Aug 21, 2020

Corn Source for 8.8% of Brazil's Ethanol Production in 2020/21

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

Brazilian sugar/ethanol producers are putting more emphasis on sugar production and less emphasis on ethanol production for the 2020/21 harvest season, which started in April. The Covid-19 pandemic has resulted in a significant reduction in ethanol demand and as a result, in the mills where the percentage of sugar and ethanol can be adjusted, producers are trying to maximize their sugar production.

Ethanol producers are trying to reduce their ethanol production due to low domestic ethanol prices and the fear that they may overproduce ethanol. In fact, some producers are slowing down the sugarcane harvest so that they don't run out of storage space. Other producers are building emergency storage units to handle the excess ethanol.

Brazil's ethanol production in 2020/21 is forecasted to decline 14.3% to 30.6 billion liters.

The amount of ethanol produced from sugarcane is expected to decline 18.1% to 27.9 billion liters, but the amount of ethanol produced from corn is expected to increase 61.1% to 2.7 billion liters. In 2020/21, sugarcane will account for 91.1% of Brazil's ethanol production while corn will account for 8.8% of Brazil's ethanol production.

The percentage of Brazil's ethanol produced from corn is expected to continue increasing as more corn-based ethanol facilities are constructed especially in west-central Brazil. It is remarkable how fast the corn-based ethanol production has increased in Brazil especially given the fact that the first corn-based facility started operations in mid-2017.

Conab recently released their second evaluation of the 2020/21 Brazilian sugarcane crop, and in that report, they estimated that Brazil would harvest 642.1 million tons of sugarcane, which would be down 0.1% compared to last year. The state of Sao Paulo will harvest 335.5 million tons of sugarcane (52% of the total) followed by Goias at 77 million tons (12% of the total), and Minas Gerais at 72 million tons (11.2% of the total). Brazil currently has 8.4 million hectares of sugarcane, which is 0.4% more than last year.

The big change this year is that Brazil is forecasted to produce 39.3 million tons of sugar, which would be an increase of 32% compared to last year. This puts Brazil as the world's largest sugar producer for the second year in a row.

During the first four months of the production year (April, May, June, and July), Brazil's international sugar sales increased 69.9% due to reduced production by Brazil's competitors and a devalued Brazilian currency.