Brazil's corn ethanol expansion hits economic hurdle

USAgNet - 02/12/2024

The biofuel industry in Brazil, once energized by the rapid expansion of corn ethanol production, is facing economic headwinds. São Martinho SA, among Brazil's largest biofuel producers, has voiced concerns over the sustainability of continued investment in corn ethanol plants.

This shift signals a potential end to the recent boom that transformed the industry and challenged the dominance of sugar cane ethanol.

The economic factors contributing to this shift include the impact of lower prices for byproducts like DDGS, an animal feed derived from corn ethanol production, exacerbated by decreasing soymeal costs. These developments have undercut the profitability of corn ethanol mills, prompting a reevaluation of future plans.

Felipe Vicchiato, São Martinho's CFO, emphasized the economic impracticality of further expansion into corn ethanol, despite acknowledging a projected increase in production from projects already in progress. This cautious outlook underscores the volatile nature of biofuel economics and its susceptibility to broader market trends.

Brazil's experience with corn ethanol underscores the challenges of balancing agricultural production with energy needs. As the industry adapts to these economic realities, the focus may shift back towards more traditional sources like sugar cane or towards new, innovative energy solutions.

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