Brazil to Use More Soybeans for Biodiesel Production

Critics say palm oil is a better use for biofuels.

PORTO ALEGRE, Brazil -- The Brazilian government will increase the use of biodiesel into its fuel supply, using more of the country’s soybeans domestically.

Biodiesel use in the nations’s fuel output will increase 1% in 2020. With that increase, Brazil’s fuel will be made up of 12% biodiesel.

This amount will continue to increase to 15% until 2023.

The minister of mining and energy, Bento Albuquerque, made the announcement in Passo Fundo, Rio Grande do Sul, last Thursday, in BsBios, the first biodiesel mill in the South American country.

“The tests have proven safe to alter the mandatory mixture to 11%,” announced Albuquerque. “In the following year, we are going to 12%. Until 2023, the mixture will be 15%,” added the minister.

The announcement has generated different reactions – even within the farm community. The Brazilian Association of Soybean Growers praised the measure, while the Brazilian Association Corn Growers obviously preferred to have ethanol in the mixture.

In the opinion of Carlos Cogo, an experienced market analyst based in Porto Alegre, Rio Grande do Sul, the most efficient source for biofuels produced in Brazil is the palm oil – not soybeans. His forecast is that if the Brazilian economy grows at a faster pace than the current growth (0.5% projected for 2019) in the next four years, the biodiesel consumption can beat the estimate of 8 billion liters per year.

In 2018, 70% of the biodiesel produced in Brazil had soybean oil as its source. “While the estimate for crushing in 2019 is 19.6 million metric tons, the forecast for 2023 is that this number will jump to 30 million metric tons, being 23.7 million metric tons for soybean meal and 5.7 million metric tons for soybean oil,” analyzed Cogo.

According BS Bios estimates, there will be an addition demand for biodiesel in 700 million liters per year and an increase of processed soybeans of 3 million metric tons per year.

The analyst says that the measure only benefits the crushing industry because that “will pressure the domestic soybean meal price unpegging it from Chicago. Current meal exports have not grown.”

“The soybean oil will also increase the price of diesel. It is the least competitive source because it has only 19% of oil, against 44% that canola has. Palm oil is the best source,” he emphasized.

Luiz Pacheco, a consultant based in Curitiba, Parana, said that Brazil has sufficient land available to fulfill the new demand for biodiesel. “Brazil only uses 12% of its territory for agriculture. There is still plenty of space to plant without deforesting. But the government should set a good balance between exports and the domestic market,” opined Pacheco.

Paulo Bertolini, a farmer from Castro, Parana, and one of the members of the Brazilian Association of Corn Growers, is happy with more demand, but he prefers a different source. “It is good to see an increase in the use of biofuel, but the most environmentally friendly source is ethanol,” affirmed Bertolini.

“Anyway, the Brazilian corn market will transform in five years because of the use of flex mills (sugarcane and corn-based ethanol) in the state of Sao Paulo. And yet the good thing is that there is no government subsidy for that,” added the farmer.

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