Brazil’s ability to grow corn ethanol production is well established, but producers say the industry still needs to convince overseas markets that its expansion can come without competing with food production or driving deforestation.
Brazil’s corn ethanol output continues to expand, but winning over international consumers will require the country to better explain the sustainability of its production model as global regulation becomes increasingly fragmented, Inpasa Trading Vice President Gustavo Mariano said.
“The biggest challenge today is integrating international regulations, particularly against a more fragmented geopolitical backdrop,” Mariano said at the Brazilian Agribusiness Congress. “The entire production chain, not just our industry, needs predictability.”
Brazil has already demonstrated its capacity to sharply expand corn supplies. Production of safrinha corn, the second crop planted on the same land after the soybean harvest, stood at about 7 million metric tons in 2004 and is expected to exceed 110 million metric tons this year, driven largely by increasing industrial demand.
The challenge now is convincing foreign markets that further growth can be sustainable.
One sticking point is the food-versus-fuel debate, or whether greater biofuel production comes at the expense of crops used for human and animal consumption.
Brazil’s production system differs from that of the US because farmers can harvest two or even three crops from the same land in a year. While US ethanol relies heavily on first-crop corn, meaning expansion can compete for acreage with other crops, Brazilian corn ethanol is largely based on a second corn crop planted after soybeans.
“We still have a lot of work to do to show that this isn’t food versus fuel,” Mariano said. “Here, it’s food plus fuel plus feed.”
Only about 35% to 38% of Brazil’s soybean acreage is currently used to grow safrinha corn, Mariano said, leaving significant room for expansion. JPMorgan estimated last year that Brazil could add 90 million metric tons of corn production without deforestation.
That argument is still poorly understood abroad, particularly in Europe, Bosch Latin America Chief Executive Gastón Perez said during the same panel.
European policymakers tend to see the food-versus-fuel debate as a zero-sum game, Perez said. Latin America’s agricultural model is different because additional crops can complement existing production and improve farm profitability, a dynamic that can be counterintuitive for European audiences.
Brazil Gains Ground
Brazil has made progress in international discussions over deforestation and biofuels, even as producers say more work is needed to explain the country’s agricultural model.
Mariano said Brazil has become more proactive in global discussions over deforestation, moving from reacting to outside pressure toward shaping the debate over future policies.
The corn ethanol industry is also watching negotiations at the International Maritime Organization, the United Nations agency that regulates global shipping.
Ethanol was initially left out of discussions over decarbonizing the global shipping fleet, but a broader range of biofuels is now being considered, Mariano said.
“We have a difficult geopolitical road ahead, but we’re confident we can find a way forward,” he said.
An IMO meeting scheduled for November could determine whether ethanol qualifies as a lower-emission fuel for meeting the shipping industry’s decarbonization targets.
If approved, the opportunity could create an estimated annual market of roughly $14 billion to $28 billion (75 billion reais to 150 billion reais), according to data compiled by Agência Infra.
Renato Zicardi, Inpasa’s International Trading Director, said at a Fastmarkets event on Monday that even a small share of the shipping fuel market could create substantial new demand.
“If the world includes a 10% ethanol blend among the options for maritime fuel, we’re talking about 60 billion liters of additional demand,” Zicardi said. “Brazil doesn’t even produce that much. E32 was important, but we’re also looking at other avenues for growth.”
Jeremias Mariano Panichek, Senior Commodities Trader at FS, said Brazilian diplomatic and commercial efforts to qualify ethanol for the shipping market could provide the industry’s clearest near-term opportunity to improve margins.
“The greatest potential to boost margins, at least in the short term, is advocacy to include ethanol as a maritime fuel,” Panichek said. “Brazil’s delegation is working so that, within two years at most, we can have the first certifications.”
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
