Structuring an expectation for the next 10 years for a segment that practically did not exist in Brazil 10 years ago is, to say the least, an exercise in sensitivity, even more so, in the well-known situation of uncertainty regarding the main product, ethanol.

Since 2017, corn ethanol production in Brazil has been growing by an average of 60% per year, driven by major players who quickly absorbed project execution skills, production technology and markets and, thus, dictated the pace of development of the segment. These are large projects, even when compared to the mature North American industry.

The rapid development recorded, added to the market opportunities that have emerged and will probably arise, denote that there is still energy for impulses that could result in average growth above 10% per year, at least until 2032.

In this context, this article will list important variables that will determine the pace of development of this industry. It is a summary of the main challenges, or rather, the sector's growing pains that require and will require special attention for the next cycle. Are they:

The expansion of ethanol supply needs to be synchronized with the development of demand. Corn ethanol production is already representative and is equivalent to between 20 and 25% of ethanol production in the Center-South of Brazil. This reinforces that understanding the size of demand to absorb the segment's growth is essential.

Especially, at this time of pressured ethanol prices, with parity levels with gasoline at very low levels, the major structural issue is the capacity of the domestic market to absorb the additional volumes of ethanol coming from the corn ethanol segment. There is no denying that the investment decision does take into account the short-term market condition and this is at least reasonable. And the current harvest (23/24) shows us how incremental volumes of ethanol (including in the sugarcane off-season) impact such a sensitive market, even with a great price for sugar and a reasonable price for oil.

Looking a little further ahead with optimism, in a hypothesis test in which we consider a greater participation of ethanol in the Otto cycle in states where gasoline is currently very predominant, we arrive at a potential increase in demand in Brazil of around 20%. Logically, the market dynamics are not that linear, but they are equations that illustrate opportunities in the country.

The optimistic view would still suggest that there are many new markets to be explored, such as exports to countries that are adopting pro-ethanol policies and/or the adoption of sustainable aviation fuel, which can generate demand shocks that will significantly impact the price situation and, consequently, in encouraging new projects.

In this environment, it is up to us, together with the entities representing our sector, to work with legislators and regulators to properly include ethanol in decarbonization programs and energy policies.

New markets for corn meal, Distillers Dried Grains are really key. In another practical exercise, when crossing the potential evolutions, over time, of the supply and demand of Dried Distillers' Grains in the domestic market, based on the growth of the corn ethanol and animal nutrition segments, it is possible to conclude that It is not possible to anchor the entire supply of bran in the expectation that domestic consumption will be able to buy everything throughout the months and years. Therefore, a positive agenda for opening new markets, including export routes, is very important.

Added to the challenge of commercializing the co-product is logistical efficiency, since internal demand is more dispersed than production; in addition to standardizing quality between industries through the use of different technological levels, adapting to customer needs.

Without biomass there is no energy and steam. Without energy and steam, there is no corn ethanol. Some regions with corn growth, which in a first analysis are suitable for the corn ethanol industry, require special attention to the biomass supply plan, even to the point of being a determining factor in the unfeasibility of projects and, consequently, creating barriers to sectoral growth.

Using approximate numerical examples, for every 1 million tons of corn processed into corn ethanol, 450 thousand tons of eucalyptus chips (40% moisture) are needed, equivalent to a forest base of 13 thousand hectares to support the cyclicality of forestry. Adding even more “color” to the example, there is practically 1 kilogram of eucalyptus chips for every 1 liter of ethanol produced.

These are large and representative figures that, when combined with the six-year eucalyptus cycle, bring a critical component to project decision-making and risk appetite.

There is corn for corn ethanol, but pay attention to regionalities. Some states and/or regions with corn production volumes can also be large consumers and, at the bottom line, have a shy balance for accommodating new industries.

As an example, we have certain regions in the states of Goiás and Mato Grosso do Sul that demand corn for animal nutrition, corn ethanol and, in addition, are historically suppliers of deficit states, such as São Paulo and the South region. In these locations, the balance of corn is fair, bringing competitive barriers and additional risks for new entrants.

Adding to the restrictions on corn availability the supply of biomass, the importance of paying attention to regionality when implementing a corn ethanol project is reinforced.

The end of development and incentive programs for industries, especially in the Midwest states. Each state has its policy for attracting enterprises, which are usually important levers for the competitiveness of projects, even more so with relevant investments.

Considering that Complementary Law number 186 of 2021 establishes that the granting of tax incentives by states will be allowed until 2032, it is natural that the absence of this promotion will impact the decrease in the pace of sectoral growth.

In conclusion, corn ethanol, using all the strength of the field, is already a Brazilian vocation in adding value to the production chain and spreading development. The challenges are great and not exclusive to the competence of industries to execute projects efficiently, but rather to important debates that involve the future of ethanol, which is certainly the best option.