Argentine price controls reduce biodiesel used in local fuel mix -trade group

BUENOS AIRES, March 10 Mon Mar 10, 2014 2:29pm EDT

BUENOS AIRES, March 10 (Reuters) - The Argentine government has set the price of biodiesel so high that producers cannot afford to use the required amount of it in diesel fuel, the head of the country's biofuels trade group told Reuters on Monday.

The amount of biodiesel in Argentine diesel fuel is less than half the mandatory 10 percent, according to Luis Zubizarreta, head of Argentina's Biofuels Chamber (Carbio), which includes major exporters such as Cargill, Bunge Ltd and Louis Dreyfus.

The official price of 4,533 pesos ($576.5) per tonne does not permit major producers to break even after paying basic costs, he added. As a result, he said less than 5 percent of Argentine diesel fuel sold at the pump along Argentina's highways is made up of biodiesel.

"They are mixing in much less than 5 percent because the official domestic price is so low it no longer bears any relation to the cost of production," Zubizarreta said.

No one from the economy ministry or state oil company YPF was immediately available for comment.

Argentina is the world's No. 3 exporter of soybeans, from which biodiesel is made. The country is also the No. 1 supplier of soyoil and soymeal livestock feed, as well as a major exporter of processed biodiesel.

Soyoil is fetching higher and higher prices, in part because of the devaluation of the local currency.

Soyoil is priced in U.S. dollars, while biodiesel is priced in the Argentine peso, which has weakened 17.1 percent so far this year against the greenback.

At home, the Argentine government regulates prices of biodiesel as it does those of other fuels and many basic foods.

Until late last year, Argentina's main biodiesel market had been Europe. In December Argentina filed a complaint with the World Trade Organization over the European Union's decision to put anti-dumping duties on the South American country's biodiesel.

In November, the EU set biodiesel duties at an average of 24.6 percent for Argentina and imposed similar tariffs on Indonesian biodiesel.

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