Nov 30, 2022

Increased Blend in Brazilian Biodiesel Temporarily on Hold

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

The recent decision by CNPE (National Energy Policy Council) to leave the blend percentage in Brazilian biodiesel at 10% vegetable oil (B10) to start 2023 and then to increase it to B15 in March has left many people questioning their decision. A prior decision by CNPE was to increase the blend to B14 in January of 2023 and then B15 in March 2023. Both the current Bolsonaro administration and the future administration of Lula had indicated that they agreed with CNPE's prior decision.

The decision was taken in an extraordinary meeting and it is unclear why CNPE reversed their prior decision. Defenders of the biodiesel sector have vowed to go the Brazilian Congress in an effort to reverse the decision. They also contend that the outgoing administration had no right to dictate a policy of the incoming administration.

In 2022, the blend percentage was lowered from B13 to B10 in response to a disappointing soybean crop and higher soybean oil prices. Soybean oil accounts for approximately 70% of the vegetable oil used in biodiesel.

The crushing industry expressed frustration with the decision because it is unclear the rational for the decision. The industry had geared up for the increase and there were no technical issues for delaying the increase. The Brazilian Association of Biodiesel Producers (Aprobio) estimates that there will be 600 million liters less of biodiesel produced during the first trimester of 2023 because of the decision.

The next regularly scheduled CNPE meeting is set for December 8 and the Lula administration is going to request that the decision be revisited. If no action is taken in the December meeting, the crushing industry is urging the Lula administration to reverse the decision as soon as they take power on January 1, 2023.