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Brazil raises mandatory biodiesel blend to 12%, below expectations

The Brazilian government raised the mandatory blend of biodiesel into diesel to 12% from 10%, below this year’s target of 13% in a bid to rein in fuel inflation amid high soybean prices.

About 70% of Brazil’s biodiesel is produced from soy oil, prices of which have risen owing to strong demand and tight supply of soybeans.

“The Brazilian biodiesel industry is entirely prepared for delivering the 13% mixture,” Daniel Amaral, chief economist at Brazilian oilseeds lobby Abiove, said in a statement on Tuesday. “Yet raising the blend to 12% is already a positive development as it stimulates soy processing and grain use in Brazil.”

According to a statement from the Mines and Energy Ministry late on Monday, Brazil’s National Energy Policy Council (CNPE) decided to raise the blend to 12% “to avoid an excessive increase” in the price of diesel for the end-consumer.

On April 9 the government cut its biodiesel blending requirement to 10% from 13% to keep fuel prices down at the pump. Following that surprise move, Abiove started to push the government to raise its biodiesel blending requirement ahead of biofuel auctions this year.

Abiove last week said that sluggish economic growth had caused biodiesel prices to fall in Brazil, justifying an increase in the mandatory biodiesel mix.

Keeping the biodiesel mix at 10% would discourage Brazilian farmers to plant soybeans next season, Abiove said.
Source: Reuters (Reporting by Gabriel AraújoWriting by Ana ManoEditing by Chizu Nomiyama and David Goodman)

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