Brazil's sugarcane production is expected to increase by 4.7%, with a significant expansion in ethanol output, while sugar production declines against the trend.

(1) The Brazilian National Supply Company released its first estimate for the 2026/27 season on Thursday, projecting a total sugarcane output of 705.2 million tons, an increase of 4.7% year-on-year, thanks to favorable weather conditions during the early growth stages supporting yields. (2) Despite the increase in raw material supply, sugar production is expected to decline by 2.9% to 42.9 million tons, reflecting that processing plants may favor allocating more sugarcane to ethanol production in their pricing strategies. (3) Ethanol output stands out as the highlight of the season, with combined sugarcane and corn ethanol production forecasted to surge 11.7% to 41.88 billion liters, as the improved biofuel market environment strongly incentivizes capacity expansion. (4) In the main production region, the South-Central area, sugarcane output is estimated to grow by 4.8% year-on-year to 645.7 million tons, while sugar production is expected to fall by 3.1% to 39.5 million tons, a decrease slightly higher than the national average. (5) Key points going forward include monitoring actual crushing progress and changes in the sugar-to-ethanol ratio, as well as the relative movements of international sugar and crude oil prices, and how these factors influence processing plants' raw material allocation decisions.