Facebook
Twitter
YouTube
Linkedin
800-622-7628
16

Brazil Commentary 08-16-19: Fuba, Cafe, & Ethanol

posted on
Brazil Commentary 08-16-19: Fuba, Cafe, & Ethanol

I enjoyed growing up in rural Brazil. Long days of working hard on the farm were welcomed. As a kid, it was a fair wage for a day’s work to get to stop by the farm house and eat bolo de fubá and drink a cafézinho on the way back to town. Bolo de fubá is made from corn and tastes a bit like cornbread. Cafézinho is black, rich, sweet coffee. The corn, coffee and sugar used in this simple snack are all part of Brazil’s long agricultural tradition and promising agricultural future.


One of the first major economic booms in Brazil was tied to sugarcane plantations. Brazil’s sugarcane production has a history of over 400 years. Tragically, it relied heavily on slave labor. While slave labor in the USA is often associated with the production of cotton, in Brazil, this connotation is tied to sugarcane. Coffee production was a secondary economic boom. Coffee barons greatly influenced the Brazilian economy and politics in the late 1800s and early 1900s. Today, influential grain production leaders have economic and political influence in Brazil as well.


I’ve always been fascinated with the ethanol industry. It sits at the intersection of the agriculture and energy. Here in the USA, we usually associate ethanol with corn, but this is not the case in Brazil. Brazilian ethanol has historically been sugarcane based. In 2006 Brazil became self-sufficient in energy, thanks, in part, to sugarcane ethanol. The table below shows weekly exports of Brazilian ethanol.


With corn ethanol, the USA is certainly ahead of Brazil. Brazil got started with corn ethanol thanks to a joint venture between a Summit Agricultural Group of Iowa and a Brazilian company based out of Central Mato Grosso. The company formed, FS Bionergia, has made headlines and is helping build the future of Brazilian agriculture. They take pride in being the first 100% corn ethanol plant in Brazil. They’ve also expanded beyond their initial plant.


Mato Grosso is an interesting candidate for a corn ethanol plant for a number of reasons. Logistically, it is landlocked and far from the Brazilian export market. The need to truck corn over precarious roads to end users and export markets that are hundreds of miles away means much of the value of corn goes to transportation companies, not farmers.
Fiscally, the state has a tax on corn sold outside of Mato Grosso. This tax benefits in state end users. Finally, it is the powerhouse of Brazilian row crop production and is gaining traction in livestock production.


Following FS Bioenergia’s pioneering initiative, at least 7 more corn-based ethanol facilities are scheduled to be built with an estimated production capacity of 3 billion liters of ethanol. Also, traditional sugarcane ethanol plants are being retrofitted to receive corn as well.


What does this mean for Brazilian corn farmers? Demand for corn is good news. Whether it is up the road or across the world, selling corn for fuel is good for demand. I spoke with a farmer in Sorriso-MT who sells to an ethanol plant. He said farmers are the same around the world, and corn buyers are welcomed.


In thinking about how ethanol plants help fuel the economies of Brazil and the USA, I couldn’t help but recall the base ingredients of the snack I enjoyed as a kid. Over the decades, farming in Brazil has become less and less dependent on manual labor. But, poetically, the corn and sugarcane that helped fuel manual labor in the past, are also the key ingredients fueling agricultural progress through ethanol.


Farmers enjoy the demand strength of ethanol plants, and celebrate innovations like these and how they reshape agriculture. At the same time, farmers appreciate traditions like eating cornbread, or fubá, after a long hard day of work.

Categories: | Tags: | Comments: (0) | View Count: (399) | Return

Post a Comment

 
Quotes are delayed at least 10-minutes. Market Data provided by Barchart.com
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. This commentary is written as a daily marketing tool to help farmers sell the grain they raise. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. Past performance and testimonials are not necessarily indicative of future results. Commodity trading involves the risk of loss, and you should fully understand those risks before trading. This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by Roach Ag. Marketing, Ltd. Roach Ag. Marketing Ltd. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. These materials do not necessarily reflect the viewpoints and trading strategies employed by Roach Ag Marketing, Ltd. All forecasts of market conditions are inherently subjective and speculative, and actual results and subsequent forecasts may vary significantly from these forecasts.