Commodities
Biofuels Update: Chicago Soybean Complex Down on Chinese Demand Doubts
The Chicago soybean complex slipped on Tuesday amid lack of confirmation from China that it would buy at least $17 billion of US farm products annually through 2028.The July soybean contract on the Chicago Board of Trade fell 0.50% to $12.03 per bushel. The corresponding soybean oil contract dropped 0.04% to 75.41 cents per pound.China's Ministry of Commerce reportedly said the US and China had agreed to establish a "guiding target" for their agricultural trade, but did not confirm the $17 billion figure stated by the White House in a fact sheet.Aside from Chinese demand worries, ample supply availability of cheaper South American cargoes also pressured Chicago soybean prices.Offers for US soybeans were more than $1 higher per bushel compared with Argentine cargoes, and were up $0.60 to $0.90 per bushel versus Brazilian cargoes, according to ADM Investor Services.ADM analyst Mark Soderberg said these price differentials should narrow to encourage China to make new US crop purchases. In April, China reportedly imported 3.3 million metric tons of soybeans from the US and 4.75 mmt from Brazil.Softer soybean oil prices dragged Malaysian palm oil futures lower on Wednesday, although losses were limited by prospects of a supply squeeze, following reports that the Indonesian government will tighten export controls on some commodities, including palm oil.The Bursa Malaysia Derivatives' June crude palm oil contract dipped 0.55% to 4,515 Malaysian ringgit ($1,134.91) per metric ton. The July contract eased 0.33% to 4,556 ringgit/mt, to end a three-session rally.Shares in Indonesian palm oil producers slumped after reports that a state-backed agency will be established to manage raw material exports, such as palm oil and coal, with a view of increasing state revenue, Bloomberg said.The move could reduce exportable supplies, particularly as Indonesia begins raising its palm-based biodiesel blending to 50%, from the current 40%, in July.With higher domestic consumption, Indonesia's exports are projected to decline by 1.7 mmt from April to September, the Malaysian Palm Oil Council reported Tuesday, citing data from Oil World Research.During the same period, Oil World reportedly expects exports from Indonesia, Malaysia, and Thailand to fall by a combined 2 mmt. In Q1, shipments from the three palm oil producers grew by 1.9 mmt.As domestic intake increases, "a sharp build-up in palm oil stocks is unlikely during the upcoming peak production season in Southeast Asia," MPOC said.Sluggish demand from India and weaker export volumes in the first half of May also continued to weigh on sentiment.Nonetheless, MPOC said "palm oil remains the most competitively priced vegetable oil in India, while palm olein prices in Malaysia were also trading at a marginal discount to Argentine soybean oil, a pricing dynamic that should continue to support palm oil demand."In the US, June ethanol prices on the NYMEX rose by a further 0.38% to about $2.01 per gallon on Tuesday, as the market awaited weekly US production, exports, and inventory data.
