Transformation time for Brazilian energy, agriculture: FS Bioenergia opens in Mato Grosso

18/08/2017 - 15:39

The $155M FS Bioenergia corn ethanol production facility opened this week in Lucas do Rio Verde, Mato Grosso. It’s the first large-scale corn ethanol production plant in Brazil and is the result of an international collaboration between Brazilian agribusiness Fiagril and U.S.-based Summit Agricultural Group headquartered in Alden, Iowa.

In its initial phase of operations, FS Bioenergia will annually process 22 million bushels of corn and produce more than 60 million gallons of corn ethanol, 6,200 tons of corn oil and 170,000 tons of valuable feed rations for Brazil’s growing livestock industry. By 2018, FS Bioenergia’s second phase of operations will increase corn processing and ethanol production two-fold.

Summit Agricultural Group and Fiagril broke ground on the corn-only ethanol production facility in early 2016. FS Bioenergia will employ roughly 150 full-time workers. In addition to ethanol and co-products for livestock feed, the ethanol facility will generate 60,000 megawatts of electricity to the local power grid.

As Rastetter explained to The Digest:

“When we sold Hawkeye in 2011, it gave me for the first time an opportunity to travel, and in traveling to Brazil we saw the double crop, without irrigation, that you can harvest in Brazil. We saw a growing success with corn that would continue to accelerate. Brazil already had the same soybean yield as the US, and with corn as a second crop, they can use the same ground, same machinery and get the benefit of two crops.

“If you think about it, it used to be around 50/50 in Iowa, but now it is often 80 percent corn and 20 percent soybeans, but there is still a lot of rotation to prevent a disease build up, and the soy nitrogen fixation does carry over for corn in Iowa. So we started asking, how big could Brazil go with corn? And I asked ICM to come down with me to look at the opportunities.”

What Rastetter was seeing was the transformation of the middle-north section of Mato Grosso state into the largest grain producing region in the country — a movement which started in the late 1980s with an intensification of settlement.

The vast tropical savannah of Brazil, spreading across Goias, Mato Grosso, Mato Grosso do Sul, Tocantins and into Minas Gerais, was known for poor soil fertility, even though it is perhaps the most biologically rich regions in the world with some 10.000 plant species. Developing the Mato Grosso region, sustainably, has been a major Brazilian project over the past decades — and Fiagril has been at the heart of it.

In Brazil, Rastetter and Marino Franz, founder of Fiagril, were quickly introduced. Fiagril had already long transformed itself into a diversified agribusiness aimed at value-add — owning, for example, a biodiesel plant. Fiagril and Rastetter’s Summit Ag Group found much in common. Ultimately, a JV was formed.

See the project video

In 3 minutes, the whole project, including a fascinating time-lapse of construction, right here.

Fiagrils’s sale to Shanghai Pengxin Group

Yes, last year Shanghai Pengxin Group purchased a 57 percent controlling stake in Fiagril — but the $290M deal excluded the company’s shipping, biofuels and seed production units — focusing instead on its grains purchasing, trading and fertilizer and pesticide operations.

The ICM relationship

FS Bioenergia utilized process technologies from ICM. Since 1995, ICM has provided engineering, construction and operational services for more than 100 ethanol plants in North America. But that company had itself been transformed from a designer of first-generation ethanol plants into a company with diversified and advanced technology that extracts value far more efficiently than just a decade ago.

So, Brazil would not only have the advantage in sustainable feedstock production through double-crop annual rotation — but would be home to a spanking-new ICM technology set at the $115M plant that was ultimately constructed.

The target for ethanol? As Rastetter explained to us — it’s neither the export market nor the traditional vehicle bastion of Brazil around the centers like Rio or Sao Paulo. Think north — think of the growth in the cities nearer the Amazon region.

“If you look at Brazil,” Rastetter said, “it’s a smaller market than the US with around 6.5 billion gallons compared to 15 in the US, but there is 27.5% blending and every car is flex-fuel and can burn up to 100 percent ethanol, so cars are allowed to choose, and that way you can flex the demand. But last year, the country imported 500M gallons into the Amazon [because the production is far to the south]. We’re a far northern plant, and that’s our market.”

What about distiller’s grains? Not a factor in sugarcane ethanol, but a critical factor in corn ethanol. Worth noting that Brazil Foods has modern pork and chicken facilities right there, and a number of hog operations and significant cattle. With new ICM innovations in protein that we covered here, expect that the venture will have solutions for all those sectors. And in Fiagril a ready customer for corn oil for biodiesel.

Comparing Brazil and the US

What’s different, we asked Rastetter, between developing a project in the US and Brazil? From technology to culture. Rastetter immediately zeroed in on culture.

“Technologically, it isn’t a lot different from the US — yes, we had to make sure we matched in Brazil the specs with the ICM specs developed originally for the US. But in Brazil there’s been an embrace of ethanol.And we saw it at the opening. An amazing support from the public and support from the government. We had the president, the agriculture minister, 8 state governors, two federal senators, and I think every mayor in Mato Grosso.

“Plus, we had 1200 farmers and suppliers. Plus major companies like Case, DuPont and John Deere, that are well established down there already. It’s interesting how well the large farmers use US technology. They have this ability to study and accept innovation and adapt it to their needs, and do so in a very efficient way. It’s impressive.”

What’s next?

Expansion, or a one-off?

“We plan to grow the platform,” Rastetter said, “but in a smart way, and we’ll continue to build the management team. We’ll focus in on the Mato Grosso region where there is that intense corn production and an ability to expand that, and well watch of course the growers there in terms of continuing to plant corn in this price environment – that will impact our growth plans.

There’s good reason for optimism. Bank of America recently estimated that annual ethanol sales in Brazil could reach 13.5 billion U.S. gallons in 2022, two-thirds greater than the 8.1 billion gallons estimated in sugar cane ethanol production in 2016.

Fiagril’s Take

“This is a transformative moment for both agriculture and the renewable fuels industry in Brazil, said Marino Franz, founder of Fiagril. “FS Bioenergia will not only meet Brazil’s growing demand for ethanol but it sets the stage for Mato Grosso to become a global leader in the production of corn ethanol.”

The Digest’s Take

It’s been long contemplated — corn ethanol from Brazil — but there’s the talk phase, and now we’ve entered the walk phase. As soy demand rises around the world — especially in relation to the shift to more meat consumption — it’s a natural that Brazil would find ways to grow more corn, and expanding into the ethanol market is a natural for companies focused on value-add with diversified product sets instead of rising a single commodity price train.

We’ve long noted that Brazil has the means of success in its hands owing to its positivist approach to innovation and technology — as we discussed in “Attitude before Altitude” here. So, in some ways unsurprising that Brazil has found a new means for growth, and entirely unsurprising that Rastetter’s Summit Ag Group and Fiagril are there in the mix.

Por Biofuels Digest

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