Brazil will miss half of 2007 biodiesel output target: official

Rio de Janeiro (Platts)--3Apr2007

Brazilian biodiesel producers will fall far short of meeting an earlier
government projection on the country's biodiesel output capacity because the
rising price of a major feedstock, soybean oil, has discouraged investors from
building new plants, a government official told Platts Monday.

Frederique Rosa e Abreu, coordinator of agro-energy for Brazil's Ministry
of Agriculture, said that Brazil's biodiesel capacity will probably only rise
to 1.5 billion liters/year (396 million gallons) by the end of 2007. That is
46% less than the 2.8 billion liters of biodiesel capacity that Brazil's
government had expected producers to build by the end of this year,
according to a government estimate from November.

"It's clear now that earlier estimates aren't realistic," Rosa e Abreu
said.

A recent surge in soybean oil prices to about $650/mt has discouraged
some investment in new biodiesel plants in Brazil, Rosa e Abreu said.

Soybean oil is the major feedstock for Brazilian biodiesel production,
although Brazil is experimenting with other oilseed crops, such as palm,
castor and jatropha, to develop more biodiesel at a lower cost.

Rosa e Abreu said that jatropha is emerging as the most promising of
those crops with a high oil yield/acre.

"At these recent prices, most people are not enthusiastic about making
biodiesel with soybean oil," he said. That is because most farmers and traders
can sell soybean oil for other uses in Brazil or export it for larger profits,
he added.

The Brazilian government in November had estimated that 34 new biodiesel
plants would open in the country during 2007, helping Brazil nearly quintuple
its biodiesel capacity from last year. However, Rosa e Abreu said some of
those plants have been delayed, as companies are opting to use less soybean
oil for biodiesel.

--Josh Schneyer, newsdesk@platts.com