Corn-based Ethanol Output Jumps 58% In Brazil, With More Growth To Come

production of ethanol from corn rose 58% in the newly passed year as dozens of recently built plants in the country's grain heartland ramped up production, and analysts see an annual increase of around 25% in the new season.

According to a report by ethanol industry group Unica published on Tuesday, plants using corn as feedstock to make ethanol produced 2.57 billion liters of the fuel in 2020/21 (April-March), or the equivalent of nearly 9% of total ethanol production in the country.

Brazil has historically made ethanol from sugar cane, but a flurry of investments in the No. 1 grain state of Mato Grosso in recent years put corn in the raw materials mix to produce the fuel, which is widely used locally - either blended into gasoline or pure.

Some U.S. companies, such as Summit Agricultural Group, were behind the largest investments.

Consultancy Agroconsult expects corn-based production to grow to 3.2 billion liters in the 2021/22 season, despite relative tightness in global corn supplies.

"Basically all ethanol producers have already signed long-term contracts for corn; they secured supplies," said Fabio Meneghin, a grains and ethanol analyst with Agroconsult.

Current prices for the biofuel are positive, he said, despite lockdowns in several cities as the country struggles to cope with the coronavirus pandemic.

Overall ethanol production in Brazil fell nearly 9% last season, Unica said, to 30.36 billion liters, as most mills using sugar cane prioritized sugar production at the expense of ethanol, due to better prices for the sweetener.

Meneghin said, however, that the tight global supply of corn will continue to be a risk for the nascent Brazilian corn-based ethanol industry. Another, according to him, is the government's moves on fuel prices.

Possible policies to cut gasoline prices would put a cap on ethanol prices, since both fuels compete at pumps.