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December 19, 2019

New Joint Venture in Brazil for Corn-Based Ethanol Production

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

For decades sugarcane had been Brazil's only source of ethanol production, but that has undergone a significant change in the last few years. The first corn-based ethanol facility in Brazil opened in 2017 in the state of Mato Grosso and since then, there have been other facilities built or are under construction.

Reuters is now reporting that a new joint venture has been set up to build more corn-based ethanol facilities. The companies involved in the joint venture include: COFCO which is a Chinese commodity trader, AMaggi which is a Brazilian grain company, and Raizen which is a joint venture between Shell and the Brazilian sugar producer Cosan.

Details of the planed corn-based ethanol facilities have not been released, but it is assumed they will be located in the center-west region of Brazil where there is an excess of corn production. The high cost of transporting corn to distant export facilities makes using the corn to make ethanol very attractive. As a result, the increased use of corn to produce ethanol could start to limit the amount of Brazilian corn available for export.

Brazil already has 8 facilities that use corn to make ethanol, 6 are under construction, and at least 7 are in the design phase. By comparison, Brazil has 349 sugar mills that utilize sugarcane to make sugar and ethanol. Some of the traditional sugar mills have been retrofitted to utilize corn to make ethanol during the time of the year when sugarcane is not available. Normally, sugarcane is not harvested during the summer rainy season, which is generally between December and March.

There is speculation that COFCO is considering locating a new corn-based ethanol facility in the city of Rondonopolis, Mato Grosso alongside of its existing soybean crushing facility. The facility would have access to the Rumo Railroad which could transport the ethanol to southeastern Brazil, which is the major ethanol market in Brazil.

Last month, Ricardo Tomczyk, who is the ex-executive president of Brazil's National Union of Corn Ethanol (Unem), assumed an executive position with the AMaggi grain company.