Brazil's Center-South Mills Prioritize Ethanol Production Amid Favorable Market Conditions

February 8, 2026 – Sugar mills in Brazil's crucial Center-South region are expected to continue prioritizing ethanol production over sugar in the upcoming 2026/27 harvest. This decision is driven by robust domestic and international ethanol prices. With crude oil prices remaining firm and government policies in Brazil supporting biofuel consumption, the economics for diverting sugarcane to ethanol production are currently more attractive than for sugar. This strategic shift by major producers like Raízen and Tereos could limit the amount of sugar available for export, despite a projected increase in overall sugarcane crushing volume. Analysts from Rabobank noted that 'the flex-fuel nature of Brazilian mills allows them to respond dynamically to market signals. As long as ethanol margins remain superior, we anticipate a higher proportion of cane will be allocated to fuel.' While the total sugarcane crop in Brazil is forecast to be healthy, the sugar mix could be lower than initially expected, potentially exacerbating global supply concerns. The National Union of Corn Ethanol (UNEM) also highlighted the growing demand for ethanol, both domestically and for export, further incentivizing mills. This trend underscores Brazil's dual role as a leading sugar exporter and a significant biofuel producer, with its allocation decisions having a profound impact on global commodity markets. Market participants will closely monitor the initial crush figures and allocation ratios once the new season commences.