One of Luiz Inácio Lula da Silva’s first tasks when returning as Brazil’s president will be to raise the blend rate of biodiesel, in a boost for soyoil demand, after energy agency CNPE surprised investors by leaving the level on hold.

The incoming Lula administration has said it will “value the biodiesel programme, rescue its objectives and set it on course”, after the CNPE’s unexpected decision to stick until March 2023 with a B10 programme, meaning a 10% blend rate of biodiesel into transport diesel.

This rate was introduced early this year, a cut from the B13 level which had been enforced, in an effort to keep a lid on fuel prices, which are a frequent cause of unrest among the country’s important truckers’ lobby.

A disappointing domestic 2021-22 soybean harvest, combined with the boost to global vegetable oil prices from the war in Ukraine, the top sunflower oil exporter, had sent soaring Brazilian prices of soyoil, the country’s main biodiesel feedstock.

In Mato Grosso, the top soybean-growing state, soyoil prices hit R$9,116.67 per tonne in April, up by 30% for 2022, according to research institute Imea.

‘Double blow’

The CNPE’s decision “could impact prices in the short term”, said Imea, which reports the Mato Grosso soyoil price at R$6,962.50 per tonne as of a week ago.

The Brazilian association of biodiesel producers, Aprobio, termed the ruling “a hard” blow, and a “double” one, in its impact both “on the biodiesel production chain, which works based on planning, and on society, by contributing to the increase in the emission of greenhouse gases”.

Dr Michael Cordonnier, the respected South America crop analyst, said that the CNPE’s decision had been “very unexpected” given apparent support too from the outgoing Bolsonaro administration, which leaves office at the end of 2022, for a return to a higher blend.

“No-one saw that coming.

“But the CNPE could yet reverse its decision” when it meets again next week, avoiding the need for the Lula administration to make good on a pledge to legislate for an increase, he told GrainPriceNews.

Extra consumption

The CNPE had originally intended to lift the blend back to B14 in January 2023, and then B15 in March to cut the country’s reliance on imports.

Brazil imports about 30% of the diesel it consumes, according to the US Department of Agriculture.

Each percentage point increase in Brazil’s blend rate consumes some 600m litres extra of biodiesel, according to the ANP petroleum, natural gas and biofuels agency.

The country produced 6.76bn litres of soyoil last year, according to the Abiove crushers’ industry group.