Brazil jockeys for biodiesel market share

04 January 2008 00:02  [Source: ICIS news]

HOUSTON (ICIS news)--Brazil could become the world’s second largest biodiesel producer, with annual production expected to skyrocket nearly 89% to 850m litres (225m gal) in 2008, a government official said on Thursday.

The country produced some 450m litres in 2007, but demand is growing due to the implementation of mandatory blending requirements.

Market sources have told ICIS news that feedstock costs have risen so much in response to demand from biodiesel production that there are doubts about the ability of the programme to generate desired results.

The chief problem is reliance on soy.

Citing global demand and Brazil’s alternatives to soy as feedstock, Energy Ministry Director of Renewable Fuels Ricardo Dornelles said the government in the year ahead would seek to spur cultivation of oilseed crops with higher oil yields.

“The markets are opening, and Brazil will become a great exporter,” Dornelles said in Portuguese, according to a state-media report from Agencia Brasil.

While an estimated 60-70% of Brazilian biodiesel comes from soy oil, Dornelles said other crops suitable to the local climate, such as castor and sunflowers, were more viable options, since they can produce more oil per area planted.

“There is concern in the government for strengthening other crops,” he said.

Brazil this week implemented mandatory “B2” blending of 2% biodiesel into conventional diesel around the country.

The blending requirement should firm up domestic demand and provide an impetus for expansion. However, export demand still depends on reduction of trade barriers and adoption of regulatory standards, Dornelles said.

Brazil has emerged as a world leader in renewable fuels development with a comprehensive programme to take advantage of ample land resources and comparatively low labour costs vis-a-vis European producers.

The country is already the world’s largest exporter of ethanol and it is second largest producer after the US. However, biodiesel has yet to take off on the same scale.

Biofuels development, including Brazil’s programme, is controversial since food costs - especially soy and soy oil in the case of Brazil’s biodiesel subsidies - have shot up in response to the demand by refiners for these goods.

Brazil is one of the world’s top livestock producers and has developed commercial feedstock from one byproduct of that industry - animal fat - currently estimated at about 10% of the feedstock mix.

Much of the country’s under-utilised cropland includes arid tropical regions that can support commercial oilseed production from castor. Currently castor accounts for roughly 10% of the country’s biodiesel feedstock.

By: John Waggoner
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