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Brazil’s soybean oil exports face uncertain future due to biodiesel boom

Brazil, the world’s second-largest soybean oil exporter, faces the potential cessation of exports in coming years due to escalating domestic demand for biodiesel, reported Energynews.pro.

Record-high blending mandates are driving up domestic consumption of soybean oil, the primary feedstock for this biofuel. Brazil’s biodiesel sector is rapidly expanding, necessitating both domestic production and biodiesel imports.

In 2024, Brazil’s biodiesel blending mandate is set at 14% (B14), marking a historical high. Projections from AgRural suggest this mandate will rise to 15% by 2025. According to Abiove (Associação Brasileira das Indústrias de Óleos Vegetais), soybean oil will constitute 72% of the raw materials used for biodiesel production in 2024, up from 69% in 2023.

The increase in blending mandates has coincided with a decline in soybean oil exports. Despite increasing production, exports fell by 22.2% to 1.4 million tonnes in 2023-2024, as the United States Department of Agriculture (USDA) reported.

The reduction in Brazilian soybean oil exports peaked in 2021 and 2022 due to lower blending mandates could significantly impact global trade. India, Brazil’s largest soybean oil importer, may face particular challenges, given that 21.2% of its imports in 2023-2024 came from Brazil. A decrease in Brazilian exports might compel India to seek alternative suppliers.

Analysts from Rabobank predict that unless Brazil increases its soybean crushing capacity or adopts alternative raw materials, the country could cease soybean oil exports within a few years. Carlos Mera, Rabobank’s head of agricultural markets, suggests that Brazil may need to adjust its mandates to avoid becoming a net importer.

The pressure on producer prices and margins is intensifying due to ample supplies in South America and reduced exports to meet domestic demands. Despite record-high soybean crush volumes in April, soybean oil prices at FOB Paranagua are at their lowest in three years.

The future outlook is further complicated by recent tax measures. The Brazilian government’s “provisional measure 1227,” aimed at restricting tax credits, is expected to increase costs for grain and oilseed exports, further impacting the soybean oil market. This measure has temporarily halted Brazilian grain and oilseed exports, redirecting buyers to markets like China.

With rising biodiesel mandates and regulatory challenges, Brazil faces the dual challenge of meeting domestic demand while maintaining its global position in the soybean oil market.

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