Soy and Biodiesel in Brazil:scenario and outlook

Campinas, SP, Brazil6th November 2019

Daniel Furlan AmaralChief Economist

São Paulo Grains Forum

Member companies

0%

2%

4%

6%

8%

10%

12%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Brazil GDP Agribusiness GDP Agriculture GDP

Soy share of GDP

Sources: IBGE and CEPEA/ESALQ/USP. Prepared by ABIOVE.

95 crushing plants

42 active biodiesel plants and 9 inactive

Over 1.5 million direct and indirect jobs

232,000 soy suppliers, of which 60,000 are small farmers

US$ 32.1 billion in exports of soybeans, meal and oil

Overview of Brazilian Soy and Biodiesel Sector

Soy area

Biodiesel plants

Soy processors

Soy S&D in Brazil: 2019 (Mt)

Crop 117.8

Exports 72.0

Meal 32.4

Oil 8.6

Exports 15.8

50%44%

6% EU

Asia (ex. China)

Others

Internal Market 16.3

Exports 1.0

70%

16%

14% Asia (ex. China)

China

Others

Internal market 7.8

Biodiesel 4.1

82%

6%5%

7%

China

EU

Asia (ex. China)

Others

Crushing 42.9

Poultry Meat

Pork Meat

Eggs

Refined Oil

Margarine

Fats

Biodiesel

Chemical

Protein Meal

Crude Oil

Soybeans

33,182

6,697

956

69

0

N/D

15

12

83

6,571

1,115

Raw Material Processing Derivatives

Source: Ministry of Economy/SECEX. Prepared by ABIOVE.

in millions of U.S. dollars

Exports concentrated in soybeans in 2018

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%1

989

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

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200

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200

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200

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200

9

201

0

201

1

201

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9*

Shar

e o

f so

y ex

po

rt r

even

ue

s

Soybeans Meal + Oil

Challenge: increase meal exports

Sources: Brazil Ministry of Economy. Prepared by ABIOVE. *Data available through October.

76,8%

7,7%

2,3%

2,3%

1,8% 9,1%

China European Union

Iran Thailand

Turkey Other

42,9%

20,8%

14,0%

10,0%

3,3%

9,0%

India China Algeria

Bangladesh Pakistan Others

53,3%

11,6%

9,6%

9,0%

5,9%

10,7%

European Union Thailand

South Korea Indonesia

Iran Others

Source: Ministry of Economy/SECEX. *Data available through October.

Soy

Quantity (million tonnes) 65.6

FOB amount (US$ billion) 23.0

Soy Oil

Quantity (million tonnes) 1.0

FOB amount (US$ billion) 0.6

Soy Meal

Quantity (million tonnes) 13.6

FOB amount (US$ billion) 4.9

Export destinations in 2019

0,60

0,70

0,80

0,90

1,00

1,10

1,20

1,30

1,40

1,50

jan

-96

jul-

96

jan

-97

jul-

97

jan

-98

jul-

98

jan

-99

jul-

99

jan

-00

jul-

00

jan

-01

jul-

01

jan

-02

jul-

02

jan

-03

jul-

03

jan

-04

jul-

04

jan

-05

jul-

05

jan

-06

jul-

06

jan

-07

jul-

07

jan

-08

jul-

08

jan

-09

jul-

09

jan

-10

jul-

10

jan

-11

jul-

11

jan

-12

jul-

12

jan

-13

jul-

13

jan

-14

jul-

14

jan

-15

jul-

15

jan

-16

jul-

16

jan

-17

jul-

17

jan

-18

jul-

18

jan

-19

Declining gross crushing margins

Sources: consulting companies. Prepared by ABIOVE.

Percentage (%)

0

50

100

150

200

250

300

350

400

450

US$

per

to

nn

e

Premium CBOT Fob Paranaguá

Trade war: soy domestic price composition

Trade war

Source: consulting companies. Prepared by ABIOVE.

