BioVerde is in talks to sign its first supply contracts with European fuel distributors, in Italy and Spain, and expects to begin shipments within 90 days, President Ailton Braga Domingues said in a telephone interview.

With biodiesel production capacity in Brazil more than double the domestic demand, Sao Paulo-based BioVerde is eager to gain access to new markets. While high freight costs and a strong local currency have made Brazilian biodiesel uncompetitive abroad, the company says exporting is viable because its plants are near the coast instead of deep in the jungle.

“Our strategy was always different from other companies,” Domingues said. “Freight costs make this kind of strategy impossible for a plant in Mato Grosso and Goais” states, in Brazil’s interior.

BioVerde received export permits from Brazil’s fuel regulator Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis on June 15. Domingues said he expects to deliver to European distributors 10 million liters (2.6 million gallons) a month by the middle of 2012 and 33 million liters a month in four years.

‘Bigger Role’

“Brazil has the agricultural capacity to play a much bigger role than it does now,” Domingues said today in an interview. “We want to become Brazil’s biggest exporter of biodiesel.”

The company has one refinery online in Sao Paulo state, in Taubate, and is spending 150 million reais to retrofit another site, in Sorocaba, to produce 400 million liters of biodiesel a year, he said.

It’s expected to go into operation this year and will overtake Archer Daniels Midland Co.’s plant in Rondonopolis, currently Brazil’s largest with annual production capacity of 344 million liters, according to Bloomberg New Energy Finance.

Brazil has the third-largest biodiesel industry, after the U.S. and Germany, with about 60 refineries that can produce 5.9 billion liters a year, according to ANP.

Brazil’s two biggest biodiesel producers, Granol Industria, Comercio E Exportacao SA and Caramuru Alimentos SA, and at least six other companies have secured export permits. Some of them have concerns about selling the fuel abroad.

Higher Prices

“I’ve been working in this industry since 2005,” Marcelo Freiria, sales manager for Sao Paulo-based Granol, said in a telephone interview. “And not once have I been offered a price,” from a European distributor “that would justify me knocking on my director’s door and asking him to take it further.”

Biodiesel is selling for 2.05 reais ($1.28) a liter in Brazil, compared with about $1.20 a liter in Rotterdam, according to data compiled by Bloomberg. Shipping costs to export the fuel from Brazil to Europe may add an additional 12 cents a liter to the final price tag and fuel retail taxes in some countries may tack on another 26 cents, New Energy Finance analyst Roberto Rodriguez Labastida said.

Part of the reason for the price differential has been Brazil’s currency’s 45 percent gain against the U.S. dollar since 2008.

“Brazilian soybean oil,” the country’s staple feedstock “often sells for cheaper than European biodiesel,” Freiria said. “The business isn’t viable,” even at Granol’s Cachoeira do Sul plant that’s 300 kilometers (186 miles) from Rio Grande port in far southern Brazil, he said.

Not Competitive

Logistical problems and low European prices have meant it’s not been competitive to sell there, according to an official at Caramuru.

Last year, 61 percent of the 2.3 billion liters of biodiesel the EU’s 27 member states imported came from Argentina while almost 26 percent came from Indonesia, according to an e- mail from the EU’s statistics department Eurostat. None was imported from Brazil, according to the statement

With plants near the coast, about an hour’s drive from Santos, Brazil’s biggest port, BioVerde is better positioned than its competitors to reach European markets, Domingues said. Most of the industry is based more than 1,000 kilometers inland in the heart of soybean-producing country, he said.

“Our biodiesel has been tested and approved by European distributors,” he said. “Now it’s a question of negotiating the commercial conditions.”BLOOMBERG.

The U.S. agribusinesses have joined Brazilian companies that are expanding facilities in a bet the government will double to 10 percent the amount of biofuel that must be blended into petroleum-based diesel, driving up demand overnight.

With oil above $100 a barrel, President Dilma Rousseff is looking for alternative fuels to fill trucks’ tanks and keep a lid on inflation. Expanding production would also boost the economy of Brazil’s impoverished center-west region, where most of the industry is based. The risk is the country will be awash in unneeded biofuel, said Roberto Rodriguez Labastida, an analyst at Bloomberg New Energy Finance.

“There’s far more biodiesel refineries online than are necessary,” Rodriguez Labastida said from the research group’s office in London. “I wouldn’t say it’s smart to invest” in any more facilities to process soybeans into fuel.

Brazil demands that diesel sold at the pump contain 5 percent biofuel. It’s the third-largest market by capacity after the U.S. and Germany. Executives at four refiners said they expect the government to double that to 10 percent within three years, giving Brazil the world’s highest biodiesel blending rate.

Edison Lobao, Brazil’s Minister of Mines and Energy, is considering a higher blend rate as long as there’s enough vegetable-oil that can be processed into fuel, according to a statement posted on the ministry’s website May 4. He did not say how much it may be increased.

A Cargill spokesman declined to discuss the company’s biodiesel plans. ADM and Bunge Ltd. (BG), another U.S. agribusiness approved to build in Brazil, did not respond to inquiries.

Europe, U.S. Overcapacity

Overcapacity is also an issue in Europe, where plants are operating at about 40 percent of potential, and in the U.S., which according to some measurements is running at about 24 percent, according to Claus Keller, senior analyst of Ratzeburg, Germany-based biofuel consulting company F.O. Licht.

Doubling the concentration would rocket demand for the fuel and would cut imports of petroleum-based diesel, easing Brazil’s balance of trade.

