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Getulio Vargas, Brazil. With its biofuels sector increasingly dominated by giant corporations, Brazil is seeking to extend the industry to include farmers like Lucas Scariot, who makes around $10,000 per year from selling grain.

For the past three years, Scariot has sold soy beans at a premium over market prices to a biofuels company under a government program aimed at supporting small farms in the countryside.

This year, Scariot planted canola for the first time in a field he usually leaves fallow during the winter, diversifying the region’s soy-dependent agricultural base and providing a new raw material for growing local biodiesel production.

“It’s good, because it gives us additional value for our crops,” said Scariot, who along with his father works 20 hectares of land in Brazil’s southernmost state of Rio Grande do Sul.

“And now we have incentives for new crops, because people are always talking about soy, soy, soy. We can’t just depend on that,” Scariot said.

The program is meant to boost production of biodiesel, which can be used in heavy vehicles like trucks, and reduce diesel imports the way the 30-year sugar cane ethanol program has cut the use of motor gasoline.

Brazil hopes backing small farmers will help it avoid problems associated with its ethanol sector, including growing concentration in the hands of large agribusiness and notoriously bad labor conditions.

But efforts to use new raw materials, including untested crops such as castor bean plants, have sparked criticism that it is sinking millions of dollars into inefficient production that mostly benefits the politically well-connected.

The program offers tax breaks to 30 participating biofuels producers and helps them get better financing arrangements.

Last year, those companies purchased raw materials from around 51,000 small farmers, a figure slated to reach 100,000 by the end of this year.

Those benefits attracted Oleoplan, a biodiesel producer with close to 800 million Reais ($451 million) in annual sales, that now buys more than a third of its raw materials from small farmers like Scariot.

“The results have been fantastic,” said Domingos Costella, Oleoplan’s director. “This is a way for us to secure more raw material while still keeping the small farmer in mind.”

The company plans to nearly double fuel production by next year in part because of the additional supply.

As part of the arrangement, Oleoplan provides technical assistance to farmers or farming cooperatives to help them boost crop yields and make more efficient use of fertilizer.

Biodiesel backers say hiking that rate would cut carbon emissions and reduce state oil company Petrobras’s imports of diesel and distillate fuels, which last year reached 78,000 barrels per day — more than 10 percent of its diesel output.

Petrobras has found new ways to refine vegetable-based oils together with diesel in its petroleum refineries.

The program recruited thousands of family farmers to grow castor bean plants, which sprout spiky green seeds that advocates insisted could produce large amounts of oil and grow on degraded soil with little water.

But no producer participating in the program has been able to commercially produce biofuels from the crop. Critics say this is because production costs and yields are too high to justify using it for fuel.

As a result, Brazil’s largest biodiesel maker had to shut two plants in the poor northeast after months of supporting castor bean cultivation, sparking outrage among farmers.

“We warned the government about the technical problems associated with turning castor beans into biodiesel, but the politicians just wouldn’t listen,” said Miguel Dabdoub, a chemistry professor at the University of Sao Paulo.

He says political leaders took advantage of the program to promote ill-advised schemes in much the same way the United States agriculture industry has used political clout to push for inefficient corn-based ethanol.

 
Reuters