Volume 11 | Issue 1 | Year 2008

If you’ve driven past a cornfield lately, you may have noticed the scent of sulfur lingering in the air. That’s the smell of ethanol in the steeping stage. Sulfur dioxide is added to the liquid corn extract to help the fermentation process, transforming the corn into fuel. Every year, more and more cornfields are sprouting up across the country, bumping into and often replacing other food crops. The patchwork of farmland that is California’s San Joaquin Valley, one of the food producing capitals of the world, now includes a surprising number of cornfields. The phenomenon is a result of the world’s continuing interest in bio-fuels: ethanol, bio-diesel, and alcohol, new fuel technologies that promise to change the landscape of world power and free us from our dependency on petroleum.
In Brazil, the same thing is happening with sugarcane and has been happening for over 30 years. Today, the borders of Sao Paulo state, Brazil’s principal sugar-producing region, are unable to contain the growth of the sugarcane industry. When growers reach their saturation point in Sao Paulo, their only recourse is to expand to other areas of the country. One company, Unialco, is leading the way and its president, Luiz Guilherme Zancaner, is waving the flag. “We have our principal plant in Sao Paulo, but our main focus for expansion is outside of Sao Paulo, because we are saturated here.” In 2000, Unialco acquired Alcovale, whose plantations are located in the Southwest Region of Brazil, in the state of Mato Grosso do Sul. Today, Unialco is one of the Brazil’s top 20 alcohol fuel producers and the company’s new sugar lands will support its growth over the next 30 years.

The New Brazilian Frontier
Mato Grosso do Sul, located on the western edge of the country, borders Peru and Paraguay. It is home to the largest wetlands in the world, known as the Pantanal, a swampy region occupied in the 1700s by explorers from Sao Paulo, known as bandeirantes, or flag bearers. Those early Brazilian pioneers discovered gold along the banks of the Paraguay River and began moving into the area. Although inhabited by indigenous people at the time, The Pantanal was technically one of the Spanish territories in South America. Later, this region would be the cause of Brazil’s war with Paraguay. Today, the state remains remote and wild, and is home to more cattle and crocodiles than humans. But a new type of gold may be growing there for Unialco.

In Brazil, expansion to remote areas of the country is not easy, and Zancaner points out some of the challenges. “We need these areas of the country, but we also need better infrastructure to help connect our states. My view is that Brazil should be moving more and more in the direction of alcohol fuels. We need to structure the future of the country to help our alcohol reach the world. Our weak side is infrastructure. We depend on roads and railways that are very bad, from the interior states to the ports. We can only compete as a strong global player if we have a strong infrastructure and logistics.” Zancaner adds that Brazil’s governmental monopoly of petroleum is partially to blame. “We need private and public companies to do this, not just Petrobras.”

Already, Brazil is losing ground to the United States in terms of plant-based fuel production. Where Brazil produces nearly 17 billion liters of sugarcane alcohol per year, the United States now produces around 18 billion liters (nearly 5 billion gallons) with plans to reach 90 billion liters by 2012 – double Brazil’s projections.

“The American market uses more dehydrated alcohol, which is mixed with gasoline, but the future is more in hydrated alcohol, which is used directly. But the United States already passed us in production volume, even using corn instead of sugar. The problem is, you need another energy source to process corn into gas, such as electricity or liquid fuels. With sugarcane, we use the same product.” For most refineries in Brazil, the bio-mass from sugarcane husks is converted into energy to run the plant, often with extra to spare…or to sell. Corn ethanol production results in only 25 percent more energy than it takes to make it. Zancaner continues: “Corn has problems when you look at the entire balance sheet. In other countries, oil or gas or even tires are used for energy [in refineries]. Here, we use the cane husk, which is cleaner and made from the same plant.”

In addition to its domestic challenges, Brazil faces challenges in the international sugar market and Zancaner does not see this changing for at least two more years. “Other countries are competing in the international sugar market and keeping prices low. But in alcohol, we expect prices to improve later this year.” Zancaner also speaks of international perceptions as a challenge for Brazil. “In Europe they think we still have slaves cutting the sugarcane. This is completely false. They don’t even know where our alcohol is made inside our country. This is to lower the value of our products and those of developing nations. If you look carefully at Europe or the United States – countries with developed infrastructures – you find that they use companies with questionable practices. Our biggest sugar producing area is the South Central Region – not the Amazon, where all the rumors are focused.” Zancaner expects these misperceptions to resolve themselves in time, stating that everything has its limits.

Consolidation among Brazil’s sugar producers may improve the country’s international leverage and Zancaner expects that within six or seven years, as much as 70 or 80 percent of Brazil’s alcohol production will be controlled by 20 to 25 groups. Today, there are around 350 players.

Down to the Last Drop
Besides expanding its crops, Unialco is using new technologies to increase the yield from its sugarcane. The company’s new infusion grinding units, acquired and installed only one year ago, squeeze a bit more from the cane than traditional methods. The technology, which is used primarily in South Africa and Australia, infuses the cane pulp with water and applies a greater mechanical force to extract the liquid. “After the numbers I saw from other companies around the world, I decided to purchase this technology too.”

“A good grinding here in Brazil would yield around 97 percent. With the infusion unit, we can get 98.5 percent. That does not seem like much, but if you multiply it by three million tons, it’s a lot of sugar and alcohol. Besides this, you have a lower cost of repairs and maintenance with these machines…and lower energy consumption. The down side is that we need an evaporation system to take out the water vapor. Still, we have a better treatment of the juice and alcohol.” The infusion unit, which costs around $15 million, has a huge capacity. “We are at 60 percent of capacity and very few ever reach 100 percent. The largest units have a daily capacity of up to 15,000 tons. That’s the kind we have now.” Unialco’s daily production in Sao Paulo is currently around 10,500 tons.

Dominance in Brazil
Unialco is one of the fastest growing companies in its industry. It began in 1982 producing a small amount of hydrated alcohol from its shareholders’ crops. It wasn’t until 1993 that the company leased 7,794 hectares (approximately 19,000 acres) of land in Sao Paulo and began processing its own sugarcane. By 2006, Unialco had grown to over 32,000 hectares, and processed over four million tons of sugarcane that year. Today, 60 percent of the company’s production is from its own crops, with 40 percent coming from shareholders’ crops.

“Inside the agro-industries in Brazil, we are very competitive and ready to face the challenges with clean and renewable energy. We’ve been growing the business seriously since 1995. We bought out about 15 shareholders and got 80 percent of the company in my family’s hands. But it’s not really a family business. I’m more of a guide than an executive of the company; the executive power is with professionals. We are more mature now and confronting the challenges of the future. With our fist crop of sugarcane we produced 200,000 sacks of sugar. In 1998, we produced one million sacks. This year we’ll produce 6.5 million sacks.”

Unialco can grind almost 18,000 tons of sugarcane per day between its two main plants in Sao Paulo and Mato Grosso do Sul. Together, these two units process nearly six million tons of cane per year and produce 230 million tons of sugar and 155 million liters of alcohol (70 million hydrated and 85 million dehydrated). “In the last 1.5 years we have had a different type of growth. Now we are more dedicated. We have 3,000 employees and more than 9,000 that depend on the company. This is a big responsibility and we have to have a consciousness of partnership.”

Zancaner, who has a ranch in the Pantanal Region, understands the partnership between agriculture and nature. In the Pantanal, one witnesses a unique balance between the region’s many species of wildlife and its agro-industries. There, over 25 million head of cattle living in relative harmony with 80 species of mammals, 650 species of birds and 50 species of reptiles. It’s likely that sugar will find its place in this ecosystem and that of the world’s fuel economy.

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