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Biodiesel production in Argentina this year [2023] is forecast at an almost record low level of 1bn litres due to weak demand for diesel, a low blending ratio and reduced exports, according to a report on the sector by the United States Department of Agriculture (USDA).

The production forecast would be the lowest in 15 years, the 26 August report said.

Biodiesel exports in the first half of this year have been slower than normal, due to the uncompetitive price of Argentine biodiesel entering the European Union (EU), according to the report.

Domestic biodiesel demand was also expected to be lower due to reduced overall diesel demand and lower mandated blending rates, the USDA’s Foreign Agricultural Service (FAS)’s Argentina: Biofuels Annual said.

At the time of the report, there were no national direct subsidies supporting the construction of biofuel plants or the production of biofuels in Argentina.

“The only significant investment taking place in the local biofuels sector is the expansion of two of the large corn bioethanol plants which are scheduled to be operational in late 2024 or early 2025,” the USDA said.

The average biodiesel blending rate in 2022 was 5.9% and is forecast at 5.6% this year, according to the report.

“While Argentina actively uses blending … a supply and price management tool responding to changes in feedstock supply and oil prices (often belatedly), biofuels continue to play only a small role supporting Argentina’s commitment to reduce greenhouse gas emissions by 2030,” the USDA said.

“Equally concerning, there are no policies advancing new biofuel commercialisation, fuels like renewable diesel than can further advance the decarbonisation of the diesel pool with no blending limits, or sustainable aviation fuel (SAF) which significantly decarbonises air transportation.”

According to the report, the Argentine biodiesel industry comprises two sections: companies operating small and medium-sized plants which supply the domestic market under the biodiesel mandate; and companies operating large plants, generally associated with large soyabean crushing facilities, which export their production. Biodiesel plants of all sizes use soyabean oil almost exclusively.

“Imports of feedstocks to produce biofuels to market under the official mandate or direct imports of biofuels for the mandate are prohibited except if authorised by the Secretariat of Energy,” the USDA said.

The law explicitly states that “only bioethanol and biodiesel produced in plants in Argentina using locally produced feedstock of agricultural origin or organic waste may be used under the official mandate”.

Biodiesel exports fluctuate year-to-year based on policies and conditions in place in different export destinations and the price of biodiesel and its relationship with the price of soyabean oil, according to the report. The EU is currently the main market for Argentine biodiesel but is expected to import smaller-than-usual volumes in 2023 due to the price scheme in place.

Biodiesel exports in 2023 were forecast at 280M litres, the second lowest volume on record.