Declining crude oil prices continued to drag Malaysian palm oil and Chicago soybean oil futures lower on Wednesday, while soybeans diverged as the market remained optimistic about large Chinese purchases.
The July soybean oil contract on the Chicago Board of Trade fell 0.69% to 70.10 cents per pound. The corresponding soybean contract gained 0.27% to $11.20 per bushel.
Jim Sutter, chief executive of the US Soybean Export Council, told CNBC that China started buying US soybeans last week, in line with its pledge to buy at least 25 million metric tons annually over the next three years.
The US Department of Agriculture last week reported a sale of 132,000 metric tons of soybeans to China for 2026/27 delivery.
However, US soybeans face competition from plentiful Brazilian cargoes, with July to August deliveries coming in cheaper by $0.15 to $0.25 per bushel, according to ADM Investor Services.
Sutter reportedly urged buyers to check crop quality and nutrition, emphasizing that US soybeans benefit from more favorable growing weather than those in Brazil.
Brazil accounted for more than 60% of China's soybean imports from January through May, while the US supplied 23%, and Argentina 10%, CNBC reported, citing customs data.
Following a record crop in the recently-concluded season, Brazil's soybean acreage is expected to expand 0.9% to 49 million hectares in the next planting cycle, media outlets reported, citing data from the consulting firm AgRural.
In Asia, Malaysian palm oil futures closed lower on Wednesday, tracking losses in crude oil and rival soybean oil, despite tightening supply and demand fundamentals.
The Bursa Malaysia Derivatives' July crude palm oil contract eased 0.54% to 4,575 Malaysian ringgit ($1,102.14) per metric ton. The August crude palm oil contract slipped 0.52% to 4,604 ringgit/mt.
Prices declined despite a reported 19.1% to 25% month-over-month increase in Malaysian shipments for the first 20 days of June, as per latest cargo estimates.
A strengthening local currency dampened competitiveness of exports, making cargoes more expensive to foreign buyers. The Malaysian ringgit firmed by a further 0.08% against the US dollar on Wednesday.
Malaysia's export market, nonetheless, may find support from Indonesia's expanding biodiesel policy, which will reduce exportable supply.
The Indonesian government is set to raise its palm-based biodiesel blending to 50% from 40%, to reduce reliance on imported fuel. The energy ministry, as cited by multiple media outlets, estimates there will be 157.28 trillion Indonesian rupiah ($8.76 billion) in foreign exchange savings this year due to lower fuel imports.
In Malaysia, the government is planning to increase its biodiesel mandate to 30% by 2030, following a shift to 15% from 10% this month, multiple media outlets reported, citing the Ministry of Plantation and Commodities.
The ministry reportedly does not expect B30 to affect Malaysia's exportable volumes, given that the higher blending ratio will just consume about 1.6 million metric tons per year of palm oil, or 7% of the country's total supply.
Malaysia's palm oil industry is export-driven, with around 15.3 mmt allocated to export markets, out of the total 22.8 mmt of domestic production, stocks, and imports, according to the ministry.
Meanwhile, July ethanol prices on the NYMEX dropped by a further 0.55% to $1.82 per gallon on Tuesday, as the market awaited release of weekly production, stocks, and exports data due on Wednesday.