Apr 24, 2020

Brazil Produced Record Ethanol in 2019/20, 4.7% Made from Corn

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

In their 4th evaluation of the 2019/20 sugar/ethanol production in Brazil released on Thursday, Conab reported that Brazil produced 35.6 billion liters of ethanol from both sugarcane and corn. This was an increase of 7.5% compared to the 2018/19 crop and it set a new record high production for Brazil.

The amount of ethanol produced from sugarcane in 2019/20 was 34 billion liters or an increase of 5.1% compared to the year before. The amount of ethanol produced from corn was 1.6 billion liters, which was double the amount produced in 2018/19. During the 2019/20 harvest season (April 1, 2019 to March 31, 2020), 34% of the sugarcane was used to produce sugar, which was the lowest in 22 years and ethanol production was at record high levels.

For the 2020/21 harvest season, which started on April 1st, it had been anticipated that the amount of ethanol produced from corn would double again to approximately 8% of Brazil's total ethanol production, but that is no longer likely to occur. The collapse of the oil market and the crisis caused by the Covid-19 virus has resulted in a steep reduction in ethanol sales and ethanol prices in Brazil.

According to the Union of Sugarcane Industries (Unica), ethanol sales in south-central Brazil fell 20% during the second half of March. Mill operators in the state of Sao Paulo are expecting to sell only 30% to 40% of their normal volume in April and maybe 60% of their normal volume in May. The problem now is that the price of ethanol in the state of Sao Paulo fell 35% in a little more than one month. As a result, most sugar/ethanol producers in Brazil are currently in "survival mode."

Producers of corn based ethanol are facing the additional problem of very high domestic corn prices. Therefore, producers of corn based ethanol may reduce production while they wait for higher ethanol prices or lower corn prices.

Brazil harvested 642.7 million tons of sugarcane in 2019/20, which was 3.6% more than 2018/19. They harvested 8.4 million hectares of sugarcane, which was down 1.7% compared to the previous year. Some sugarcane producers moved out of sugarcane production to other crops such as soybeans due to higher returns.

Southeastern Brazil accounted for 415 million tons of sugarcane production in 2019/20 (64.5% of Brazil's total production) followed by the center-west region at 141 million tons (2.6% of the total), the northeastern region at 49 million tons (7.6% of the total), the southern region at 34.4 million tons (5.3% of the total), and the northern region at 3.7 million tons (0.5% of the total).

Brazil's sugar production in 2019/20 was estimated at 29.8 million tons which is up 2.6% compared to the prior year. Due to the Corvid-19 crisis, the survey for Conab's latest report was conducted electronically and by telephone.