Sharp declines in crude oil prices, following a US-Iran interim peace deal that will lead to the reopening of the Strait of Hormuz, dragged major biofuel feedstock futures lower on Monday.
The July soybean contract on the Chicago Board of Trade retreated to four-month lows and dropped 0.52% to $11.08 per bushel. The corresponding July soybean oil contract fell 1.87% to 72.89 cents per pound in early trade.
The drop in oil prices made biofuels less price competitive versus fossil fuels, weighing on demand sentiment and pressuring related vegetable oil markets.
Other demand downsides include a lack of Chinese purchases and the slowing pace of soybean crushing. Analysts reportedly estimated the US soybean crush slowed for a third straight month in May due to plant maintenance.
On the supply side, weather conditions in the US Midwest remained favorable for soybean planting, raising prospects of improved yields.
The South American harvest is also expected to be plentiful, with the US Department of Agriculture revising its Argentine soybean production outlook upward by 2 million metric tons to 50 mmt.
"The combination of expected ample US soybean production and the pressure of a bumper harvest in South America has created a loose global soybean environment, which has been the underlying driver behind the recent decline in US soybean prices," price reporting agency MySteel said.
In Asia, Malaysian palm oil futures fell 0.5% on Monday, tracking crude oil price losses, but a recovery in exports and weather-related supply risks limited losses.
The Bursa Malaysia Derivatives' July and August crude palm oil contracts eased to 4,412 Malaysian ringgit ($1,089.52) per metric ton and 4,451 ringgit/mt, respectively.
A strengthening local currency also weighed on prices, with the Malaysian ringgit firming against the US dollar for a third straight session on Monday. This makes cargoes costlier to foreign buyers and weighs on export competitiveness.
Last month, Malaysian exports dropped 14.5% month over month to 1.1 mmt, data from the Malaysian Palm Oil Board showed.
Preliminary cargo estimates showing a 3.5% to 4.9% rebound in June 1-10 exports, versus the previous month's levels, countered what had looked like weak demand.
However, Malaysian shipments face competition with growing numbers of Indonesian cargoes, as exporters reportedly rush to sell palm oil ahead of the full implementation of the single-gate export system in 2027.
In key buyer China, "port arrivals are expected to face significant pressure in June and July," due to "substantial" palm oil procured, MySteel said.
Exportable supplies from Malaysia and Indonesia may drop once a developing El Nino weather phenomenon begins to impact yields.
Malaysian economic minister Akmal Nasrullah Mohd Nasir said that key commodity sectors may see an 8% to 10% reduction in yields as a result of dry weather, multiple media outlets reported.
Prices could rise between 5% and 10% due to weather-related supply risks, according to Kenanga Research cited by The Star. It reportedly raised its 2026 price outlook by 4% to 4,400 ringgit/mt and its 2027 forecast by 6% to 4,450 ringgit/mt.
In the US, July ethanol prices on the NYMEX rose 0.67% to about $1.89 per gallon on Friday, ending four sessions of losses.