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November 6, 2017

Second (and larger) Corn Ethanol Plant Announced for Mato Grosso

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

The governor of Mato Grosso met last week with executives of the company that will construct the second (and larger) corn-based ethanol facility in the state. The executives confirmed that the facility will be an R$ 500 million investment (approximately $155 million) and it will be built in the city of Sinop in northern Mato Grosso. The construction is scheduled to start in January of 2018 and be completed in June of 2019.

This second corn-based ethanol facility in the state (and in Brazil) is expected to utilize 1 million tons of corn annually. The first corn-based ethanol facility in Lucas do Rio Verde, which is also in Mato Grosso, started operations earlier this year and it will utilize 600,000 tons of corn annually.

As part of the incentive package to locate the facility in Mato Grosso, the ICMS tax on the ethanol produced will be reduced from 25% to 7% making the industry competitive with other states. The ICMS tax is often called a "circulation tax" on products produced in one Brazilian state, but sold in another state. Each state can set its own tax rate and it is used to encourage products to be industrialized within the state.

There are expected to be many more of these facilities built in the state due to the ever increasing corn production in the state. Increased corn production is an integral part of the state's developmental plan. The state currently produces approximately 30 million tons of corn and state officials feel it could increase to 50 million tons annually within 5 years.

The domestic demand for corn within the state only utilizes a small portion of the corn and the remainder is shipped to livestock producers in southern Brazil or distant export facilities. Transporting the corn to these distant locations is very expensive and producing value added products from the corn is seen as a viable alternative to exporting the corn.

This new facility will be just the latest in a series of such facilities expected to be built in the state. The consulting firm Ericson Marion Consultoria, estimates that the break-even price of corn in Mato Grosso to make corn-based ethanol feasible is in the range of R$ 16 to R$ 24 per sack or approximately $2.30 to $3.45 per bushel. According to the Mato Grosso Institute of Agricultural Economics (Imea), the current price of corn in Mato Grosso is R$ 14.62 per sack or approximately $2.10 per bushel.