Focus: Wheat, Trash, and Sweet Potatoes: Brazilian Ethanol Is a Smorgasbord of Raw Materials

by Oliver Griffin, Diego Vara and Oliver Griffin (Reuters) Brazil's 'third wave' biofuel innovation expands to wheat, sweet potatoes, and food waste; Sugarcane producers warn of overproduction with sugar prices near six-year lows; New feedstocks offer co-products like animal feed, with investments from Be8, Shell, and others; Brazil's ethanol industry is second only to the United States

A new wave of biofuel innovation is sweeping the nation, with developers in unexpected corners of the country's farm sector encroaching on decades of domination by sugarcane producers in ethanol markets, betting on everything from staple crops like wheat or barley ‌to waste products like discarded foodstuffs.

"The future of the energy transition is not a world of 'ors', it's a world of 'ands'," said Alexandre Breda, low carbon technology manager for Shell's Brazil unit, which is researching the viability of agave as a biofuel. "We need the sugarcane and the corn and the agave and the wheat and all the different biomass. One single feedstock will not bring the answer."

Brazil's roughly $20 billion ethanol industry is second only to the United States, and it has long been known for its fleet of "flex-fuel" passenger cars that can run on a 30% mandatory blend of ethanol mixed into gasoline, or ethanol alone.

The global surge in energy prices due to the U.S.-Iran war has squeezed consumers worldwide, but the hit has been much less pronounced in Brazil, where the vast quantities of biofuel-powered light vehicles have shielded the South American nation's consumers.

The average price of Brazilian gasoline was up just 5% to 6.62 reais (around $1.30) per liter at the end of May from 6.32 reais in January, according to national data. By contrast, ⁠U.S. gasoline prices have risen more than 40% since the war started at the end of February.

The country's biggest biodiesel producer, Be8, is investing 1.7 billion reais ($338 million) in a plant to produce wheat-based fuel. The biorefinery, located in the southern state of Rio Grande do Sul, is expected to launch in March 2027, becoming Brazil's first large-scale plant using wheat and other winter grains as biofuels, with a goal to produce 220 million liters per year.

In Brazil's north and northeast, where corn ethanol has grown quickly, sugarcane ethanol producers are wary of new feedstocks, and of overproduction in general as they struggle with sugar prices near six-year lows.

"Now is not the time for expansion ‌and investment in ⁠raw materials for ethanol," said Renato Cunha, chief executive of regional cane-ethanol producers' association NovaBio, who said the disorderly growth of corn ethanol had hurt the market. "You can't just think you're going to produce ethanol and sell it all."

Other observers said the government's rising biofuel mandate and broader adoption of 100% ethanol pumps serving Brazil's flex-fuel passenger cars would support production. The government is expected to boost the mandatory percentage of ethanol in gasoline to 32% in June, which would boost annual ethanol demand by about 1 billion liters, according to industry group UNICA.

Wheat ethanol, like corn, produces a key co-product after fermentation and evaporation. The protein-rich leftovers, called dried distiller grains, are used for livestock feed, giving those producers an additional revenue stream that sugarcane ethanol cannot provide.

Be8's plant is expected to produce 155,000 metric ⁠tons of dried distiller grains and 27,000 tons of wheat gluten.

Producers in Sao Paulo state have discovered a similar process for turning excess sweet potatoes into ethanol and animal feed. Currently, those potatoes "are effectively left in the field because it isn't even viable to harvest them," said David de Carlo Fernando Junior, industrial manager for Agropecuaria Vista Alegre.

Major soybean processors such as Caramuru and CJ Selecta are squeezing more profit out of Brazil's top crop by making ethanol from the soy molasses that results from processing ⁠soymeal. Molasses otherwise yields weak margins, CJ Selecta said in a press release.

Even food bound for the garbage heap is included. Environmental services company Ambipar (AMBP3.SA), opens new tab is using food waste such as unwanted soft-drink syrups and other discarded items to produce about 2.4 million liters of ethanol annually, though that's a fraction of the country's 40 billion liter output.

In Brazil's semi-arid north, Shell is investing 100 million reais to research whether agave, used to make tequila and mezcal, could be a feedstock. If successful, the project could unlock new biofuel opportunities in similar regions worldwide, said Shell's Breda.

"If you can produce tequila, you can produce ethanol," he said. "Everything ferments to something." READ MORE