Brazil Center-South Sugarcane Crop Forecast Jumps to 641 Million Tons, Driving Record Ethanol Shift

The 2026/2027 sugarcane harvest in Brazil’s Center-South region is poised to be the second-largest on record, with updated forecasts confirming high operational activity and increased optionality for major producers like São Martinho (SMTO3) and Cosan-controlled Raízen (RAIZ4). Consulting firm StoneX has revised its projection for the Center-South crushing to 641.1 million tons of sugarcane, a 4.9% increase over the previous cycle, driven by favorable rainfall distribution that boosted agricultural productivity. This near-record volume provides the critical raw material necessary for mills, many of which in São Paulo state are operating on a demanding three-shift schedule, to execute a strategic pivot in their product mix.

The mechanism behind the benefit to Brazil agribusiness stocks is the widening arbitrage between low global sugar prices and robust domestic biofuel prices. The unexpectedly large cane supply allows mills to maximize total output, while market signals are strongly incentivizing a greater allocation of the harvest toward ethanol. Analysts note that ethanol prices are currently offering a significant premium over sugar, giving producers the flexibility to channel more of the cane’s Total Recoverable Sugar (TRS) into the more profitable fuel. This demonstrates the core advantage of the integrated sugar-ethanol model, which serves as a natural hedge against volatility in international commodity markets.

In response to this price environment, the sector is strategically shifting its focus, despite the massive cane volume providing capacity for a large sugar crop. StoneX projects that the sugar mix—the percentage of cane allocated to sugar—will fall to 46.1%, a notable reduction from the 50.4% seen in the previous season. This reallocation is set to drive ethanol production to a record 38.8 million cubic meters (m³), with the fuel mix rising to 53.9%. For publicly traded companies such as RAIZ4 and SMTO3, this strong sugar/ethanol optionality provides a path to higher revenue and better margins, maximizing the value derived from the massive 641.1 million ton crush.

Investors should now monitor weather patterns, which represent the main risk to the harvest schedule and final yield. While recent favorable conditions resulted in the high yield, StoneX cautions that the harvest could be extended due to increased rainfall expected later in the year, particularly in the final quarter, a factor often associated with El Niño. The ability of mills to efficiently process the full volume and maintain a high operational tempo will depend on manageable weather conditions, which will determine if the current robust pace can be sustained without significant logistical delays.