Brazil expected to raise biodiesel blend requirement -industry
SAO PAULO May 26 (Reuters) - Industry representatives said on Monday they expected Brazil's government to announce on Wednesday an increase in the minimum amount of biodiesel that must be blended into diesel.
The move would increase the biodiesel requirement to 6 percent in July and 7 percent in November from the current 5 percent, decreasing Brazil's diesel fuel imports and giving farmers an incentive to grow more soy used to make the fuel.
Changing the blend requirement has been on the table for years but faced resistance from the Finance Ministry, which has struggled to keep inflation within the central bank's target range before a presidential election scheduled for October.
Opponents feared using more soy to make fuel could raise the price of the commodity and affect Brazil's consumer price index.
"The Finance Ministry had this inflationary concern, but it seems to have been overcome," said Leonardo Zilio, economic adviser to the Brazilian Association of Vegetable Oil Industries. "It is very welcome news," he added, saying recent private studies had shown the impact of biodiesel on inflation to be negligible.
The announcement would also be good news for state-run oil firm Petroleo Brasileiro SA, which has been forced by government policies to import diesel fuel and sell it at a loss. That has contributed to a surging debt load for Petrobras, as the company is known. Brazil uses more diesel than gasoline and has domestic refining constraints in both fuels.
With a 7 percent biodiesel blend requirement, biodiesel consumption in Brazil could rise to 4.2 billion liters a year from the current 3 billion liters. In 2015, Brazil would replace 10 percent of the volume of its diesel demand with domestic biodiesel, according to industry data.
Large agribusiness firms such as Cargill Inc and Bunge Ltd have opened biodiesel plants in Brazil in recent years because of an expected spike in demand.
Brazil pioneered the production of another biofuel, ethanol produced from sugarcane, and the cane industry has petitioned the government to raise the minimum amount of ethanol in gasoline to 27.5 percent from 25 percent this year. Continuación...