Viewpoint: Brazil biodiesel input demand, risks to rise

: Agriculture, Biofuels, Oil products
24/01/02

Brazil's decision to accelerate the national biodiesel blending mandate will contribute to higher feedstock costs, as unfavorable weather threatens a slump in the soybean crop and as exports of beef tallow surge.

In mid-December, the national energy policy council CNPE increased the biodiesel mandate to 14pc starting in March, up from the current 12pc. According to the previous government schedule defined in March 2023, the blend was to increase to 13pc in 2024, adding to fuel costs but reducing emissions.

Neighboring Argentina is poised to recover its former share of the global soy export market after a period of drought. For 2023-24, 48mn metric tonnes (t) of soybeans are forecast to be harvested in Argentina, rebounding from 21.1mn t in the prior crop, according to the US Department of Agriculture (USDA).

Brazil's soybean oil prices fell in 2023, influenced by five series of Argentina's "soybean dollar" scheme, involving favorable exchange rates for soy exports in Argentina to boost currency reserves there. At the Brazilian port of Paranagua, prices of soyoil exports dropped by 31pc to $876/t fob in 2023,according to Argus data. Product delivered in Sao Paulo dropped by 22.5pc to R5,350/t ($1,091/t) cif. Those impacts may unwind as the new Argentinian president has moved quickly to stabilize the currency.

The Argus beef tallowassessment, which tracks the price of the second most used feedstock in the country, dipped last year by 13pc to R4,950/t on a cif Sao Paulo basis . Rising shipments to the US Gulf coast led to the product being traded at a premium to soyoil between March and May and in October.

Participants do not yet expecta shortage of biodiesel inputs. But investors are closely watching forecasts for dry weather in the country's largest oilseed producing regions and for any cuts in harvest yield estimates.

In early December, national supply company Conab reduced its estimate for soybean production by 2.2mn metric tonnes to 162.2mn t for the 2023-24 period.

Even with the crop reduction, Conab expects the soybean harvest to be 3.6pc above the record 154.6mn t recorded in the prior cycle. But Brazilian investment bank Itau BBA expects the harvest will just 153mn t, or 7.2mn t below Conab's predicton, with crop failure in west central Mato Grosso state possibly reaching 20pc and production below 40mn t.

One trading analyst estimates that the biodiesel mandate at 14pc will increase demand for soybean oil by 300,000t in 2024. The commodity differential at Paranagua compared to the Chicago Board of Trade (CBOT) strengthened in relation to the basis in Argentina's Rosario region because of Brazil's weather risk that may affect the soybean harvest in the world's biggest producer. Participants are carefully monitoring the rainfall pattern in the center-west, the main soybean producing region in the country. Drought in Mato Grosso and Goias states delayed the planting of the oilseed and could harm productivity in the region.

Soybean crop planting in Brazil is 2.1 percentage points below last season at 94.6pc, according to Conab data. Weather conditions at the beginning of the year will be essential for crop growth and reduced rainfall may push up the price of vegetable oil in Chicago.

On the beef tallow side, the meatpacking and animal rendering sector have maintained estimates for stable 2024 production of 1.1mn-1.3mn t. Of this total, 35pc is usually directed to biodiesel, with the remainder divided between the hygiene, animal feed, and pet food sectors.

Brazil exported 198,340t of beef tallow in January-November 2023, up from 81,348t a year earlier, according to Brazil's trade ministry data.

Limited heated tankingcapacity in ports prevents faster shipments, but scheduled investments in the ports of Porto Alegre in Rio Grande do Sul state, Paranagua in Parana, and Itaqui in Maranhao are expected to support exports in 2024.

Biodiesel producers in Brazil are starting to look at alternatives to eventually replace tallow with other inputs in periods when the product is at a premium to vegetable oils. Some options are cotton oil, used cooking oil (UCO), and mixes of other animal fats.

Biodiesel imports

Biodiesel imports remain on the industry's radar screen, despite the 19 December decision of Brazil's energy council CNPE to suspend biodiesel imports previously authorized by oil regulator ANP.

Brazil's biodiesel congressional caucus FPBio is working to halt biodiesel imports, arguing that they have the potential to halt industry investments.

On 26 December, the ministry of mines and energy published anotice in Brazil's official gazette that a working group with nine members will evaluate the impacts of potential imports and the new direct sales model launched in 2022. The objective is to defend domestic biodiesel production.

