Sharp increases in crude oil prices amid escalating tensions in the Middle East buoyed Chicago soybean oil and Malaysian palm oil on Tuesday, but soybeans retreated as US crop conditions improved.
The August soybean oil contract on the Chicago Board of Trade firmed for a third straight session and rose 0.22% to 72.98 cents per pound in early trade. The August soybean contract pared the previous session's gains and lost 0.44% to $11.91 per bushel.
Renewed tensions in the Middle East and the reinstated US blockade on Iranian shipping through the Strait of Hormuz buoyed global energy prices, improving the competitiveness of biofuels versus fossil fuels and boosting demand sentiment for vegetable oils used as biofuel feedstock.
However, soybeans diverged from other feedstocks following report from the US Department of Agriculture that 65% of planted US soybeans were in good-to-excellent condition as of July 12. This was up from the previous week's 64% and exceeded market expectations.
Crop conditions improved despite elevated temperatures in the US Midwest in recent weeks, which raised concerns over soybean growing conditions in the region.
Soybean prices also fell despite a report from the USDA that China bought another 136,000 metric tons of US soybeans, bringing total export sales to the country since last week to around 1 million metric tons.
For the week ended July 9, the US inspected 418,592 mt of soybeans for export, down from the previous week's 542,355 mt, but up from last year's 151,933 mt.
For the current marketing year, export inspections have so far totaled 38.3 mmt, still significantly below the prior season's 46.4 mmt.
In the near term, price reporting agency MySteel expects soybean futures to trade in a "firm rangebound pattern" from $11.80 per bushel to $12.00 per bushel, with the market focusing on weather conditions in the US Midwest.
In Asia, Malaysian palm oil futures closed higher on Tuesday, as they moved in tandem with crude oil and rival soybean oil, and as strong exports lent support.
The Bursa Malaysia Derivatives' August crude palm oil contract firmed 0.80% to 4,529 Malaysian ringgit ($1,109.99) per metric ton. The September contract gained 0.88% to 4,573 ringgit/mt.
Prices were also supported as preliminary estimates of Malaysian shipments showed further growth in the first 10 days of July, continuing June's upward trend.
Cargo surveyors cited by Trading Economics estimated shipments during the period to have risen by 1.6% to 5.1% from a month earlier. In June, industry data showed exports grew 6.2% month over month to 1.2 mmt.
Malaysia's export market is expected to strengthen after Indonesia introduced its higher 50% palm-based biodiesel blend mandate, or B50, Bernama reported, citing Malaysian Palm Oil Council chief executive Belvinder Sron.
Malaysia's market share will likely increase as Indonesia's domestic consumption increases, curbing exportable supplies to 48% of annual production from the previous 68% with B20, Sron reportedly said.
Indonesia's B50 policy and El Nino supply risks will underpin the global balance moving forward, according to the MPOC, likely pushing crude palm oil prices up between 4,300 ringgit/mt and 4,700 ringgit/mt in H2.
Hong Leong Investment Bank, as cited by The Star, also sees palm oil prices remaining firm in H2 amid prospects of tightening supply and robust demand.
Meanwhile, TA Research reportedly expects prices to remain range-bound in Q3 due to persisting high inventories, before strengthening in Q4 as production tapers down seasonally and as B50 gains traction.
As crude oil prices continued to rise, August ethanol prices on the NYMEX firmed for a fourth straight session by a further 0.26% to about $1.97 per gallon on Monday.