When is it viable to invest in corn ethanol?

Despite still representing a low percentage, in comparison with the total produced (4,62%), the extraction of ethanol from corn is seen positively due to its potential for growth in terms of the market, as it presents itself as another option for the flow of Brazilian production, which is one of the largest in the world.

By the end of the next decade, the expectation is that national production of corn ethanol will reach 20 billion liters annually. In this scenario, Mato Grosso is becoming a production hub, already concentrating a large part of current production and also capacity expansion projects, mainly due to the volume of its grain supply, low local consumption and the great distance to production flow. This is because these factors cause the price of grain in Mato Grosso to be structurally lower than in the rest of the country, making ethanol a way of adding value to corn.

States in the Central-West follow in the same vein as Mato Grosso, but it is important to highlight, however, that not all regions of the country will be able to benefit from this type of production, since corn ethanol production is not competitive. in all situations.

The viability of an enterprise for the production of corn ethanol depends, fundamentally, on the competitiveness of this input (corn market price), as in places where there is a structural excess of supply and low corn prices, ethanol production becomes viable as an alternative to add value to the grain.

Or the preponderant factor is the attractiveness of the market for commercializing DDG (Dried distillers grains -distiller's dried grains), since the corn ethanol production process also results in the production of DDG, a product that can be used as a substitute for other protein sources in animal feed. DDG cannot be understood as a by-product of ethanol, but rather as a co-product: without it, corn would hardly be competitive in relation to sugarcane. The existence of a local market for DDG can greatly increase the attractiveness of the enterprise.

As another advantage, it is worth highlighting that ethanol production from corn can occur throughout the year, due to the storage of grains – which is not possible with sugarcane.

States with large areas planted with both sugarcane and corn, with long distances to transport the grain and the DDG consumer market are, in turn, good candidates for adopting technologies flex, with the installation of plants that can also distill ethanol from corn, in the sugarcane off-season.

Therefore, to strategically analyze the potential for investments in corn ethanol, it is necessary to take into account whether there is a structural surplus supply of the grain in the region, its cost and the feasibility of disposing of the co-product generated in production.