Brazil is currently facing significant domestic pressures that could impact its sales of used cooking oil (UCO), particularly in the context of its growing biodiesel industry.
As the country ramps up its biodiesel blending mandates, the demand for soybean oil — of which UCO is a crucial component — has surged. This shift in focus towards meeting domestic biodiesel needs may lead to a reduction in the availability of UCO for export.
Factors influencing Brazil’s UCO sales include biodiesel demand and blending mandates.
- Brazil’s biodiesel blending mandate is set to reach 14% (B14) in 2024, with projections to increase to 15% by 2025. This represents the highest blending requirement in the country’s history.
- The growing domestic consumption of soybean oil for biodiesel production is expected to significantly reduce the volume available for export. In fact, soybean oil accounted for 72% of raw materials used for biodiesel in 2024, up from 69% in 2023
Impact on exports
- The increased domestic demand has already begun to affect export levels. In the 2023-2024 period, Brazilian soybean oil exports fell by 22.2% compared to previous years, despite an overall increase in production.
- Analysts suggest that if Brazil does not enhance its soybean crushing capacity or diversify its feedstock sources, it may stop exporting soybean oil altogether within a few years.
The U.S. ag attaché in Brazil projected 5.6 million metric tons of soybean oil would be used to make biodiesel in 2024 with 630,000 MT from tallow, 165,000 MT palm oil, 100,000 MT UCO and 820,000 MT of other feedstocks (link).
Cumulative biodiesel production from January through June 2024 reached 4.2 billion liters, a 27% increase over the same period in 2023 (3.3 billion liters). Soybean oil accounted for 73% of the total. Tallow accounted for 6% of biodiesel production and palm oil for 1%. The remaining 15% came from fats and 5% from various feedstocks, including chicken fat, pork fat, cottonseed oil, rapeseed/canola oil, used cooking oil, and corn oil.
Economic Considerations:
The Brazilian government has also introduced measures that could further complicate the export landscape. For instance, recent tax changes aimed at restricting tax credits for certain exports could raise costs for grain and oilseed exporters, adding pressure to the already strained market.
Additionally, with U.S. imports of used cooking oil from Brazil now authorized and increasing due to favorable biofuel policies in the U.S., Brazil’s domestic market dynamics may shift further towards prioritizing local biodiesel production over exports.
Bottom line: Brazil’s amendments to its domestic policies and increasing biodiesel mandates are likely to reduce the availability of used cooking oil for export, potentially reshaping its role in the global biofuel market.
