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1 www.codevasf.gov.br INTEGRATED PROJECT OF SUSTAINABLE BUSINESS INVESTMENT OPPORTUNITIES IN COTTON PRODUCTION IN THE SÃO FRANCISCO AND PARNAÍBA VALLEYS.

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Presentation on theme: "1 www.codevasf.gov.br INTEGRATED PROJECT OF SUSTAINABLE BUSINESS INVESTMENT OPPORTUNITIES IN COTTON PRODUCTION IN THE SÃO FRANCISCO AND PARNAÍBA VALLEYS."— Presentation transcript:

1 1 www.codevasf.gov.br INTEGRATED PROJECT OF SUSTAINABLE BUSINESS INVESTMENT OPPORTUNITIES IN COTTON PRODUCTION IN THE SÃO FRANCISCO AND PARNAÍBA VALLEYS

2 2 www.codevasf.gov.br Equipe do Projeto PRESIDENT NATIONAL INTEGRATION MINISTRY Luiz Inácio Lula da Silva Geddel Vieira Lima CODEVASF DIRECTORS President Orlando Cezar da Costa Castro Integrated Development and Infrastruture Director Clementino Souza Coelho Irrigation Project Management Director Raimundo Deusdará Filho Hydrographic Basins Revitalization Director Ricardo Luiz Ferreira dos Santos

3 3 www.codevasf.gov.br Presentation Structure 1. Introduction; 2. Cotton Market; 3. Biodiesel Market; 4. The Viability of Producing biodiesel from cotton seed in the Brazilian semi-arid; 5. Export logistic;

4 4 www.codevasf.gov.br 1. Introduction

5 5 www.codevasf.gov.br Introdução The PINS Project? The project is a governmental initiative, aiming to attract investments to the São Francisco Valley (webpage: http://www.fundace.org.br/pins).http://www.fundace.org.br/pins PENSA Agribusiness Intelligence Center. PENSA researchers are responsible for the business models proposition, economic and marketing analysis and for interacting with potential investors tailoring the analysis to their particular needs (web page: http://www.pensa.org.br).http://www.pensa.org.br CODEVASF São Francisco and Parnaíba Development Company, which the mission is to develop economically and socially the Valley of the São Francisco and Parnaiba Rivers (web page : http://www.codevasf.gov.br).

6 6 www.codevasf.gov.br 2. The Cotton Market

7 7 www.codevasf.gov.br Cotton Brazilian Production Region/States Planted area (thous. ha) Cotton Production (thous. t) Cotton Productivity (Kg/ha) MA 12,317,73.750 PI 18,422,13.330 BA 317,84823.840 MT 543,1799,53.775 MS 4671,24.020 GO 74,6103,93.570 MG 22,828,13.285 SP 16,720,53.229 PR 6,96,32.451 North/Northeast 385,0528,83.501 Centre-South710,11.029,53.728 BRAZIL1.095,11.558,33.648 Source: Conab Crop 2007/08

8 8 www.codevasf.gov.br Cotton Market The main demand driver for cotton is the textile industry. –Growth of 3,8% in 2007 and 0,7% in the first half /semester of 2008. (MDIC, 2008) –Cotton supplies approximately 60% of internal industry demand for fibers and filaments. (only natural fibers and filaments, its share grows to 97%). (ABRAFAS, 2008) In the fiber world market, cotton represents 40%. –Driven by growth in emerging markets, the world demand for cotton grews 7% annually between 2005 and 2007 –Global demand should fall 2% in 2008 and 1% in 2009. (Rabobank apud Algodão Brasileiro, 2008)

