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August 29, 2017

Ethanol is Option for Excess Corn Production in Mato Grosso

Farmers in Mato Grosso in central Brazil are wrapping up the harvest of a record large corn crop. That is the good news. The bad news is that corn prices are very low and much of the corn is piled outside. The director of Embrapa's Corn and Sorghum division, Antonio Alvaro Corsetti Purcino, believes that producing ethanol from the excess corn is a viable option for producers in Mato Grosso and in other areas of central Brazil.

There are currently huge piles of corn being stored outside in Mato Grosso because of a record large production and a lack of adequate storage space. Much of the potential storage is still be occupied by the recently harvested record large soybean crop.

Five years ago during the 2011/12 growing season, farmers in Mato Grosso produced 17.8 million tons of corn and that has now increased to 28.5 million tons during the 2016/17 growing season. The state of Mato Grosso now accounts for 28.5% of Brazil's total corn production.

The problem is that only 3 million tons of corn are consumed within the state and the remainder must be shipped to southern Brazil where the livestock industry is concentrated or to export facilities in southeastern Brazil or facilities along the Amazon River. The problem is that transporting the corn to these distant locations can be very expensive and the cost of transportation can exceed the actual price of the corn.

Not only has Brazil's grain production outpaced their ability to store the grain, farmers prefer to store soybeans instead of corn because of the higher value of the soybeans. The problem of excess corn production is expected to get worse going forward as corn production increases not only in Mato Grosso but also in the states of Goias, Parana, Mato Grosso do Sul, Minas Gerais, and Sao Paulo.

The director of Embrapa views ethanol produced from corn as a viable alternative to simply exporting the excess corn supply. In fact, FS Bioenergy recently inaugurated Brazil's first corn-based ethanol facility in the city of Lucas do Rio Verde in central Mato Grosso. This facility will utilize 600,000 tons of corn annually and there are more corn-based ethanol facilities planned for the state.

While producing ethanol from corn may be a viable option for producers in Mato Grosso, Mr. Purcino also expressed a word of caution because corn-based ethanol can also face obstacles in the future. Brazil has 27% of the international ethanol market and nearly all the ethanol is produced from sugarcane while the United States has 58% of the market and it produces all of its ethanol from corn.

The potential problem is that corn-based ethanol is not looked on favorably in parts of the world. The European Union is proposing the elimination of biofuels made from food crops starting in 2012. The state of California does not consider corn-based ethanol as a greenhouse gas reducing fuel. To meet the standard set by California, a biofuel must reduce greenhouse gases by at least 50%. Corn-based ethanol reduces greenhouse gases by 15% to 20% while sugarcane-based ethanol reduces greenhouse gases by 40% to 60%. Mr. Purcino made his comments while participating in the Fifth Forum of South American Agriculture sponsored by Agronegocio Gazeta do Povo in the city of Curitiba, Parana. Participating in the discussion was a representative of FS Bioenergia, which is the company operating the corn-based ethanol facility in Mato Grosso. The FS Bioenergia representative emphasized that their facility does not use natural gas and that the facility produces excess electricity that goes back into the grid.