Impact of the drought: the lower harvest will force the ethanol factories of Córdoba to bring corn from further away

During the past year, the production of corn ethanol that takes place in the province of Córdoba reached a record number. According to data from the national chamber that groups companies, the four plants in Cordoba –ACA Bio, Promaíz, Bio 4 and Maíz Energía– processed a historic figure of 1,596,400 tons of corn.

They did it to supply the gasoline that is sold in the domestic market with 12% renewable fuel, with a production capacity that between the four establishments reaches 614 million liters per year.

For this year, the projections for the industrialization of corn to convert it into ethanol are the same as in 2022.

From the companies, based on the queries made by agrovozassure that to supply the mandatory mixture they must work at full throughout the year.

However, they will have to do it under different conditions for the origination of the raw material.

“The issue of the availability of corn from June in Córdoba will depend a lot on how much the late crop yields,” says Víctor Accastello, deputy general manager of the Association of Argentine Cooperatives (ACA), owner of ACA Bio, which is the largest plant that produces ethanol in the province located in Villa María.

Beyond the fact that the crop will exhibit a significant loss in its production, domestic consumption (to produce meat, milk and fuel) will be guaranteed; the cut in the commercial stock will be in the volume destined for export, through the port.

“It is possible that we will have to originate corn from further away, travel more kilometers and with a higher incidence of freight, which impacts the margin, in a context in which companies are already complicated with the price of ethanol,” acknowledges Juan Cano, general manager of Promaíz, the plant that produces ethanol in Alejandro Roca (Juárez Celman department).

Bid on available corn

Until the arrival of the corn from the new harvest, the tokens are placed on the cereal available from the last season. After the implementation of the two versions of the soybean dollar, the industry perceives that the producer is setting the value of corn very slowly, based on their needs.

“The corn from the previous campaign is available, but that does not mean that the companies have bought it,” clarifies Accastello, who reflects on the difficulties of having working capital in pesos, in an inflationary economy, to acquire a dollarized input.

“Every day we are producing a significant volume of ethanol that we invoice to the oil companies that pay after 30 days and in pesos. When it is collected, it is money, you have to go out and set the price of corn,” explained the deputy general manager of ACA.

That is why they have warned the Ministry of Energy that the price of ethanol that in recent months was set based on the increase in the value of gasoline at the pump is insufficient.

“There is a gap between the last monthly increases that gasoline had and the general price inflation that weighs on the costs of the industry. That is why we are asking for the restitution of the formula that contemplates the setting of the price of ethanol based on production costs and a minimum profitability, as the law says,” says Manuel Ron, president of Bio 4, the company that produces ethanol in the city of Río Cuarto.

Commercial strategies

As of June, with the arrival of late corn to the commercial circuit, the origination of the raw material will begin to play another game.

In a scenario in which the cereal harvest will be reduced in the province –due to the weather– by 7.5 million tons, according to the Córdoba Grain Exchange, obtaining the grain would imply, in principle, bringing it from further away.

“Under normal circumstances we originate the grain within a radius of 70 kilometers from the plant; Today we are seeing that we are going to be originating at more than 100 kilometers”, observes Cano, from Promaíz.

The company carries out its corn supply strategy through the two companies that own it: Bunge and AGD.

At present, for the available corn, the factories pay the price of Rosario slate (around US$ 250 per ton), less a discount (which can be up to US$ 10 per ton), due to the economic convenience and logistics of delivering the grain to a destination closer to the port.

For this campaign, from the industry they observe that this discount would be absorbed in the new values.

“In years of greater supply, this discount is greater and in years of volume restrictions it is less. It is probable that this plus will be reduced in the majority of consumptions. The lack of supply will mean that there will be more bids to get the raw material”, warns Ron, from Bio 4.

In the department of Río Cuarto (where the plant is located), the largest producer of corn in the province and in the country, there are areas that –despite the weather– will have an acceptable harvest.

“We have a supply radius of 60 kilometers and perhaps this year we will have to go a little further,” admitted Ron, adding that the company already has closed commitments for the bulk of the 2023 campaign.

“In general, we are breaking down the purchase of corn among producers, we also buy a lot from collections and cooperatives that also originate from producers. We are part of a supply commitment chain that we hope will not be cut. However, these climatic catastrophes generate tensions that must be managed,” acknowledges the industrialist.

By the time the corn from the new harvest comes in, the players in domestic consumption do not envision a rise in the price.

Nafta: corn, more than 70% participation in the national cut

The full activity exhibited by the plants that produce corn ethanol in the province contrasts with what happens in the north of the country with the establishments that make the renewable fuel based on sugar cane.

“At the cut with 12% gasoline, corn ethanol is contributing two thirds, the rest is sugar cane ethanol,” compares Víctor Accastello, deputy general manager of the Association of Argentine Cooperatives (ACA), the owner of ACA Bio, in Villa Maria.

The lower production of corn ethanol has to do with a seasonal issue of lack of raw material that, according to warnings in the sector, would not be reversed with the arrival of the new crop.

“Based on the sugarcane harvest forecast, it is not foreseen that the market can decompress, for which reason we see demand in the corn sector until the 2023/2024 harvest,” predicted Juan Cano, general manager of Promaíz, the renewable fuel manufacturing plant, located in Alejandro Roca.

In order to guarantee 12% ethanol for the cut with gasoline, the companies that produce the renewable fuel based on corn plan to work fully throughout the year.

Although from the factories they leave a warning. “If there is no shortening price path, it will be difficult to work fully, they warn.

It is that the price of $135 per liter of ethanol set by the National Secretariat of Energy, and depending on the integration that the factories make with the rest of the by-products, does not provide profitability. “If we measure all the costs that can be incurred, the depreciation of the fixed asset and the opportunity cost, it is at the limit of equilibrium, without profitability,” said Accastello.

For Manuel Ron, president of Bio 4, neglecting the price of ethanol, whatever the circumstances, means a threat to an activity that has been working at full speed in the last year, providing employment and generating added value at source.