Commodities
Biofuels Update: Major Feedstock Futures Extend Gains on Strong Crude Oil
Major biofuel feedstock futures extended gains as demand sentiment improved with elevated crude oil prices stemming from the outage of Saudi's East-West pipeline and limited flow through the Strait of Hormuz.The Nymex November ethanol futures contract rallied for a third straight session on Monday and rose 0.37% to about $2.05 per gallon.The October soybean oil contract on the Chicago Board of Trade firmed by a further 0.24% to 69.82 cents per pound in Tuesday's early trade, although the November soybean contract dipped 0.61% to $12.96 per bushel.The US Department of Agriculture projects corn use for ethanol to increase to 5.60 billion bushels in the 2026/27 season from the 2025/26 level of 5.55 billion bushels.In Iowa, gasoline blended with 15% ethanol, or E15, is set to surpass E10 as the top-selling fuel in the state this year, according to the Iowa Renewable Fuels Association. Distributed E15 volumes exceeded 46 million gallons in August, the second highest amount on record.Meanwhile, the USDA estimates soybean oil consumption in biofuels to grow to 17.80 billion pounds in the 2026/27 marketing year, up from the 2025/26 volume of 14.80 billion pounds.Surging diesel prices, which analysts expect to weigh on farmers' margins due to resulting high crop production costs particularly during harvest season, may offer further upside to biofuel feedstock prices. Corn and soybeans serve as raw materials for ethanol and soybean oil, respectively.Data from agriculture intelligence provider DTN showed that the spread between corn and diesel futures in the US has narrowed significantly this year."If we're still staring at such high input costs (in 2027), you will most likely start to hear arguments for lower area to be planted in several regions," DTN analyst Rhett Montgomery said.In Asia, Malaysian palm oil futures rose further on Tuesday, driven by stronger crude oil and soybean oil, but high inventories and weak exports capped gains.The Bursa Malaysia Derivatives' October crude palm oil contract closed higher by 0.51% to 4,741 Malaysian ringgit ($1,165.21) per metric ton. The November contract firmed 0.70% to 4,884 ringgit/mt.Subdued Malaysian exports partially offset the rise in prices, with cargo surveyors estimating a 17.8% to 25.6% month-over-month drop in Sep. 1-15 shipments, according to UkrAgroConsult.Malaysian inventories also remained high, with end-August stocks reaching an eight-month peak due to weak exports and higher production."Increased production combined with weak exports has led to continued inventory accumulation, resulting in loose supply conditions," commodity data group SunSirs said, noting that the stock buildup is a short-term bearish factor that weighs on near-month futures.Although the high seasonal production cycle is gradually tapering off, "weak export demand provides an offset, leaving the short-term overseas market without a clear direction," price reporting agency MySteel said.Nonetheless, SunSirs highlighted that current inventory levels will not change the long-term outlook, and the market structure of "weak near-term, strong long-term" is likely to remain."Long-term pricing continues to be driven by two major bullish factors: long-term consumption from Indonesia's B50 biodiesel mandate and the potential for El Nino-induced drought to reduce next year's output," the firm said.Indonesia is on track to fully implement its B50 policy by Oct. 1 and is assessing a further increase to B60 next year.