Domestic sales and exports of technical corn oil (TCO) will boost Brazilian corn ethanol plants' margins, as the sector looks to monetize byproducts.
Brazil will produce 10.5bn liters (181,230 b/d) of corn ethanol and, consequently, around 453.9mn liters of TCO — byproduct of corn-based ethanol production — in 2026, according to the Corn Ethanol Strategy Report from Argus' consulting division. The report expects TCO production is expected to jump to 691.8mn liters by 2035, in line with the expansion of corn ethanol production to 16bn liters.
TCO serves as a third source of revenue for corn ethanol plants, behind ethanol and a class of dried grains — including those without solubles (DDG) and those with solubles (DDGS). TCO's price is currently based on references for other oils, such as soybean oil or used cooking oil (UCO), with a premium or discount applied.
Processing one metric tonne (t) of corn yields 420 liters of ethanol, 212kg of DDGS and 19kg of TCO, equivalent to about 20 liters.
Because TCO generates more decarbonization credits than other inputs, the strongest demand for it comes from the biofuel industry. TCO can be used as a feedstock for biodiesel, hydrotreated vegetable oil or sustainable aviation fuel (SAF).
Producers see opportunities in the foreign market, notably in Europe, where residual feedstocks generate credits that make the final product more valuable. This differs from the Brazilian domestic market, which lacks tax incentives for biofuels derived from waste. TCO, which is more acidic than UCO and soybean oil, ends up being traded at a discount in the domestic market because it has a lower yield than other oils and fats.
Corn ethanol plants eyeing arbitrage opportunities are seeking to certify their production to expand exports of TCO and TCO-based biofuels.
The feedstock is already being directed toward the biodiesel industry. PBio, a biofuels subsidiary of state-controlled energy company Petrobras, carried out its first export of biodiesel produced from TCO to Europe in September, in partnership with the local corn ethanol giant Inpasa.
Other biodiesel producers are showing interest in expanding their presence in the international market, especially due to their idle production capacity, which is leading them to seek out alternative raw materials for production.
The expectation is that new SAF biorefineries will also demand TCO to be used via the hydroprocessed fatty acids and esters route. bids from the SAF industry for TCO tend to be higher than those from the biodiesel sector, given the higher returns on aviation fuel, According to market participants.
Although part of the sector is targeting international markets, the lack of certification for some corn ethanol plants and freight costs — both road and sea — may keep most volumes in Brazil.
Most corn ethanol and TCO producers are concentrated in the central-westERN state of Mato Grosso, home to most biodiesel plants. The positioning could facilitate logistics of domestic sales.
