Cooperfarms ponders cereal-based ethanol production in Northeast Brazil

Brazilian agribusiness cooperative Cooperfarms plans to build what could be Bahia's first cereal-based ethanol plant, aiming to use corn and sorghum as feedstocks instead of the more traditionally employed sugarcane.

Ethanol from corn has been on the Brazilian market for years, but not in the Northeast, where most regional producers turn to sugarcane as a primary feedstock source to manufacture biofuel.

Now Bahia-based Cooperfarms intends to build a new mill to process ethanol from corn and sorghum near its home base in Luis Fernando Magalhaes, on the state's western coast, where it farms fruits, grains, livestock, and other products. In addition to biofuel, the cooperative has an eye on corn ethanol's by-products, particularly dried distillers' grain (DDG) – a corn bran rich in protein and fiber that is used as a lower-cost alternative to soybean meal to fatten animals.

Cooperfarms disclosed its plans during a meeting with agriculture minister Carlos Favaro and state-run development bank BNDES president Aloizio Mercadante on April 30 in Rio de Janeiro, in hopes of facilitating long-term financing options.

"It was a positive agenda; we were heard by all BNDES' executive board," Cooperfarms' vice president Luiz Pradella said in a statement. "The next step is to wait for the engineering and energy generation technology projects, which are already underway, and then move forward with attracting investment funds."

No further details on timelines or production sizes were disclosed.

Sources with knowledge of the matter told S&P Global Commodity Insightsthat the project dates to September 2022, when the idea was to partner with local energy firm Impacto Energia and US technology leader ICM to get the plant off the ground. Impacto Energia controls a sugarcane-based ethanol plant in Teotonio Vilela, in Alagoas. That industrial unit would have capacity to grind 1,700 tons of grains daily, meaning it could produce up to 260 million liters of anhydrous (pure) ethanol per year. The plant would also be able to produce 9,000 tons/year of corn oil and 185,000 tons/year of DDG. Operations were expected to start in the first quarter of 2025, but nothing much has been heard since then.

It is unclear whether the current project will follow the same specifications.

Cooperfarms' move comes at a time when corn-based biofuel is expanding its share in the country's production mix, mainly the result of increased output capacity concentrated in Center-West Brazil, spread across Mato Grosso and Goias states. Grain-based ethanol production is also filtering into non-traditional markets, such as the southern state of Rio Grande do Sul, where making the biofuel from only one raw material is unfeasible.

Northeast Brazil – which comprises nine states stretching from Maranhao to Bahia – has a structural deficit in ethanol. Despite its local production, it is necessary to bring the biofuel from elsewhere to meet demand. The deficit tends to increase after the end of the September-March sugarcane crop harvest, when the region enters its off-season. Bahia, for example, imports 80% of all ethanol it consumes, whether from Mato Grosso, Sao Paulo, Goias, Minas Gerais, Pernambuco or Alagoas. The remaining 20% is produced locally by companies such as Agrovale, Santa Maria and Bahia Etanol.

Alagoas-based agribusiness cooperative Pindorama started producing ethanol from corn in February 2023 in its mill in Coruripe, where it already produced biofuel from sugarcane. Later that year, Paraguayan ethanol group Inpasa revealed it would invest up to Real 2.5 billion to build a cereal-based plant in Maranhao, expanding its foot towards Northeast Brazil.