FOCUS-Wheat, trash, and sweet potatoes: Brazilian ethanol is a smorgasbord of raw materials

The cars navigating Brazil's crowded streets currently powered by sugarcane ​or corn-based ethanol could before long run on a cornucopia of fuels made from grains, tubers and ‌other ​exotic feedstocks. 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 cars navigating Brazil's crowded streets currently powered by sugarcane ​or corn-based ethanol could before long run on a cornucopia of fuels made from grains, tubers and ‌other ​exotic feedstocks.

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 THIRD WAVE The country's "third wave" of biofuel innovation from both major industry producers and upstarts promises even more variety than the ‌sugarcane and corn inputs that have dominated fuel production. The activity is bolstering production of crops like sorghum and could do the same for wheat and other products just as ethanol plants have done for Brazilian sugarcane and corn.

Some 28.5 billion liters, or 71%, of Brazilian ethanol will come from sugarcane in 2026, according to the government's Energy Research Company, while 11.2 billion liters will come from corn, once the upstart to sugar. That figure includes soy, wheat, and other cereals, which are currently not broken out separately. 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.

"Rio Grande do Sul was left out of both the first wave ⁠of ethanol production, which was sugarcane, and the second wave, which was corn," Be8 founder and CEO Erasmo Carlos Battistella said at the company's biodiesel plant in the city of Passo Fundo. "Now a third wave is coming, driven by developing technologies that will use the raw materials we have here." CANE CRUSHED?

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. Mario Ferreira Campos Filho, head of ethanol industry group Bioenergia Brasil, predicted that 40% to 45% of Brazil's ethanol production could come from grains in five to six years.

"Not even half of the municipalities in Rio Grande do Sul have ethanol-only pumps," Campos Filho said. "The possibility of having your own production allows you to open the market up." Be8 expects to meet 23% of gas station ethanol demand in the state once ⁠its ​plant is operational.

BIOFUELS AND OTHER PRODUCTS Biofuel demand is squeezing extra income out of previously unloved products in Brazil's economy.

Using wheat and other winter cereals for ethanol may encourage more plantings for crops with historically limited commercial appeal, said Giovani Stefani Fae, head of technology transfer in state research agency Embrapa's wheat unit. 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. "The industry guarantees that whatever is planted will be harvested." 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 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."