Global sugar markets face a structural shift as Brazilian mills continue their pivot toward ethanol production, with sugar allocation declining for seven consecutive fortnights to reach 35.5% in late November, down sharply from 44.6% in the same period last year.

The sustained shift reflects mills responding to relative margin advantages favouring biofuel production over sugar, with ethanol mix reaching 64.5% as of late November. The allocation dropped 3.08 percentage points in the second half of November alone, falling from 38.6% to 35.5%.

Production data shows declining sugar output

Center-South mills crushed 592.3 million metric tonnes of cane in the 2025/26 season from April through end of November, down 1.9% year-over-year from 603.9 MMT. Despite lower crushing volumes, sugar production rose 1.1% to 39.9 MMT as mills initially increased sugar allocation to 51.1% versus 48.3% in the prior season.

However, the second half of November showed declining performance with 16.0 MMT cane crushed (down 21.1% year-over-year), producing 724 thousand tonnes of sugar (down 32.9%) and 1.2 billion litres of total ethanol (down 1.3%). The sugar mix dropped sharply to 35.5% versus 44.6% in the same period last year.

Total ethanol production for the season declined 5.4% to 29.5 billion litres, with hydrous falling 7.9% to 18.3 billion litres and anhydrous dropping 1.2% to 11.2 billion litres.

Export momentum continues despite production shift

In the first 15 days of December, Brazil exported 2.13 MMT of sugar, up 5.4% from 2.02 MMT in the same period last year. The steady export momentum persisted despite reduced domestic sugar output as mills prioritise ethanol production.

2026/27 outlook raises supply questions

Looking toward the 2026/27 campaign starting in April, industry forecasts project a crushing recovery of approximately 3% to 615 MMT. However, campaign startup is expected to continue favouring ethanol if current margin dynamics persist.

This could drive sugar allocation below this season’s 51.1% average and limit production gains from increased crushing volumes. The sustained ethanol margin advantages may offset the projected crushing recovery, potentially limiting or reversing sugar production gains from increased cane availability.

The development contrasts with near-term supply abundance, as India’s production increased 25% year-over-year to 11.90 MMT through December with full season estimates revised upward to 31 MMT. European markets also face oversupply, with producer responses for 2026 varying widely from 15-25% cuts to unchanged commitments.


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