Biodiesel Expansion In Brazil

Seeking to increase domestic crush of soybeans, Brazil announced it is boosting its biodiesel blend levels to 11% and, eventually, up to 15% nationally.

The change goes into effect after March 2019, when Brazilian truck drivers will start to fill their tanks with 11% diesel blends (B11) at fuel stations throughout the country. This is thanks to a new mandatory policy to increase domestic biodiesel blending in the country.

“Brazil will start a new mandatory biodiesel blending policy to increase biodiesel blending each year by 1% until we reach B15. That means 15% of biodiesel blending at the pump,” says Andre Nassar, chief executive of the Brazilian Association of Vegetable Oils Industries (ABIOVE). “This new policy will bring a demand of 600,000 metric tons (188 million gallons) more biodiesel production next year.”

ABIOVE represents the vegetable oil industries working with the Brazilian government on policies related to this sector, as well as promoting those Brazilian products.

DEMAND PROJECTION

The country produces 4 million metric tons (mmt) of biodiesel (1.5 billion gallons) a year, with around 40 biodiesel processors. The addition of 600,000 tons of soybean oil demand will need 3.3 mmt (121 million bushels) of soybean crushing. When B15 becomes mandatory before 2023, there will be increased demand of more than 17 mmt of soybean (625 million bushels) for biodiesel production.

“Besides the mandatory biodiesel blending, the country also approved a voluntary program for B100 for special fleets, such as buses in the city,” Nassar says. “This pure biodiesel will be delivered to the users directly, not sold through gas stations, but will need to be reported to Brazil Oil and Petrol National Agency for regulation.”

The country is doing testing of both the quality of B100 and special engines that can use pure biodiesel, he adds.

GROWING CAPACITY

Brazil’s crushing industry still has room to expand crushing volume, according to ABIOVE. Brazil has a soybean-crushing capacity of 55 mmt (around 2 billion bushels), but the industry only crushed 39 mmt last year (1.4 billion bushels) and will crush 45 mmt (1.65 billion bushels) this year as the market demand increased after Argentina’s crop failure.

According to USDA’s latest World Agricultural Supply and Demand Estimates, Brazil is projected to produce 120.5 mmt (4.43 billion bushels) of soybeans. If crush capacity reaches 45 mmt, that would put domestic crush at about 37% of production. USDA currently pegs Brazil’s projected domestic crush at closer to 42.7 mmt.

The increase in biodiesel demand will use more of the soybean oil supply in Brazil, causing potentially lower exports if no new crushing plants are built. However, more soybean oil demand is expected to stimulate the crushing industry and also bring more soybean meal to the market, which will compete with U.S. and Argentinian soy meal in Europe and other markets. Nassar believes, however, the internal market will also consume more soy meal in the coming years.

“Livestock companies were not doing good in the past year, but with the economic recovery, as well as new development in the industry, we’ll need more soybean meal in the domestic market. This change will help the industry to keep a healthy condition,” Nassar says.

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