The Impacts of Soy-Based Biodiesel on the Main Soy Producers in the International Market

Abstract

This study analyzes the impacts of soy-based biodiesel consumption on the main soybean-producing countries. To achieve this goal, a partial equilibrium model formulated as a Mixed Complementarity Problem (PCM) is used, which allows the inclusion of trade barriers and the construction of alternative scenarios. Four scenarios are analyzed. The first simulates a demand shock for soybean meal and soybean oil, considering the observed growth in demand over the last ten years. The second evaluates the effects of an increase in the demand for meal, oil and biodiesel. The third considers the elimination of the demand for soy-based biodiesel. The last scenario assesses the effects of the elimination of tariffs and subsidies on the grain and food markets. In general terms, the results show that: in the second scenario, Brazil is the only exporting country that shows a greater increase in consumption than in production, reflecting the country’s smaller share in the world soybean trade; in the fourth scenario the gains are relatively smaller than the potential gains in the first scenario; in the third scenario, soybean prices are about 8% higher because of the use of soybeans for biodiesel production, demonstrating the relevance of mandatory policies in this market.