9 9 www.codevasf.gov.br Balance of Supply and Demand Crop Initial Stock ProductionImportSupplyConsumptionExport Final Stock 1999/00 231,9700,3299,92,5885,028,5318,6 2000/01 318,6938,881,31338,7865,0147,3326,4 2001/02 326,4766,267,61160,2815,0109,6235,6 2002/03 235,6846,5118,91202,0830,0175,4196,6 2003/04 196,61309,4105,21611,2909,9331,0370,3 2004/05 370,31298,737,61706,6952,5391,0363,1 2005/06 363,11037,881,61482,5987,3304,5190,7 2006/07 190,71524,096,81811,51009,8419,4382,3 2007/08 382,31602,560,02044,81050,0520,0474,8 Source: CONAB 89% -80% 29% 374% Fiber Cotton (thous. ton)

10 10 www.codevasf.gov.br Prices Index Source: CONAB

11 11 www.codevasf.gov.br “Turbulence Time”: Low Prices and High Costs * 04-30-10 (70%) e sulfato de amônia (30%) Source: Conab 65% da safra 2007/2008 recebeu o Prepo. Média de setembro do índice Esalq (R$ 1,2166/lp) foi a mais baixa desde julho/96. High costs and decrease of credit to imputs purchase. Planted are should decline 10% in the U.S. and between 10 and 20% in Brazil. Source: Cepea and Conab.

12 12 www.codevasf.gov.br 3. Biodiesel Market

13 13 www.codevasf.gov.br Agricultural Chain Plantation Pressing Grain Oil By-product Market Alcohol biodiesel Glycerin Torta Distributors Resellers Refinaria B3 Fertilizer Production Animal Feed B3 Consumers Direct Sale is not permitted Consumers B100 Biodiesel Producers B100 Processing and Distribution Chain (regulated by ANP) Biodiesel Agro Industrial System Source: ANP

14 14 www.codevasf.gov.br Biodiesel Agro Industrial System: B – 3 Seeds Pesticides Machinery Fertilizers SOYBEAN COTTON CASTOR OIL PALM JATROPHA SUNFLOWER AGRICULTURE INPUTS INDUSTRY Processing Biodiesel Production DISTRIBUTORS Auctions Acquisition INSTITUTIONAL ENVIRONMENT(laws, norms, costums) PETROBRÁS REFAP Blending and Distribution

15 15 www.codevasf.gov.br Public Auctions The auctions are conducted by the NPA (National Petroleum Agency) in order to ensure the supply and the compulsory demand Provides: - Participation criteria of producers: authorized by NPA to produce; registered in SICAF; “Social Fuel” certificate. - Price - fixed rate(reverse auction, lots are sold with lower prices). - Percentage of purchases by buyers (diesel fuel producers and importers) according to their market share. - Deadlines and delivery conditions.

16 16 www.codevasf.gov.br Source: ANP Public Auctions Nº of winnersVolume (m³)Value (R$)Average Price (R$/m³) 1º Auction 23/11/2005 470.000133.338.8431.904,84 2º Auction 30/03/2006 6170.000316.140.3201.859,65 3º Auction 11/07/2006 450.00087.689.3141.753,79 4º Auction 11/07/2006 8550.000960.664.1591.746,66 5º Auction 14/02/2007 345.00083.796.3841.862,14 6º Auction 14/11/2007 7304.000567.592.7051.867,08 7º Auction 14/11/2007 976.000141.603.1941.863,19 8º Auction 10/04/2008 16264.000710.608.8002.691,70 9º Auction 11/04/2008 1266.000177.225.1802.685,23 10º Auction 14/08/2008 20264.000687.624.9602.604,64 11º Auction 15/08/2008 1866.000172.240.2002.609,70

