Brazil's new government plans biodiesel mandate increase: sources

Representatives of Brazil’s new government have signalled that it plans to return to the original planned schedule and ramp up the country’s biodiesel mandate in a move that will likely lead to the adoption of higher blend requirements in 2023, sources familiar with the matter have told Agricensus.

The biodiesel mandate defines the share of biodiesel that must go into the diesel mixture in the country and is a major outlet for soybean oil that accounts for about 70% of the feedstock used to produce biodiesel in Brazil.

According to sources in contact with members of the new government’s transition team, the goal is to increase the mandate to 14% (B14) from January to March, and to 15% (B15) from March onwards.

This timetable is in accordance with the original schedule set out in 2018 by the National Energy Policy Council (CNPE) and would reverse a decision made by outgoing president, Jair Bolsonaro.

Brazil’s biodiesel blend mandate was reduced from 13% to 10% in May 2021 and remained at that level throughout 2022.

The move reinforces suggestions last week, from ministers of Bolsonaro’s outgoing government, that the country would return to the original planned programme in the new year.

The president of the FPBio, the biodiesel parliament caucus, Pedro Lupion, said last week that Bolsonaro’s Minister of Mines and Energy, Adolfo Sachsida, had also indicated that this was the outgoing government’s intention.

“The consensus is that the schedule should be adhered to,” Lupion said.

Now that the government transition has officially started, ahead of the arrival of new president Luiz Inacio Lula da Silva, it looks as though the new administration also intends to ramp up mandates in line with the original timetable.

That said, while rumours about the restoration of B14 and B15 mandates in 2023 have been circulating for several weeks, there are market concerns as to whether ramping up the mandates to B14 in January - effectively in six weeks’ time - will even be feasible.

“I believe [B15 from March onwards] can be enforced without major issues, especially if we have a good 2022/23 soybean crop,” Daniele Siqueira, senior market analyst for Brazil-based consultancy Agrural told Agricensus.

“The big question is for January and February: Will it be B10 as it is now, B14 or B12, which would be a middle ground?” Siqueira asked.


Part of the concerns regarding a potential mandate increase for the first months of 2023 has to do with the time industries need to adjust for an improved demand outlook.

“An immediate definition would be interesting so that the industry can organise itself for the first couple of months of 2023,” Siqueira said.

In this regard, the vice president of the Brazilian Union of Biodiesel, Ubrabio, and president of the Oleoplan group, Irineu Boff, told Agricensus that the sector expects a final decision soon.

“We have to know as soon as possible so that the industry can organise itself to supply the required volumes. To be able to meet the new mixture in January we need to know what it will be today,” Boff said. 

He pointed out that the industry has enough installed capacity to meet demand from a B20 mandate but that it is currently working with a higher-than-usual spare capacity considering the current B10 and poor margins over the past few months.

However, following the original timetable for the mandate increases may be difficult even if a decision is announced in the coming days.

“Getting to B14 [in the beginning of 2023] may prove really challenging considering the good pace of exports in the end of 2022 and harvest delays that can never be ruled out,” Siqueira said.

In 2022, Brazil is forecast to export a record volume of soyoil and soymeal, taking advantage of a combination of reduced domestic demand for biodiesel and a favourable outlook for exports.

Brazil's national food agency Conab forecasts 2.5 million mt of soyoil will be exported in 2022, a figure that will be reduced to 1.8 million mt in 2023, according to its latest report released Wednesday.

"Talking to the industries I think the consensus is that the mandate will be extended to B14 in April, and we could start with B12 in February, since there won't be enough soy in January to increase the blend," Eduardo Vanin of Brazil's Agrinvest Commodities told Agricensus.

While some analysts take a more cautious look at the potential pace of mandate increases through the coming months, other market participants remain optimistic about the possibility to meet a higher demand from the domestic industry without losing much export market share.

"If B14 becomes a reality, these extra volumes shipped in 2022 will be used for biodiesel production, but we also believe that crushing will increase allowing more exports," projects Boff.

Conab estimates that soybean crushing will reach 48.9 million mt in 2022 and increase to 51.4 million mt in 2023 considering an all-time high soybean output projected at 153.5 million mt for 2022/23. 

“I believe that we can maintain soyoil exports at this level, even if we have to meet B15, since the new soybean crop should be abundant,” Ubrabio's managing director Donizete Tokarsk said.