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Brazil – the third largest producer and consumer of biodiesel after Indonesia and the USA – is forecast to produce 7.1bn litres of biodiesel this year, according to a report by the United States Department of Agriculture (USDA).

If realised, Brazilian production in 2023 would increase by 5% compared to the previous year’s volume of 6.77bn litres, the USDA’s Foreign Agricultural Service (FAS)’s Brazil: Biofuels Annual said.

In March, the Brazilian government announced an increase to the biodiesel blending rate from 10% to 12%, which took effect from 1 April.

At the time of the announcement, the government also said that there would be further increases in the blending rate to reach 15% in 2026, the 5 September Global Agricultural Information Network (GAIN) report said.

The USDA estimated that the 12% blending rate would be reached late this year.

Biodiesel production from January to June this year totalled 3.3bn litres, a 13% increase compared to the same period last year when 2.9bn litres were produced.

According to the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (ANP) – the regulating body for the country’s oil, natural gas and biofuel sectors – at the time of the report, Brazil had 59 authorised biodiesel plants. Almost 60% of the plants are in the Centre-West region, where there is an ample soyabean supply.

The authorised industrial capacity for 2023 was estimated at 38.6M litres/day of biodiesel or 14.1bn litres/year, based on a 360-day operational cycle, which would be an increase of 3.2% compared to 2022 (14bn litres).

ANP data showed that of last year’s total production, about 65.8% was produced from soyabean oil and 16.2% from greasy material, with the remaining feedstock comprising animal fat (7.9%) and palm oil (2.1%).

In addition, 8% of the total was produced from other fatty materials such as different raw materials blended in tanks and co-products from biodiesel production.

In the January-June period this year, 68.3% of biodiesel production was made from soyabean oil, 6.8% from tallow and 2.3% from palm oil. The remaining feedstock comprised 15% greasy material and 7.5% other raw materials.

Factors impacting biodiesel production costs included changes in international soyabean oil prices, Brazil’s Real exchange rate, and plant energy operating costs, the USDA report said.

Brazilian biodiesel consumption in 2023 was forecast at 7.15bn litres – a 6% increase compared to the previous year (6.75bn litres).

The hydrotreated vegetable oil (HVO) and sustainable aviation fuel (SAF) sectors were also covered in the report.

Unlike other major markets for renewable diesel in Europe, the USA and Canada, Brazil is only now starting to focus on supporting the sector, according to the report.

To date, HVO was the only type of renewable diesel commercially available at scale in Brazil, the report said.

The situation is the same regarding the SAF sector, according to the report.

“Mandates and/or effective incentive policy/financial support mechanisms have yet to emerge causing Brazil to fall behind those with more dynamic policy environments,” the USDA said.

HVO production and commercialisation in the Brazilian market had been recently regulated by ANP, the report said.

Recent developments in the sector included an agreement between palm oil producer Brazil Biofuels (BBF) and leading Brazilian fuel distributor Vibra Energia – formerly BR Distribuidora – to build the country’s first HVO plant.

BBF would invest R$1.8bn (US$340M) in the new unit that would use palm oil as feedstock and was expected to become operational by 2025 in Manaus in the state of Amazonas, according to the report.

Under the agreement, Vibra Energia would trade the entire output of the plant that would have an initial capacity to produce 500M litres/year of palm oil-based HVO.

In addition, the Brazilian group ECB was building a plant in Paraguay, the Omega Green plant, which was due to become operational by next year, according to the report. Omega Green had an estimated production capacity of 27.6M litres/year, comprising renewable diesel, sustainable aviation fuel and green naphtha. ECB Group planned to use soyabean oil, animal fats, and used cooking oil (UCO) as feedstock.

Meanwhile, Brazil’s state-controlled oil company Petrobras and Vibra Energia were testing Petrobras’ renewable diesel blend made partly from edible oils in public buses in the city of Curitiba.

The USDA said the Brazilian government had also discussed introducing an SAF mandate that would take effect in January 2027, targeting the reduction of Brazilian airline greenhouse gas (GHG) emissions by 1% of total emissions generated by the industry in 2026.

“GHG emissions reductions for Brazilian airlines would potentially reach 10% with the ongoing development, production, and commercialisation of SAF,” the USDA said.

Last July, Brazilian aircraft manufacturer Embraer signed a letter of intent with leading Brazilian biofuels producer Raízen to support SAF development.