Argentina is betting on corn to boost its ethanol mix with the potential for gasoline blended with 20 or 25% of the additive, an industry insider said Thursday.
The government has authorized five projects to supply corn and sorghum-based ethanol to oil refiners, with the $450 million in financing already lined up, Martin Fraguio, executive director of the Argentine Corn Association (Maizar), said in an interview.
The plants will have a combined capacity to produce 400,000 to 500,000 cubic meters/year of ethanol, enough for a 10% mix in gasoline, he said.
The capacity will start coming into production in the second half of 2012, he added.
This will help Argentina get up to speed on its ethanol blends after a sluggish start. The government launched a 5% mix, or E5, in January 2010, at first relying on sugarcane. The cane industry has struggled to build enough capacity, now only selling about 70,000 to 80,000 cu m/year to refiners for an E2 mix. The E5 mix requires 230,000 cu m/year of ethanol supplies.
While more cane-ethanol projects are in the pipeline, the sugar industry lacks dimension to expand the mix compared with corn, said Fraguio.
Argentina doesn't have the large tropical region like Brazil, the world's biggest producer of ethanol from cane. So cane doesn't grow so readily and requires more water, jacking up costs. The cane harvest runs for five to five-and-a-half months in northern Argentina, so cane-ethanol factories can only work for half a year. Cane ethanol producers also have to buy land for planting cane to feed a factory, adding to the cost, Fraguio said.
By comparison, corn is more traditional in Argentina, with huge room for expansion and plentiful storage capacity and logistics infrastructure for year-round ethanol production.
Corn is the second biggest crop after soybeans in Argentina. The government estimates corn output will rise to 30 million mt in the 2011-12 season, up from an expected 21.9 million mt in the current season. Farmers planted 4.4 million hectares to corn in the 2010-11 season, up from 3.7 million in the previous season, according to government data.
Fraguio said Argentina has an additional 2 to 5 million hectares (4.9 to 12.4 million acres) of land for expanding planted area to corn, far more than the 10,000 to 20,000 hectares for cane.
What's more, he estimates that the investment for producing a liter of ethanol from corn is half that of cane because of lower land and infrastructure costs, while production costs are 5 to 20% cheaper largely because of less watering.
He expects that with corn ethanol, Argentina could replicate Brazil's industry, where the blend ranges from E20 to E25 depending on cane availability. The countries already share close ties in auto manufacturing, so Argentina could import flex-fuel motors to allow cars to run on any mix of ethanol, even 100%, Fraguio said.
"Argentina can use ethanol to reduce the price of gasoline like in Brazil, by averting costlier gasoline imports," Fraguio said. "Argentina could become like Brazil for ethanol but with grains as the feedstock."
As corn ethanol plants come on line, he said Argentina could build the mix to E20, or even E25.
