The Brazilian National Energy Policy Council on Nov. 18 published a resolution that allows imported soybeans and imported soybean oil to be used to produce biodiesel. It is unclear how long the resolution will remain in force.
A report filed with the USDA Foreign Agricultural Service’s Global Agricultural Information Network explains that soybean oil prices in Brazil have been spiraling in correlation with quickly dissipating product stocks. The new policy move reflects the government’s growing concern over spiking consumer inflation, according to the report. Consumer inflation was at 0.94 percent in October, the highest monthly rate since 1995. Soybean oil prices were up 22.4 percent for the month.
The Nov. 18 resolution effectively creates an exemption to Brazilian legislation that mandates that all biofuel sold at Brazilian Petroleum, Natural Gas and Biofuels Agency (ANP) auctions has to be manufactured from oils and fats of domestic origin. The newly approved exemption permits ANP to allow for the use of imported raw materials in biodiesel auction notices. ANP auctions are the official and only channel of biodiesel distribution in Brazil.
The GAIN report explains that ANP auctions allow the biodiesel industry to keep tight stocks, and produce only the volume of fuel that is to be delivered over the next two months. Brazil in 2019 produced 5.9 billion liters (1.56 billion gallons) of biodiesel. Soybean oil accounted for more than 70 percent of the feedstock used.
The ANP has progressively increased the mandatory blend rate for biodiesel sold domestically in recent years, including a 12 percent mandate put in place in March 2020. Since March, however, the ANP has temporarily lowered the biodiesel blend mandate twice due to a lack of available supplies.
According to the GAIN report, the market is ambivalent on whether the resolution will lead to higher Brazilian imports of soybeans and soybean oil. In the first two days following the resolution, no noticeable impact on prices was realized. The report explains that soy and soybean oil prices from traditional suppliers to the Brazilian market are also currently high, and Brazil’s devalued national currency is making imports more expensive. Prices are expected to come down at the start of 2021, when Brazil’s 2020-’21 soybean harvest begins and stocks are replenished.
Source: USDA FAS GAIN