May 20, 2019 / 3:52 PM / 4 months ago

Brazil corn ethanol industry booms as cereal's output nears 100 mln T

SAO PAULO, May 20 (Reuters) - The news back in 2014 of a group of investors launching a project to build Brazil’s first ethanol plant based 100% on corn raised eyebrows in a country that had invented a national ethanol program entirely based on sugarcane.

Analysts thought the plan carried risks associated with an unstable market for the fuel and uncertainty regarding corn supplies and prices, beyond the fact that there was a general assumption that it was more expensive to produce ethanol from corn than from sugarcane.

Five years on, the group has doubled capacity in the initial plant, built a second unit and announced plans for three more, as Brazilian farmers ramp up corn production.

Two other companies are building 100% corn-based ethanol plants in Brazil, and others are revamping existing mills to run on corn as well in the cane’s between-harvests periods, the so-called flex ethanol plants.

“We are pleased with the outlook, our first plant has been delivering excellent results,” said Rafael Abud, chief executive of FS Bioenergia, the pioneering company backed by Brazil’s Tapajós Participações SA and the United States’ Summit Agricultural Group.

All five FS plants will be located in Mato Grosso, Brazil’s top grain state, where corn production has increased by 275% in the last ten years, mostly due to the growing practice by farmers to plant a second crop, normally corn, after the harvest of the main summer crop, usually soybeans.

Mato Grosso is leading Brazil’s growth in corn production, expected to reach a record near 100 million tonnes this crop.

“The second crop with corn is consolidated. That opens room for several projects in Brazil,” said Ricardo Tomczyk, head of UNEM, a recently created group to represent the corn ethanol industry in Brazil.

He says strong ethanol demand lately, partly due to high gasoline prices, has helped.

That demand may increase next year when Brazil begins the RenovaBio program, with targets for fuel distributors to cut carbon emissions by gradually increasing use of biofuels.

Impasa, a company operating two corn ethanol plants in Paraguay, will open its first unit in Brazil in July.

Luís Pomata, Inpasa’s commercial manager, says that besides ethanol, byproducts such as dried distillers grains (DDGs) and corn oil are also in demand.

Mato Grosso is Brazil’s leading cattle producer, with 14 percent of the country’s 220 million herd. The livestock industry in the state is seeking to boost feedlots, reducing the vast pastures, and DDGs are seen as a valuable feed ingredient. (Reporting by Marcelo Teixeira Editing by Susan Thomas)

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