Brazilian sugar producer Jalles Machado is getting little relief from a tough market, with sugar prices under pressure and cane yields recovering more slowly than investors expected.
Shares fell nearly 10% on Wednesday after the company released guidance for the 2026/27 season showing an 8% increase in agricultural productivity. While an improvement from recent crops, the forecast missed market expectations.
BTG Pactual analysts Thiago Duarte and Guilherme Gutilla said the projection was about 5% below their estimates.
“Until clearer signs of a productivity recovery emerge, it is difficult to foresee a meaningful shift in market sentiment,” the analysts wrote, maintaining a neutral rating on the stock.
Executives said on a conference call that cane yields are recovering gradually and that sugar prices may only begin to strengthen in the 2027/28 crop year.
CFO Rodrigo Penna de Siqueira said the longest sugar-price downturns since 1998 have lasted about 444 days. The current cycle has already reached 383 days.
“It is still difficult to know whether this cycle will end around the historical average or last longer,” Siqueira said. “We believe there will be a shift next season. When we look at the fundamentals, current prices are hard to justify.”
Based on historical averages, sugar prices would be closer to R$2,300 per metric ton, compared with about R$1,600 currently, he said. A move back above long-term averages may take longer, but sugar could regain an economic advantage over ethanol sooner.
Sugar Versus Ethanol
That premium is crucial for Brazil’s sugar and ethanol producers, especially as ethanol markets face pressure from ample supply.
Jalles expects ethanol to represent 59% of its production mix in 2026/27, up from 53% a year earlier. Sugar’s share is expected to decline to 41% from 46%.
“At current prices in Minas Gerais, producing sugar or ethanol generates roughly the same return,” Siqueira said. “In that situation, we prioritize ethanol because its net present value is better due to freight costs. In Goiás, ethanol is already more attractive than sugar at current prices.”
Brazil’s ethanol production is expected to rise by about 5 billion liters this season, including 2 billion liters from corn and 3 billion liters from sugarcane, according to the CFO.
The planned implementation of E32, which would increase the ethanol blend in gasoline, is expected to add about 1.1 billion liters of demand this season. That still would not be enough to absorb the oversupply, the company said.
Cost Discipline
Jalles is leaning on cost controls and efficiency measures to get through the downturn.
The company cut 350 jobs during the 2025/26 season and has invested in irrigation, cane-variety replacement, especially at its Santa Vitória mill in Minas Gerais, and on-farm production of biological inputs.
Its balance sheet remains solid. Jalles ended the 2025/26 season with R$1.8 billion in cash, enough to cover debt maturities through the 2030/31 crop year.
The company has also outperformed peers in locking in sugar prices, according to BTG Pactual. For 2026/27, Jalles has hedged 80% of expected sugar output at prices about 40% above current spot levels, and has fixed part of its sugar sales for the following two seasons.
Jalles, listed on Brazil’s B3 exchange, has a market value of about R$717 million. Its shares have dropped 47% over the past 12 months.
