Brazilian biodiesel bimonthly auction moves 463.8 million liters

Sao Paulo (Platts)--11Apr2014/323 pm EDT/1923 GMT


Brazilian fuel distributors secured 463.8 million liters of biodiesel in an auction concluded Friday to fulfill the country's B5 mandate, according to the country's fuel regulator, ANP.

The 36th ANP auction closed with an average price of Reais 1.88 per liter, representing a 23% discount to the reference price and without taking into account Petrobras' margin, it said in a statement on Friday.

As a result of this auction, the ANP said that it expects to commercialize approximately 9.2 billion liters of biodiesel in May and June of this year. The auction was held April 10 and 11, and 99.4% of the total volume auctioned was by producers accredited to Brazil's Social Fuel sustainability program.

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A total of 42 suppliers took part in the auction offering 735.2 million liters of biodiesel, of which 98.7% conformed with the country's Social Fuel standards.

The Brazilian government created the Social Fuel accreditation program in 2004 for biodiesel producers that purchase feedstock from family farmers and provide them with technical assistance.

Brazilian fuel distributors had secured 390.7 million liters of biodiesel in the first day of an auction on Thursday. The first day of the biodiesel auction was open only to bids from producers that conform with the Brazil's Social Fuel standards. The Brazilian government created the Social Fuel accreditation program in 2004 for biodiesel producers that purchase feedstock from family farmers and provide them with technical assistance.

Producers who do not hold the Social Fuel Seal would allowed to participate the second day of the auction. However, the maximum volume auctioned by the non-Social Fuel distributors was set at 97.6 million liters, ensuring that 80% of the total volume comes from accredited producers, the ANP said.

Brazil has more than 55 biodiesel producers with an annual capacity of 6.27 billion liters/year to fulfill the country's B5 mandate, which has been in place since 2010. A total of 2.71 billion liters were produced in 2012, mainly from crops such as soy, palm and sunflower.

ANP's biodiesel auction system was revamped last year after the government found evidence that producers were colluding to keep prices high.

Under the new system, biodiesel producers negotiate contracts directly with distributors. Previously, contracts to supply the biofuel were signed with state-controlled oil company Petrobras, which then sold the product to distributors.

With the new system in place, biodiesel producers can furnish distributors with three offers during bimonthly auctions.

Biodiesel output in Brazil has been rising rapidly in recent years. This year's harvest will see Brazil overtake the US as the world's top soy producer, President Dilma Rousseff said in February, citing numbers from Conab, the government's food supply agency.

That would be up from the world's sixth position in 2007, according to data from energy consultancy Santiago & Sinclair. Brazil is forecast to account for 8% of global biodiesel production by 2022, behind the EU-28 block with 51% and the US with 15%, the UN's Food and Agriculture projected in its 2013-22 Agricultural Outlook report.

--Vinod Sreeharsha, newsdesk@platts.com
--Edited by Katharine Fraser, katharine.fraser@platts.com

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