Brazil’s soybean crushing capacity rose about 13% in 2026 to 86.4 million metric tons a year, driven by growing demand for soy oil used in biodiesel production. But the expansion is raising concerns about profitability as processing capacity outpaces actual crushing volumes and industry utilization rates decline.
The increase, reported Tuesday by Abiove, Brazil’s vegetable oil industry association, comes as processors face pressure on margins from logistics costs, volatile commodity prices and delays in raising the country’s mandatory biodiesel blending requirement.
The number of soybean processing companies rose to 89 from 75 in 2025, while the total number of industrial facilities increased to 157 from 149, according to Abiove.
Operating plants increased to 148 from 131, while the number of idled facilities halved to six from 12. Three plants were under construction this year, compared with six a year earlier.
Daniel Furlan Amaral, Abiove’s director of economics and regulatory affairs, said the expansion reflects the industry’s response to rising demand for soybean meal and oil, particularly the latter’s growing use in biodiesel.
“The results reaffirm the industry’s readiness to add value to Brazil’s soybean crop and strengthen its position in global markets for processed products,” Amaral said.
Abiove expects investments of about $1.53 billion (7.65 billion reais) in new facilities and expansions over the coming years. The projects could add another 7.4 million metric tons of annual crushing capacity, an increase of approximately 8.5%.
Capacity Growth Outpaces Demand
The expansion, however, does not necessarily translate into higher margins.
According to a recent industry report by BTG Pactual, soybean processors’ profitability remains heavily dependent on factors largely outside their control, including local commodity price differentials, sales timing, hedging strategies, logistics and Brazil’s biodiesel mandate.
“Screen prices don’t tell the whole story of financial performance,” BTG analysts Thiago Duarte and Guilherme Gutilla said, referring to commodity futures quotations.
Actual margins depend on the basis — the difference between local physical prices and futures benchmarks — as well as the timing of transactions, hedging contracts and operational execution, the analysts said.
Production efficiency also matters. Soybean meal typically accounts for 75% to 78% of the volume processed, while soybean oil represents about 19% to 20%. Extraction yields, product quality and freight expenses can materially affect profitability.
Low-value commodity products leave little room to absorb logistics costs, the analysts noted.
“Theoretical crushing spreads are a useful compass, but they don’t provide a complete map of profitability,” Duarte and Gutilla said. “Two processors looking at the same market prices can still report different margins.”
Biodiesel Delays Weigh On Utilization
On the revenue side, Brazil’s mandatory biodiesel blending requirement is a key driver of domestic demand for soybean oil.
The country currently requires a 15% biodiesel blend in conventional diesel, known as B15. An increase to 16%, or B16, was scheduled for March 2026 under Brazil’s Fuel of the Future law but has yet to be implemented by the government and could be postponed until 2027.
Duarte and Gutilla estimate that moving to B16 would generate enough additional demand for soybean products to require another 2.4 million metric tons of annual crushing.
The delay has contributed to a widening imbalance between installed capacity and actual processing volumes.
Soybean crushing capacity has expanded faster than processing activity, while slower-than-expected growth in biodiesel demand has likely exacerbated the gap, according to the analysts.
They estimate that the industry’s operating utilization rate will fall to 80% in 2026, down from 88% in 2022.
The resulting pressure on profitability is already evident.
Gross profit per metric ton — calculated as the combined revenue from soybean meal and oil minus the cost of purchasing raw soybeans — remains at its lowest level since December 2022, according to BTG Pactual.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
