El Niño could disrupt Brazil’s cane harvest in the second half of the year, clouding the outlook for the new crop.
If rainfall comes in above normal during the period — as the weather pattern’s history suggests — ATR levels could take a hit, according to Marina Regina Zechin de Lucca, sugar and ethanol analyst at Itaú BBA’s agribusiness consultancy.
Itaú BBA expects sugarcane crushing to rise in the 2026/27 crop, but its volume and yield projections hinge on how much operating time mills can actually capture. The bank forecasts Center-South crushing of 644.8 million metric tons, up 5.5% from the previous cycle, with planted area growing 2.3%.
“It’s not enough to have cane available — and there’s plenty of it right now. The weather has to cooperate so mills can harvest and process that volume,” De Lucca said.
In its annual report, Itaú BBA warned that El Niño brings “risks of more carryover cane and deterioration in raw-material quality.”
The impact varies by region, De Lucca noted. The Northeast tends toward water stress and below-normal rainfall, while the Center-West historically sees above-normal rainfall during strong El Niño events — the pattern forecasters expect this year.
The impact varies by region, De Lucca noted. The Northeast tends toward water stress and below-normal rainfall, while the Center-West historically sees above-normal rainfall during strong El Niño events — the pattern forecasters expect this year.
“In the Center-South, what we’re seeing is a deterioration in raw-material quality, measured in kilograms of ATR per ton of cane. In a second phase, mills face longer and more significant stoppages,” she said.
The industry has already sounded the alarm. In late May, São Martinho CFO Felipe Vicchiato voiced the same concern, saying the company was accelerating fieldwork to head off problems later in the year. “We pushed crushing as hard as we could to keep the crop as short as possible. I can’t leave cane standing in the field — it’s a challenge for the entire sector,” he said at the time.
A Shift in Seasonality
De Lucca also pointed to another way weather is reshaping the industry: a break from the crop’s historical seasonality, as crushing delayed by rain-related stoppages gets pushed later in the calendar. One sign of that shift was a record 19.4 million tons crushed in March.
“During the crop there were significant stoppages, but the tail end turned dry — a drought, even — which let mills extend the season,” she said.
Combined with the rise of corn-based ethanol, this new seasonality could pressure ethanol prices right when they typically deliver their best returns — squeezing a key revenue source in the overall crop-year math, De Lucca said. Ethanol also faces regulatory uncertainty, including delays in rolling out E32 and questions over gasoline pricing now that the federal subsidy meant to offset the Iran war’s impact on fuel prices has expired.
Where Sugar Is Headed
On sugar, Itaú BBA keeps a bearish bias on New York prices in the short term, citing ample supply, funds’ net short position, and a still-fragile ethanol market that offers little support. Conditions may improve starting with the 2027/28 crop: “The scenario becomes more constructive, though without a strong rally, given the projection of a slight global deficit,” the bank said.
Itaú BBA estimates a sugar mix of 46.4% for the 2026/27 Center-South crop, putting production at 39.4 million tons — 1 million tons below 2025/26.
This story was translated with the assistance of artificial intelligence.
