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May 23, 2019

Corn-Based Ethanol Production continues to Expand in Brazil

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

For decades Brazil's biofuel program was based entirely on the production of ethanol derived from sugarcane, but that is now quickly changing with the advent of corn-based ethanol production in Brazil. Corn accounts for only 4.6% of Brazil's total ethanol production, but that is expected to surge in the near future.

Brazil's first corn-based ethanol production facility started operations in June of 2017 in the city of Lucas do Rio in central Mato Grosso. The facility is operated by FS Bioenergia, which is a joint venture between the Brazilian company Tapajos and the American company Summit Agricultural Group.

The company has reported excellent results from their first facility and they have already doubled the capacity of that facility. FS Bioenergia is currently building a second facility, and they recently announced that they will build three more corn-based ethanol facilities. All of their ethanol facilities will be located in the state of Mato Grosso.

Two other companies are building similar corn-based facilities. The Paraguayan company Inpasa, which operates two corn-based ethanol facilities in Paraguay, is set to inaugurate their first Brazilian corn-based facility in July.

In addition to stand along facilities, at least a half a dozen traditional sugar mills in central Brazil have been retrofitted to utilize corn during the period of the year when sugarcane is not available. Sugarcane is not harvested during the summer rainy season (December to March), so these "flex" facilities can switch over to corn and continue producing ethanol until the new sugarcane harvest begins. These "flex" facilities have been reporting very positive results.

The success of corn-based ethanol production is based on the premise that corn will be readily available at relatively low prices. That is exactly the situation in Mato Grosso, which is Brazil's largest corn producing state. The state produces a huge surplus of corn which goes primarily into the export market. Corn prices are relatively cheap in Mato Grosso because it can cost as much to transport the corn to export facilities as it does to purchase the corn. It is the high cost of transportation that helps to keep corn prices relatively cheap in Mato Grosso.

In addition to ethanol, these corn-based facilities will also produce dry distillers grain (DDG), which is used in animal rations. DDGs will be used in the expanding cattle feedlot operations in the state as well as hog and chicken operations. Mato Grosso is the state with the largest cattle herd in Brazil at approximately 30 million head. This represents 14% of Brazil's 220 million head of cattle.