Dec 02, 2021
Brazil to Keep B10 Biodiesel Blend for 2022, Producers are Upset
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian government announced last Monday that they will maintain a B10 biodiesel blend for all of 2022 (10% vegetable oil blended into petroleum diesel). The biodiesel producers complained bitterly that this is contrary to what they were promised by law and it would cause severe hardships for the industry. The biodiesel producers also indicated that this decision is contrary to what Brazil promised in the recent COP26 climate meeting.
A note from the Ministry of Mines and Energy indicated that they were taking this action to protect the interest of the consumer concerning prices and the quality of the biodiesel. Petroleum producers and distributors have been against the increased blend percentage because they contend that it is harder to maintain the quality of the fuel and it reduces their market share.
Biodiesel was mandated in Brazil starting in 2008. The blend started as B2 and since then the mixture has increased gradually to B13 earlier this year.
During 2021, the government gradually reduced the blend to B10 in an effort to hold down diesel prices. Soybean oil makes up 70% of the vegetable oil used in biodiesel and the government contended that the rising price of soybean oil was driving up the price of diesel fuel. But even with the reduced blend, the price of diesel fuel continued to increase indicating that petroleum prices were the main driving force behind the price increase and not soybean oil.
Biodiesel producers invested heavily to increase their production capacity because the blend was scheduled to increase to B15 in 2023. They now contend that this decision will have devastating consequences for their industry.
In a joint statement from the Brazilian Association of Vegetable Oil Industries (Abiove), the Brazilian Biofuels Producers Association (Aprobio), and the Brazilian Union of Biodiesel and Biokerosene (Ubrabio), they contend that this decision was contrary to the government's commitment to greener energy and renewable fuels (RenovaBio).
The Soybean Producers Association of Brazil (Aprosoja) stated that there was no justification for keeping the blend at B10 for all of 2022 because Brazil is expected to produce a record soybean crop in 2021/22 resulting in an ample supply of soybeans and soybean oil.
This decision will have a direct impact on Brazil's soybean exports. With the reduced demand for soybean oil, processors will send more of their soybeans to the export market instead of processing the soybeans into value added products such as soybean oil and soybean meal.