Corn ethanol expansion in Brazil accelerates, says Itaú BBA

The corn ethanol sector in Brazil is experiencing rapid expansion, with a significant increase in its share of national production. Between 2019 and the 2023/24 harvest, the share of corn ethanol in the total market jumped from 2% to 19%.

According to estimates, this percentage could exceed 22% in the next two years, if half of the projects predicted by the Itaú BBA study are implemented.

The Itaú BBA report identifies 22 new projects, including plant construction and expansions, which, if fully implemented, will require an additional 14 million tons of corn, demanding investments of over R$20 billion, in addition to an additional R$9 billion in working capital.

This increase in demand for the grain may affect supply in some regions, especially in the states in the area known as Matopiba (Maranhão, Tocantins, Piauí and Bahia).

“Corn ethanol projects represent a strategic opportunity for Brazil to consolidate its position as a leader in biofuel production, strengthening our energy matrix in a sustainable way and boosting the economy,” highlights Guilherme Novaes, agribusiness credit manager at Itaú BBA.

The entry of new plants should inject more than 6 billion liters of ethanol into the market, although, according to Itaú BBA's Agro Consultancy, the market should only absorb this additional volume by 2028.

Itaú BBA analyst Lucas Brunetti points out that there is room for growth in the use of hydrated ethanol in the Otto Cycle (a mixture of gasoline and ethanol), especially in the North and Northeast regions. In addition, he foresees incentives for corn production in these regions, replicating the expansion model seen with the second corn crop in Mato Grosso.