“Brazil is bound to increase the biodiesel blend to 7 percent in the next 5 months,” said Paulo Jose Fuga, a manager at Fuga Couros SA. The Marau, Brazil-based leather maker and meat processor is spending 22 million reais ($13.6 million) on a biodiesel plant that will process as much as 108 million liters (29 million gallons) a year beginning in February. He forecast the requirement reaching 10 percent by 2014.

21 Projects

The Fuga project is one of 21 in Brazil, either new plants or expansions of existing ones, that received permits in the last year to begin construction from fuel regulator Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis.

Developers include Decatur, Illinois-based Archer-Daniels- Midland’s local unit, ADM do Brazil Ltda.; Minneapolis-based Cargill; and Bunge, based in White Plains, New York. Together they are set to add slightly more than 2.2 billion liters of annual capacity, increasing the production base by about 38 percent, according to the regulator.

New biodiesel units in Brazil cost about $0.25 a liter to build, according to data compiled by London-based New Energy Finance. Rodriguez Labastida estimates that refiners are investing more than $560 million to boost their capacity, based on construction permits they have received.

Refiners, which make the fuel by treating vegetable oils or animal fats with alcohol in a chemical reaction, say they need more capacity to keep pace with rising demand for the standard diesel with which it’s mixed.

Rising Consumption

Even without the blending increase, national consumption of the fuel is expected to rise by 6 percent a year over the next decade, according to a Ministry of Mines and Energy projection.

The producers are overly optimistic about their sales outlook because national output capacity is growing faster than demand, according to F.O. Licht’s Keller.

There’s “already strong competition for volumes,” in the government’s quarterly auctions for the fuel, he said. “That’s only going to increase as more plants start operations.”

Only biodiesel projects with access to cheap raw materials, like soybean and animal fats, or “at minimum, ownership over a seed crushing plant,” make economic sense, Keller said. “I’d only build a project if I had access to the feedstock for the next 10 years.”

More Refineries

There are about 60 biodiesel refineries selling fuel in Brazil with production capacity of 5.9 billion liters a year, according to fuel regulator ANP. That’s up from 47 at the start of 2010.

The average price of biodiesel in a government-organized auction in February was 2.05 reais a liter, down 11 percent from the previous auction in November, according to ANP. Soybean oil was selling for 2.14 reais a liter on April 28 in Sao Paulo, according to information compiled by Bloomberg.

Brazil imported 9 billion liters of diesel last year, according to the Secretary of External Commerce. Increasing the percentage of biodiesel in the fuel sold at retail would decrease the amount of standard diesel in drivers’ tanks and would have saved the country about $2.2 billion in the first half of 2010 on imports, according to Brazil’s biodiesel trade group Uniao Brasileira do Biodiesel.

Vegetable Oil Supplies

Keller questioned the impact of a higher blend rate on Brazil’s farmers. A 10 percent requirement may require an additional 2.4 billion liters of vegetable oil to produce, double the current level, he said.

That new blend obligation may consume as much as 69 percent of the 7.4 billion liters of soyoil that the Brazilian vegetable oil trade group Associacao Brasileira das Industrias de Oleos Vegetais predicts will be produced in the 2011 to 2012 harvest season. About 84 percent of Brazilian biodiesel was derived from soy in February, according to ANP.

That would drive up prices for soy, raising production costs for refineries, Keller said. “Some producers may not be able to deliver” their product “under those conditions.”BLOOMBERG.

It is the Global Agricultural Resources (Gar) company.Â

Its representative in Argentina advanced that once they reach the 50.000 sowed hectares, they will install an oil factory and later on, a biofuel elaborato.Â

The Global Agricultural Resources (GAR) company, of Swiss capitals, advanced that it will build an oil plant oil in the Nea and later on, a biodiesel elaborator.

In the first stage of the project, the company is promoting the tartago cultivation in the whole region. To that effect, they guarantee the purchase of all the volume of this oleaginous that is produced in the region and they give seeds to the colonists that are interested in this cultivation.Â

It is expected that next year, that Misiones reaches 6.000 hectares covered with this bush, while in Corrientes and Chaco there will be a total of 15.000.Â

As its representative explained in Argentina, Daniel Kait, once we get to the 50.000 hectares in production, the industrial stage will begin, that plans the construction of an oil factory to process the seeds and then, a biodiesel plant “as long as the forecasts of profitability allow it”, Kait explained.Â

The factory will settle in the province that has the biggest cultivated surface, in order to minimize the costs of freight.Â

Rustic plantÂ

The main attractiveness that presents the Tartago as cultivation in the area, is its wildness. It is a bush that grows in wild way in the area, it resists extreme droughts and high temperatures. It can even be developed in highly degraded floors and it doesn’t require much cares.Â

Due to its characteristics, this cultivation represents an ideal alternative be practiced in “capueras” and other lands not incorporated to the productive system for being of low fertility.

The average price of the seeds is of 170 dollars per ton and the yield oscillates between the 2.500 and 4.000 kilos per hectare. Keeping in mind these data, the cultivation would offer an annual income of up to 680 dollars for hectare, similar to the one that is obtained in a low yield weed.Â

Kait estimated however that the values of the tartago would increase in the future from the hand of the strong increment that is forseen in the biodiesel demand. In that sense, Kait highlighted that the European Union will force to mix the fossil fuel that is sold in the old continent, with a biofuel percentage.Â

Starting from 2009, the oil companies will incorporate 2 percent of vegetable components to their fuels, percentage that will be increased progressively until arriving to 20 percent in 2020.Â

Source: Misiones on line

Translation by Nextfuel/Biodiesel.com.ar