Viewpoint: Brazil biodiesel input demand, risks to rise
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.
| 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 | |
Related news posts
Brazil's Rio Grande do Sul reallocates gas supply
Brazil's Rio Grande do Sul reallocates gas supply
Sao Paulo, 17 May (Argus) — Natural gas supply in Brazil's Rio Grande do Sul had to be redistributed because of the historic floods in the state, with diesel potentially making its way back as an power plant fuel to leave more gas available for LPG production. Gasbol, the natural gas transportation pipeline that supplies Brazil's south, does not have capacity to meet demand from the 201,000 b/d Alberto Pasqualini refinery (Refap), state-controlled Petrobras' Canoas thermal power plant and natural gas distributors in the region, according to Petrobras' then-chief executive Jean Paul Prates said earlier this week. The Santa Catarina state gas distributor has adjusted its own local network to meet peak demand in neighboring Rio Grande do Sul via the pipeline transportation network. The Canoas thermal plant is running at its minimum generation at 150GW, with 61pc coming from its gas turbine. The plant was brought on line to reinstate proper power supply after transmission lines in the south were affected by the floods. Petrobras plans to use a diesel engine to increase power generation. The current approved fuel cost (CVU) for diesel in the Canoas plant is of R1,115.29/MWh. Petrobras is also operating Refap at 59pc of its maximum installed capacity, at 119,506 b/d. Heavy showers in Rio Grande do Sul since 29 April brought unprecedented flooding to the state, causing a humanitarian crisis and infrastructure damage. The extreme weather has left 154 people dead, 98 missing and over 540,000 people displaced, according to the state's civil defense. By Rebecca Gompertz Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Houston area refiners weather hurricane-force winds
Houston area refiners weather hurricane-force winds
Houston, 17 May (Argus) — Over 2mn b/d of US refining capacity faced destructive winds Thursday evening as a major storm blew through Houston, Texas, but the damage reported so far has been minimal. Wind speeds of up to 78 Mph were recorded in northeast Houston and the Houston Ship Channel — home to five refineries with a combined 1.5mn b/d of capacity — faced winds up to 74 Mph, according to the National Weather Service . Further South in Galveston Bay, where Valero and Marathon Petroleum refineries total 818,000 b/d of capacity, max wind speeds of 51 Mph were recorded. Chevron's 112,000 b/d Pasadena refinery on the Ship Channel just east of downtown Houston sustained minor damage during the storm and continues to supply customers, the company said. ExxonMobil's 564,000 b/d Baytown refinery on the Ship Channel and 369,000 b/d Beaumont, Texas, refinery further east faced no significant impact from the storm and the company continues to supply customers, a spokesperson told Argus . Neither Phillips 66's 265,000 b/d Sweeny refinery southwest of Houston nor its 264,000 b/d Lake Charles refinery 140 miles east in Louisiana were affected by the storm, a spokesperson said. There was no damage at Motiva's 626,000 b/d Port Arthur, Texas, refinery according to the company. Marathon Petroleum declined to comment on operations at its 593,000 b/d Galveston Bay refinery. Valero, LyondellBasell, Pemex, Total, Calcasieu and Citgo did not immediately respond to requests for comment on operations at their refineries in the Houston area, Port Arthur and Lake Charles. A roughly eight-mile portion of the Houston Ship Channel from the Sidney Sherman Bridge to Greens Bayou closed from 9pm ET 16 May to 1am ET today when two ships brokeaway from their moorings, and officials looked in a potential fuel oil spill, according to the US Coast Guard. The portion that closed provides access to Valero's 215,000 b/d Houston refinery, LyondellBasell's 264,000 b/d Houston refinery and Chevron's Pasadena refinery. By Nathan Risser Houston area refineries Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Texas barge collision shuts GIWW section: Correction
Texas barge collision shuts GIWW section: Correction
Corrects volume of oil carried by barge in fourth paragraph. Houston, 16 May (Argus) — Authorities closed a six-mile section of the Gulf Intracoastal Waterway (GIWW) near Galveston, Texas, because of an oil spill caused by a barge collision with the Pelican Island causeway bridge. The section between mile markers 351.5 and 357.5 along the waterway closed, according to the US Coast Guard. A barge broke away from the Philip George tugboat and hit the bridge between Pelican Island and Galveston around 11am ET today. Concrete from the bridge fell onto the barge and triggered an oil leak. The barge can hold up to 30,000 bl oil, but it was unknown how full the barge was before the crash, Galveston County county judge Mark Henry said. It was unclear when the waterway would reopen. An environmental cleanup crew was on the scene along with the US Coast Guard and Texas Department of Transportation to assess the damage. Multiple state agencies have debated the replacement of the 64-year-old bridge for several years, Henry said. The rail line alongside the bridge collapsed. Marine traffic does not pass under the bridge. By Meghan Yoyotte Intracoastal Waterway at Galveston Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US RIN generation up in April as D4 climbs
US RIN generation up in April as D4 climbs
Houston, 16 May (Argus) — Generation of renewable identification number (RIN) credits in April rose by 12pc, as biomass-based D4 diesel credits posted their second highest monthly volumes ever. Total RIN generation rose to 2.06bn credits in April, up from 1.84bn a year earlier, the US Environmental Protection Agency reported on Thursday. D4 credits continued to lead gains in April, with generation increasing on the year by 29pc to 780mn credits. The only month with greater D4 RIN generation was December 2023. D4 accounted for 38pc of all RINs in April, up from 33pc in April 2023. Ethanol D6 RIN generation rose from a year earlier by 2.4pc to 1.2bn credits, accounting for 58pc of all RINs generated in the month. D6 credits were also up by 4pc from March, a month that was affected by seasonal ethanol plant maintenance. Cellulosic biofuel D3 credit generation rose by 7.6pc from a year earlier to 69mn credits. RINs are credits traded and produced by refiners and importers to show compliance with the EPA's Renewable Fuel Standard program. Obligated parties can produce credits when renewable fuels are blended into conventional transportation fuels or can purchase credits from other RIN producers. By Matthew Cope 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