November 18, 2013
Brazil may raise biofuel use to lessen soy surplus
Brazil''s energy minister is studying a request from soy crushers and biodiesel manufacturers that could mop up some of the country''s massive soy harvest, but analysts differ on how helpful it could be.
Soy crushers and biodiesel manufacturers are asking the government to increase the country''s biodiesel mandate to 7% from 5% by January 1.
According to reports, a two percentage point increase in the mandate would create an additional eight to nine million tonnes of soy demand in Brazil next year.
It would be a significant relief valve for overstuffed oilseed markets. Oil World estimates world oilseed production in 2013-14 at 488 million tonnes, a 22 million tonne increase over last year.
Brazil''s government estimates the soy crop at 88 to 90 million tonnes, shattering last year''s record of 81.5 million tonnes.
Oil World analyst Thomas Mielke said the proposed policy change would lead to "sharply higher" biodiesel use and soy demand in Brazil but not as big as the reports suggest, according to a copy of an October 22 presentation he delivered at the Oilseed and Grain Trade Summit 2013 in Minneapolis.
Mielke said a shift to a 7% mandate would increase soy biodiesel demand by 0.8 million tonnes in 2014, requiring 4.2 million tonnes of additional soy crush.
Dan Basse, president of AgResource Company, was far more bearish about the impact of the proposal.
Basse said he can''t understand how people are coming up with eight to nine million tonnes of newly created soy demand.
"It''s not going to be a significant increase down there, maybe the equivalent of something like 700,000 or 800,000 tonnes of beans."
And that is if the government agrees to the request, which is far from certain.
A tremendous amount of oilseeds will be in the system by the end of next year, he added.
Chinese demand in the near term could create a market window but it will close as Brazil harvests its crop.