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U.S. ethanol exporters to face more competition in north Brazil

United States ethanol exporters are likely to face increased competition in one of the few foreign markets where they have been able to deliver large volumes in recent years, the North and Northeast regions of Brazil, an industry association chief said.

Ironically, that competition would come in the form of corn-based ethanol common in the United States, not sugar-based ethanol that has traditionally dominated in Brazil. Corn ethanol is taking off in Brazil’s grain heartland of Mato Grosso state, where production is expected to grow more than 50 percent in 2019 from a year earlier.

But one major obstacle for that to happen is logistics. Mato Grosso corn-ethanol producers are waiting for completion of a key road linking the center-west region to a river port in Miritituba, Para state, from where barges would take the ethanol to fuel distributors in North and Northeast Brazil.

“We produce the cheapest corn ethanol in the world in Mato Grosso. When we have that road ready, I’m sure we would be able to compete with U.S. suppliers,” said Ricardo Tomczyk, head of Brazil’s association of corn ethanol producers (UNAM), on Thursday.

Brazil is the top destination for U.S. ethanol. Exports to the country in 2018 reached 499 million gallons out of total exports of 1.37 billion gallons.

That fuel is delivered mostly to ports in the Northeast to supply states such as Pernambuco and Ceará. Some vessels also deliver the fuel to Maranhão, in the North.

Tomczyk said those markets have large potential for expansion. Some service stations in north Brazil do not even have ethanol pumps alongside the gasoline ones, unlike what is seen in the rest of the country.

Corn ethanol production in Brazil is expected to grow to 1.4 billion liters in 2019 from 840 million liters in 2018. Most of that increase will come from three new projects in Mato Grosso, including a large plant in Sinop with capacity to produce 530 million liters per year when fully operational.

Mato Grosso is Brazil’s No. 1 soybean producer. Most farmers plant corn as a rotation crop right after soy is harvested. The so-called “safrinha,” or second corn crop, is currently Brazil’s larger corn crop with around 66.6 million tonnes of production expected in 2018/19 crop year.

That corn provides low-cost raw material for the nascent ethanol industry there, Tomczyk says. Prospects are for a good second corn crop in 2019, since soy was planted and harvested earlier than normal, allowing for a favorable planting window for corn.
Source: Reuters (Reporting by Marcelo Teixeira Editing by Susan Thomas)

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