Chicago soybean oil and Malaysian palm oil slipped on Wednesday, as biofuel economics dampened due to lower crude oil prices, following Iran-Oman talks on the management of the Strait of Hormuz.
The September soybean oil contract on the Chicago Board of Trade fell 1.41% to 66.57 cents per pound in early trade.
A possible deadline extension for meeting renewable fuel standard obligations also continued to weigh on sentiment, due to potential feedstock demand softening.
Meanwhile, the September CBOT soybean contract moved in the opposite direction, gaining 0.41% to $12.33 per bushel, as crop conditions in the US remained weak.
Across 18 states, 60% of the soybean crop was rated good to excellent as of Aug. 23, the US Department of Agriculture reported. This is down relative to the previous week's 61% and last year's 69%.
Talks of Chinese buyers asking for more soybean cargoes also supported prices, according to agriculture intelligence provider DTN. China has so far bought 36% of its 25 million metric ton pledge.
However, US President Donald Trump's threat of secondary sanctions against Iran's trading partners might dent US-China relations and weigh on soybean demand. Chinese leader Xi Jinping is scheduled to visit the US next month.
In Asia, weaker crude oil and soybean oil weighed on palm oil futures, which fell around 2% on Wednesday following a public holiday.
The Bursa Malaysia Derivatives' September and October crude palm oil contracts closed lower at 4,630 Malaysian ringgit ($1,150.00) per metric ton and 4,761 ringgit/mt, respectively.
Lower exports also pressured prices, with Malaysian shipments for the Aug. 1-25 period dropping 20% from a month earlier, according to Intertek Testing Services, as cited by Trading Economics. If the weak export trajectory is sustained throughout August, this will be the first time in three months that exports have declined month over month.
A strengthening local currency is making cargoes more expensive, thus dampening export competitiveness. Malaysian ringgit has so far firmed against the US dollar by around 1.4% this month.
In Indonesia, June exports reportedly fell from a year ago by 9.2% to 3.3 million metric tons, despite higher shipments to China and India.
The full implementation of a higher 50% biodiesel blend from October could further reduce the producer's exportable supplies, while a strong El Nino weather phenomenon may impact supply from year-end through 2027.
SD Guthrie, as cited by The Edge Malaysia, projects crude palm oil prices to trade between 4,600 ringgit/mt and 5,000 ringgit/mt through year-end, and to reach 5,200 ringgit/mt in Q1 2027 if drought persists.
In August and September, PhillipCapital Research reportedly expects prices to range from 4,400 ringgit/mt to 4,600 ringgit/mt.
In terms of demand, geopolitical tensions lifting crude oil prices are expected to support biofuel economics, while Black Sea disruptions curbing sunflower oil cargo arrivals will likely boost substitution demand for palm oil.
India's festival season from September to November could also buoy near-term demand, although a narrowing discount of palm oil to soybean oil will likely cap purchases.
Meanwhile, September ethanol prices on the NYMEX fell 2.59% to about $2.07 per gallon on Tuesday, in line with the global energy price movement.