SAO PAULO, Nov 5 (Reuters) - Brazil may raise the biodiesel blend required in diesel fuel as early as January, a change that could result in up to 10 percent more of an expected record soybean crop getting crushed into meal and oil, industry sources say.
Raising the blend from the current 5 percent to 7 percent, a move long advocated by soy crushers, would relieve pressure on state-run oil company Petróleo Brasileiro SA, which has been forced to import diesel fuel to make up for a domestic refining shortfall and sell it at a loss on the local market.
"Our view is that by January we could have an increase in the blend," said Leonardo Zilio, economic adviser for Brazil's vegetable oil association (Abiove).
Last week, Energy Minister Edison Lobão said the government was evaluating a blend increase, without giving details.
To meet the 2 percentage-point-higher demand, between 8 million and 9 million tonnes of soybeans would be needed. In crushing, soybeans yield 80 percent meal, 18 percent oil and 2 percent waste.
Brazil's government crop supply agency Conab is forecasting soy output in the current 2013/14 crop of between 87.6 million and 89.7 million tonnes, which would provide most of the extra supply needed if the crop is confirmed. Brazil harvested 81.5 million tonnes in the previous season.
Brazil's demand for biodiesel in 2013 will likely be around 3 billion liters, but with a 7 percent blend requirement it could reach 4.2 billion liters in 2014. The agricultural powerhouse has capacity to produce 7 billion liters, according to the Brazilian biodiesel union (Ubrabio).
Some 75 percent of the country's biodiesel is produced from soybeans, though some is made with materials like palm oil and cotton seed.
Betting on higher domestic demand for the fuel, big multinational crushers like Bunge Ltd and Cargill have built biodiesel plants in recent years.
Brazil, which uses more diesel fuel than regular gasoline, consumed 38.4 billion liters of diesel between January and August, 7.2 billion of which were imported.
Diesel imports are expected to fall in tandem with an increase in biodiesel production, and a 7 percent blend requirement 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 aligned with this decision (to raise the mixture) certainly we are talking about the need to import diesel," said the president of the Superior Council of Ubrabio, Juan Diego Ferres.