April 5, 2007

High soybean prices hold back Brazil's biodiesel growth

Brazilian biodiesel producers will fall far short of meeting an earlier government projection on the country's biodiesel output capacity because the rising price of a major feedstock, soyoil, has discouraged investors from building new plants, a government official said Monday.

Frederique Rosa e Abreu, coordinator of agro-energy for Brazil's Ministry of Agriculture, said that Brazil's biodiesel capacity will probably only rise to 1.5 billion liters/year by the end of 2007.

That is 46 percent below the 2.8 billion liters of biodiesel capacity that Brazil's government had expected producers to build by the end of this year, according to a government estimate from November.

The coordinator admitted that the earlier estimates had been off the mark.

A recent surge in soyoil prices to about $650/tonne has discouraged some investment in new biodiesel plants in Brazil. Soy is the major feedstock for Brazilian biodiesel production, although Brazil is experimenting with other oilseed crops, such as palm, castor and jatropha, to develop more biodiesel at a lower cost.

In particular, jatropha is emerging as the most promising of those crops with a high oil yield/acre. Recent prices are not making it profitable for biodiesel use, and farmers and traders can sell soyoil for other domestic or export for higher margins.

In November, the Brazilian government estimated that 34 new biodiesel plants would open in the country during 2007, helping Brazil to raise its biodiesel capacity by five-fold from last year. But high soyoil prices have led to the delay of some of those plants.