Commodities
Biofuels Update: Soybean Complex, Palm Oil Decline as Ethanol Rises
The Chicago soybean complex and Malaysian palm oil edged lower on Thursday as market participants awaited potential deals in agricultural trade between China and the US, while ethanol firmed after the US House of Representatives approved a bill that will allow year-round sale of 15% ethanol-based gasoline.The July soybean oil contract on the Chicago Board of Trade slipped 1.41% to 73.27 cents per pound. The corresponding soybean contract dropped 2.18% to $12.02 per bushel. Prices also tracked a softening in crude oil prices."Traders are anticipating that China, the world's largest importer, may agree to increase purchases of US soybeans as leaders of the two countries hold a summit," Chinese price reporting agency MySteel said.However, some traders cited by Reuters said China is unlikely to commit to additional soybean purchases, although the country may consider buying more US corn, sorghum, and milling wheat.The US Department of Agriculture has raised its outlook for US soybean exports in the 2026/27 marketing year to 1.63 billion bushels, relative to the 2025/26 season, due to expected increases in shipments to China.For the current marketing year, the agriculture department is set to release export sales data on Thursday.Elsewhere, the Netherlands reportedly raised concerns over unauthorized genetically modified crops found in six batches of Argentine and Brazilian soybean meal. Dutch authorities returned at least three cargoes, while Argentina's Ministry of Agriculture reportedly questioned the testing methods used by the importing country.In Asia, weak demand continued to pressure Malaysian palm oil futures, which declined for a third straight session on Thursday to hit their lowest in more than two months.The Bursa Malaysia Derivatives' June crude palm oil contract dipped 1.07% to 4,362 Malaysian ringgit ($1,108.80) per metric ton. The July contract fell 1.01% to 4,393 ringgit/mt.The lack of demand from key buyers, India and China, primarily weighed on sentiment, according to Paramalingam Supramaniam, director at brokerage Pelindung Bestari, as cited by Reuters.The discounts of palm oil to competing oils have eroded following a war-driven surge in prices, prompting Indian refiners to turn to rival soybean oil and sunflower oil.In April, industry data reportedly showed that India's palm oil imports dropped 26% month over month to their lowest in four months at 513,403 metric tons. At the same time, soybean oil purchases rose 25% to 360,350 mt and sunflower oil shipments increased 121% to their highest in 22 months at 434,240 mt.India typically buys palm oil from Malaysia and Indonesia, and sources soybean oil and sunflower oil from Argentina, Brazil, Russia, and Ukraine.In China, near-term purchases of palm oil have remained weak, although the market was seeing an appetite for forward buying."Domestically, basis levels remain persistently weak, and movement of goods is slow," MySteel said, adding that traders were mainly looking for December-loading cargoes.With this week's downward movement in palm oil prices, MySteel said that "vegetable oils have shown slight divergence, with palm oil leading the market decline."Going forward, analysts expect the market to find support from expanding biodiesel programs in Indonesia and Malaysia, geopolitical tensions in the Middle East, and El Nino-related supply risks.In the US, June ethanol prices on the NYMEX gained by a further 1.02% to about $1.99 per gallon on Wednesday, as the US House approved HR 1346 bill, or the Nationwide Consumer and Fuel Retailer Choice Act, to allow fuel retailers to sell E15 permanently.The bill requires a Senate vote and an approval by US President Donald Trump before enactment.Prices were also supported by a reported decline in US ethanol stocks and a rise in exports. For the week ended May 8, the US Energy Information Administration reported that inventories dipped to 24.9 million barrels from the prior week's 26.0 mmbbls, as exports grew to 162,000 barrels per day from 139,000 b/d.Production, on the other hand, showed an upward trend and rose week over week to about 1.1 million barrels per day from 1.0 mmbbls/d.