(Photo: view of the Renova soybean cluster in Timbúes, where biodiesel is produced for export)

Buenos Aires, August 2nd. The local branch of global KPMG analyzed the biofuels industry in Argentina, concluding that leading indicators will be the same that during 2018. Since 2017 the ethanol industry is producing the same volume, around 1.1 million cubic meters, while biodiesel production dropped from 2.8 million tons in 2017 to 2.5 million tons in 2018, and nothing indicates that this trend will be reversed this year.

The paper was conducted by economist Matías Cano, from Customers and Markets Unit. The paper focused on the unpredictables changes that the industry suffered in relationship with the determination of the biofuels prices by the Government. Due to the currency depreciation, inflation rate and rising costs, the ethanol and biodiesel prices were down, expressed in dollars.

Argentina has a mandatory blend between gasoline and ethanol (12%) and between diesel and biodiesel (10%) since 2010, and that will be in force until middle 2021. But KPMG analysts suggest that this blend should be rose to boost the biofuels industry, particularly in the biodiesel industry for whom the US market remains closed and the only export destination is some countries in the European Union. At the present 43% of the biodiesel output and 100% of the ethanol is targeted to domestic consumption; therefore, the percentage of the mandatory blend has a dramatic impact to impulse the production. On the other hand, the installed capacity of the biodiesel industry reaches 4.5 million tons, i.e., they could double the current production if they have more markets.

The consulting company also suggest continuing with the mandatory blend after 2021, and with its promotion framework, although this will depend on the politic humor of the Government at that moment.

The report shows the great potential of the biofuels industry in Argentina, thanks to the high availability of raw materials, like soybean, corn, and sugarcane, but also reminds that the country should advance towards second-generation biofuels, based on biomass, where there is no competition between food and energy.

Link to the paper (Spanish version) at https://home.kpmg/ar/es/home/industries/agronegocios.html