17 17 www.codevasf.gov.br Diesel Demand vs Biodiesel Production USA Diesel Consumption: 219 bil./l Biodiesel Demand B2: 4,38 bil./l B5: 10,95 bil./l B10: 21,9 bil./l Brazil Diesel Consumption: 39 bil./l Biodiesel Demanda B2: 0,78 bil./l B3: 1,17 bil/l B5: 1,95 bil./l B10: 3,9 bil./l Europe Diesel Consumption : 354 bil./l Biodiesel Demand B2: 7,08 bil./l B5: 17,7 bil./l B10: 35,4 bil./l Japan Diesel Consumption : 70 bil./l Biodiesel Demand B2: 1,4 bil./l B5: 3,5 bil./l B10: 7 bil./l China Diesel Consumption: 91 bil./l Biodiesel Demand B2: 1,82 bil./l B5: 4,55 bil./l B10: 9,1 bil./l India Diesel Consumption : 46 bil./l Biodiesel Demand B2: 0,92 bil/l B5: 2,3 bil./l B10: 4,6 bil./l

18 18 www.codevasf.gov.br Raw Materials Source: Embrapa 2007 Type Production Start Harvest Months Production Time Grains ( Kg/ha) % of oil Oil (Kg/ha ) Energy Balance Jatropha Perenial2º ano1230 / 50 years5 a 12 thous 381,9 a 4,56 thous - Palm Perenial3º ano1230 years10 a 20 thous 232,3 a 4,6 thous 9 Mamona Annual1º ano32 years750 a 1,5 thous 48370 a 735- Soybean Annual1º ano31 year2,2 a 2,8 thous 18400 a 5003 Cotton seed Annual1º ano31 year1,8 thous 15270- Rape-seed Annual1º ano31 year1,85 thous 40 a 48740 a 8902,5

19 19 www.codevasf.gov.br Biodiesel from Cotton Pit “ Biodiesel is most viable when it is made from cotton seed” Pólo Nacional de Biocombustíveis da USP Cost of $ 0.81 against the U.S. $ 0.90 for soybeans (07/2007). Easy access and made from a sub product. Embrapa works to increase the oil inside the pit. Cotton pit Extraction Plant Biodiesel Plant Fuel Distributors Biodiesel Commercialization Industry rações/fertilizers Cake/ cotton Biomass for the Boiler Organic Fertilizer 15,2% OIL 46,7% BIOMASS

20 20 www.codevasf.gov.br 4. The viability of Producing Biodiesel From cotton seed in the Semi-Arid Brazil

21 21 www.codevasf.gov.br Business Model Cotton Producer “SPE-1” Emtrepeneurs Associated or individuals Producer A Producer B Producer n Cooperative Extration + Biodiesel Industry (“SPE-2”) Tradings/ Central Cooperatives Funds Supplying Contract (Cotton pit) Futures Contracts, Public Auctions or Spot Market (oil or biodiesel sales) Partnership Contract Cotton Ginning and Pit Originating LintWool Supplying Contract (Lint, Fibers) Financing Financing Contracts

22 22 www.codevasf.gov.br Premises Operating Results PINS PROJECT – BIOENERGY Agroindustrial System VIABILITY ANALYSIS OF PRODUCING BIODIESEL FROM THE COTTON SEED Financial Planning Operating and Financial Flows Final Results Income flow Revenues and costs Revenues and costs Calculation Sensibility Analysis Industrial Agricultural Cotton Extraction Plant

23 23 www.codevasf.gov.br Investments Drip irrigation: –R$ 6.800/ha –R$ 13,6 millons / 2 thous. ha Cotton tree 30 bales/hour: –R$ 5,3 millions Extraction/Partner 100 ton/day –R$ 6,7 millions Biodiesel Plant 10 ton/day: –R$ 2,6 millions

