Brazil may raise biodiesel blend with record soy crop on the way


SAO PAULO, Nov 5 (Reuters) - Brazil may raise the biodieselblend required in diesel fuel as early as January, a change thatcould result in up to 10 percent more of an expected recordsoybean crop getting crushed into meal and oil, industry sourcessay.

Raising the blend from the current 5 percent to 7 percent, amove long advocated by soy crushers, would relieve pressure onstate-run oil company Petróleo Brasileiro SA, whichhas been forced to import diesel fuel to make up for a domesticrefining shortfall and sell it at a loss on the local market.

"Our view is that by January we could have an increase inthe blend," said Leonardo Zilio, economic adviser for Brazil'svegetable oil association (Abiove).

Last week, Energy Minister Edison Lobão said the governmentwas evaluating a blend increase, without giving details.

To meet the 2 percentage-point-higher demand, between 8million and 9 million tonnes of soybeans would be needed. Incrushing, soybeans yield 80 percent meal, 18 percent oil and 2percent waste.

Brazil's government crop supply agency Conab is forecastingsoy output in the current 2013/14 crop of between 87.6 millionand 89.7 million tonnes, which would provide most of the extrasupply needed if the crop is confirmed. Brazil harvested 81.5million tonnes in the previous season.

Brazil's demand for biodiesel in 2013 will likely be around3 billion liters, but with a 7 percent blend requirement itcould reach 4.2 billion liters in 2014. The agriculturalpowerhouse has capacity to produce 7 billion liters, accordingto the Brazilian biodiesel union (Ubrabio).

Some 75 percent of the country's biodiesel is produced fromsoybeans, though some is made with materials like palm oil andcotton seed.

Betting on higher domestic demand for the fuel, bigmultinational crushers like Bunge Ltd and Cargill havebuilt biodiesel plants in recent years.

Brazil, which uses more diesel fuel than regular gasoline,consumed 38.4 billion liters of diesel between January andAugust, 7.2 billion of which were imported.

Diesel imports are expected to fall in tandem with anincrease in biodiesel production, and a 7 percent blendrequirement could save Petrobras 2 billion reais ($877 million)per year by lowering fuel imports, according to Abiove.

"When we say that the country's interests are very alignedwith this decision (to raise the mixture) certainly we aretalking about the need to import diesel," said the president ofthe Superior Council of Ubrabio, Juan Diego Ferres.

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