South America Calling
Alastair Stewart South America Correspondent

Monday 06/09/14

Brazil to Raise Biofuel Percentage in Diesel

Brazil has decided to raise the mandatory percentage of biofuel in diesel, impacting soy oil exports.

The mix of biodiesel will rise from 5% to 6% in July and 7% in November.

In Brazil, soy oil is the main source of biodiesel. As such, demand for soy oil will rise 300,000 metric tons to 6.1 million metric tons, according to Brazil's Vegetable Oil Industry Association (ABIOVE).

Half the fresh demand will be met with extra crushing and the other half will be diverted from exports. As a result, ABIOVE has reduced its soy oil export forecast from 1.3 million metric tons to 1.15 mmt.

While Brazilian soybean production has grown consistently over the last decade, crushing has not kept pace. Part of the problem is that it is more tax efficient to export soybeans than process them and accumulate tax credits on selling soy oil.

Nonetheless, the increase in the biodiesel mix will prompt a 600,000 mt increase in processing to 37.6 mmt in 2014, forecasts ABIOVE. And crushing will be even greater in 2015, when the biodiesel mix rises to 7%.

According to ABIOVE, some 40% of Brazil's crushing capacity was underutilized in 2013.

Brazil will reduce diesel imports by 317 million gallons a year on the move, the government estimates.


Posted at 2:21PM CDT 06/09/14
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