November 6, 2013
Corn Used to make Ethanol in Brazil Chips Away at Excess Corn
Everyone involved with corn production in Mato Grosso is searching for ways to more fully utilize the corn within the state instead of paying sky-high freight rates to transport the corn to export facilities in southern Brazil. The state produced about 22 million tons of corn in 2012/13, but consumed only about 3.4 million tons domestically.
One novel approach to utilizing more corn has been the retrofitting of two sugarcane mills in the state to utilize corn as the raw product during the time when sugarcane is not available (generally December to March). Instead of leaving the plants shut down for four months or more, they now utilize some of the excess corn in the state to keep the plant running year-round.
The plants, which started operating in 2013, picked a very good time to start processing corn due to the depressed corn prices in the state. Company officials have stated that they could afford to pay up to R$ 18.00 per sack (approximately US$ 3.70 per bushel) and still be able to turn a profit using corn to make ethanol. Fortunately for them at least, the current price of corn in the state is one third less than that R$ 18.00 per sack.
According to a study conducted by the Mato Grosso Institute of Agricultural Economics (Imea), the ethanol mills could afford to purchase corn at prices that are above the cost of production, which they estimate at R$ 17 per sack including land costs with an average yield of 100 sacks per hectare or 92 bushels per acre (approximately UD$ 3.50 per bushel).
The first sugar/ethanol mill in Brazil to utilize corn is operated by Usimat and located in the city of Sapezal in western Mato Grosso. The company spent R$ 47 million retrofitting the plant to be able to utilize both sugarcane and corn and it expects to recoup those costs in three to five years. While the mills main raw material continues to be sugarcane, it is utilizing 100,000 tons of corn per year in 2013 and it expects to double that in 2014.
Using the Usimat mill as an example, other investors have retrofitted a second sugarcane mill in the city of Sao Jose do Rio Claro in central Mato Grosso to utilize corn as well. The plant started using corn in the middle of October at the rate of 20 tons per hour. They are planning to do the same thing for another mill located in Rio Verde, Goias. The group expects to utilize 900,000 tons of sugarcane and 185,000 tons of corn in 2014 and in 2015 the corn usage is expected to increase to 285,000 tons.
Using corn to make ethanol is also expected to lower the cost of producing livestock in the region as well because the dry distillers grain (DDGs), which is a byproduct of the process, is cheaper than soybean meal in animal rations. The price of soybean meal in the region last year was R$ 1,200 per ton while DDGs were selling for R$ 440 per ton. Each ton of corn used to make ethanol is expected to produce 375 liters of ethanol, 240 kilograms of DDGs, and 18 liters of corn oil.
One of the reasons these projects could be successful is because the plants are located in areas of excess corn production which are 2,000 kilometers from the main export facilities in southern Brazil. The cost of transporting the corn to the ports can be more than it costs to purchase the corn. Farmers in Mato Grosso would be very happy to sell their corn at R$ 18 per sack to the sugar/ethanol mill instead of the minimum price they get from the government which is R$ 13 per sack (approximately US$ 2.70 per bushel).
In 2014, these two plants may utilize 400,000 tons of corn (about six vessels worth) which would equate to about 1-2% of the state's corn production, so these plants will not solve the problem of excess corn production in the state, but it could be a start.