November 9, 2011

Argentina Gearing up to Produce Corn-Based Ethanol

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

The ethanol industry in Argentina is poised to move from sugarcane-based ethanol to more corn-based ethanol production. The 2011/12 Argentine corn crop could be one of the largest in decades and there has been an aggressive move to utilize more of that corn to produce ethanol. Currently, most of the ethanol produced in Argentina is sugarcane-based, but sugarcane is only grown in three provinces in northern Argentina (Tucuman, Salta, and Jujuy) whereas corn can be produced throughout the entire country. The new emphasis on corn is simply because not enough ethanol can be produced from sugarcane to increase the blend in gasoline to more than just a few percent.

Last year Argentina produced 120,000 tons of ethanol from sugarcane and that is expected to increase to 190,000 tons in 2011. That is only enough ethanol to produce a 2% blend in gasoline. The government wants to increase that to 5% next year and 20% in ten years and the only way to do that is to start increasing the production of corn-based ethanol.

After giving subsidies and incentives almost exclusively for sugarcane-based ethanol and biodiesel production using soybean oil, the government is now giving these same types of incentives for corn-based ethanol production. Of the US$ 600 million being invested in five corn-based ethanol projects, approximately US$ 100 million is coming from the public sector.

The two largest of these ethanol projects are requiring investments on the order of US$ 200 million each. The largest is the Promaiz project which is a joint venture between a local Argentine company and Bunge. The second largest is a project from the Association of Argentine Cooperatives that unites 50,000 small producers through the country.

Bunge is already heavily invested in sugarcane-based ethanol production in Brazil. Just recently they inaugurated one of the largest and most technically advanced ethanol mills in Brazil in the state of Tocantins. Ethanol from this plant will be used to supply the domestic needs throughout northern and northeastern Brazil.