Brazil's Sugar Exports Signal a Bullish Turn: Why 2025/26 is a Sweet Spot for Investors

Global sugar markets are on the cusp of a historic shift. With Brazil’s production dynamics, rising crude oil prices, and geopolitical supply risks converging, the stage is set for a dramatic tightening of global sugar supplies. For investors, this is a rare opportunity to capitalize on a structural imbalance that could propel sugar prices to multi-year highs. Here’s why now is the time to act.

The Ethanol-Sugar Tug-of-War: Crude Prices and Production Shifts

Brazil, the world’s largest sugar producer, faces a critical crossroads. While its 2025/26 sugar output is projected to hit 44.7 million metric tons (MMT), rising crude oil prices are pushing mills to favor ethanol production—a move that could slash sugar availability.

Crude oil’s influence is stark: when prices exceed $80/barrel, ethanol becomes cost-competitive with gasoline, incentivizing mills to divert sugarcane from sugar to ethanol. With WTI crude forecast to hover near $90–95/barrel in Q2 2025, ethanol production is expected to surge. This shift could reduce sugar output by 2–3 MMT, even as total sugarcane use rises.

The data is clear: a 51% allocation to sugar in 2025/26 assumes stable crude prices. But if oil climbs above $95/barrel—a distinct possibility amid geopolitical tensions—the ethanol share could jump to 62–65%, squeezing sugar supplies.

Brazil’s Export Dynamics: Growth Amid Constraints

Despite a 7% year-on-year rise in exports to 35.8 MMT, Brazil’s sugar stocks face hidden pressures. Key factors include:
1. Hedging Limits Flexibility: Over 72% of exports are already hedged at $18.80/lb, locking in prices but leaving mills vulnerable if spot prices spike.
2. Ethanol’s Growing Appetite: Each 1% shift toward ethanol reduces sugar availability by ~450,000 MT. With crude prices elevated, this could cut exportable sugar by 1.5–2 MMT.
3. Weather Risks: El Niño patterns threaten to disrupt yields in key regions like São Paulo, compounding logistical bottlenecks from wildfires.

The result? A supply gap between projected exports and actual deliverable volumes, creating upward price pressure.

Global Supply Risks: India and Thailand’s Vulnerabilities

Brazil’s challenges are amplified by weaknesses in its competitors:
- India’s Drought-Stricken Output: The world’s second-largest producer saw its 2024/25 output plummet to a 5-year low of 26.4 MMT, with export restrictions persisting despite easing.
- Thailand’s Limited Upside: While Thailand’s output is projected to rise 18% to 10.35 MMT, this still lags Brazil’s scale and cannot offset a global deficit.

Together, these factors create a fragile supply landscape. Even a modest demand surge—a 1% increase in global consumption—could push the market into deficit.

The ISO Deficit and Market Tightening

The International Sugar Organization (ISO) revised its 2024/25 deficit to -4.88 MMT, signaling chronic undersupply. While the USDA projects a +2.7 MMT surplus in 2025/26, this assumes Brazil’s sugar output stays at 44.7 MMT—a scenario increasingly unlikely if ethanol production accelerates.

If Brazil’s sugar output falls to 42–43 MMT due to ethanol shifts, the surplus could vanish entirely, creating a deficit of -1.5 MMT. Such a shift would ignite a price rally, with ICE #11 sugar futures breaking above $0.22/lb—a level not seen since 2017.

Investment Opportunities: Long Sugar Futures and Brazilian Mills

The bullish case is undeniable. Here’s how to play it:
1. Go Long on Sugar Futures:
- Target: NY #11 sugar futures (ICE Futures U.S.).
- Strategy: Buy contracts at current levels (~$0.19/lb) with a price target of $0.24/lb by Q3 2025.
- Catalyst: Crude oil spikes above $100/barrel, or Brazil’s export data shows tighter inventories.

1. Invest in Brazilian Sugar Mills:
2. Top Picks: Cosan (CSAN3.SA) and Raízen Energy (RAI.BZ), which benefit directly from rising sugar prices and ethanol demand.
3. Performance:

Conclusion: Act Now—The Clock is Ticking

The stars are aligning for a sugar price surge: ethanol’s dominance, Brazil’s constrained exports, and global supply fragility. With $0.22/lb acting as a critical resistance level, a breakout here could signal a multi-year bull market.

For investors, the path is clear: allocate capital to sugar futures or Brazilian sugar stocks before the rally accelerates. This is a rare moment where fundamental shifts and market dynamics align—don’t miss the sugar rush of 2025/26.

Risk Warning: Agricultural commodities and equities carry volatility risks. Always conduct due diligence and consider market risks before investing.