The working group to be established will have 180 days to submit to the CNPE a report on the effects of imports. This group must be formed within 30 days.

By Alexandre Melo

Brazil's biodiesel production	bn l
Year

2012	2.7
2013	2.9
2014	3.4
2015	3.9
2016	3.8
2017	4.1
2018	5.3
2019	5.9
2020	6.4
2021	6.8
2022	6.3
2023*	7.3
2024*	8.9
2025*	10.1
— ANP, Abiove
*Expected production

Biodiesel feedstocks in 2023 bn l

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/12/20

Shell and Prax call off deal on German refinery stake

Hamburg, 20 December (Argus) — Shell's planned sale of its 37.5pc stake in Germany's 226,000 b/d Schwedt refinery to UK energy firm Prax has fallen through. "Both parties have taken the decision not to proceed with the transaction," Prax said, without elaborating. The refinery will continue to operate as normal, it said. Shell said the companies had reached the end of an agreed timeframe for closing the deal. It said it is still looking to sell the stake. The deal with Prax, which was announced a year ago , was initially due to be completed in the first half of 2024. Shell owns its stake in Schwedt through the PCK joint venture, which also includes Italy's Eni and Rosneft Deutschland, one of the Russian firm's two German subsidiaries. Shell previously attempted to sell its PCK share to Austria-based Alcmene in 2021 but that deal failed to complete after Rosneft Deutschland exercised its pre-emption rights later that year. Rosneft was unable to buy the stake after the German government placed its two German subsidiaries under trust administration in 2022 in the wake of Moscow's invasion of Ukraine, forcing Shell to seek an alternative buyer. In October, a court in Germany rejected a complaint by Rosneft Deutschland against Shell's plan to sell its PCK stake to Prax. By Svea Winter Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: EU, UK mandates will drive global SAF demand

24/12/20

Viewpoint: EU, UK mandates will drive global SAF demand

London, 20 December (Argus) — Europe will be a primary consumption hub for sustainable aviation fuel (SAF) in 2025, driven by EU and UK mandates that come into effect in January. The mandates could push European SAF demand above 1.5mn t next year, according to Argus Consulting estimates. There should be more than enough global SAF supply to meet mandated demand in Europe in the early stages of obligations. If all announced projects are completed on time, global capacity could surpass 10mn t/yr in 2025, according to Argus Consulting, with hydrotreated esters and fatty acids synthetic paraffinic kerosene (HEFA-SPK) still the dominant SAF production pathway. But several projects have been hit with delays in the past, and some European majors have scaled back or paused their capacity plans. Actual production is likely to be far lower than nameplate capacity, with the International Air Transport Association (Iata) forecasting global output of 2.1mn t next year . European suppliers may also opt to maximise hydrotreated vegetable oil (HVO) production over HEFA-SPK. In most HEFA-SPK plants, the production process relies on first hydrotreating vegetable oils and fats, a process aligned with standard HVO production. Renewable diesel demand should increase with higher mandates for renewables in road transport and changes to German and Dutch carryover rules on renewable fuel tickets next year. At the same time, European HVO imports face barriers. Definitive EU anti-dumping duties (ADDs) on Chinese biodiesel and HVO are expected to be imposed by February . And anti-dumping and anti-subsidy duties are in place on HVO and biodiesel of US and Canadian origin . SAF is excluded from ADDs on Chinese biofuels. SAF supply has grown at a faster pace than demand this year, pushing the northwest European HEFA-SPK premium to jet fuel to record lows . The European benchmark HEFA-SPK fob ARA range assessment averaged around $2,203/t over 1 January-12 December, down from around $3,016/t in the same period last year. Ready, set, mandate Fuel suppliers will need to incorporate a 2pc share of SAF in their annual EU jet fuel deliveries from next year, with the share rising to 70pc by 2050. Synthetic aviation fuels, such as e-kerosine and hydrogen, must reach a total share of 1.2pc from 2030, rising to 35pc in 2050. The UK's mandate also requires aviation fuel suppliers to hit a 2pc SAF share in 2025, increasing linearly to reach 22pc in 2040. A UK obligation for power-to-liquid SAF will be introduced from 2028 at 0.2pc of total jet fuel demand, rising to 3.5pc in 2040. Separately, London's Heathrow airport aims to increase the share of SAF used to 3pc in 2025 as part of an incentive scheme that helps airlines cover extra costs. Beyond Europe Progress to introduce SAF blending obligations or legislate consumption targets is slower outside of Europe. In China, a pilot programme was launched earlier this year to support domestic SAF uptake. A consumption target of 50,000t was set in the country's five-year plan for 2021-25. Other initiatives in the Asia-Pacific region include South Korea's plan to require all international flights departing from its airports to use a mix of 1pc SAF from 2027 and Singapore's 1pc SAF target by 2026 for flights departing the country. Indonesia plans to require 1pc SAF from 2027, while Malaysia and Hong Kong are also expected to set targets. In the US, the level of priority to be given to renewable aviation fuels is less clear following Donald Trump's election victory. Guidance around a new producers' tax credit, set to come into effect next year, is still pending . The growth of the US SAF market has so far been driven mainly by federal and state financial incentives. By Giulia Squadrin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump backs new deal to avoid shutdown: Update

