Brazil’s additional biodiesel demand to hit soyoil, soybean exports

A decision to boost the blend of biodiesel into diesel from March 2024 will create additional internal demand for an estimated 5 million metric tons of soybeans and potentially cut Brazilian soybean and soyoil exports, according to analysts.

The situation could be a boon for rival exporters like Argentina, which is expected to reap a full harvest after a drought destroyed its soy in 2023 and crippled its soyoil and soymeal exports in the period.

“I believe we could see a reduction in Brazilian soyoil exports of between 0.8 to 1.0 million tons, which would leave us with a total [domestic] demand for soyoil between 0.2 million and 0.4 million tons greater than in 2023,” said Pedro Schicchi, grains and oilseeds analyst at hEDGEpoint Global Markets.

Some 70% of Brazil’s biodiesel comes from soybeans after it is processed into soyoil.

Brazil’s government this week boosted the mandatory biodiesel mix to 14% from a current 12%.

That means Brazilian soy processors are expected to crush between 1 million and 2 million tons more soybeans in 2024 to cater to additional biodiesel demand, Schicchi said.

The analyst noted that disregarding existing stocks, Brazil’s exportable soybean surplus could be about 2 million tons lower than this year’s.

Based on oilseed crushers’ estimates, Brazil would then export a little over 99 million tons of soybeans in 2024, below a record of around 101 million projected for 2023.

“The market must be doing the math,” said Jose Gomes, a senior grains and oilseed analyst at S&P. “For now, we have not noticed major fluctuations in the basis (premiums in relation to futures markets) for soybean oil,” he said

Yet Gomes said traders do see support in FOB Paranagua port premiums for shipments from the second quarter onwards, as the trend is for a reduction in Brazilian soy oil destined for export.

Source: Reuters

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