Commodities
Biofuels Update: Chicago Soybean Complex, Malaysian Palm Oil Diverge
Declining global crude oil prices dragged the Chicago soybean complex down on Tuesday, but Malaysian palm oil held firm due to expanding biofuel use in the region.The July soybean oil contract on the Chicago Board of Trade retreated from contract highs and dropped 0.08% to 76.47 cents per pound in early trade. A recent rally in soybean oil lifted crush margins to near all-time highs, agriculture data provider DTN said.At the same time, the July soybean contract eased 0.41% to $12.18 per bushel.A record pace of US soybean planting also weighed on prices, with agriculture data showing 33% progress across 18 states. This is higher than the previous year's 28% and the five-year average of 23%.Weaker export levels also continued to pressure the market, with soybean inspections totaling 33.3 million metric tons for the current marketing year through April 30, versus the previous season's 43.5 mmt, industry data showed.Nonetheless, the Trump-Xi meeting is expected to transpire in mid-May, "with traders expressing optimism of demand assurances during the summit," DTN said.In Brazil, soybean production in the current marketing year is expected to reach a record 181.6 mmt, according to higher revised estimates by consultancy firm StoneX, as cited by Reuters.In Asia, Malaysian palm oil futures rose further on Tuesday after the country's government announced that it will begin raising its palm-based biodiesel blend to 15% from the current 10% in June.The Bursa Malaysia Derivatives' June crude palm oil contract climbed 1.98% to 4,681 Malaysian ringgit ($1,180.58) per metric ton. The July contract inched up 1.90% to 4,710 ringgit/mt. Both contracts touched near four-week highs earlier in the session.Deputy Prime Minister Seri Ahmad Zahid Hamidi reportedly said that 19 biodiesel plants will start producing B15 from June 1, according to multiple media outlets. The government will also target a shift to B20 and then to B50 over the next two to three years.However, lower exports continued to weigh on prices, with cargo surveyors reportedly estimating a 15.7% to 16.8% month-over-month decline in Malaysian shipments for the April 1-25 period. Malaysia's industry body will release monthly data on May 11.In Indonesia, exports totaled 1.31 million tons in March, a drop versus the previous year's 2.0 mmt. Q1 export volumes also fell year over year to 5.85 mmt from 5.35 mmt.The country's move to raise its biodiesel mandate to 50% from the current 40% beginning July 1 will increase domestic consumption, potentially reducing exports further, particularly with the expected reduction in local supply due to a developing El Nino weather phenomenon and rising fertilizer costs.Exports from both Malaysia and Indonesia weakened due to lower demand from key importer India. A war-driven price rally prompted Indian buyers to cut purchases, with palm oil imports dropping 27% month over month to a one-year low of 505,000 metric tons in April, according to dealers cited by Reuters.As palm oil prices rose and discounts to rival oils narrowed, India's April soybean oil imports reportedly increased from a month earlier by 24% to 355,000 mt. Sunflower oil purchases more than doubled to a 22-month high of 435,000 mt.Declining exports in both Malaysia and Indonesia, as well as the ongoing geopolitical tensions in the Middle East, could influence price movements this week, according to financial services company PhillipCapital.In the US, June ethanol prices on the NYMEX slipped 0.73% to about $2.05 per gallon on Monday.