July 27, 2007

 

Brazil mulling to build corn-ethanol mills

 

 

Call it an ironic twist on today's conventional wisdom.

 

But if some bold local thinkers are right, farmers in Brazil's No. 1 soy state of Mato Grosso could begin brewing their own corn-based ethanol, the way the US does, as early as the end of 2008.

 

The innovation, however, would have little to do with any thought of substituting Brazil's cheap sugarcane-based ethanol with the less energy-efficient corn-based biofuel, according to Mato Grosso government officials and analysts.

 

Rather, regional producers in Brazil, the world's leading ethanol exporter, are examining the possibility of building "flex" ethanol mills to produce the biofuel eight months of the year from sugarcane and the rest of the time from corn, to increase efficiencies.

 

"There is this information that ethanol from corn is 30 percent more expensive than ethanol made from cane," Clovis Vettorato, the Mato Grosso secretary of strategic projects, said in a telephone interview with Dow Jones Newswires. "But that's only true with US corn, which is 100 percent more expensive than corn in Mato Grosso."

 

After extremely preliminary calculations, in fact, the costs of producing corn-based ethanol in Mato Grosso appear to be similar to those of producing sugarcane-based ethanol, as long as some of the energy costs are taken out, Vettorato said.

 

From that point on, it was only a small leap to the next logical breakthrough: What about constructing a corn ethanol-producing annex next to an existing sugarcane mill, to give the facility the benefits of both feedstocks as well as year-round production capabilities?

 

"Corn-based ethanol is almost nonviable on its own, given all its high energy needs," said Normando Corral, the vice president of the Mato Grosso Federation of Agriculture and Cattle, or Famato. "But if you could pair it with a sugarcane mill, which co-generates its own electricity, and then run it on corn during the inter-harvest period for sugarcane, then the idea becomes interesting."

 

Moreover, both corn and excess sugarcane biomass, or bagasse - which is burned to co-generate electricity - can be stored for future use, though sugarcane cannot because sugar starts degrading just hours after the plant is cut.

 

The idea for "flex" mills arose soon after Vettorato alongside Mato Grosso governor and the country's "soy king," Blairo Maggi, visited Illinois in May to tour ethanol-production facilities.

 

"We did the calculations - very preliminary calculations to be sure - and were surprised," Vettorato said.

 

Mato Grosso, located hundreds of kilometres away from the country's ports in Brazil's centre-west agricultural belt, is the country's fourth-largest corn-producing state, with an estimated 5.45 million tonnes of corn set to be harvested for the 2007/08 season, according to estimates by the government-linked National Commodities Supply Corp., or Conab.

 

While the state could quadruple, or even quintuple, its corn output if there were ready buyers for the product, high logistical costs currently make transporting the corn to the country's principal commodities ports of Santos and Paranagua nonviable, producers said.

 

If, however, the state's existing sugarcane mills were adapted to use corn, then that would give local farmers another source of income during the winter harvest months, when corn can be planted.

 

"The only reason we don't plant more corn is because there isn't a demand," Corral said.

 

Still, a thorough viability study needs to be done to suss out the costs, necessary technology, benefits and risks, before any further steps can be taken, analysts said.

 

On the surface of things, after all, corn-based ethanol continues to make far less environmental sense than cane-based ethanol, because it requires roughly four times much energy and produces a third of the ethanol per hectare, say local engineers.

 

Corn also absorbs five times fewer carbon emissions than sugarcane, making it a far less environmentally friendly biofuel crop, especially at a time when UN-backed groups are already warning that fuel crops can push up food prices and help lead to increased starvation among the world's poor.

 

Finally, an overwhelming byproduct of corn-based ethanol is an excess of dry distillers' grains, which cuts down on the crop's efficiency.

 

Despite such factors, US researchers alongside Mato Grosso producers point out that agribusiness is all about increasing efficiency and reducing costs.

 

"Our sense is that flex mills make a lot of sense, because you can use corn in the periods when the mill is idle, and mills in Mato Grosso are out of position and need to be more efficient," said Peter Goldsmith, an agricultural and consumer economics professor at the University of Illinois, which has a partnership with a Sao Paulo university to discuss ethanol technology among other issues.

 

Local engineers add that they believe that the idea is economically feasible.

 

"As long as you have the corn close to the mill, there's  a very good chance it's viable, since you can take advantage of the bagasse and don't need to foot any extra energy bills," said Jayme Polachini Filho, an engineer at a sugarcane plant engineering firm MT Assessorias.

 

However, no commercial projects are likely to get the green light until the Mato Grosso government finishes conducting a viability study by the end of the year, Vettorini said.

 

"By next year, if all goes well, we expect to present the results to interested entrepreneurs, who could then consider investing in this from here on out," he said.

 

Brazil is the world's leading ethanol exporter, and No. 2 ethanol producer after the US.