SAO PAULO, Nov 5: Brazil may raise the biodiesel blend required in diesel fuel as early as January, a change that could result in up to 10 per cent more of an expected record soybean crop getting crushed into meal and oil, industry sources say.

Raising the blend from the current 5pc to 7pc, a move long advocated by soy crushers, would relieve pressure on state-run oil company Petrleo Brasileiro SA, which has been forced to import diesel fuel to make up for a domestic refining shortfall and sell it at a loss on the local market.

“Our view is that by January we could have an increase in the blend,” said Leonardo Zilio, economic adviser for Brazil's vegetable oil association (Abiove). Last week, Energy Minister Edison Lobo said the government was evaluating a blend increase.

To meet the two percentage-point-higher demand, between eight million and 9m tonnes of soybeans would be needed. In crushing, soybeans yield 80pc meal, 18pc oil and 2pc waste.

Brazil’s government crop supply agency Conab is forecasting soy output in the current 2013/14 crop of between 87.6m and 89.7m tonnes, which would provide most of the extra supply needed if the crop is confirmed.

Brazil’s demand for biodiesel in 2013 will likely be around three billion litres, but with a 7pc blend requirement it could reach 4.2bn litres in 2014. Some 75pc of the country’s biodiesel is produced from soybeans, though some is made with materials like palm oil and cotton seed. “When we say that the country's interests are very aligned with this decision (to raise the mixture) certainly we are talking about the need to import diesel,” said the president of the Superior Council of Ubrabio, Juan Diego Ferres. —Reuters