Sharp declines in crude oil prices, following reports that the US and Iran were closing in on a one-page memorandum to end the conflict between them, pressured major biofuel feedstocks on Wednesday.
In early trade, the July soybean oil contract on the Chicago Board of Trade dropped 1.92% to 75.43 cents per pound, to end a nine-session rally. The July soybean contract slipped 0.47% to $12.06 per bushel.
A weakening crude oil market could dampen competitiveness of biofuels over fossil fuels, due to reduced economics.
Ample supply availability also continued to weigh on the market, with Brazil's soybean harvest now more than 95% completed and US planting maintaining a record pace despite unfavorable planting conditions in the Midwest.
Consultancy firm Stone X, as cited by multiple media outlets, has raised its projection for Brazilian soybean production by 1%, versus its April outlook, to 181.6 million metric tons.
Brazil's largest soybean export market is China. However, China's plan to reduce the use of soybean meal in animal feed will likely weaken Brazil's export outlook, DatamarNews reported.
China's soybean imports could decline by 6.1% in 2026 and up to 30% by 2030, as the country adopts new feed technologies, according to China's agriculture ministry, as cited by the news agency.
Lower imports by China could also impact the US export market, but traders were eyeing a potential increase in Chinese purchases following the Trump-Xi summit in mid-May.
Greg McBride of agricultural commodity research firm Allendale, as cited by AgWeb, said that an additional 8 mmt purchase pledge by China is unlikely, but that any such increase would "shock" the market.
Going forward, the market is expected to focus on US soybean export data, US planting pace and weather patterns, and South American harvest progress, according to price reporting agency MySteel.
In Asia, Malaysian palm oil futures retreated from near four-week highs on Wednesday, as traders took profits and as crude oil prices dropped.
The Bursa Malaysia Derivatives' June crude palm oil contract slumped 2.86% to 4,547 Malaysian ringgit ($1,150.85) per metric ton. The July contract declined 2.78% to 4,579 ringgit/mt.
Expectations of weaker exports and higher production in April following a seasonal low in Q1 also weighed on prices. Cargo surveyors reportedly estimated a 15.7% to 16.8% month-over-month decline in Malaysian shipments for the April 1-25 period.
Lower purchases from top importer India, due to surging palm oil prices, contributed to a downward trend in exports. The country's palm oil imports dropped 27% month over month to a one-year low of 505,000 metric tons in April, according to dealers cited by Reuters.
Purchases of rival edible oils rose as the competitiveness of palm oil diminished. Dealer estimates reportedly showed that India's April soybean oil imports increased from a month earlier by 24% to 355,000 mt, and sunflower oil purchases more than doubled to a 22-month high of 435,000 mt.
The Malaysian ringgit's 1.2% strengthening against the US dollar could further erode attractiveness of the country's cargoes, as it makes exports more expensive.
Nonetheless, domestic demand is set to increase as the Malaysian government proceeds with its B15 program beginning June. The richer biofuel blend could add 300,000 mt per year of palm oil demand to current B10 levels, according to its industry body.
"April production is expected to increase, but with anticipated growth in domestic consumption, inventory accumulation is likely to be limited," MySteel said.
In Indonesia, exports also slowed, with March volumes falling to 1.31 million tons relative to the previous year's 2.0 mmt, and Q1 volumes declining year over year to 5.85 mmt from 5.35 mmt, data from the statistics bureau showed.
Similarly, local consumption is set to rise beginning July, as the government raises its B40 mandate to B50. Malaysia's industry body said this could increase Indonesia's annual domestic palm oil demand by 3 mmt.
Analyst Dorab Mistry, as cited by Reuters, projects palm oil futures to remain strong in the coming months due to rising biodiesel demand, with June levels likely to touch the 5,000 ringgit/mt mark and mid-July levels to approach 5,200 ringgit/mt.
In the US, June ethanol prices on the NYMEX fell by another 0.98% to about $2.03 per gallon on Tuesday, as the market awaited weekly production, exports, and stocks data due Wednesday.