Brazil’s Corn Ethanol Boom Benefits Global Sugar Market
Brazil’s corn production is up, offering an unexpected boon to the global sugar market. High sugar prices may soon fall.
As corn becomes more profitable for ethanol, sugar mills are making more sugar and less biofuel.
Market analyst Eder Vieito points out to Bloomberg Linea that this could help consumers facing high food costs.
Bad weather had hurt India’s sugarcane crop, affecting sugar supplies worldwide.
In Brazil, corn ethanol is growing fast. It now makes up nearly a fifth of all biofuel production.
According to analysts at BTG Pactual, corn ethanol costs 16% less to produce than sugarcane ethanol.
However, ethanol demand is slowing as cheaper gasoline attracts drivers. Consultant Willian Hernandes notes that biofuel prices might drop to 65-68% of gasoline costs.
This would encourage more drivers to use ethanol but limit mill profits. Meanwhile, sugar mills plan to add 2.5 million tons of sugar production, says consultancy FG/A.
Challenges do exist for corn ethanol. It relies on wood biomass for energy, and wood supplies are dwindling.
“Wood scarcity could limit corn ethanol’s growth,” says analyst Ana Zancaner. Despite this, the sector is expanding.
Eight existing mills are adding capacity, and seven new ones are in construction. This is promising for corn farmers, especially in the state of Mato Grosso.
“Corn ethanol has a bright future,” concludes farmer Zilto Donadello.
Background
The rise of corn ethanol in Brazil has multifaceted implications. First, it’s an alternative to sugarcane, Brazil’s traditional biofuel source.
This diversification is good for the country’s energy security. Second, it’s giving relief to the global sugar market.
By incentivizing sugar over biofuel production, corn ethanol indirectly stabilizes sugar prices.
On the flip side, it brings up sustainability issues. Corn cultivation can be resource-intensive, needing more water and fertilizers than sugarcane.
Also, reliance on wood biomass for energy in corn ethanol production could exacerbate deforestation. This is an environmental concern that needs addressing.
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This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief