Consultancy Assesses Drivers and Consequences of Brazil's Ethanol Production Increase

Datagro consultancy projects Brazil's ethanol production to reach 33.89 billion liters in the 2025/26 season and further increase to 38.42 billion liters in 2026/27. The firm has analyzed the price fundamentals driving sugar mills to shift their production mix and justifying this anticipated growth. "There is little doubt about which production mix incentivizes the producer," stated Plinio Nastari, president of the consultancy, during an event held in Ribeirão Preto (SP) on October 11. According to Nastari, the relative prices of sugar and ethanol indicate a significant advantage for the production of biofuel, both hydrous and anhydrous. Datagro's calculations show that the price difference between export VHP sugar and ethanol sold directly at the pump exceeds 200 points; for anhydrous ethanol, this difference is even greater, surpassing 310 points. Furthermore, converting the prices of the most active contract in New York—from cents per pound to Brazilian Reais per ton—the price of export sugar stands at R$1,700/ton. This amount is 37.5% below the level recorded on the same date last year and 32.5% lower than the average of the last five years. Nastari attributes the primary cause of this commodity price retraction to funds' oversold and speculative positions. He cited recent data released by the Commodity Futures Trading Commission (CFTC), indicating that the product is currently in a net short position.