Chicago soybean oil and Malaysian palm oil moved in tandem on Thursday, as they tracked higher crude oil prices, which continued to boost biofuel demand sentiment.
The May soybean oil contract on the Chicago Board of Trade was up 0.95% to 68.24 cents per pound, diverging from the May soybean contract, which saw a 0.15% drop to $11.65 per bushel in early trade.
The US soybean complex was also supported by a strong soybean crush volume. Data from the National Oilseed Processors Association reportedly showed that volume rose 8.3% month over month and 16.3% year over year to 226.2 million bushels in March.
Adding to the positive market sentiment was the planned Trump-Xi summit next month, which is highly likely to take place amid seemingly improving relations, after US President Donald Trump said that China agreed not to supply weapons to Iran.
The market is expecting China to increase its US soybean purchases.
Weather-related risks in US soybean planting may also buoy prices, with market participants pricing in a risk premium for the rainy weather, according to price reporting agency MySteel.
However, Brazil's record crop will continue to weigh on prices. Brazil's National Supply Co., Conab, projects the country's output to reach 177.9 million tons, while analysts surveyed by Bloomberg expect 179 mmt.
In Asia, Malaysian palm oil futures closed higher on Thursday, as soybean oil rose and amid expectations of stronger domestic demand due to higher biodiesel blending.
The Bursa Malaysia Derivatives' May crude palm oil contract climbed 0.38% to 4,443 Malaysian ringgit ($1,123.96) per metric ton. The June contract was up 0.09% to 4,476 ringgit/mt.
The government's decision to raise biodiesel blending from 10% to 12%, and then to 15%, will boost local demand, but this did not lift market sentiment significantly, as traders were expecting an increase to at least 20%, Oilworld reported, citing Sunvin Group's head of commodity research Anilkumar Bagani.
The first 2% increase in blending ratio could boost biodiesel demand by 130,000 metric tons per year, and the next 3% jump could add another 200,000 mt, according to Malaysian Palm Oil Board director-general Ahmad Parveez, as cited by The Star.
Parveez told the news agency that the planned phased implementation was a "measured" approach to avoid additional fiscal burden, while utilizing existing blending facilities.
The 15% mandate could reportedly absorb 1.8 million metric tons of crude palm oil, equivalent to 9% of total domestic production of 20 mmt.
Malaysia's move followed Indonesia's plan to raise its biodiesel mandate to 50% from the current 40% beginning July 1, and Thailand's decision to increase blending ratio to 7% from the current 5%.
Despite expanding biofuel use, Malaysian shipments for the first half of April were estimated to have dropped 34% from a month earlier, according to cargo surveyors cited by Trading Economics.
Malaysia's move to increase export duty to 10% in May from 9.5% in April, following a rise in palm oil reference price, could further dampen export competitiveness.
With export volumes declining and production set to increase in the coming months, "palm oil is expected to trade in a range-bound and weak manner in the short term," MySteel said.
In the US, the May-dated ethanol futures on the NYMEX slipped by another 0.91% to $1.91 per gallon on Wednesday, as weekly production steadied and exports declined.
The US Energy Information Administration reported that, for the week ended April 10, US ethanol production was unchanged from week-ago levels at 1.12 million barrels per day.
At the same time, exports dropped to 81,000 barrels per day from the previous week's 203,000 b/d.
Domestic stocks were also flat at 26.1 million barrels.