Aug 09, 2013

Flex-fuel Ethanol Plant in Brazil uses Sugarcane and Corn

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Flex fuel vehicles that can burn gasoline or ethanol have been common in Brazil for many years and now there is a flex-fuel ethanol plant in Brazil that can make the fuel from either sugarcane or corn. In a country famous for its sugarcane-based ethanol, a pioneering mill in Brazil is now making ethanol from both sugarcane and corn depending on the season.

This new plant uses either source of raw material to make ethanol depending on which crop is available at the time. During the traditional sugarcane harvest, which goes from April to November, the plant uses sugarcane to make the ethanol, but during the time when sugarcane is not being harvested, the plant uses corn produced in the state to continue operations. Normally the plant would be shut down during the December to March period between the sugarcane harvests.

The plant called Usimat, is located in the city of Campos de Julio in southwest Mato Grosso, and is in its first full year of commercial operation. Thus far, the plant operators have been very encouraged by the results. This first of its kind operation in Brazil is being watched very closely by other ethanol producers in Mato Grosso and it could be a model for future ethanol plants in the state.

The opening of the plant is coming at a very opportune time since a record large corn crop in the state has resulted in very low corn prices. The operators feel they can only make money from using corn if the price of corn is R$ 16.00 per sack or lower (approximately US$ 3.30 per bushel). Currently, the price of corn in the region is R$ 13.00 per sack (approximately US$ 2.70 per bushel).

Farmers in the state are expected to produce a record large corn crop this year, so large in fact, that a lot of the corn is being piled on the ground for lack of storage space. The state is expected to produce 18 million tons of corn, but the consumption within the state is only projected to be 3 million tons. The cost of transporting the excess corn to ports in southern Brazil is extremely expensive and can be as high as R$ 340 per ton or R$ 20 per sack. Therefore, anything that can utilize more of the corn within the state would be very welcome news for producers.

Using corn in the off-season can help to reduce the seasonality of ethanol production and the accompanying wide price fluctuations. During the sugarcane harvest, there is generally an excess of ethanol available in Brazil leading to lower prices, but between sugarcane harvests, there is a shortage of ethanol leading to price spikes. If ethanol could be produced year round, it would help to even out the prices.

The ethanol produced from sugarcane or corn has the same value, but the by-produce of using corn, which is dry distillers grain or DDGs, greatly adds to the bottom line when using corn. The DDGs are a valuable source of energy and protein in animal rations. The Usimat plant produces 370 liters of ethanol from a ton of corn and 180 kilograms of DDGs. Operators of the plant feel they can increase that to 400 liters of ethanol and 200 kilograms of DDGs per ton next year. At the end of 2012 and early 2013, the plant processed 21,000 tons of corn and that is expected to increase to 72,000 tons of corn at the end of 2013 and early 2014.

The DDGs are used in animal rations to substitute for some of the more expensive soybean meal. In southwest Mato Grosso, a ton of soybean meal with 46% protein costs approximately R$ 1,000. A ton of DDGs with 35% or 36% protein costs R$ 400. The lower cost of protein from DDGs could spark an increase interest in livestock operations within the state.

The plant was originally designed to only use sugarcane and they have invested R$ 35 million to retrofit the plant to use corn as well. Plant operators feel their investment to retrofit the plant will be repaid in five or six years.

The plant creates its own electricity to run the operation by burning the sugarcane residue left over from the processing. They actually stockpile the sugarcane residue to burn during the four months that the plant uses corn, thus holding down the cost to process the corn. An ethanol plant in Brazil that used only corn would be non-economical due to the high cost of electricity in Brazil.