May 30, 2014

Brazil Increases Biodiesel Blend to B7 Sites many Advantages

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

The Brazilian President Dilma Rousseff announced this week that biodiesel fuel sold in Brazil will go from its current mixture of 5% vegetable oil blended into petroleum diesel (B5) to a B6 mixture (six percent vegetable oil) in July and then a B7 mixture (seven percent vegetable oil) in November. This came as welcomed news for the biofuel industry and soybean producers who have long pushed for the increased use of vegetable oil in biodiesel production.

Everyone involved in the industry views this as a positive development and they feel there are many advantages to increasing the blend including: increase the demand for soybeans since soybean oil is the primary raw material used to produce biodiesel, it will increase domestic employment, it will increase the demand for a value added product such as soybean oil, small family farmers will benefit from increased demand for other vegetable oils, a higher blend will reduce pollution including levels of carbon dioxide, particulate matter, hydrocarbons and carbon monoxide, and Petrobras will be able to reduce their imports of petroleum diesel.

The Brazilian Association of Vegetable Oil Producers (Abiove) has indicated that they have idle capacity at their plants and that they could easily produce a B10 blend for the country (10% vegetable oil blended into petroleum diesel). In the past, Abiove has pushed for a B10 blend nationwide and a B20 blend for large urban areas.

The Ministry of Agriculture conducted a study titled Environmental Benefits from the Production and Use of Biodiesel which found that a B7 biodiesel blend would reduce CO2 emissions in Brazil by 7.3 million tons per year and a B10 blend would reduce emissions by 10.4 million tons per year. Each 1% increase in the vegetable oil blend would reduce carbon emissions by the equivalent of planting 7.2 million trees.

Increasing the mixture will also directly benefit small family farmers as well and not just commercial soybean producers. By law, soybean oil is only allowed to constitute a maximum of 80% of the vegetable oil used to make biodiesel. The remaining 20% must come from other sources of vegetable oil some of which are produced by small family farmers. The Agriculture Development Minister has indicated that 90,000 producers are involved in the National Program for the Production and Use of Biodiesel (PNPB), so an increase in the blend percentage should help many of those producers.

In Brazil approximately 70% of the vegetable oil used in biodiesel is soybean oil, 20% is beef tallow, 4% is cotton seed oil, and 6% is other vegetable oils. The government has set a limit of 80% soybean oil in order to stimulate the production of other types of vegetable oils.

The state of Mato Grosso is the largest soybean producing state in Brazil and this news is coming as producers are planning for their 2014/15 soybean crop. The Mato Grosso Institute of Agricultural Economics (Imea) has indicated that farmers in the state intend to increase their soybean acreage by approximately 100,000 hectares in 2014/15 to 8.67 million hectares which would be a new record for soybean acreage in the state.