February 7, 20262 views0 shares
Brazil's Ethanol Parity Drives Sugar Allocation, Impacts Global Supply
As of early 2026, Brazil's favorable ethanol-sugar parity, coupled with robust crude oil prices, incentivizes mills to prioritize ethanol production. This trend is expected to continue, potentially limiting Brazil's sugar output and significantly impacting global sugar supply and prices.
The interplay between sugar and ethanol production in Brazil remains a dominant factor shaping global sugar supply, with current ethanol prices providing strong incentives for mills. As of early February 2026, the attractive parity between ethanol and sugar continues to favor ethanol production, particularly as crude oil prices remain robust on international markets. Brazilian mills, equipped with flex-fuel capabilities, are strategically allocating a larger proportion of their sugarcane crush towards ethanol, rather than sugar, to capitalize on better margins. This trend is expected to persist into the 2026/2027 season, potentially limiting Brazil's sugar output despite a potentially larger overall cane harvest. Industry analysts estimate that the sugar-to-ethanol mix could lean heavily towards ethanol, possibly reaching 55-60% of the total crush, depending on the evolution of both energy and sugar markets. This strategic decision by Brazilian producers has significant implications for global sugar availability, as Brazil is the world's largest sugar exporter. Any sustained preference for ethanol could tighten global sugar supplies and exert upward pressure on international prices, impacting importing nations and food manufacturers worldwide. The government's biofuel policies and domestic fuel demand will also play a critical role in influencing these allocation decisions.