The biodiesel market in Brazil has been pressured by low demand and high raw material prices

Rising soybean oil prices are reducing margins for biodiesel producers in Brazil, and low demand for it is leading to a build-up of inventories.

According to Platts (S&P Global Energy), contract price differentials for biodiesel delivered in November-December decreased by more than 30 reais/ ^m3 compared to deliveries in September-October, with the largest declines in the state of Mato Grosso (the largest producer of soybeans and biodiesel) - by 35-70 reais/ ^m3 , and in the state of Rio Grande do Sul - by 9 reais/ ^m3 , while at the beginning of the season, refiners expected a 300 reais/ ^m3 increase in premiums to offset costs and restore profitability.

Seasonal increases in soybean oil prices at the end of the year usually support biodiesel prices, but this year they have not offset the pressure of low demand and large inventories. Petrobras quotas and import supplies have restrained purchases by buyers, forcing sellers to lower prices.

The depreciation of the Brazilian real against the US dollar led to an increase in domestic prices for soybean oil and reduced the margin of biodiesel production, as its cost formula takes into account the SWOT soybean oil quotation, the price basis at the port of Paranagua and the real exchange rate. Processors tried to increase spot prices for biodiesel but were unable to do so due to low demand for the product.

Experts believe that the difficult situation in the biodiesel market in Brazil will continue into early next year, when demand traditionally declines. Some processors are already limiting contract volumes according to the amount of raw materials previously purchased, so as not to continue buying soybean oil at high prices.