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Industry group: Declining prices make it possible for Brazil to increase biodiesel blend from 10% to 15%

Industry group: Declining prices make it possible for Brazil to increase biodiesel blend from 10% to 15%

Daniel Amaral of the oilseed industry group Abiove said that the decline in vegetable oil prices has cleared the way for Brazil's mandatory biodiesel mix into diesel to be increased to 15% from 14%.

Brazil's National Energy Council decided to keep the blend at 14% in February amid fears that the proposed increase would push up food costs, negatively impacting President LuizInacio Lula Da Silva's decreasing approval ratings.

The government was trying to combat inflation by raising the price of vegetable oil in the second half last year. Inflation stood at 5.48 percent for the 12-month period ending March. The central bank targets 3%.

Amaral stated that prices have fallen again due to a recovery in supply and demand for vegetable oils. Amaral said that the price of vegetable oils has dropped, and the government must now move ahead with plans to increase biodiesel to 15%.

Amaral told Abiove attendees in Sao Paulo that "the conditions for this are already there, the industry is capable, we're increasing crushing. All of this has already been put in place." The decision is now in the hands of the government, and we hope that it will be made as soon as possible.

The Ministry of Mines and Energy didn't immediately respond to an outside of normal office hours request for a comment.

Amaral stated that Abiove had always maintained that an increase in demand for biodiesel wouldn't affect the prices of consumers. He said that the rise in vegetable oil prices in the first half of this year was primarily due to foreign exchange rates, and the problems in Southeast Asia with palm harvest.

He said that these issues were not only limited to Brazil.

After the decision was made to keep the blend at 14 percent, the agribusiness consulting firm StoneX reduced its forecast for the growth of biodiesel from 1.2 to 600,000 cubic metres. Reporting by Oliver Griffin Editing and Rod Nickel

(source: Reuters)