24 24 www.codevasf.gov.br Agricultural Premises – Opening Areas Operational Costs- R$/haSoybeanCorn Activities Operation with machines R$ 153,65 R$ 213,96 Temporary Labor R$ 6,09 R$ 18,79 Labor R$ 24,92 R$ 22,80 Seeds R$ 83,25 R$ 216,00 Fertilizers R$ 557,77 R$ 686,75 Pesticides R$ 175,09 R$ 495,69 External Transport R$ 31,68 R$ 66,00 Reception, cleaning, drying, storing 30-d R$ 14,06 R$ 79,99 PROAGRO R$ 39,03 R$ - Techinical Assistance R$ 20,02 R$ - Regular maintenance of machinery R$ 23,46 R$ 30,12 Irrigation R$ 442,45 Operational Cost (R$/ha) R$ 1.571,47 R$ 2.272,55 Operational Cost (R$/bag. 60 kg) R$ 23,57 R$ 13,64 Soybean: Income Factors Factorbag. 60 kgTon Prices (R$)32,77546,10 Productivity (ha)674 Corn - 1 a crop: Income Factors FatorBag. 60 kgTon Prices (R$)19,83330,55 Productivity (ha)16710,00 Source: elaborated by the author based on Seagri, Conab, interviews with producers from west Bahia. Source: adapted from Conab

25 25 www.codevasf.gov.br Agricultural Premises Cotton: Agricultural Operational Costs - Irrigated (R$/ha)Corn Operações / Atividades AnchorIntegratedAll A.1. Soil Manteinance R$ - R$ 15,08 A.2. Soil Preparation R$ 124,01 R$ 165,00 R$ - A.3. Planting R$ 72,23 R$ 145,77 R$ 75,76 A.4. Culture Care R$ 505,41 R$ 248,10 R$ 56,09 A.5. Harvest R$ 411,70 R$ 480,00 R$ 80,64 A.6. Irrigation R$ 442,45 B.1. Fertilizers R$ 1.524,29 R$ 418,50 R$ 411,60 B.2. Seeds R$ 97,30 R$ 91,77 R$ 169,00 B.3. Pesticides R$ 1.448,45 R$ 175,00 R$ 105,88 B.4. Others inputs used R$ - C – Administration R$ 68,28 R$ 52,14 R$ 89,29 D – Post harvesting R$ 884,00 R$ 442,00 R$ 181,37 Operational Cost (R$/ha) R$ 5.578,13 R$ 2.660,73 R$ 1.627,16 Operational Cost (R$/15 kgs of cotton) R$ 36,70 R$ 35,01 R$ 20,77 Source: Agrianual, Netafim

26 26 www.codevasf.gov.br Agricultural Premises - Cotton Cotton: Productivity per hectare and total project Anchor 1 hectareTotal hectares6.000,00 ton/ha@**/haTons@ Cotton 2,28 152,00 13.680,00 912.000,00 Seed 3,18 212,00 19.080,00 1.272.000,00 Seedcotton 6,00 400,00 36.000,00 2.400.000,00 Cooperative 1 hectareTotal hectares2.000,00 ton/ha@/haTons@ Cotton 1,14 76,00 2.280,00 152.000,00 Seed 1,59 106,00 3.180,00 212.000,00 Seedcotton 3,00 200,00 6.000,00 400.000,00 Total Production Produtividade MédiaTotal hectares8.000,00 ton/ha@/haTons@ Cotton 2,00 133,00 15.960,00 1.064.000,00 Seed 2,78 185,50 22.260,00 1.484.000,00 Seedcotton 5,25 350,00 42.000,00 2.800.000,00 Corn: Income Factors Fatorbag. 60 kgTons Prices (R$)19,83330,55 Productivity (ha)784,70 Source: Elaborated by the author based on interviews with producers from West Bahia region; Netafim ** @ = 15 kgs

27 27 www.codevasf.gov.br Industrial Premises Productivity and Income Premises Areaha8.000 Productivityton/ha5,25 @ 350,0 SEED COTTON COMPOSITION Cotton Income38% Seed Income53% Inpurities6,5% Fiber2,5% Total Production of Seedton22.260 SEED COMPOSITION Oil Seed Income15,2% Linter Residual12,5% Linter Income7% Cake Income46,7% Peel Income20,7% Residuals Income4,9% PRICES Biodiesel Density(Kg/L)0,88 Oil/biodiesel conversion rate98% R$ / litre of biodieselR$ 2,13 R$/ Ton of oil R$ 1.329,96 R$/ Ton cake R$ 521,74 R$ /ton de Línter - 1º cut R$ 904,84 Source: Market Data, interviews and Cotton Products Business Unit - ABOISSA

