Biodiesel mandate cuts in Brazil, Argentina may lift soybean oil exports

Brazil's surging diesel demand and record soybean prices, coupled with domestic inflation, led the government to cut biodiesel blend in diesel to 10% from 13% in April. The mandate -- primarily announced for May and June -- has now been extended till August, the Ministry of Mines and Energy said May 13.

There is also a likelihood that the mandate will be extended further, according to S&P Global Platts Analytics.

The latest biofuel mandate is estimated to lower biodiesel demand by 300,000 cubic meters in the 80th biodiesel auction, set to begin June 2, sources said.

If so, domestic soybean oil demand would drop by nearly 200,000 mt, they added.

However, it remains unclear whether such a volume will be redirected to exports or plants would reduce crushing.

Brazil's oilseeds crushers association Abiove on May 20 said it estimated soy oil exports reaching 1 million mt in 2021, up from its previous estimate of 700,000 mt in April.

Also, soybean oil prices are expected to remain firm, on the back of soaring CBOT futures and Asian demand, according to Platts Analytics.

The CBOT July soybean oil futures were trading at 65.36 cents/lb at 0700 GMT May 21, up about 9% on the month.

ARGENTINA'S SOY OIL EXPORTS LIKELY TO RISE

If a potential bill to reduce biodiesel blend in Argentina passes, it could free up additional 500,000 mt of soybean oil for exports, according to a broker.

The country's soy oil exports have already been increasing. In January 2021-April 2021, exports surged 62% on the year to 2.18 million mt amid strong demand from India and China, according to the government's trade data.

On May 10, the Argentine government extended the mandate for refiners to blend 10% of biodiesel until July 12. Meanwhile, the government is seeking to get a bill approved in the Parliament that is calling for reducing the biodiesel blend to 5%, mainly to promote its use in vehicular fuels.

If such a bill passes, it could have an impact on prices of soybean oil, a main additive in biodiesel.

Argentina's FOB Up River price for soybean oil for June loading was assessed at $1,339.53/mt May 20, up 120% on the year, according to Platts data.