A conversation with Christoph Berg
Good morning, Christoph, and welcome to Commodity Conversations. Tell me a little about yourself.
I joined F.O. Licht in 1994, working on co‑products of sugar production, such as molasses and alcohol. Ethanol was still treated mainly as a co‑product of sugar rather than as a standalone fuel. Over time, alcohol led me naturally into biofuels, especially as the European Union began focusing on renewable fuels in the late 1990s and then launched the first Renewable Energy Directive in 2003.
What are the biggest changes you’ve seen in the global market in your 30-year career?
Two shifts stand out: geography and feedstock.
Geographically, Brazil has lost the dominant export position it held in the 1990s. It still exports ethanol, but not in the volumes it once did. The US has taken over that role, as in many other energy markets. More recently, Asia has come into play: countries such as India, Thailand and the Philippines are developing ethanol industries, partly for decarbonisation but mainly for commodity management and energy security.
On feedstocks, ethanol was largely a sugar play in the 1990s and early 2000s: molasses, sugarcane juice and even sugar beet juice were the dominant raw materials. Today, the centre of gravity has shifted to starch, especially cornstarch, which is now the major source of ethanol globally. That is true even in countries where you might have expected sugarcane to retain the lead, such as Brazil and India, where most incremental growth now comes from corn ethanol rather than sugarcane ethanol.
This shift has big implications for co‑product revenues, production flexibility, policy design and future yield growth.
If you take a full‑cost, carbon‑adjusted view, how competitive is Brazilian sugarcane ethanol compared with Brazilian corn ethanol? Which is better environmentally and in terms of cost?
Decarbonisation costs are complex and depend on many variables, but for many years, sugarcane ethanol has had significant advantages. A key advantage is that cane mills generate process energy by burning bagasse, which lowers the fuel’s carbon intensity. However, sugarcane has a major weakness: yields have essentially stagnated over the past 20 years.
When Brazilian cane yields fluctuate, it is usually due to weather—La Niña or El Niño—and associated rainfall rather than genuine genetic or agronomic improvements. From a carbon‑intensity perspective, this is a problem because the agricultural yield per hectare is the single most powerful lever in most life‑cycle calculations. The more biomass you harvest from a fixed plot of land, the lower the carbon intensity of the resulting fuel tends to be.
Corn in Brazil, by contrast, has one major structural advantage: it can be double‑cropped. The main corn crop now accounts for only a small share of total output; most volume comes from the safrinha (second) crop, often grown immediately after soybeans on the same land. This means you effectively harvest two crops within 12 months from one plot—soybeans then corn—which significantly reduces the land‑use component of carbon intensity. As a result, the carbon intensity of corn ethanol made from safrinha corn can be at least on a par with, and in many cases lower than, that of sugarcane ethanol.
Most Brazilian corn ethanol plants also build their own energy systems because they are located in frontier regions without natural‑gas pipeline infrastructure. In those areas, the cheapest option is often to grow eucalyptus and burn it in their boilers. Ecologists dislike eucalyptus monocultures for environmental reasons, but from a carbon-accounting perspective, using biomass instead of fossil fuels further reduces the plants’ carbon intensity.
On cost, corn ethanol in Brazil is often highly competitive because corn is a relatively clean, storable, high‑starch feedstock with co‑product streams.
Corn yields have risen for decades, while sugarcane yields have remained flat. Why?
A big part of the story concerns attitudes to genetic modification and how research money is allocated. In sugarcane, there has been strong resistance to genetically modified varieties because sugarcane is closely linked to the food chain via sugar, and most consumers and regulators do not want GM traits in sugar products. That has limited breeders’ tools and probably held back yield gains.
Corn is different. The corn used for ethanol is not sweet corn eaten directly as food; it is an industrial and feed crop, and GM traits are widely accepted in those markets. Large seed companies continue to invest heavily in corn genetics, partly because fuel and alcohol markets in the United States—and increasingly in Brazil—provide a stable demand “safety net” when food and feed markets are weak. In other words, the existence of a large ethanol industry justifies greater R&D spending on corn, which in turn keeps yields rising.
At the same time, demographic and consumption trends are putting pressure on conventional corn demand: China’s population is shrinking, which is likely to reduce incremental demand for corn‑based products. This widens the gap between what U.S. and Brazilian farmers can produce and what food and feed markets require, making industrial uses such as ethanol even more important for absorbing the surplus.
Is corn now structurally surplus and seeking new markets?
That is a fair characterisation. Long‑term price forecasts indicate that real corn prices are essentially flat and not expected to trend higher over time. This suggests that production potential will continue to outpace “traditional” demand, reinforcing the importance of biofuels and other industrial outlets.
Many Brazilian sugar mills are now flex-fuel, processing both corn and cane. Is this the way forward?
For now, this “flex” configuration is essentially a Brazilian speciality. Something similar could emerge in India, but on a smaller scale. Technically, flex plants—cane mills adapted to process corn—help extend the operating season from perhaps 190–200 days of cane crushing to 300 or even 330 days by running corn during the cane off‑season. That improves economics by spreading fixed costs over more output.
However, by their nature, these flex operations tend to be much smaller than dedicated corn‑only ethanol plants. Sugarcane is bulky and requires heavy pre‑treatment: washing, preparation, and handling of bagasse, with relatively modest ethanol yields per tonne of harvested material. Corn arrives as a clean, dense commodity, allowing plants to scale to very large capacities from a much smaller physical throughput.
The Inpasa unit at Sinop, a Brazilian corn-only plant, is now the world’s largest ethanol plant, with a nameplate capacity of around 2.1 billion litres per year. By comparison, the largest sugar-to-ethanol plants are in the 200–300 million-litre range. Flexing cane mills for corn utilisation is very useful, but it does not add capacity on the same scale as building a modern, corn-only facility.
How important are dried distillers’ grains (DDGS) to corn ethanol economics?
DDGS are an important revenue stream, but you have to consider how markets evolve. In the early stages, siting corn ethanol plants in grain‑surplus interior regions gave producers access to cheap corn and local markets for DDGS as animal feed, while converting part of the corn into ethanol to meet regional fuel demand. That model still holds, but only up to a point.
Once Brazil’s corn ethanol output approached around 10 billion litres, the volume of DDGS became so large that local feed markets could no longer absorb it all. Brazil has therefore started exporting DDGS, which means producers must establish logistics routes for co‑products as well as for ethanol. That export requirement slightly alters the economics but does not negate DDGS’s overall contribution; it simply means the simple “local surplus” story has become more complex.
Looking 5–10 years ahead, do you expect corn to continue gaining market share in ethanol at the expense of sugar?
Yes, I expect the trend towards corn to continue. I do not see a strong case for seed companies to make massive new investments in sugarcane varieties, especially as the sugar market for food is contracting in many mature economies. It is hard to justify large R&D budgets for a crop whose main food market is stagnant or shrinking.
At the same time, corn ethanol is now the more competitive feedstock in many markets, even in countries where sugarcane might seem the natural champion. Unless there is a major policy or technology shock, corn’s share of the global ethanol supply should continue to rise relative to sugar.
Thank you, Christoph, for your time and input.
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