28 28 www.codevasf.gov.br Results Agricultural ProductionCotton GimExtractorBiodiesel IRR13,6%13%36,9%28,9% NPV$ 16.072,702,76$ 1.543.545,58$15.882.449,20$7.772.058,91 Agriclture + Cotton GimExtrator + BiodieselIntegrated Chain IRR10,5%26,4%14% NPV$ 6.492.431,06$ 25.276.970,91$ 34.146.053,07 Own participation capital of the financing agents of the chain Agents Rural ProductionCotton GimExtractorBiodiesel Plant Small Producers25% Big Producers75%100% Cooperatives\ Tradings 51% Investment Funds 49% Total100% Integrated Number of total hectares2.000 Number of integrated s100 Hectares per cooperated20 IRR14,0% NPVR$ 86.697,51 Individual annual Income Individual Monthly income Annual Average incomes in nominal values R$ 12.372,56 R$ 1.031,05

29 29 www.codevasf.gov.br 5. Export Logistic

30 30 www.codevasf.gov.br Ports Juazeiro – Salvador (Aratu Port) - Modality: railroad -Centro-Atlântica Railroad (FCA). -Distance: 573 Km. Petrolina – Recife (Suape Port) -Modalidade: rodovia -BR-128; BR-122; BR-428; BR- 316; PE-360; BR-110; BR-232. -Distance: 715 Km.

31 31 www.codevasf.gov.br Cost of Road Transport - Simulation Freight Cost - Road TypeCapacity (l)R$/KmR$/l715 Km Truck15.0001,800,15 R$ 1.287,00 Carreta30.0002,300,10 R$ 1.644,50 Bi-truck40.0002,600,08 R$ 1.859,00 Rodo-trem54.0002,950,07 R$ 2.109,25 Source: Interview with fuel and distributors CVRD. Petrolina – Recife (Porto de Suape) -Modality: road -BR-128; BR-122; BR-428; BR-316; PE- 360; BR-110; BR-232. -Distance: 715 Km.

32 32 www.codevasf.gov.br Cost of the Rail Transport - Simulation Juazeiro – Salvador (Aratu Port) - Modality: railroad - Centro-Atlântica Railroad (FCA). -Distance: 573 Km. Rates Basis Distances R$/t.km Until 4000,16002 from 401to8000,14398 from 801to16000,11190 from 1601Upward 0,08026 Parcela fixaR$/t19,87 Rail Distance (km):573Rates - R$/t Charges Distance (km):575 109,07

33 33 www.codevasf.gov.br TEAM CODEVASF Integrated Development and Infrastructure Director Clementino de Souza Coelho Integrated Development and Infrastructure Directory Assistant Alvane Ribeiro Soares Irrigation Project Management Production Unit Chief Nair Emi Iwakiri PINS Coordinator : Prof. Dr. Marcos Fava Neves Project Executive Manager : Luciano Thomé e Castro Project Executive Manager : Ricardo Messias Rossi Project Executive Assistant: : Marina Darahem Mafud Researcher Responsible : Marco Antônio Conejero Researcher Assistant : Mairun Junqueira Alves Pinto Colaborators César Augusto Mendonça Zambrano

34 34 www.codevasf.gov.br http://www.codevasf.gov.br/principal/estudos-e-pesquisas/pins

35 35 www.codevasf.gov.br PROJETO INTEGRADO DE NEGÓCIOS SUSTENTÁVEIS Details contact: E-mail address: pins@fundace.org.brpins@fundace.org.br http://www.fundace.org.br/pins/ Av. Pres. Vargas, 2001- Conj. 143/144, Jardim América Ribeirão Preto - SP - CEP: 14.020-260 Tel.: +55 (16) 3456-5555


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