April 7, 2016

Brazil and Argentina increase use of Biofuels

The governments of both Brazil and Argentina are proposing increased production of biofuels. In the case of Brazil, they are proposing increasing the percentage of vegetable oil used to make biodiesel and in Argentina, they are mandating for more ethanol to be blended into the country's gasoline supply.

Brazil is proposing increasing the blend of vegetable oil into diesel fuel from the current 7% to 8% within 12 months and then to 9% within 24 months and 10% within 36 months. The increase will be predicated on engine testing that doesn't reveal any problems with the higher blend. The increase use of vegetable oil has been pushed by soybean processors who claim that they are only using about 60% of their capacity to make biodiesel.

The Brazilian government only allows soybean oil to make up 80% of the vegetable oil blend. The legislation mandates that 20% of the vegetable oil must come from other sources such as palm oil, caster bean oil, nut oil, tallow, etc. There are also incentives given to the biodiesel producers to source the other 20% from small family farmers. If the 20% set-aside was not in place, 100% of the vegetable oil would be soybean oil.

Brazil followed the same procedure of engine testing when they recently increase the amount of ethanol blended into gasoline from 25% to the current 27.5%.

The Argentine government announced last week that the amount of ethanol blended into gasoline will go from the current 10% to 12%. Currently, there is less ethanol produced in Argentina from sugarcane than from corn, so ethanol produced from sugarcane will be the preferred source of the additional 2% of ethanol.