7-2012 Prospects for Corn Ethanol in Argentina

Countries that export biofuel feedstocks such as grain or sugar and that are also importers of motor fuels will have a natural competitive advantage over other countries in the production of biofuels. Argentina is one of a very few countries that both export potential feedstocks and import gasoline and diesel. This combination means that an Argentine ethanol plant will pay less for feedstock and receive a higher price for ethanol than an ethanol plant located in a country that imports feedstocks and exports motor fuels. Argentina is the world’s second-largest exporter of corn. This export status, when combined with high internal transportation costs, lowers the price of corn in the major production areas of Argentina. In addition, Argentina’s farmers need to plant more corn to create a more sustainable balance between corn and soybeans. In particular, in Argentina’s northern production regions, the large amount of crop residue from increased corn plantings is needed to help build soil quality. Thus there is significant potential for expansion of corn in Argentina, which makes corn an even better feedstock for ethanol. The variable or direct cost of converting a ton of corn into ethanol in Argentina is comparable to conversion costs in the United States, with the exception that natural gas costs more in Argentina. For a plant that does not dry distillers grains, conversion costs would be approximately $40 per ton of corn processed. Drying distillers grains adds about $10 per ton. The domestic price of corn in Argentina not only reflects the cost of transporting corn from the interior to Rosario, but it also reflects the effects of export taxes and the need to obtain government permission to export. Over the period from October 2010 to March 2012, the cost of corn to an ethanol plant in the state of Iowa in the United States averaged $110 more per ton than the local price of corn paid to farmers in Córdoba over the same period, and $140 more per ton than the Salta corn price. Argentina also has a large livestock sector that can readily use distillers grains from corn ethanol plants. Plants that are located close to cattle operations can sell wet distillers grains to these operations thereby saving the cost of drying. Plants that have dryers installed can export distillers grains. Livestock producers in many countries have learned how to use imported distillers grains from US ethanol plants over the last few years, so Argentina would have the ability to export dried distillers grains. Disciplines Agricultural and Resource Economics | Agricultural Economics | Economics | Oil, Gas, and Energy This article is available at Iowa State University Digital Repository: http://lib.dr.iastate.edu/card_staffreports/3 Prospects for Corn Ethanol in Argentina Bruce A. Babcock and Miguel Carriquiry Staff Report 12-SR 107 June 2012 Center for Agricultural and Rural Development Iowa State University Ames, Iowa 50011-1070 www.card.iastate.edu Bruce Babcock is the Cargill Endowed Chair of Energy Economics, the Director of the Biobased Industry Center and a professor of economics at Iowa State University. Miguel Carriquiry is an associate scientist at CARD. This report is available online on the CARD Web site: www.card.iastate.edu. Permission is granted to excerpt or quote this information with appropriate attribution to the authors. Questions or comments about the contents of this paper should be directed to Bruce Babcock, Iowa State University, 578 Heady Hall, Ames, Iowa 50011-1070; Ph: (515) 294-6785; Fax: (515) 294-6336; E-mail: babcock@iastate.edu. Funding for this study was supported by a grant from Monsanto. The authors thank them for this support. Iowa State University does not discriminate on the basis of race, color, age, religion, national origin, sexual orientation, gender identity, sex, marital status, disability, or status as a U.S. veteran. Inquiries can be directed to the Director of Equal Opportunity andDiversity, 3680 Beardshear Hall, (515) 294-7612.