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Corn+Soybean Digest

Brazil Expands Biodiesel

Roberto Kitagawa says he might have planted soybeans this year if there had been more orientation about biodiesel. As it is, the former soybean grower has switched last year's 222 acres of beans over to pasture. “There haven't been any lectures or presentations on how it (biodiesel) works for the farmer, nothing very concrete,” he says.

Even with two biodiesel plants under construction within 100 miles of his farm, he says, “I don't know what the price would be, what the costs would be.” And one of the two plants, in São Miguel, Goiás, is just across the state line. That potentially means paying taxes on interstate transportation. Or maybe biodiesel is exempt. Kitagawa doesn't know.

“If I had known at least the minimum price they're paying for soybeans for biodiesel, of course it would have gone into my calculations on whether to plant soybeans this year or not,” Kitagawa says.

Brazil has instituted mandatory minimums for biodiesel content of 2% for 2007. The minimum blend of biodiesel creeps up thereafter. Meanwhile, the maximum blend of biodiesel to diesel starts out at 5%. There's already been talk of moving forward the dates for increasing the minimum percentage of biodiesel in diesel, but if the current timetable holds, it would mean demand for about 200 million gallons of biodiesel per year.

Roberto Buller, whose company hauls inputs in and harvested crops out to market for farmers in Kitagawa's town, says his fuel costs in 2006 were “up about 20% over last year.” His average round trip for inputs, he says, is about 650 miles, and the average round trip from farm to market is about 220 miles. Fuel costs add up.

“I think it will be good to have biodiesel,” he says. “It can help steady costs, and can contribute something back to farmers.”

Meanwhile, their state announced it will be the first to switch the government fleet to a 2% biodiesel blend in 300 of the 1,060 state vehicles running on diesel. The recently re-elected governor pushed the concept, and urged hard-scrabble farmers to grow castor beans in the some of the least-productive soils.

The castor bean project should benefit 310 poor rural families, says the state's communications secretary, and create 1,200 jobs.

And there are tax breaks to biodiesel producers who use product from poor farmers. When the plant is finished, he says, he hopes to produce 100,000 liters of biodiesel a day.

Fabiano Calicchio de Campos, partner in a private company building a biodiesel plant in nearby São Miguel, Goiás, starts out talking about sunflower, wild turnips and Barbados nuts as feedstocks for the plant workers are building near his office. “There are tax advantages to having the Social Seal,” he says. “Up to an 87% tax deduction when you use feedstock from family farms. And in five years or so, I think we may be using tallow.”

One reason producers like Kitagawa weren't briefed on biodiesel is that Campos wanted to get poor rural families on board right away, in order to realize the tax incentives. “We had two meetings with recently settled landless families to organize things,” he says.

Petrobrás, the state oil company, with plans to produce 225 million gallons of biodiesel yearly by 2011, has plans to build at least 16 plants nationwide.

It's too late for Roberto Kitagawa to switch back to soybeans, he says, even if he wanted to. But he points out that soybean prices have improved, following good corn prices. “I'm glad I'm planting pasture,” he says. Cattle are always a good business. The soybean price is improving. The problem, he says, is the exchange rate between the U.S. dollar and the Brazilian currency.

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