Brazil’s soybean active crush capacity reaches nearly 20-year high

Brazil’s soybean processing capacity is likely to reach its highest active level in nearly 20 years by the end of 2024, driven primarily by positive margins and an increased mandatory biodiesel blend with diesel.

According to S&P Global Commodity Insights, Brazilian crushing plants will close the year with an active capacity of 204,793 metric tons per day, representing 93.5% of the country’s total installed capacity, the highest utilization rate since 2005 (93.6%). The calculation is based on data from the country’s Association of Vegetable Oil Industries, or Abiove.

In recent years, the industry has not only invested in new facilities and expansions, but has also converted inactive capacity into operational status. This surge in processing capacity aligns with favorable margins for Brazil’s industry, particularly for those integrated with biodiesel production, according to sources.

Biodiesel Effect

Soybean oil serves as the primary raw material for Brazil’s biodiesel production, with the blending mandate raised from 12% to 14% in March 2024 and an anticipated increase to 15% in March 2025. The byproduct from soybean’s crush accounts for around 70% of biodiesel feedstocks, meaning that any adjustments in these mandates directly impact supply, demand, and pricing.

As the third-largest producer globally, Brazil exported an average of nearly 1.80 million metric tons of soybean oil over the past five years, with exports of 2.60 million in 2022 and 2.33 million in 2023. However, due to the increased biodiesel mandate, Commodity Insights forecasts shipments to drop below 1.50 million metric tons in 2024 – a scenario that has already been seen in prices.

According to Platts, part of Commodity Insights, FOB Paranaguá soybean oil prices reached their highest assessed level since May 2022 on Sept. 20 at $1,063.95/mt.

Coming years

Looking ahead, the Brazilian government has outlined a plan to increase the blend rate of biodiesel by one percentage point annually, aiming to reach 20% by 2030. Such an increase is not set in stone, but reflects the government’s intention, contingent on further technical research to validate the viability of the so-called B20 blend.

Should the government approve these gradual increases, the crushing industry will need to expand its capacity to meet the target, as less than 7% of current capacity remains inactive.

Throughout the first half of 2024, crush margins in Brazil’s interior have remained below the five-year average, dampening industry investment in new plants. Consequently, companies were more inclined to activate dormant capacity. Crush margins in 2024 are significantly lower than those observed during the 2021-2023 period, which saw a surge in new investments.

In this context, Commodity Insights anticipates that Brazil will continue to reduce its soybean oil exports to fulfill domestic demand. Otherwise, an increase in crush capacity will be essential within the next few years.

Tags: Brazil, soybean