South America Calling

Brazil's Corn Ethanol Play

There is a buzz about corn ethanol in Brazil at the moment.

Since 2012, when Brazil's first corn ethanol distillery was opened in Mato Grosso, nine other projects have been announced.

Last month, the Iowa-based Summit Group said it would invest in Brazil's Fiagril $140 million distillery project and BioUrja announced it would start construction of a $150 million plant this week.

The growth in corn production as a second crop in the Cerrado region over the last ten years has created this opportunity.

The high cost of freighting corn from Mato Grosso and surrounding areas means local quotes are sometimes half those at port, creating cheap raw material for ethanol production.

But we must be careful about defining the opportunity here.

Brazil is a massive ethanol producer, from sugarcane. The sickly sweet smell rising from local traffic jams attests to the prevalence of the biofuel, which accounts for over 20% of all fuel consumption here.

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And, stated simply, corn ethanol can't compete directly with sugarcane-based ethanol in Brazil.

Cane's energy balance, the difference between energy employed and energy released when combusted, is seven times greater than corn. When produced on the massive commercial scale it is in Brazil, ethanol from sugarcane is significantly cheaper to produce.

A recent study by FCStone showed that a stand-alone corn ethanol plant is only viable in one place; that's the far-off state of Mato Grosso.

Not only does the No. 1 grain state have an abundance of corn and low local prices, it has some of the country's most expensive gasoline because of the distance from refineries and ports.

Not many people are taking on this challenge though. At present, the Fiagril project is the only standalone announced in Mato Grosso. The BioUrja project is the other one in Brazil, fairly close to the Mato Grosso border in Chapadao do Sul, Mato Grosso do Sul.

The other proposed projects are actually adaptions of existing cane ethanol plants to the use of corn.

Adapting plants to corn is not only cheaper than building a stand-alone, they enjoy the benefit of using the cane bagasse to power the plant, significantly lowering energy costs.

Adapting plants is attractive to cane processors because it allows them to operate 12 months a year.

Cane ethanol plants close in the inter-harvest months between December and March as cane has to be processed more or less immediately after harvest. Corn obviously can be stored and used in that period.

But, according to the FCStone report, flex plants that use corn in the cane inter-harvest are only viable in Mato Grosso and neighboring Mato Grosso do Sul.

These plants principally serve consumers in these states, and northern Brazil. That's a bit of an issue as these markets are currently saturated.

In June, Glauber Silveira, corn ethanol commission coordinator at the Mato Grosso Soybean and Corn Association (APROSOJA-MT), estimated that the nine ethanol plants planned for the state could demand up to 59 million bushels of corn a year, a fairly considerable sum but less than 2% of total Brazilian output.

Brazil consumed over 8 billion gallons of ethanol fuel last year. That's a huge market but not the market available to corn ethanol.

(CZ)

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