Brazil's biodiesel mandate to increase to 14% in March 2024

Brazil's National Council for Energy Policy, or CNPE, decided Dec. 19 to increase the country's biodiesel mandate to 14% (B14) as from March 2024, and ruled out a previous measure that would allow biodiesel imports to fulfil the mandatory mixture into diesel next year.

According to CNPE's Resolution 16/2018, a 15% mandate was to be implemented in 2023, but it wasn't put in force amid inflation fears. The mandatory blend ended up being raised to 12% in April 2023 and was due to increase by 1 percentage point till 15% in 2026.

However, CNPE's Dec. 19 sets a 14% biodiesel mandate starting in March 2024, which will reach 15% in 2025, from 12% currently.

Additionally, CNPE temporarily prohibited a recent resolution from the National Agency of Petroleum, Natural Gas and Biofuels, or ANP, that allowed up to 20% of imported biodiesel to be used for mandatory mixture. A technical multidisciplinary study group will be created to discuss the matter next year.

Brazil currently operates with around 50% of idle biodiesel production capacity, according to ANP data.

Such measures should decrease carbon footprint and reduce diesel imports and support national production of biofuels, Brazil's Mines and Energy Ministry said in an official statement.

Expectations for soybean oil market

CNPE's decision on increasing the Brazilian biodiesel mandate to 14% as from March 2024 is likely to support the country's soybean oil FOB Paranaguá Q2 basis levels, sources told S&P Global Commodity Insights.

According to ANP, Soybean oil accounts for more than 70% of all the feedstocks used by the domestic biodiesel industry, so any change on the mandatory mixture into diesel has a direct impact on the volumes of the edible oil that can be exported.

The Platts-assessed soybean oil FOB Paranaguá basis was Dec. 18 at minus 750 points to Chicago Board of Trade futures, considering January-loading cargoes. For March dates, Platts heard sellers offering at minus 1,050 points and buyers asking at minus 1,200 points to CBOT references.

For now, S&P Global Commodity Insights estimates a Brazilian soybean oil production of 11.30 million mt in the 2023-24 marketing year (February-March), with 5.26 million mt of the commodity used for biodiesel purpose, or 14% higher on the year.

Brazil's soybean oil exports, in turn, are expected to reach 2.35 million mt in MY 2023-24, according to S&P Global.