The sugar market is currently trading within a narrower- than-usual range, given the mix of short- and long-term signals.


We ended the 2025/26 (April/March) sugar year with a small surplus of around 2 million tonnes and could be heading for another small surplus in 2026/27, if all goes well. Will it?


In the short term, there is little to worry about. But in the long term, much remains uncertain when it comes to weather and, therefore, production. For sugar prices to break out of the current trend, we may need a strong event — most likely weather-related, such as a strong El Niño.


The current Middle East situation, which pushed crude prices higher, has affected sugar to a lesser degree, but it has had some impact. Countries have also woken up to the need to address their energy imbalance. Raw materials such as cane, beet, corn and vegetable oils can all play a part in the solution — some in the short term, others in the medium term.


KEY FORCE SHAPING THE GLOBAL SUGAR AND ETHANOL BALANCE Brazil remains the key force shaping the global sugar and ethanol balance in 2026. However, developments across Mexico, India, China, Pakistan and the United States are creating a much more complex market than many expected at the start of the year.


The Brazilian sugar and ethanol sector continues to attract close attention from traders and investors, as oil prices,


currency movements, domestic fuel consumption and crop conditions all influence production decisions. While crude oil prices have weakened and the Brazilian real has softened against the US dollar, domestic fuel pricing policies have limited the impact on local markets. With national elections approaching, the government has shown little appetite for measures that could increase inflation through higher fuel prices.


Brazil’s Centre-South sugarcane harvest is progressing well. Higher sugar content in the cane has helped compensate for a lower sugar mix, allowing mills to maintain solid production levels. At the same time, ethanol remains central to the country’s energy strategy. The government increased the mandatory anhydrous ethanol blend in gasoline from 27% to 30% in August 2025, supporting domestic ethanol demand. Further increases to 32% or even 35% remain under discussion.


Fuel consumption trends reveal an interesting picture.Through April 2026, diesel sales fell 2.9%, hydrous ethanol sales declined 3.8%, and gasoline sales were down 0.8%. However, demand for anhydrous ethanol rose by 7.6% due to the higher blending mandate. Overall ethanol demand was 3.6% higher in the first four months of the year compared with the same period in 2025.


Brazil is expected to produce between 3.3 billion and 4.7 billion litres more sugarcane ethanol during the 2026/27 season, while corn ethanol production could increase by another 1.1 billion litres. The country’s rapidly expanding corn ethanol sector remains one of the most important structural developments in global biofuels. Corn ethanol production reached approximately 9.2 billion litres in 2025/26 and is expected to exceed 11.3 billion litres next season.


Energy consumption mix (Brazil, Jan-Apr 2026) Diesel Ethanol Gasoline Source: AP Commodities 50% 26% 25%


Policy Blend


mandates


Agriculture Cane


and corn Source: AP Commodities 23 | ADMISI - The Ghost In The Machine | Q2 Edition 2026


Demand Vehicle fleet


Brazil Fuel Matrix


Market Sugar – ethanol


FORTUNATELY, CORN SUPPLY DOES NOT APPEAR TO BE A CONSTRAINT Brazil’s corn crop is projected at around 139–140 million tonnes, with the crucial second crop accounting for roughly 108 million tonnes. Domestic demand, excluding ethanol production, is estimated at 69 million tonnes, leaving substantial exportable supplies even after accounting for ethanol use. Carryover stocks of around 12 million tonnes provide an additional cushion against potential weather-related losses.


Yet demand remains the critical issue. Brazil needs stronger domestic ethanol consumption and improved export performance to absorb rising production. Current projections suggest ethanol inventories could rise significantly by the end of the season, although stocks began the current crop year at unusually low levels.


Mexico presents a very different challenge. The country produces roughly 500,000 to 900,000 tonnes more sugar than it consumes annually, creating a surplus that traditionally found a home in the United States. However, access to that market has become increasingly restricted.


Mexican sugar exports to the United States have fallen sharply, from approximately 1 million tonnes annually to around 180,000 tonnes this year. The reduction stems from quota limitations and minimum price requirements introduced following dumping disputes more than a decade ago. As a result, Mexican producers have been forced to sell larger volumes into alternative export markets, where prices are generally less attractive than those available in the United States.


Key Drivers


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