Brazil’s on the move on a number of fronts — sales, diversification of products and feedstocks, and even in engine development. Let’s look at the Top 10 Trends.
1. Feedstock Diversification
If you thought it was all cane, cane, cane, think again. There’s a lot of movement on sorghum, and castor beans — and even some on corn.
Sorghum: The biggest news of late was from NexSteppe, which reported this week that it sold more than 1,000 hectares (2,500 acres) of its Palo Alto high biomass sorghums for biopower in Brazil this past growing season. This makes it the market share leader in the fast-growing market for bioenergy sorghums in Brazil, with 65 percent market share.
Yields vary by location, but NexSteppe CEO Anna Rath told the Digest that “50-60 wet tons or ~25 dry tons per hectare is a conservative expectation under “ordinary” conditions.”
NexSteppe’s Palo Alto high biomass sorghums can be used alongside bagasse and other sources of biomass to provide a source of renewable power. Unlike wind and solar, biopower is baseload power, meaning it is available 24/7. In addition to production of electricity for the grid, biopower can therefore also be used as onsite industrial power. This is common practice in Brazil for everything from sugar and ethanol production to grain drying to food processing.
As a result of the significant drought this year, Brazil is experiencing a shortage of hydropower, its main energy source. Because of their heat and drought tolerance, Palo Alto hybrids performed well even under this year’s extreme conditions. Standing at up to 20 feet tall after only four months of growth, NexSteppe’s Palo Alto high biomass sorghum hybrids provide a high-yielding, low-cost, high quality biomass feedstock for biopower. Designed to have low moisture levels at maturity, Palo Alto high biomass sorghums offer reduced harvest and transport costs and greater energy production.
Market growth expectations for NexSteppe in Brazil? “As for next season,” Rath told the Digest, “all I can tell you at this point is that we’ve had multiple customers indicate interest in increasing their areas 8-10 fold from what was planted this year.
In other sorghum news, we reported last October that Ceres and Syngenta extended a joint market development agreement in Brazil. The companies will move forward with their efforts to promote the use of both sweet sorghum and high biomass sorghum at Brazilian ethanol mills.
Under the renewed agreement, Syngenta and Ceres will continue to collaborate on field evaluations with mills. Syngenta will evaluate its portfolio of crop protection products alongside Ceres hybrids, while Ceres will provide both seed and research support. Both companies will coordinate outreach to ethanol mills and develop industry training programs. Syngenta indicated that it plans to move forward with its evaluations aimed at registering additional crop protection products for sorghum.
Corn: In December the country’s agriculture secretary says the ministry is exploring subsidies for ethanol production from corn and is looking to develop a policy to support its production. The country’s corn production has doubled in the past 11 years and the secretary says that ethanol is likely the best outlet for the surplus because it’s competitive.
Curiously, U.S. ethanol giant POET is investigating its options in the Deep South. In February, it was reported that POET representatives met with the government of Mato Grosso do Sul last Friday where local officials pointed towards a $350 million corn-based ethanol project. The facility would produce 50 million liters of ethanol per year from 350,000 metric tons of corn.
Castor bean: Last month, we reported that Evogene and SLC Agricola, one of Brazil’s largest landowners and agriculture businesses, announced the signing of a collaboration agreement between SLC and Evofuel Ltd., Evogene’s wholly-owned subsidiary, for the commercial production of Evofuel developed castor bean varieties in Brazil, expected to take place during 2016. Evofuel focuses on the development of high yielding castor bean seeds as a second-generation feedstock for the growing biofuel and other industrial markets.
Under the terms of the agreement, Evofuel will provide SLC with seeds of its proprietary castor bean varieties and SLC will be responsible for growing the crop on its farms in northeast Brazil. The resulting castor bean grain will be sold to local oil producers to address the industry need for castor oil. The agreement provides for the allocation between SLC and Evofuel of revenues from sales of castor bean grain.
2. Soaring Sales
Ethanol: Domestic sales during 2013/14 reached an all-time high of 23.07 billion liters, compared to 18.68 billion liters during the previous season. Hydrous ethanol sales saw more than a 16% increase while anhydrous sales jumped nearly 36%.
Biodiesel: The ANP’s bimonthly biodiesel auction held on Friday saw 463.8 million liters sold to supply the country’s B5 blending mandate. A total of 735.2 million liters were offered at auction with more than 98% of it complying with the social seal standard even though only a minimum of 80% of the volume had to comply with the standard. The average price was BRL1.88 per liter, 23% lower than the reference price.
3. Higher Blends
Heading for 27.5 percent? Earlier this week, the agriculture ministry has confirmed that it is looking to increase the blend of anhydrous ethanol in gasoline to 27.5 percent from the current 25 percent. Such a move is expected to reduce Petrobras’ fuel imports, helping to offset some of its losses. The Brazilian stock exchange BOVESPA responded favorable to Petrobras on Friday after the confirmation was announced.
4. Exports and Imports
US market? Soaring ethanol prices due to rail bottlenecks across the country has led the US to buy ethanol from Brazil rather than vice-versa as has become common during the latter’s inter-harvest period. About 5.3 million gallons of Copersucar ethanol is set to be loaded this week in Santos, arriving in Tampa a few weeks later.
EU imports? In February, we reported that multi-year low prices for ethanol in Rotterdam has traders looking to export to Brazil, where the inter-crop season typically leads to shortages from January through April. Dry weather may lead to a later-than-usual start to the crush which could extend the demand period for ethanol imports.
Last month, the Commerzbank, Inter-American Development Bank and Banco Pine S.A. closed a $115 million syndicated A/B loan to expand access to financing for environmentally sustainable projects in Brazil. The Green Line Finance Partnership entails a $75 million A loan from the IDB and $40 million B loan from Commerzbank.
With the demand for energy for both domestic and industrial purposes expected to expand 60 percent by 2021, Brazil’s energy matrix will likely shift toward a higher concentration of renewable energies, most notably energy from sugar cane derivatives and other renewables such as wind energy, small hydroelectric plants and biomass.
The Green Line Finance Partnership with Banco Pine will increase access to adequate financing for transactions, particularly in renewable energy sectors that promote environmentally sustainable initiatives and reduce the impact on climate change in Brazil.