Major biofuel feedstock futures dipped on Friday, tracking sharp losses in the crude oil market due to a potential US-Iran peace deal.
The July soybean contract on the Chicago Board of Trade dropped 0.18% to $11.13 per bushel and hovered near more-than-four-week lows. The contract was set to decline for a third straight week by 0.76%.
The corresponding July soybean oil contract fell 0.86% to 73.81 cents per pound in early trade and was on track to lose 0.40% over the week.
The US Department of Agriculture's latest supply and demand outlook was found to be "neutral to slightly bearish," according to price reporting agency MySteel, with only little adjustments made to an already "loose" balance.
The agency kept US soybean supply and demand balance unchanged and raised Argentina's production outlook for the current season by 2 million metric tons to 50 mmt.
Soybean oil for biofuel use is raised for 2025/26 to 14.55 billion pounds from 14.20 billion pounds, while exports are revised down to 1.05 billion pounds from 1.20 billion pounds.
Globally, biofuel use could surge 70% by 2030 if higher mandates in countries such as the US, Brazil, India, and Indonesia are fully implemented, according to T&E, a European clean transport and energy advocate.
In Asia, Malaysian palm oil futures dropped on Friday, as crude oil prices declined and as the local currency strengthened, making exports costlier to international buyers.
The Bursa Malaysia Derivatives' July crude palm oil contract eased 1.53% to 4,440 Malaysian ringgit ($1,090.94) per metric ton, bringing weekly losses to 1.90%. The August contract fell 1.67% to 4,475 ringgit/mt, and fell 1.73% over the week.
Malaysian ringgit has strengthened against the US dollar for another session, partially offsetting losses earlier in the week. This dampens attractiveness of exports, which may further face pressure from cheaper and plentiful Indonesian cargoes.
Indonesian exporters may rush to sell cargoes ahead of the full implementation of the single-gate export system in 2027.
Nonetheless, Malaysia still saw a recovery in its exports in the first 10 days of June, with cargo surveyors reportedly estimating a 3.5% to 4.9% increase from a month earlier. This followed a 14.5% month-over-month drop in May to 1.1 mmt, according to Malaysian Palm Oil Board data.
Going forward, supplies from Malaysia and Indonesia could fall as a developing El Nino weather phenomenon may impact yields.
Historical trends show that a strong El Nino episode cuts Malaysia's fresh fruit bunch yields by 13% to 16%, according to CGS International, as cited by Bernama. Crude palm oil prices could reportedly rise 22% to 23%, as a result.
CGS International and MySteel expect prices to firm in H2.
In the US, July ethanol prices on the NYMEX continued to fall for a fourth straight session by a further 1.06% to about $1.88 per gallon on Thursday.
The USDA reduced its outlook for 2025/26 corn use in ethanol to 5.58 billion bushels from 5.60 billion bushels, while it kept its 2026/27 forecast unchanged at 5.60 billion bushels.
In India, the government has removed excise duty on petrol with higher ethanol blends, between 22% and 30%, to promote biofuel use.