Brazil Considers Corn Ethanol as Grain Prices Decline

Brazil, the world’s largest producer of ethanol from sugarcane, may start producing the biofuel from corn after a record crop prompted domestic prices to slump below costs, the country’s agriculture policy secretary said.

“We’re studying to provide financial support to corn ethanol and to design an agriculture policy for it,” Neri Geller said in a telephone interview from Brasilia. “Corn ethanol is competitive and is probably the best outlet for the corn surplus.”

Corn prices have fallen as Brazil’s output has more than doubled in 11 years. The nation’s yield reached 81 million metric tons in 2012-13 as farmers started planting two crops per season and used new technologies and more fertilizer, data from the country’s Ministry of Agriculture show.

Output is expected to drop to as much as 79.8 million tons in 2013-14 after prices fell, the ministry said. Corn in the main state of Mato Grosso dropped 37 percent this year to 11.26 reais a 60-kilo bag ($2.04 a bushel), below the production cost of 13.02 reais, data from the government show.

Geller declined to comment on how much ethanol Brazil might produce from grains such as corn and sorghum.

Production of ethanol from corn faces criticism within the government amid concerns over food prices and livestock feed costs, Geller said. Brazil would consider financing ethanol distillers in remote corn-producing areas that are not connected to ports or anywhere near consumer markets.

“In some areas it costs more to transport the corn than to produce it,” he said. “Processing corn and selling ethanol and distillers’ dried grains locally makes sense and would reduce ethanol imports from the U.S.”

Brazil is the world’s second-largest ethanol producer after the U.S., where the biofuel is made mostly from corn.

To contact the reporter on this story: Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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