Corn ethanol production is progressing apace in Brazil, Argus estimates

Research carried out by Argus, a company specialized in producing reports and price analyses, found that 15 new ethanol units from raw materials other than sugar cane have been announced throughout 2023 and more could be on the way . According to Argus, a consensus among market participants is that corn ethanol is on the verge of capturing increasingly larger portions of the domestic biofuel market, via greenfield and brownfield projects.

In the 2022/23 harvest, Brazilian ethanol production was estimated by the Sugarcane and Bioenergy Industry Union (Unica) at 31.1 million m³, of which 4.43 million m³ came from corn, corresponding to 14% of the total. The corn ethanol sector expects to produce 10 million m³ by the 2030/31 harvest, covering more than 20% of the Brazilian fuel market, according to data from the National Corn Ethanol Union (Unem), cited by Argus.

Argus' ethanol market specialist, Vinicius Damazio, said in a note that “Brazil has traditionally invested in sugar cane as the main raw material for ethanol processing, but the growing interest of old and new investors should increase the market share of biofuel made from corn”. According to him, “advertisements for new ethanol plants are appearing throughout the country. The plants themselves are nothing new, given the country's rich history in the production of biofuels – especially ethanol from sugarcane. What draws attention is that the raw material that these factories will process is corn.”

Naturally, argued Argus, some projects are more ambitious than others. A key factor that led some companies to advance in the production of biofuel from corn and other cereals was the wide availability at a low cost, with the safrinha (second corn harvest) enabling supply for the entire year.

Furthermore, Argus highlighted, investment bank analysts say that ethanol plants – whatever the raw material – are capital intensive, but the Return on Investment (ROI) in corn projects it is faster compared to cane.

Some experts believe that the advance in corn ethanol could even change the trading dynamics during the off-season, Argus noted. This is because more capitalized mills tend to adopt a “carry” strategy, which involves building stocks to benefit from more attractive prices when their competitors have stopped crushing sugarcane, that is, when there is less product available on the market. Sugarcane has a limited growing season and cannot be stored as it begins to ferment as soon as it is cut, while corn plants can produce year-round.