Source: Ukragroconsult (Ukraine)
Soybean processing capacity in Brazil is expected to reach its highest level in 20 years by the end of 2024, mainly due to positive margins and an increase in mandatory biodiesel/diesel blending.
According to S&P Global Commodity Insights, Brazil’s oil extraction plants will end the year with an active capacity of 204,793 metric tons per day, representing 93.5% of the country’s total installed capacity and the highest utilization since 2005 (93.6%). The calculation is based on data from the country’s association of vegetable oil producers (Abiove).
In recent years, the industry has not only invested in new plants and expansions, but has also commissioned inactive capacities. According to the sources, this increase in processing capacity corresponds to favorable profit margins for the Brazilian industry, especially for those integrated into biodiesel production.
Soybean oil serves as the main feedstock for biodiesel production in Brazil, with the blending mandate increased from 12% to 14% in March 2024 and expected to rise to 15% in March 2025. The by-product from soybean crushing accounts for around 70% of biodiesel feedstock, meaning that adjustments to these mandates have a direct impact on supply, demand and prices.
As the third largest producer in the world, Brazil has exported an average of around 1.80 million tons of soybean oil over the last five years, with exports reaching 2.60 million in 2022 and 2.33 million in 2023. However, due to the tightened biodiesel mandate, Commodity Insights predicts that exports will fall below 1.50 million tons in 2024, a scenario that is already reflected in prices.
According to Commodity Insights’ Platts, prices for soybean oil FOB Paranaguá reached their highest level since May 2022 at US$1,063.95 per tonne on September 20, while the price for soybean oil FOB Paranaguá reached US$1,063.95 per tonne.
Looking to the future, the Brazilian government has presented a plan to increase the share of biodiesel in the fuel mix by one percentage point per year, with the aim of reaching a 20 percent share by 2030. This increase is not set in stone, but reflects the government’s intention, which depends on further technical studies to confirm the feasibility of the so-called B20 blend.
If the government approves these incremental increases, the refining industry will need to expand its capacity to meet the target, as less than 7% of current capacity remains unused.
In the first half of 2024, refining margins in the Brazilian hinterland were below the five-year average, which discouraged the industry from investing in new plants. As a result, companies were more inclined to activate unused capacity. Refinery margins in 2024 are significantly lower than in the 2021-2023 period, when there was a surge in new investments.
Against this backdrop, Commodity Insights expects Brazil to further reduce its soybean oil exports to meet domestic demand. Otherwise, the expansion of refining capacity will be important in the coming years, according to S&P Global Platts.