Brazil’s biofuel mandate to hike soyoil consumption to 5m mt, hit meal prices

7 Nov 2019 | Andy Allan

Brazil’s drive to decarbonise its liquid fuel carbon emissions will mean 5 million mt of soyoil will head to the sector next year, according to Brazil’s Association of Vegetable Oils (Abiove).

Last week, Brazil’s minister of mines and energy, Bento Albuquerque, approved the increase in the country’s biofuel mandate from 11% in all diesel sold currently to 12% starting in January 2020.

The overarching target is for a 15% blend by 2023. 

“Biodiesel production in the year is expected to reach 6.8 million cubic metres, an increase of about 20% over that produced in 2019, which should generate a financial turnover of BRL19 billion ($4.8 billion),” Abiove said in a release on Wednesday.

“Meeting that demand will require 5 million mt of soybean oil, raw material responsible for 75% of the total biodiesel produced and consumed in the country,” it said.

The total soyoil consumption figure is equivalent to just under two-thirds of current supply of 8 million mt.

After soyoil, beef fat and used cooking oil makes up the remainder of biodiesel feedstock.

Meanwhile, the rise in the mandate will prompt crush rates rise 4% next year to 44.1 million mt, according to Fabio Meneghin, a senior analyst with Brazil’s Agroconsult, which should see Brazilian soymeal prices fall.
“Soybean meal will be in surplus for the next few years, Brazil will need to find a solution for this mountain,” Meneghin told the Dalian Commodities Exchange conference in Guangzhou on Wednedsay.

Total soyoil production

Brazil's ministry of mines and energy expects diesel consumption to expand 2.7% per year, leading to total consumption of diesel and biodiesel to 73.9 billion litres and 11 billion litres, respectively by 2028.

Maintaining the 75% soyoil market share in the biodiesel pool, that would be enough to consume the total current production of the vegetable oil.

Brazil is the third-largest exporter of soyoil and any increase in demand will slowly erode its ability to export the 1.1-1.3 million mt that it is expected to sell on the international market over the next two years.

However, the nation’s long-standing plan to cut emissions of greenhouse gases 43% under 2005 levels by 2030 has suffered delays over technical problems, largely on the ability of the car fleet to run on higher levels of plant-based fuel.

The roll out to 11% this year was continuously beset by delays and only approved in August.

With the new biodiesel mandate, consultants Ubrabio expects a new wave of investment in the sector that could see another 12 plants come online with the capacity to produce another 2 billion litres per year.