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Biofuels Update: Major Feedstocks Rise on Higher Crude Oil Prices

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Crude oil market strength amid renewed hostilities in the Middle East spilled into the biofuels market on Wednesday, lifting futures for both Chicago soybean oil and Malaysian palm oil.

The July soybean oil contract on the Chicago Board of Trade rose 1.26% to 79.40 cents per pound in early trade. The corresponding soybean contract recovered from near two-month lows and gained 0.56% to $11.72 per bushel.

Strong domestic demand, reflected in the high volumes of soybeans crushed in the US, also supported the entire complex.

The US soybean crush totaled 218.5 million bushels in April, according to US Department of Agriculture data, exceeding market expectations of 214.7 million bushels.

Crush margins also reached a record $4.07 per bushel, AgWeb reported, citing Martinson Ag Risk Management.

Soybean prices firmed despite the lack of purchases from China and ample supply availability from Brazil, according to financial services firm StoneX.

"Despite expectations that the absence of Chinese buying would weigh heavily on demand, soybean consumption indicators continue to outperform forecasts," financial services firm StoneX said.

"Brazilian soybean production estimates remain exceptionally large, yet US demand indicators continue to show resilience," it said, adding that US soybean exports are only 1% behind the pace required to meet annual target.

Meanwhile, prospects of improving weather in the US, which supports planting and enhances yield, weighed on prices, according to analysts.

In Asia, Malaysian palm oil futures jumped around 3% on Wednesday, tracking higher crude oil and rival soybean oil, and following the implementation of Indonesia's new export policy.

As the market reopened after a holiday, the Bursa Malaysia Derivatives' July and August crude palm oil contracts surged to 4,638 Malaysian ringgit ($1,163.84) per metric ton and 4,677 ringgit/mt, respectively.

Indonesia reportedly began a phased implementation of its centralized export system on June 1, to initially cover palm oil, coal, and ferroalloys.

Coordinating Minister for Economic Affairs Airlangga Hartarto, as cited by multiple media outlets, said full operation is targeted by Jan. 1, 2027.

During the transition period, Hartarto reportedly said that exporters will conduct overseas sales independently, but all export activities must be reported to Danantara Sumberdaya Indonesia, a newly established state-owned entity for improving trade transparency.

Prices for palm oil fresh fruit bunches have declined since Indonesia announced export revamp plans last month.

Nonetheless, prices may see a recovery once all technical guidelines are finalized and market conditions normalize, Antara reported, citing Regional Representatives Council Speaker Sultan B. Najamudin.

In H2, global crude palm oil prices are also projected to rise up to $1,500/mt, driven by bullish factors including elevated crude oil prices, Indonesia's B50 biodiesel blend rollout in July, and the potential development of an El Nino weather phenomenon, according to industry analysts cited by Jakarta Globe.

On the NYMEX, July ethanol prices slipped by a further 1.25% to about $1.98 per gallon on Tuesday.

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