Commodities
Biofuels Update: Stronger Crude Oil Prices Lift Soybean Oil, Palm Oil
Chicago soybean oil and Malaysian palm oil traded higher on Monday, driven by a rally in crude oil prices due to concerns over prolonged supply disruptions related to conflict in the Middle East.The July soybean oil contract on the Chicago Board of Trade hit new contract highs and rose 0.17% to 75.29 cents per pound in early trade. The May soybean contract also climbed 0.56% to $12.10 per bushel.Soybean oil futures have recorded monthly gains since January, as the US approved higher biofuel blending levels and following the outbreak of conflict in the Middle East in late February.Soybeans have tracked stronger soybean oil prices, although ample supply availability has continued to cap gains.Brazil was entering its peak export season, with its record crop of around 180 million metric tons almost completed, according to multiple media outlets.Offsetting robust supply sentiment were weather-driven delays in Argentine harvesting and US soybean planting.Argentina's harvest reportedly lagged at 18.3% versus seasonal average of around 60% due to late-season rains.Wet conditions also caused delays in planting in the central and eastern US grain belt, although the country's overall pace has exceeded historical averages, agriculture data showed.In Asia, Malaysian palm oil futures reached one-week highs as they tracked gains in the crude oil and soybean oil market, according to Iceberg X trader David Ng, as cited by Dow Jones.The Bursa Malaysia Derivatives' June crude palm oil contract climbed 1.10% to 4,590 Malaysian ringgit ($1,161.29) per metric ton. The July contract gained 1.14% to 4,622 ringgit/mt.Trading resumed following a public holiday on May 1 but news on supply and demand was limited with the Chinese market closed for May Day holidays. The Dalian exchange is set to open on May 6.A 15.7% to 16.8% month-over-month decline in Malaysian shipments for the April 1-25 period, as reportedly estimated by cargo surveyors, capped price gains. Malaysia's industry body will release monthly data on May 11.Lower exports in April reflect typical post-festive weakness, according to Trading Economics. In March, exports jumped 40.7% from a month earlier, industry data showed, as buyers advanced purchases due to the expected surge in shipping costs and as volumes of rival Indonesian cargoes softened due to higher export levies.With a recent strengthening in the local currency, export demand may remain under pressure due to rising costs for foreign buyers.Indonesia's planned increase in its biodiesel blend to 50% from the current 40% will reduce exportable supplies and may improve competitiveness of Malaysian cargoes.Palm oil supplies to the global market could also shrink if Indonesian output declines due to concerns over the El Nino weather phenomenon and rising fertilizer costs. Eddy Martono, chairman of the Indonesian Palm Oil Association, cautioned of a possible 1 million to 2 million ton drop in Indonesian production this year, relative to 2025 levels, Reuters reported.Meanwhile, in the near term, production in Indonesia and Malaysia may still rise versus Q1 lows due to seasonal factors.In the US, ethanol prices on the NYMEX rebounded almost 2% to $2.05 per gallon on Friday, as the market priced in a surge in weekly exports and a drop in output and inventories.