November 7, 2013


Brazil may increase biodiesel blend by 7%


As early as January, Brazil may raise the biodiesel blend required in diesel fuel, a change that could result in up to 10% more of an expected record soy crop getting crushed into meal and oil.


Raising the blend from the current 5% to 7%, a move long advocated by soy crushers, would relieve pressure on state-run oil company Petróleo Brasileiro SA, which has been forced to import diesel fuel to make up for a domestic refining shortfall and sell it at a loss on the local market.


Last week, Energy Minister Edison Lobão said the government was evaluating a blend increase, without giving details.


In order to meet the two percentage-point-higher demand, between eight million and nine million tonnes of soy would be needed. In crushing, soy yields 80% meal, 18% oil and 2% waste.


Brazil's government crop supply agency Conab is forecasting soy output in the current 2013-14 crop of between 87.6 million and 89.7 million tonnes, which would provide most of the extra supply needed if the crop is confirmed. Brazil harvested 81.5 million tonnes in the previous season.


Brazil's demand for biodiesel in 2013 will likely be around three billion litres, but with a 7% blend requirement it could reach 4.2 billion litres in 2014. The agricultural powerhouse has capacity to produce seven billion litres, according to the Brazilian biodiesel union (Ubrabio).


Some 75 % of the country's biodiesel is produced from soy, though some is made with materials like palm oil and cotton seed.


Betting on higher domestic demand for the fuel, big multinational crushers like Bunge Ltd and Cargill have built biodiesel plants in recent years.


Brazil, which uses more diesel fuel than regular gasoline, consumed 38.4 billion litres of diesel between January and August, 7.2 billion of which were imported. Diesel imports are expected to fall in tandem with an increase in biodiesel production, and a 7% blend requirement could save Petrobras BRL2 billion (US$877 million) per year by lowering fuel imports, according to Abiove.

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