September 15, 2017

Study Indicates Corn-Based Ethanol Feasible in Mato Grosso

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

The first corn-based ethanol facility in Brazil opened recently in Mato Grosso to such fanfare that even the Brazilian President helped to inaugurate the facility. Corn producers in Mato Grosso view such facilities as a way to increase the value of their corn by saving on transportation cost needed to move the corn long distances to export facilities. Mato Grosso is the largest corn producing state in Brazil, but only 15% of the corn production is utilized within the state with the remainder being exported to either states in southern Brazil or abroad.

Farmers in the state have been promoting the use of corn for ethanol production as a way improve corn prices, benefit the local economy, create thousands of jobs, and improve the environment at the same time.

So Noticias reported that a recent study was released that indicated the viability of corn-based ethanol production in Mato Grosso. The study was a collaboration between the Mato Grosso Institute of Agricultural Economics (Imea) in conjunction with the Soybean and Corn Producers Association of Mato Grosso (Aprosoja) and Syndicate of Sugar/Alcohol Industries (Sindalcool).

The study was headed by Imea who conducted interviews in 2016 and 2017 all throughout the various regions of the state looking at the feasibility of various sized corn-based ethanol production facilities in the various regions of Mato Grosso. They interviewed corn producers, sugarcane producers, ranchers, specialists in public institutions, politicians, industry representatives, and investors.

The study concluded that a full sized ethanol production facility in central Mato Grosso would be profitable with corn prices up to R$ 26 to R$ 36 per sack (approximately $3.80 to $5.25 per bushel) and ethanol prices of R$ 1.98 per liter (approximately $2.45 per gallon). A full sized facility would require an investment of R$ 450 million reals (approximately $150 million) and that it would pay for itself in six years with an annual profit margin thereafter of 27%.

The study was conducted during a period when corn prices in Brazil were very high because Brazil had actually run out of corn and was forced to import corn from Argentina and even the U.S. Currently, the price of corn in Mato Grosso is much below the R$ 26 to R$ 36 per sack threshold. In 2016/17 Mato Grosso produced a record large corn crop and corn prices in the state have struggled to reach the minimum price guaranteed by the Brazilian government, which is R$ 16.50 per sack or approximately $2.40 per bushel. Utilizing the current corn prices in the state, a corn-based ethanol facility would pay for itself in less than the six years indicated in the study.

In addition to being profitable for investors, these corn-based ethanol facilities would generate jobs and expand the local tax base for the communities. For each full time job at the facility, 14 indirect jobs and 10 induced jobs would be created. Therefore, a full sized facility would create 87 full time jobs and as many as 2,000 indirect jobs.

Replacing gasoline with ethanol would also help the environment by reducing greenhouse gas emissions by as much as 70%.