Brazil could raise mandatory biodiesel blend rate by January

MEDELLIN, Colombia (ICIS)–Brazil may raise the biodiesel blend required in diesel fuel as early as January as producers contend with a soybean bumper crop expected for the 2013-2014 season, players in the sector said on Tuesday.

Last week, Energy Minister Edison Lobao said the government was evaluating a blend increase, although he did not give any details.

Market participants in the region are discussing a blend rate increase from the current 5% to 7% by January 2014.

The government crop monitoring agency Conab has forecast a 2013-2014 soybean crop that would surpass last season’s record by as much as 10% and make Brazil the world’s top producer.

To meet the 7% blend rate, an additional 8m and 9m tonnes of soybeans would be needed, a producer in the region said.

Brazil produced 2.7bn liters (713m gallons) of biodiesel in 2012, fuel regulator ANP said.

Additionally, raising the blend rate would relieve pressure on state-run oil company Petrobras, which has been forced to import diesel fuel to make up for a domestic refining shortfall and sell it at a loss domestically.

The blend rate could expand again to 10% in 2020, biodiesel sellers said.

Brazil started requiring distributors to blend 2% biodiesel with diesel in 2008, and initially planned to increase that to 5% in 2013, the Ministry of Mines and Energy said.

The 5% blend was pushed forward to 2010 after companies brought sufficient capacity online to meet demand.

Soybean oil makes up about 85% of the feedstock for biodiesel production in Brazil.

ANP reports that as of May 2012, Brazil had 64 plants authorised to produce biodiesel, 10 projects with authorisation to build plants and six new projects in the process of receiving authorisation from the national agency.

Biodiesel is an alternative fuel produced from renewable resources. The most commonly used feedstocks are rapeseed, soy and palm oil.