Commodities
Biofuels Update: Major Feedstocks Up on Stronger Crude Oil
Major biofuel feedstocks rose on Thursday as crude oil prices firmed on dampening hopes for a peace deal between the US and Iran.The July soybean contract on the Chicago Board of Trade recovered 0.72% to $11.94 per bushel in early trade. The July soybean oil contract extended gains for a fourth consecutive session and rose 0.65% to 75.75 cents per pound.However, plentiful supplies in South America and a rapid pace of US soybean planting capped gains.As Brazilian harvest concluded, trade association Anec estimated soybean exports for this month at 15.9 million metric tons, up relative to the prior year's 14.1 mmt.In Argentina, the Buenos Aires Grain Exchange, as cited by agricultural trading firm GrainTrade, raised its soybean production outlook in the current season to 50.1 million tons from the previous forecast of 48.6 mmt, due to better-than-expected yields.The country's soybean harvest has reportedly reached 74.7% completion, with average yield of 3.28 tons per hectare, the highest in the last six seasons.In the US, agriculture data showed that the pace of soybean planting remained higher at 79%, compared with the previous year's 75% and the five-year average of 68%.Going forward, China's purchases of US soybeans will influence futures. However, China may buy when prices start falling going into harvest season, according to Chuck Shelby of Zaner Ag Hedge, as cited by AgWeb.In Asia, Malaysian palm oil futures tracked higher crude oil and rival soybean oil prices, and found further support from a weakening ringgit that buoys export competitiveness.The Bursa Malaysia Derivatives' June crude palm oil contract rose 0.75% to 4,462 Malaysian ringgit ($1,128.05) per metric ton. The July palm oil contract inched up 0.87% to 4,505 ringgit/mt, to reach a one-week high.The local currency has eased against the US dollar since the second week of May, with Thursday's decline at 0.4%. A weaker ringgit makes exports cheaper and more attractive to foreign buyers.This could support Malaysia's export market, which has so far seen a 14.5% to 18.0% month-over-month moderation in shipments for the May 1-25 period, according to cargo surveyors cited by Trading Economics.Uncertainties over Indonesia's new export policy, which intends to centralize shipments of palm oil and other commodities through a state-backed entity, could provide further upside to Malaysia's export market, particularly during the transition period.Several buyers have reportedly halted purchases of fresh fruit bunches until the government issues clarity on the new mechanism, according to Bloomberg.Globoil Intelligence, the research and intelligence arm of Globoil India, said Malaysian palm oil prices could jump 15% to 25% within 30 days if the export revamp is executed "aggressively without adequate infrastructure at the new state entity."A more probable scenario where the government issues the new regulation within 60 days, with a pilot phase through Q3 and a full rollout thereafter, could result in supply uncertainties in the short term before stabilizing as procurement processes adjust. Globoil expects prices to range from 4,200 ringgit/mt to 4,600 ringgit/mt in H2 in this case.Indonesia's planned export revamp has prompted key buyer India to start planning for procurement diversification, according to the research firm.Meanwhile, the Indonesian government said palm oil producers have agreed to buy fresh fruit bunches at reference prices set by local authorities to help maintain the stability of prices during the transition period, Bloomberg reported, citing Deputy Minister of Agriculture Sudaryono.In the US, June ethanol prices on the NYMEX eased by a further 1.49% to $1.98 per gallon on Wednesday, as the market awaited release of weekly production, inventories, and export data.