November 17, 2011

In 2012 Brazil Will be Largest Producer and Consumer of Biodiesel

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

In September of 2011 Brazil became the largest consumer of biodiesel in the world and the second largest producer of the fuel. According to the president of Petrobras Biofuels, Miguel Rossetto, Brazil will surpass Germany in 2012 as the largest producer and consumer of the fuel in the world.

Currently Brazil has a 5% mixture of vegetable oil in petroleum diesel (B5) and there is a strong possibility that it will go to 7% in 2012. The industry already has the capacity to increase the blend to 10% and industry representatives would like to see a 7% mixture in 2012, 10% in 2014, and 20% in 2020. In order to achieve the increased blend percentage, the industry is urging the government to set more long-term goals for the country so investors and producers can better plan for the increased production.

From 2008 to 2011, the sales of biodiesel in Brazil more than doubled from 1.1 million cubic meters to 2.6 million cubic meters. There are 86 biodiesel production facilities in Brazil with the majority of the plants located in the center-west, south, and southeast regions of Brazil. The state of Mato Grosso has the most plants with 20, followed by Sao Paulo with 8, Goias with 7, and Rio Grande do Sul with 5.

Eighty percent of the vegetable oil used to make biodiesel in Brazil is soybean oil, 16% is from beef tallow and 4% is from various other vegetable oils such as sunflower, cotton seed, canola, and castor bean. The government wants to diversify the type of oils used and Embrapa is conducting research on other possible oils such as palm oil and nut oil among others.

The biodiesel program in Brazil is viewed by the government as a means of increasing rural incomes for small family farmers especially in the poorest regions of Brazil. Part of Embrapa's research is to develop other type of oils that can be grown with a minimum amount of mechanization, which would benefit small family farmers.

One of the ways to achieve this goal is to offer incentives for manufactures to source their raw material from small farmers. If they source more than 20% of their oil from small farmers, they are given preferential treatment when it comes time to auction off the biodiesel to the government.

Increasing the participation of small family farmers in the program has been a slow process up to this point. As of the end of 2010, 100,000 small family farmers had participated in the program in one form or another, but this is far short of the government's goal of having the majority of the oil being produced by small farmers.