B100 price at record high
Platts Soybean oil assessment rise 28% so far in 2021
New trading model to be announced
Brazilian Biodiesel Auction (L79), which started on April 5, was suspended suddenly April 6 by the Brazilian National Agency of Petroleum, Natural Gas and Biofuel, ANP without any conclusion, which market sources suspect could be due to the record high price for the B100.
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The maximum reference price (MRP) was established between Real 7,420/cu m to Real 7,860/cu m, a surge of nearly 26% from the prior auction. The price reference was published by the Brazilian National Agency of Petroleum, Natural Gas and Biofuel, ANP on March 31.
Brazil has a mandatory blend of 13% of B100 in the diesel and the current country’s regulation settles that the biofuel can only be traded within the auction process, which happens in a bi-monthly basis.
Despite the prior notice released by ANP, communicating the MRP to whole market, the L79 was suddenly suspended on April 6, during the 3A stage, which is exclusively for the small-scale farmers. By that time, the Brazilian regulator, ANP just informed the immediate precautionary suspension of the L79.
By the time of the suspension or 27 minutes after the beginning, 61,400 cu m were traded, a volume equivalent to 62.2% of the maximum allowed in the 3A stage of the auction. According to Biodiesel BR the average MRP for the small scale farmers was expected to be between Real 7,600/cu m and Real 7,640/cu m.
After a few hour of the L79 suspension, ANP published a statement informing that the Ministry of Mines and Energy was the entity requesting the auction suspension, however it did not disclose the reason.
Market participants feel that the reason behind the suddenly suspension and lacking of official notice after more than 24 hours could be the record high price for the B100, which according to sources would be three times higher than the diesel supply cost.
A few entities suggested that a blend reduction could be the only option to lower the economic impact for diesel consumers.
Soybean oil price impact
Brazilian biodiesel has 70% of its feedstock supplied by soybean oil, therefore any price movement in that commodity has a huge impact in the biodiesel production cost.
S&P Global Platts soybean oil price assessment for front month loading FOB Paranagua rose so far in 2021 by over 28%, moving from $952.40/mt in Jan. 19, peaking at $1,255.75/mt in March 12 and being last assessed at $1,232.86/mt on April 6.
Soybean oil prices at the Chicago Board of Trade May futures contract has also been trading higher on the year, starting the year at low 40s cents/lb and reaching the highest value in 10 years in March 24, when settled at 57.48 cents/lb.
According to analysts, the rally on the year for the main vegetable oils prices, such as palm oil, soybean oil and sun oil, reflect the expected low stocks, slow recovery on output and also an increasing demand for food and energy.
New trading model
After the record prices during the 2020 auctions, that triggered blend reductions, a special commission from the Ministry of Mines and Energy, proposed a shift from the currently auction to a partial open market as of Jan. 1, 2022.
The proposal was discussed by the National Council of Energy Policies, CNPE and is now under ANP studies.
An official notice published on March 26, informed that the working group constituted by ANP Ordinance No. 292/2020, to propose the new biodiesel trading model, extended the deadline for 15 days to adequately conclude the final report, as well as to internally adjust any details that may arise in this final stage of the work.