Brazil’s biodiesel market faces pressure from high soybean oil prices and weak demand

Biodiesel producers in Brazil are facing further margin pressure amid high feedstock costs, substantial inventories of finished products and limited demand. According to Platts, part of S&P Global Energy, contractual price differentials for biodiesel deliveries in November–December 2026 declined by more than R$30/m³ compared with September–October. As a result, differentials turned negative across all major Brazilian regions, further squeezing producers’ margins.

The largest decline in contractual differentials was recorded in Mato Grosso, one of Brazil’s main soybean and biodiesel production hubs. In the Sorriso–Nova Mutum region, the differential fell by R$70/m³, while Cuiabá–Rondonópolis recorded a decline of R$35/m³. In Rio Grande do Sul, the decrease was R$9/m³. At the beginning of negotiations, producers had sought increases of approximately R$300/m³ to offset rising costs and restore profitability.

Traditionally, reduced soybean oil availability during the inter-harvest period supports biodiesel prices toward the end of the year. However, this time seasonal factors were unable to offset weak demand and inventory accumulation. Distributors held substantial outstanding biodiesel volumes under previous contracts, while limited diesel availability due to Petrobras quotas and import constraints further restricted purchases. As a result, buyers gained greater bargaining power and were able to negotiate lower contractual premiums.

Producers faced additional challenges as domestic soybean oil prices increased following the depreciation of the Brazilian real against the US dollar. Since the biodiesel pricing formula incorporates CBOT soybean oil futures, the soybean oil price basis at Paranaguá port and the exchange rate, fluctuations in these indicators directly affect production costs. Some companies attempted to raise spot biodiesel offers, but weak trading activity meant that most of these offers did not result in transactions.

Market participants expect challenging conditions for Brazilian biodiesel producers to persist into early 2027, when demand typically weakens. Some companies are already limiting contracted volumes to the amount of feedstock purchased earlier to avoid additional costs associated with buying soybean oil at elevated prices.

Tags: soybean oil, Brazil, biofuel