February 3, 2016

Brazil to have Seven Corn-Based Ethanol Facilities by end of 2016

Corn production in Brazil has been surprisingly strong in recent years as farmers continue to increase their safrinha corn acreage, which is planted after the first crop of soybeans are harvested. The number one state for safrinha corn production in Brazil is Mato Grosso, but the problem is that only a small percentage of the corn produced in the state is consumed within the state. The vast majority of the corn must be transported long distances mostly by truck to export facilities in southeastern Brazil or livestock producers in southern Brazil at very high transportation costs.

A partial solution to these high logistical costs is to consume more of the corn within the state and one way that is being accomplished is by making ethanol from corn. Brazil is world famous for its sugarcane crop so it would seem to be a strange place to produce ethanol from corn. Corn based ethanol production only works in the interior of Brazil where there is an excess of corn and it works because it saves on transporting the corn to export facilities and it doesn't require trucking ethanol produced in southeastern Brazil back to the interior.

According to Infomoney, the first corn based ethanol plant in Brazil was actually a FLEX production facility that could use either sugarcane or corn to make ethanol. In 2013, a sugarcane mill in Mato Grosso was retrofitted to utilize corn to make ethanol when sugarcane was not available. Generally sugarcane is not harvested during the summer rainy season (December to March) because the harvesting machinery cannot get into the fields and as a result, the mills shut down 3-4 months for maintenance. Once the plant was retrofitted, it just switched to corn (or grain sorghum) when sugarcane was not available and continued producing ethanol year round. Early economic results were very encouraging and other mills have been retrofitted as well.

There are now four ethanol mills in Brazil that use corn to produce ethanol with a total capacity of 75 million liters per year. This is a tiny fraction of the 29 billion liters of ethanol produced in Brazil using sugarcane. Corn-based ethanol represents just 0.25% of all the ethanol produced in Brazil

During 2016 three new ethanol mills are scheduled to come on-line in Brazil with two of the facilities only using corn and one will be a FLEX facility that will use sugarcane and corn. All the corn-based facilities are located in the center-west region of Brazil, which encompasses the states of Mato Grosso, Mato Grosso do Sul, and Goias. By the end of 2016, Brazil will have seven ethanol facilities compared to 214 facilities in the U.S. that produces about 58 billion liters per year.

Corn-based ethanol production is not nearly as efficient as sugarcane-based production. Utilizing sugarcane to produce ethanol is approximately nine times more efficient than using corn. Sugarcane has a high sucrose content that is easier to convert to ethanol than the starch in corn. Sugarcane facilities are also more efficient because most of the sugar mills in Brazil burn the sugarcane residue to produce electricity to run the mill. In fact, these mills produce more electricity than what they consume and the excess electricity is sold back into the grid. In contrast, corn-based ethanol mills must consume energy to produce ethanol. Additionally, some of the newer sugarcane-based mills in Brazil are utilizing the excess sugarcane residue to produce second generation cellulosic ethanol.

Corn-based ethanol production in Brazil will never rival sugarcane-based production and it is only economically viable in the interior of Brazil where there is excess corn production and high transportation costs.