Middle East tensions push up cost of sugar production in Brazil

Rising tensions in the Middle East are beginning to impact Brazil’s sugar and ethanol industry, as higher global fuel prices increase production costs and influence mill strategies in the Centre-South region, CPG reported.

According to an assessment by StoneX, the sharp rise in crude oil prices has created mixed effects for the sector. Since February 28, Brent crude has climbed by over 40%, while import-based prices have surged by 48% for petrol and as much as 91% for diesel.

The increase has been felt domestically, with diesel prices rising by more than R$1 per litre on average across the country by March 21. In São Paulo, the increase was around 12%.

Industry analysts say higher oil prices tend to support ethanol revenues, improving income prospects for mills. However, the steep rise in diesel prices has significantly increased operational costs, particularly in farming activities.

Diesel plays a major role in the sector’s cost structure, with a strong link to overall agro-industrial expenses. Estimates suggest that every R$1 increase per litre can raise costs by up to R$36.5 per tonne of sugarcane.

Efforts to ease the burden, including tax relief on diesel, have had limited impact, as price adjustments have continued to push costs higher.

With ethanol becoming more competitive due to higher oil prices, mills are likely to shift more sugarcane towards ethanol production. At the same time, rising diesel costs are putting pressure on sugar margins, prompting mills to adjust their strategies for the 2026–27 season.

Tags: Brazil, sugar