Robust harvest in the Center-South region puts pressure on sugar prices.

Expectations of a robust sugarcane harvest in the Center-South region in 2026/27, with projected production of around 635 million tons and sugar production exceeding 40 million tons, should reinforce the global oversupply and maintain structural pressure on prices, while ethanol regains competitiveness and prominence in market adjustments.

This performance, coupled with the partial recovery of production in Northern Hemisphere countries such as India, Thailand, and Mexico, is expanding the global surplus and consolidating a scenario of structurally lower sugar prices.

In this scenario, even recent upward price movements — which took sugar to around 16,1 cents per pound — lost momentum as geopolitical risk premiums decreased and the energy complex retreated, highlighting the limited nature of this support in the short term.

“Although macroeconomic and geopolitical factors have driven short-term volatility, the fundamentals remain bearish, with ethanol regaining competitiveness as the main adjustment mechanism through blending reductions and demand stimulation,” says Lívia Coda, Market Intelligence Coordinator at Hedgepoint Global Markets.

In parallel, ethanol has regained competitiveness relative to sugar since the end of 2025, encouraging adjustments in the production mix of mills. Currently, the market operates with a mix close to 48% sugar, although the level needed to balance supply and demand is closer to 44,5%, which reinforces the role of ethanol as the main lever for rebalancing.

Nevertheless, operational and commercial limitations should restrict faster changes in the mix composition, keeping the market in a surplus situation. This imbalance is estimated at at least 3,2 million tons, which continues to put pressure on prices.

In this scenario, the effective floor price for sugar is estimated at around 13,5 cents per pound, considering hydrated ethanol at around R$ 2,2 per liter, which serves as a reference for adjusting supply and demand throughout the harvest season.

Even with this structurally bearish bias, there are factors that can bring volatility to the market. Among them, potential changes in the energy scenario stand out, and especially the climate risks associated with El Niño, whose intensification could affect production in the Northern Hemisphere during the 2026/27 cycle and contribute to a scenario of firmer prices in 2027.