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May 9, 2019

Corn-Based Ethanol now 4.6% of Brazil's Ethanol Production

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

One of the recent advances in Brazilian agriculture over the last couple of years has been the production of ethanol from corn instead of the traditional sugarcane. Corn-based ethanol production is still only a small percentage of Brazil's total ethanol production, but it is on an upward trajectory.

Earlier this week, Conab released their first assessment of the 2019/20 sugarcane production in Brazil and they estimated that Brazil will produce 30.3 billion liters of ethanol in 2019/20 and that 1.4 billion liters, or 4.6%, will come from corn. A few years ago, 0% of Brazil's ethanol was produced from corn. In fact, the first corn-based ethanol facility in Brazil started operations in mid-2017.

The state of Mato Grosso is the largest producer of corn-based ethanol responsible for 75% of the total followed by Goias at 21.4% and Parana at 3%. The report stated that corn-based ethanol is becoming more relevant and they expect the production to continue to increase. This type of ethanol production will only be viable in areas where corn prices make it attractive. The Coordinator of Sugarcane and Agroenergy in the Ministry of Agriculture estimates that there will be R$ 5 billion invested in the corn-based ethanol sector over the next 4-5 years.

The Superintend of Agribusiness Information for Conab stated in interviews that the price of corn is a major factor in deciding to use corn to make ethanol but another factor is the fact that corn can be used during the period when sugarcane is not available. Numerous sugarcane mills have been retrofitted to become "flex" facilities that can utilize corn to make ethanol during the summer rainy season when they do not harvest sugarcane.

The Superintend indicated that Conab has conducted studies comparing corn and sugarcane for ethanol production. One ton of corn can produce 420 liters of ethanol compared to one ton of sugarcane that can produce 90 liters of ethanol, but there are many more tons of sugarcane produced per hectare than corn. Corn can produce 2,500 liters of ethanol per hectare compared to sugarcane which can surpass 6,000 liters per hectare.

Conab estimated that Brazil will produce 616 million tons of sugarcane in 2019/20, which is 0.7% less than in 2018/19. The sugarcane harvested acreage is expected to be 8.38 million hectares, which is down 2.4% compared to last year.

Total ethanol production in 2019/20 is expected to decline 4.2% from last year. Anhydrous ethanol production (the type blended into gasoline) is expected to increase 11%, while hydrous ethanol (sold as E100) is expected to decline 16.5%. Sugar production is expected to rebound in 2019/20 to 31.8 million tons, which is up 9.5% compared to last year.

Last year, low international sugar prices and higher gasoline prices made ethanol production much more attractive. Conab is expecting more of an equilibrium between sugar and ethanol production in 2019/20. The gasoline now sold in Brazil contains 27.5% ethanol.