policies supporting richer blends and from geopolitical tensions going forward, the investment bank reportedly said.

In the US, June ethanol prices on the NYMEX slipped by a further 1.41% to around $1.93 per gallon on Friday.

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