Dec 01, 2016

Brazil to Expand Biodiesel Production over Next Few Years

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazil is already a world leader in the use of renewable fuels in the transportation sector and the country is now set to greatly expand the use of vegetable oils in the production of biodiesel.

Currently the diesel fuel in Brazil is a mixture of 7% vegetable oil with petroleum diesel or B7 as it is known. The mixture will increase to a B8 blend in March of 2017. In 2018, it will increase to B9 and then B10 in 2010. In the next few years, it could reach B15 and by the year 2030, it could be as high as a B20 blend.

The vegetable oils used in the production of biodiesel are generally soybean oil, cotton seed oil, palm oil, as well as beef tallow and used cooking oils. The proposed increased production of biodiesel has long been promoted by the Brazilian Vegetable Oil Industry Association (Abiove) who contend that their biodiesel production capacity is being underutilized.

In addition to the crushing industry benefiting from the increased use of biodiesel, grain producing states in Brazil will also benefit from the increased blend because they produce the raw materials and the crushing facilities are generally located in the states where the oil is produced.

In the state of Mato Grosso for example, there are currently 15 industries associated with biodiesel production and the Biodiesel Industrial Syndicate of Mato Grosso (SindBio-MT) is expecting a 50% increase in biodiesl production in the state within the next three years.

Not only will grain producers benefit, the original legislation which passed the Brazilian Congress in 2004, stipulated that no more than 80% of the vegetable oil used to make biodiesel may be soybean oil with the remaining 20% being other oils that are sourced from local small family farmers. The program is known as the Social Combustion Seal or the "Seal of Approval" so to speak for the facilities that promote small family farmers participation in the program.

In order to obtain the Seal of Approval, the facility must source 20% of its vegetable oil from small family farmers in the local area. It is estimated that the program has helped 70,000 small family farmers to supply raw material for the program. Facilities that have the Seal of Approval are given preference in supplying biodiesel to the National Petroleum Agency (ANP).

The Brazilian Minister of Mines and Energy expects the biodiesel industry to invest R$ 22 billion by the year 2030 in the construction of new crushing facilities and the expansion of existing facilities in order to meet the new demand. The expansion of the crushing industry is expected to also increase the production of soybean meal for example, which would benefit the local livestock industry. The increased use of vegetable oils would also add value to the soybeans and increase jobs in the local economy instead of just shipping raw soybeans to distant ports for export.

The federal government also feels the increased use of a clean and renewable fuels such as biodiesel will help Brazil meet its commitments to reduce greenhouse gas emissions.