Low corn prices favor new type of ethanol in Brazil

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Low corn prices in Brazil following a bumper crop are worrying farmers but providing favorable margins for an incipient corn-ethanol industry, said the manager of Usimat, the first Brazilian mill to produce the corn-based biofuel.

Usimat, located in a remote, corn-producing part of Mato Grosso state in central Brazil, plans to increase corn-based ethanol output to 100,000 tonnes this year from 67,000 tonnes last year.

Sergio Barbieri, the mill manager, currently is buying corn for 15 reais ($6.73) per bag, and says it is more profitable to use the grain than to buy sugarcane at up to 18 reais per bag.

"We are living in a cane hell and corn heaven," Barbieri told Reuters in an interview.

Brazil was a global pioneer in sugarcane-based biofuels, but corn-derived ethanol is more common in the United States. After rapid expansion, many of the Brazilian sugarcane-based ethanol mills are financially strapped and some are closing.

Usimat produces ethanol with sugarcane from April until November and switches to corn for the remaining months, allowing it to operate 340 days out of the year, Barbieri said.

Other corn-ethanol projects are being studied in Mato Grosso. Specialists say corn-based ethanol is only profitable in remote areas of Brazil, far from the heart of the sugarcane country in Sao Paulo state.

Brazil produced a record 81.5 million tonnes of corn last year but production is expected to fall below 80 million tonnes this year due in part to low prices.

Mato Grosso state's farm institute said local farmers are receiving 11 reais per bag of corn, a price that has fallen 44 percent in two months as the second of two annually corn crops is harvested.


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