FOCUS: Timid investment in Brazil’s biodiesel

02 May 2007 21:44  [Source: ICIS news]

SAO PAULO (ICIS news)--Brazilian investment in biodiesel may not keep pace with global demand over the next 3-5 years, said a biodiesel official on Wednesday.

 

“Nobody will invest in mills to produce castor oil and no one will ever invest a large sum of money aiming at tax exemptions,” said Nivaldo Trama, President of Biodiesel Industry Association (Abiodiesel). 

   

The government offers tax exemptions to those who buy castor and other grains for the production of biodiesel from small producers in northeast Brazil, for example, as reported by ICIS news.

 

According to Trama, the biodiesel government plan could be losing precious time with its family agriculture programme, while large-scale producers should be better supported to fulfil the growing global demand.

 

Brazilian farmers are looking at the biodiesel market and could save millions of reais (R) a year by producing biofuel for their own use, said farm owner from Tocantins state, in northeast Brazil, at the sidelines of a biodiesel event on Monday.

 

“We could save as much as R1m/year ($493,000) by producing biodiesel with oil of our grain production,” said farmer and architect Helio Sato in Portuguese at the sidelines of the Biodiesel Market Opportunities Conference.    

 

According to the Government’s Biodiesel Programme Coordinator Arnoldo Campos, however, large producers do not need any incentives. 

 

“The world has a frightening demand for biofuels estimated at some 41bn litres/year and that supply will never be obtained through small-scale family production,” said Trama.

 

Brazil’s current production capacity is at 700m litres/year, but production is expected to soar to 1.3bn litres/year in 2007, according to the Agrarian Development Ministry. However, the burst of new biodiesel production may have trouble playing out over the medium term, skeptics said.

 

Trama added that a few factors have also worried new investors such as the price of soy, which has already increased some 30% on greater demand for biodiesel and the fact that some food commodities have followed the trends of major market players.

 

There are other feedstock options, according to Consultant Cleber Garany, Director of Vigna Brasil. “Although most still need investments in research and market development,” added Garany.

 

Castor oil is not one of the best options, he said, its oil is hard to produce, ending up not being viable or profitable.

 

“Small-scale farmers have no idea what they are doing and need to follow a recipe with specific instructions,” said Trama.

 

Soy production, on the other hand, also seems to frighten new investors because it is in the hands of large companies and it covers over 90% of the market, said the president of Abiodiesel.

 

“The fact is that we can have capital input and technological means available but we do not have enough feedstock production…and there are no specific plans for that,” said Trama.

 

($1.00 = R2.03)

By: Hellen Berger
+1 713 525 2653

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