Commodities
Biofuels Update: Major Feedstocks Drop as Crude Oil Plunges
Major biofuel feedstock futures fell on Monday after crude oil prices declined sharply with attacks between the US and Iran appearing to have slowed.The August soybean contract on the Chicago Board of Trade ended a three-session rally and dropped 2.70% to $12.14 per bushel in early trade. The August CBOT soybean oil contract dipped 2.06% to 72.80 cents per pound.Soybean futures have so far risen around 7% in July amid renewed US-Iran tensions, which buoyed crude oil prices and improved competitiveness of biofuels over fossil fuels, according to price reporting agency MySteel.Other positive market drivers include expectations that China would fulfil its pledge to purchase US soybeans, strong US export data, and forecasts of hot and dry weather in parts of US Midwest, according to price reporting agency MySteel.The market is optimistic about Chinese buying despite ample supplies of soybean oil in the country."...imported soybean arrivals (in China) remain elevated, crusher operating rates stay high, and soybean oil inventories are in a replenishment cycle, while terminal demand remains tepid," MySteel said.Despite today's price moderation, Chicago soybeans may reach $13 per bushel on supportive factors, after reaching the $12.50 mark last week, AgWeb reported, citing Brian Grete of Commstock Investments.In Asia, Malaysian palm oil futures retreated on Monday as traders took profits and as crude oil and soybean oil prices slipped.After prices reached their highest level since early April in the previous session, the Bursa Malaysia Derivatives' August crude palm oil contract fell 0.87% to 4,551 Malaysian ringgit ($1,113.94) per metric ton. The September contract dropped 1.00% to 4,630 ringgit/mt.Interband Group of Co. senior palm oil trader Jim Teh told Bernama that palm oil is expected to trade between 4,400 ringgit/mt and 4,500 ringgit/mt this week, as traders lock in gains following a recent rise in prices.High inventories in Malaysia and Indonesia will also reportedly pressure prices, despite presence of demand from importing regions, including India, China, Pakistan, the Middle East, the EU and the US.Purchases from top importer India are expected to rebound from July through October ahead of Diwali.Edible oil prices in the country are rising due to prospects of lower supplies from Indonesia following its expanded biofuel policy, Deccan Chronicle reported, citing the Reserve Bank of India.In China, several cargoes were recently booked as import margins remained positive despite elevated domestic inventories, MySteel said.During the July 1-25 period, cargo surveyor Intertek Testing Services, as cited by Trading Economics, reportedly estimated Malaysian shipments to have risen 15.9% from a month earlier.However, a strengthening local currency could dampen export competitiveness as it makes cargoes more expensive. The Malaysian ringgit firmed against the US dollar by 0.16% on Monday, extending last week's 0.08% rise.Going forward, RHB Investment Bank, as cited by Business Today, projects prices to hit another technical resistance point at 4,900 ringgit/mt after a recent improvement in supply and demand fundamentals resulted in a technical breakout at 4,700 ringgit/mt last week.Meanwhile, August ethanol prices on the NYMEX rose by a further 0.52% to about $1.95 per gallon on Friday.