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January 9, 2017

First Corn-Based Ethanol Facility set to open in Mato Grosso in June

Farmers in Mato Grosso are hoping that the state's first corn-based ethanol plant, which is scheduled to open in June, will offer an alternative for marketing their grain instead of just shipping their corn to distant export facilities at very high transportation costs.

The corn-based ethanol facility will be operated by FS Bioenergia and is located in Lucas do Rio Verde in south-central Mato Grosso. The enterprise is a joint venture between the American company Summit with participation of the Brazilian company Fiagril Participacoes and the Chinese company Hunan Dakang.

They started to contract corn in central Mato Grosso last August and they have already contracted 20% of the 560,000 tons of corn the facility will process during the second half of 2017. The plant is expected to produce 220 million liters of ethanol during the first six months of operation.

The ethanol produced by the facility will be distributed in the center-west region of Brazil with longer term plans of marketing the ethanol in northeastern Brazil, which always has an ethanol deficit. The longer term plan is to double the production of the facility with a second phase scheduled for construction after the next Brazilian presidential elections in late 2018.

This is just the first of what is expected to be numerous corn-based ethanol plants in the center-west region of Brazil. There is always a surplus of corn in the region and the production of ethanol is seen as a viable alternative to corn exports. It is estimated that Mato Grosso will produce 25 million tons of corn or more in 2016/17 and that the domestic consumption in the state will be approximately 4 million tons. A small amount of corn is currently being used to produce ethanol at sugar mills in the region that have been retrofitted to utilize corn during the 3-4 months when sugarcane is not available.

Generally, corn prices in Mato Grosso are some of the lowest in Brazil due to surplus production and the high cost of transporting the corn to distant export facilities. In a recent interview, the CEO of FS Bioenergia expressed confidence that the recent record high corn prices in Brazil will not be repeated. In his view, the high prices in 2016 were the result of a unique combination of events including: high external demand, a high dollar, political crisis in Brazil, and drought reduced domestic production.

Farmers in the state are very confident that they will produce a good safrinha corn crop in 2017. Almost all the corn in the state is double cropped after soybeans and the soybeans should be harvested earlier than normal this year insuring enough time to plant all the safrinha corn within the ideal planting window which closes at the end of February.

Livestock producers in the region are also anxiously awaiting the main byproduct of ethanol production which is dry distillers grain. This byproduct is a high protein animal feed that should stimulate more poultry, hog and cattle production in the region. The ethanol itself will be used in Brazil's extensive fleet of flex-fuel vehicles that can unitize either 100% ethanol or gasoline, which currently contains 27.5% ethanol.

This may be just the first of the corn-based ethanol plants in the center-west region of Brazil. There are other plants under constructed in neighboring Mato Grosso do Sul and other companies were in Mato Grosso in December scouting out locations for additional facilities.