Argentina’s ethanol producers prepare to boost output by up to 60%

By Maximilian Heath

BUENOS AIRES (Reuters) -- Argentina's corn ethanol producers are ready to increase output by up to 60%, depending on how much the government boosts the minimum amount of the fuel required to be used in gasoline, according to the head of the local corn industry chamber.

In April, the government raised the amount of ethanol used by motorists by 2 percentage points to 12%. The move boosted the country's sugar industry, which has been battered by low international prices.

The government plans another increase of ethanol in fuel, although specific targets have yet to be fixed.

Martin Fraguio, executive director of Maizar, said Argentine sugar producers would be hard-pressed to continue increasing ethanol output, while corn growers are expected to boost plantings starting in the 2016/17 season thanks to policy changes by new President Mauricio Macri.

"Further increases in ethanol production will come only from corn," Fraguio said in a recent interview. Argentine sugar producers are expected to reach a peak of 490,000 cubic meters this year, from 328,000 cubic meters in 2015, he added.

Corn production is meanwhile expected to zoom higher now that Macri has eliminated corn and wheat export taxes and other controls that had dampened production. Fraguio expects Macri's policies to eventually boost corn plantings to 6.2 million hectares from the current 4.2 million hectares.

"There are three corn ethanol plants of 100,000 cubic meters a piece that have the capital and the engineering plans ready to expand," Fraguio said, adding that it would take six to 10 months to build the plants once the government announces further increases of ethanol to the fuel mix.

The new plants, which would cost up to $500 million to build, could increase Argentina's ethanol output by up to 60% from current capacity of 507,000 cubic meters/year, Fraguio said.

The capacity brought online by the three new plants could require 700,000 tons of corn on top of the close to 1.2 million tons currently used in Argentina's corn ethanol industry, he said.

The country is expected to produce 25 million tons of corn this year, according to the Rosario grains exchange.