January 5, 2011

Mato Grosso Leading Biodiesel Producer in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The state of Mato Grosso has taken over the lead in biodiesel production in Brazil. During the January to October period of 2010, the state produced nearly 500 million liters of biodiesel surpassing the state of Rio Grande do Sul where 475 million liters were produced during the same period. The amount of biodiesel production in Mato Grosso during the January to October period was 34% greater than during all of 2009.

According to the National Petroleum, Natural Gas, and Biofuels Agency (ANP), the state of Mato Grosso now accounts for 25% of Brazil's total biodiesel production and 21 of the 64 biodiesel production facilities in Brazil are located in the state of Mato Grosso. As a sign of the health of the industry, three production facilities in Mato Grosso are being expanded and a new facility is under construction.

The reason for the big increase in production in the state is the ready availability of the primary vegetable oil used to make biodiesel - soybean oil. Approximately 80% of the biodiesel is made using soybean oil with lesser amounts coming from sunflower oil, cotton seed oil, and beef tallow. Many of the production facilities in the state are in association with soybean crushing plants. When a new crushing plant is constructed in the state, it usually includes a biodiesel production facility as well.

Biodiesel production in Brazil has been a real success story. In 2008, it was estimated that the nation's diesel supply would contain 5% vegetable oil (B5) by the year 2013. That goal was reached three years earlier than anticipated. Industry representatives feel that they already have enough capacity to meet a 10% blend (B10) and that it could go to 20% (B20) by the year 2020.

The Brazilian government has put in place incentives to develop other vegetable oil sources, but it is going to be hard to displace soybean oil due to the availability of soybean oil and the existing infrastructure that also favors the use of soybean oil. Strong prices are expected to encourage soybean expansion in Brazil, but increased biodiesel production is expected to absorb much of the increased soybean oil production.