24/12/19

Trump backs new deal to avoid shutdown: Update

Adds updates throughout Washington, 19 December (Argus) — US president-elect Donald Trump is offering his support for a rewritten spending bill that would avoid a government shutdown but leave out a provision authorizing year-round 15pc ethanol gasoline (E15) sales. The bill — which Republicans rewrote today after Trump attacked an earlier bipartisan agreement — would avoid a government shutdown starting Saturday, deliver agricultural aid and provide disaster relief. Trump said the bill was a "very good deal" that would also include a two-year suspension of the "very unnecessary" ceiling on federal debt, until 30 January 2027. "All Republicans, and even the Democrats, should do what is best for our Country, and vote 'YES' for this Bill, TONIGHT!" Trump wrote in a social media post. Passing the bill would require support from Democrats, who are still reeling after Trump and his allies — including Tesla chief executive Elon Musk — upended a spending deal they had spent weeks negotiating with US House speaker Mike Johnson (R-Louisiana). Democrats have not yet said if they would vote against the new agreement. "We are prepared to move forward with the bipartisan agreement that we thought was negotiated in good faith with House Republicans," House minority leader Hakeem Jeffries (D-New York) said earlier today. That earlier deal would have kept the government funded through 14 March, in addition to providing a one-year extension to the farm bill, $100bn in disaster relief and $10bn in aid for farmers. The bill would also provide a waiver that would avoid a looming ban on summertime sales of E15 across much of the US. Ethanol industry officials said they would urge lawmakers to vote against any package without the E15 provision. "Pulling E15 out of the bill makes absolutely no sense and is an insult to America's farmers and renewable fuel producers," Renewable Fuels Association chief executive Geoff Cooper said. If no agreement is reached by Friday at 11:59pm ET, federal agencies would have to furlough millions of workers and curtail services, although some agencies are able to continue operations in the event of a short-term funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US Congress passes waterways bill

24/12/19

US Congress passes waterways bill

Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

USDA awards more funding to increase fertilizer output

24/12/19

USDA awards more funding to increase fertilizer output

Houston, 19 December (Argus) — The US Department of Agriculture (USDA) awarded over $100mn this week across nine states to increase domestic fertilizer production as the effort to make farmer affordability more favorable continues. About $116mn will be invested through the USDA's Fertilizer Production Expansion Program (FPEP) to help eight facilities expand output in California, Colorado, Georgia, Indiana, Iowa, Kansas, Michigan, Oklahoma and Wisconsin. Recipients include the Michigan Potash Company, where the construction of a new facility should yield 400,000 metric tonnes (t) annually of high-grade potash, and Farmers Cooperative Association, where funding will expand its existing dry fertilizer facility with additional storage and processing capacity. "When we invest in domestic supply chains, we drive down input costs and increase options for farmers," USDA secretary Tom Vilsack said. Through the FPEP, the USDA has invested $517mn in 76 fertilizer production facilities across 34 states and Puerto Rico. President Joe Biden's administration committed up to $900mn in the program through the Commodity Credit Corporation, which is expected to support long-term investments by strengthening supply chains. Higher US fertilizer prices throughout this year deterred fall demand as lower crop prices forced farmers to sell more of a crop to afford nutrients. The last USDA FPEP funding announcement was in August , when $35mn was granted to boost seven domestic production projects. By Taylor Zavala Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more