Commodities
Biofuels Update: Chicago Soybean Complex Up on China Tariff Talks; Palm Oil Steady to Higher
The Chicago soybean complex firmed on Friday amid talks of China possibly lowering tariffs on imports of US grains and oilseeds, offsetting pressures from a weaker crude oil market.The July soybean contract on the Chicago Board of Trade rose by a further 0.44% to $11.99 per bushel in early trade, bringing weekly gains to almost 0.1%.The July soybean oil contract reached new highs as it inched up 0.77% to 77.29 cents per pound. The contract was set for a five-session rally and a weekly gain of more than 4%. It has been rising since January due to expanding biofuel demand, and was on track to rise 3.5% this May.On Friday, rumors that China may lower import tariffs, potentially enabling higher purchases of US farm goods, supported the entire soybean complex, according to ADM Investor Services and Water Street Solutions.Chicago futures rose despite China's purchases of cheaper Brazilian soybeans, which totaled four cargoes overnight, ADM said.Brazilian and Argentine cargoes are currently offered at discounts of $400 to $450 per metric ton versus US cargoes, according to agricultural trading firm GrainTrade.Brazil's soybean exports have reached their highest in almost two decades, with shipments from January through April rising 47% year over year, largely due to a record crop and weak domestic demand, Oils & Fats International reported.In Asia, Malaysian palm oil futures were steady to higher on Friday, with weekly gains of about 1%, due to stronger Chicago soybean oil.The Bursa Malaysia Derivatives' June crude palm oil contract was up 0.18% to 4,470 Malaysian ringgit ($1,130.07) per metric ton. The July palm oil contract was largely flat at 4,503 ringgit/mt.However, futures declined over the month by around 1.5%, as weaker exports weighed on sentiment and as crude oil prices eased on peace deal hopes between the US and Iran.Malaysian ringgit also firmed against the US dollar by a further 0.1% in May, following a 2% gain in April. This kept Malaysian export cargoes costlier for international buyers.For the May 1-25 period, Malaysian shipments were estimated to have declined between 14.5% and 18.0% from a month earlier, according to cargo surveyors cited by Trading Economics.Demand for Malaysian palm oil may increase as Indonesia tightens its oversight of shipments by routing exports of palm oil and other commodities to a state-backed entity.In India, world's top palm oil importer, "refiners have already begun internal scenario planning for accelerated Malaysian palm oil sourcing, increased domestic crush of soybean and rapeseed, and renewed evaluation of South American soybean oil contracts," Globoil Intelligence said, as buyers start diversifying their procurement strategies.While tightening global supply will support palm oil prices going forward, Indonesia's export revamp could weigh on margins and valuation of plantation firms, which have already seen a decline in shares following the announcement, analysts said.Indonesia's new export policy is reportedly slated to begin in September, according to Trading Economics, while its mandate to increase palm-based biodiesel blending to 50% from the current 40% is set to start in July.In Malaysia, the government will begin rolling out a new biodiesel blend mandate of 15% in June. This is up from the current blending ratio of 10%.In the US, June ethanol prices on the NYMEX recovered 1.77% to about $2.02 per gallon on Thursday, as weekly production rose.Data from the US Energy Information Administration showed that output averaged 1.09 million barrels per day in the week ended May 22, a decline from 1.11 mmbbls/d a week earlier.Exports, on the other hand, dropped week over week to 102,000 barrels per day from 149,000 b/d, while domestic stocks grew to 25.0 million barrels from 24.9 mmbbls.