Trade war

0

1

2

3

4

5

6

7

8

9

10Brazil

U.S.

Trade war: U.S. and Brazil exports to China

Sources: Brazil Ministry of Economy and USITC.

In million tonnes

1 69 4041.167

1.6082.386 2.673 2.717 2.917

3.4223.937 3.801

4.2915.350 5.734

6.8197.611

8.4449.319

14.503

B2

B2

B2

B2

/B3

B3

/B4

B4

/B5

B5

B5

B5

B5

/B6/

B7

B7

B7

B7

/B8

B8

/B10

B1

0/B

11

B1

1/B

12

B1

2/B

13

B1

3/B

14

B1

4/B

15

B2

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ... 2028

2018 B8/B10

2028 B20

Biodiesel mandates and production (thd m3)

Production (ANP)

Projection (ABIOVE)

0

1

2

3

4

5

6

7

8

9

10

89/

90

90/

91

91/

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17/

18

18/

19

19/

20

Mill

ion

to

nn

es

Human Exports Biodiesel

Sources: ABIOVE and ANP.

Soy oil: adequate supply for all uses

Biodiesel and commercial diesel sales projections

O&D 2018 2019 2020

Supply 9,282 9,059 9,120

Starting stock 413 409 259

Production 8,833 8,600 8,810

Imports 35 50 50

Demand 9,282 9,059 9,120

Exports 1,416 1,000 300

Biodiesel 3,769 4,110 5,021

Other uses 3,688 3,690 3,679

Final stock 409 259 120

Brazilian crushing will be around 44.0

mt in 2020.

This volume is sufficient to produce

soy oil for all uses: food, biodiesel,

chemical and others.

ABIOVE also projects soy oil exports at

300,000 tonnes.

Source: ABIOVE.

Crushing and soy oil projections

0

10

20

30

40

50

60

70

2019 2020 2021 2022 2023

Soy crushing needs(million tonnes)

Food and others B10 B11-B15 Active capacity

The soy processing industry has sufficient active capacity to increase crushing.

Increase in biodiesel production will require the growth of soy crushing to meet all domestic and international demands.

Source: ABIOVE.

Soy S&D in Brazil: 2020 (mt)

Crop 122.8

Exports 75.0

Meal 33.5

Oil 8.8

Exports 15.3

50%44%

6% EU

Asia (ex. China)

Others

Internal Market 16.9

Exports 0.3

70%

16%

14% Asia (ex. China)

China

Others

Internal market 8.7

Biodiesel 5.0

82%

6%5%

7%

China

EU

Asia (ex. China)

Others

Crushing 44.0

RenovaBio Legal Base

RenovaBio Decarbonization Model

RenovaBio Market

16,8

28,7

41,0

49,8

59,6

66,9

73,3

79,585,1

90,195,5

0

10

20

30

40

50

60

70

80

90

100

Mil

lions

Source: Resolução CNPE nº 15/2019.

RenovaBio Annual Targets for CBIO purchases

Law 13.576 createsRenovaBio

CNPE Resolutionnº 5/2018 and15/2019 over tenyear targets ofcarbono intensityreduction.

ANP Resolutions nº 758/2018 over certification firmsand nº 791/2019 over individual targets for fueldistributors for CBIO acquisition.

CHALLENGES in 2S 2019:- CBIO commercialization platform;- Rules definition for CBIO’s bookkeeping and commercialization in organized markets.

Feb-Mar/2020:beginning of CBIS commercialization.

RenovaBio present stage and challenges

Soy crop has responded adequately to cope with domestic andinternational demands.

Trade war has created new challenges for the Brazilian industry due toprice premiums.

Brazilian industry seeks to increase meal exports to stimulate soycrushing.

Biodiesel mandates have a positive impact on domestic crushing:

Technical approval allows mixtures between a minimum of 11% and amaximum of 15%: diesel/biodiesel price ratios will be determinant.

RenovaBio will create new incentives for biofuel usage after 2020.

Final remarks