Commodities
Biofuels Update: Major Feedstocks Rise but Softer Exports Limit Gains
Major biofuel feedstocks firmed on Wednesday, tracking gains in the crude oil market, but weaker export demand capped gains.The July soybean contract on the Chicago Board of Trade ended an eight-session rally and edged higher by 0.67% to $11.21 per bushel. The July soybean oil contract inched up 0.36% to 75.18 cents per pound in early trade.Prices were supported by a lag in soybean planting, with US Department of Agriculture data showing 92% progress in the week ended June 7, lower than analysts' estimates of 93%. That was still faster than last year's 89% and the five-year average of 88%.The agency rated 65% of planted crop in good-to-excellent condition, down relative to the previous week's 66% and the prior year's 68%. Analysts cited by Reuters expected a higher rating.Favorable weather conditions supporting planting weighed on prices, as well as a lack of Chinese purchases, despite last month's US-China summit.According to price reporting agency MySteel, domestic soybean supply in China remains ample and soybean oil inventories are building up."With a loose supply environment, near-term spot basis for soybean oil is expected to see rangebound consolidation," MySteel said.The market is now awaiting the USDA's supply and demand outlook, due on June 11.In Asia, Malaysian palm oil futures ended higher on Wednesday, but weaker exports and inventory build-up limited upside.The Bursa Malaysia Derivatives' July crude palm oil contract gained 0.09% to 4,498 Malaysian ringgit ($1,105.19) per metric ton. The August contract rose 0.22% to 4,538 ringgit/mt.Malaysian shipments in May weakened 14.5% from a month earlier to 1.1 million metric tons, data from the Malaysian Palm Oil Board showed. Cargo surveyors earlier estimated an 8.8% to 15.5% drop.This contributed to a buildup in stocks, which rose for a second straight month, this time by 1.6% to 1.3 mmt in May. Inventories remained higher than the previous year's 1.1 mmt.Stocks grew despite a 7.0% month-over-month decline in production to 1.5 mmt, the report showed.Lower crude oil and soybean oil prices also pressured palm oil futures, which may see a recovery in H2 as El Nino-linked supply risks weigh on sentiment and as Indonesia begins implementing a higher biodiesel mandate of 50%, versus the current 40%.MySteel agricultural editor Stacy Chen toldthat prices may range from 4,500 ringgit/mt to 5,000 ringgit/mt in H2, while the Palm Oil Strategic Policy Institute reportedly projects global prices will exceed 6,000 ringgit/mt in that period.In Indonesia, fresh fruit bunch prices will rise 10%, following President Prabowo Subianto's directive to help boost margins for farmers, Antara reported, citing agriculture minister Andi Amran Sulaiman.The increase is also in line with strengthening palm oil prices and a weakening local currency, Sulaiman reportedly said, noting that the government will ensure fresh fruit bunch prices return to normal levels following last month's plunge due to the new export policy.Prices across 70% of regions have already partially recovered, according to the minister.Meanwhile, the US will exempt the country's palm oil from its planned 10% tariffs on Indonesian products, according to chief economic minister Airlangga Hartarto, as cited by Jakarta Globe.The new import tax will likely come into effect after the current 10% global levy expires on July 24, the minister reportedly said.In the US, July ethanol prices on the NYMEX eased by a further 0.91% to $1.91 per gallon on Tuesday, as industry data showed a drop in ethanol exports in April.US ethanol exports fell to 171.6 million gallons during the month, "registering below 200 mmgal for the first time in six months amid broadly weaker shipments across several key markets," the Renewable Fuels Association said, citing USDA data.Lower shipments to Canada, the EU and the Philippines more than offset increases in South Korea, according to the report, with these four markets accounting for about three-quarters of total US exports in April.