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Brazil corn ethanol surge 'curtailing export prospect'

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The scramble in Brazil to build corn ethanol plants may be only in its early stages, US officials said, blaming the trend for a reduced expectations for the South American corn exports next season.

 

Brazil’s overall ethanol consumption “is expected to expand greatly” as the country raises blending rates of biofuel into gasoline, to help meet environmental goals laid down in the 2016 Paris Agreement, the US Department of Agriculture’s Brasilia bureau said.

 

However, while the South American country has typically focused on sugar cane as a feedstock for bioethanol, the “abundant availability of corn in Brazil, and the fact that it can be stored for long periods, unlike sugar cane”, are focusing attention on the grain in new biofuel capacity.

 

“Many investors are rushing to build corn-only ethanol plants or retrofit sugarcane plants into ‘flex’ plants that can process both crops,” the bureau said, noting that the trend had attracted many foreign investors, including those from Paraguay and the US.

 

‘Unlikely to be a short-lived trend’

“The corn ethanol industry continues to grow in central Brazil,” the bureau said, highlighting last month’s announcement by cane processor Sao Martinho that it is to build a corn-only ethanol plant next to its cane mill in the state of Goias.

 

This demonstrates “that Brazilian corn ethanol production is unlikely to be a short-lived trend”.

 

Indeed, the bureau highlighted data from Brazilian corn ethanol industry group Unem forecasting the country’s production of the biofuel from the grain at 8.0bn litres in 2028, up from 840m last year and 1.45bn expected for 2019.

 

Corn used in making ethanol will grow from 2.0m tonnes last year to 3.50m tones in 2019 and 20.0m tonnes in 2028, Unem believes.

 

Export impact

The USDA bureau pegged Brazilian total consumption of corn for food, seed and industrial uses this season at a record 11.5m tonnes, rising to 12.5m tnnes in 2019-20 (as actually starts in March 2020).

 

Both figures are 1.0m tonnes above USDA official estimates.

 

Meanwhile, the bureau forecast Brazil’s 2019-20 corn exports at 33.0m tonnes - 1.0m tonnes below the official USDA estimate, and the 34.0m tonnes expected for 2018-19 too - citing “competition from domestic demand for corn ethanol production in the Centre West region”, which includes the likes of Goias, Mato Grosso and Mato Grosso do Sul.

 

‘Have become a problem’

The bureau also forecast Brazil’s feed use of corn, at 57.0m tonnes, 1.0m tonnes below the official USDA figure, citing the livestock industry’s focus in southern Brazil, where growers are moving away from corn – unlike Centre West peers, who are producing increasing amounts, grown on a “safrinha” basis as a follow-on crop from soybeans.

 

“Shifting cultivation periods and areas have become a problem for poultry and swine producers, who traditionally have relied on first-crop corn grown in southern Brazil as a large part of feed rations.

 

“Poor infrastructure connections and the high price of transporting safrinha corn from the Centre West have meant that livestock and poultry operators in southern Brazil are increasingly turning to corn imports for feed rations.”

 

First vs safrinha crops

The bureau pegged the Brazilian corn harvest in 2019-20 at 101.0m tonnes, in line with the official USDA forecast, and the result expected for this season.

 

“While first-crop corn area is expected to decline yet again in 2019-20, safrinha area is expected to grow, offsetting any first-crop area losses.

 

“As soybean area in Brazil has climbed, first-crop corn plantings, concentrated mainly in southern Brazil, have been sacrificed to area for high-priced soybeans.

 

“At the same time, expanded soy area in the states of Mato Grosso and Parana, with climatic conditions to support production of two crops in the same year, has led to the rapid growth in safrinha corn area.”

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