Nov 14, 2022

Biodiesel Blend in Brazil to Increase in Early 2023

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

Brazil appears to be poised to return to their original schedule for a slow and steady increase in the amount of vegetable oil used to produce biodiesel. The current blend percentage is 10% vegetable oil (B10) with soybean oil accounting for approximately 70% of the feedstock.

In the original schedule established by the National Energy Policy Council (CNPE) in 2018, the blend was supposed to be increased to B14 in January of 2023 and then B15 in March of 2023. From that point forward, it was scheduled to increase 1% per year up to B20.

The incoming administration of Luiz Inacio Lula da Silva (Lula) has indicated that they are receptive to reverting to the original schedule. Even the outgoing administration of Jair Bolsonaro had indicated that was the outgoing government's intension. Lula will assume power on January 1, 2023.

The soybean crushers in Brazil had increased their crush capacity in recent years in anticipation of the increase, but they were very disappointed when President Bolsonaro reduced the blend to B10 and declared that the blend would stay at level for all of 2022. The reason stated for the reduction was to hold down the price of diesel fuel during the pandemic.

Getting to a B14 blend in January of 2023 may be a challenge because the industry needs to adjust to the increased domestic demand for soybean oil. Export demand for whole soybeans is very strong, but most industry participants feel it would not be much of a problem getting to a B15 blend by March or April of 2023 especially if Brazil produces a record 2022/23 soybean crop.

The industry already has an installed crush capacity for a B20 blend, but crushers want clarity on the blend percentage as quickly as possible so they can gear up their processing.

Conab forecasts 2.5 million tons of soybean oil will be exported in 2022 and that will be reduced to 1.8 million tons in 2023. Conab is estimating that soybean crushing will reach 48.9 million tons in 2022 and 51.4 million tons in 2023. Conab is also forecasting a record large 2022/23 soybean production of 153.5 million tons.