Brazil and Corn Based Ethanol

Lucas Do Rio Verde is the first location in Brazil to welcome the country's first manufacturing facility solely dedicated to the production of corn ethanol. The $115 MM facility, FS Bioenergia, celebrated its grand opening and is the result of a union between Brazilian agricultural manufacturer Fiagril and Summit Agricultural Group, a U.S. company that's based out of Alden, Iowa.

FS Bioenergia to Support Domestic and International Needs

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Throughout its first year, FS Bioenergia is expected to process 22 MM bushels of corn, which should be enough to produce 60 MMgal of corn ethanol, in addition to also manufacturing 6,200 tonnes of corn oil. The facility will also provide 170,000 tonnes of feed to help nourish Brazil's livestock, which is also a growing industry for the country.

Because the growing demand for ethanol is high, the first priority for the corn ethanol produced by FS Bioenergia will be to supplement the current supply of sugarcane ethanol . Since the early 70s, Brazil has been producing sugarcane ethanol and that industry has grown to provide as much as 25% of the world's ethanol needs. That business is still booming and Brazil may be expected to provide close to 13.5 Bgal of ethanol by the year 2022. That estimate puts the ethanol needs at two-thirds more than the 8.1 Bgal of sugarcane ethanol produced in Brazil in 2016. That kind of demand calls for new and more effective production methods, paving the way for the production of corn ethanol.

The new FS Bioenergia facility was constructed in record time to allow for a speedy start-up. Summit Agricultural Group and Fiagril initially broke ground on the construction in 2016 and manufacturing in the facility is now fully underway. The plant employs 150 full-time employees.

Corn Ethanol Will Raise Profits For Brazil

Because many sugarcane facilities in Brazil were designed to also process corn, many of them can manufacture corn ethanol during the sugarcane off season. Ordinarily, sugarcane production facilities lay dormant during the off season, wasting valuable resources, but that's all about to change. By adding the manufacturing of corn ethanol, facilities can run year round, maximizing production efficiency.

This will also help the corn farming industry. In the northern portion of Mato Grosso, corn is grown in abundance, but the fact that it's so widely available makes it less valuable. The introduction of corn ethanol into the market will likely change that and increase earning potential for farmers, as well as for the production facilities. During the period from January to October, Mato Grosso produced and exported 10 million tons of grain. That yield earned an estimated profit of R$ 3 billion ($1 billion). However, that same quantity of grain could have otherwise been used to produce 4 billion liters of ethanol. Calculating the possible production of corn ethanol, electricity production also provided by the facilities, and the manufacturing of livestock grade feed, financial experts estimate Brazil's corn production sector could generate R$ 13 billion ($4.3 billion) in annual profits. 

Of the 85 million tons of corn grown each year, only 55 million tons are consumed as food by Brazil's population. That leaves a 30 million ton surplus, which the country can now use to produce corn ethanol. This yield places Brazil ahead of several other countries in their corn production and in the resources they need for producing more ethanol.

The Future of Brazil's Corn Yield

Climate issues during the second half of the 2015/16 season resulted in a lower than expected corn yield. Brazil experienced a 17 million ton decrease in their corn surplus, dropping from the 84 million tons to 67 million tons. Mato Grosso, alone, lost 5.5 million tons of product for that season. Even taking this loss into account, Brazilian officials say there's no cause for concern. The 2015/16 season still produced enough corn to meet their distribution needs and had an excess that could be used for corn ethanol production. 

Additionally, those numbers are expected to rise back up. Agricultural experts are forecasting a high corn yield for the current season. Corn harvests have been steadily gaining in the seasons following 2015 and there's no reason to doubt corn production won't continue to improve. If trends continue, Mato Grosso is expected to boost corn production by 81%, which will result in 81 million tons of corn. That's almost as much corn as the entire country currently produces. Meanwhile, corn crops continue to improve in other parts of Brazil, as well.

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Looking at future expectations for corn growth and the needs of Brazil's population, it's safe to assume that a corn shortage isn't a large concern for the country. The surplus of corn that the country produces each season will be used to produce electricity and supply livestock feed in addition to the manufacturing of corn ethanol, so the country already has good plans for using that extra corn yield to bolster their economy.

If expectations ring true in the coming years, FS Bioenergia may not be the only full-time corn ethanol production facility to operate in Brazil. While sugarcane ethanol plants can handle corn production, it's not difficult to imagine more facilities devoted exclusively to the processing of corn ethanol joining the sector. The fear of a corn shortage is certainly unfounded in light of the predictions made by Brazil's agriculture experts and financial analysts.

In recent years, technology has advanced by leaps and bounds, so we may even see corn ethanol processing refinements make the industry more efficient. This means the demand for corn will rise and Brazil will be poised on the edge of a promising new opportunity.