“The Brazilian sugar-ethanol sector is going through a transition period…”
Jacyr Costa Filho is a partner at AgroAdvice, a farmer and financial director of FIESP. He holds degrees in civil engineering and business administration from Mackenzie Presbyterian University, with a specialization in marketing from IMD Lausanne, Switzerland.
Jacyr Costa Filho, partner at AgroAdvice
AgriBrasilis – How do you see the current moment of the Brazilian sugar-ethanol sector?
Jacyr Costa – The Brazilian sugar-ethanol sector is going through a transition period. In recent years, we have had exceptional harvests, with historic records in sugar exports and an unprecedented volume in the domestic supply of ethanol, including corn-based ethanol. This demonstrates the sector’s structural strength.
Now, the scenario is more challenging. International sugar prices have dropped significantly, with an annual decline of 22%, the largest since 2017, driven by oversupply and lower-than-expected imports in key markets such as India and China. This has compressed mill margins and reduced investments in the sector.
On the ethanol side, the picture is positive. Rising oil prices, resulting from the war in the Middle East, have increased the value of biofuel as a strategic alternative. The government, which had already increased the ethanol blend in gasoline from 27% to 30%, is considering raising it to 32%. As a result, more than two-thirds of the sugarcane processed at the beginning of the 2026/27 harvest has already been directed toward ethanol production. We are also awaiting a gasoline price adjustment by Petrobras, which is currently priced 30% below international levels.
It is worth highlighting that the consumption of biofuel prevented the emission of 50 million tons of greenhouse gases last year, a historic record for the sector.
AgriBrasilis – How does the war in the Middle East affect the Brazilian biofuels market?
Jacyr Costa – The conflict accelerated something that was already underway in Brazil: the recognition of biofuels not only as an environmental agenda, but also as an instrument of energy sovereignty. With the escalation of the conflict involving the U.S., Israel and Iran, biofuels have come to occupy the role of strategic energy security assets, reducing Brazil’s exposure to external oil and fuel shocks.
The government had already raised the ethanol blend in gasoline from 27% to 30% and the biodiesel blend in diesel from 14% to 15%. Now, in response to rising oil prices, it is considering advancing the ethanol blend to 32% and biodiesel to 16%.
Brazil is experiencing this crisis with less impact than other countries, thanks to its robust production and extensive biofuel distribution network. However, there is no complete protection: the country still depends on diesel imports and remains vulnerable to international freight volatility.
Brazil’s positive example has inspired other countries. India, Indonesia, Argentina and the U.S. are also advancing toward higher ethanol blending in gasoline.
AgriBrasilis – What effects have recent public policies had on ethanol competitiveness?
Jacyr Costa – Regulatory progress has been significant. The Future Fuel Law, enacted in October 2024, establishes a minimum ethanol blend of 22% in gasoline, which may reach up to 35%, ensuring predictability and encouraging long-term investments. The law also promotes the integration of initiatives such as RenovaBio, the Mover Program and Proconve.
However, it is important to be honest about the limitations. The regulatory framework created strong incentives, but the high cost of capital offset part of this benefit for the most indebted mills. The next essential step is to guarantee adequate credit conditions to make the planned investments viable.
AgriBrasilis – Why have so many mills entered into crisis? Does the Raízen case indicate a worsening scenario?
Jacyr Costa – The crisis does not have a single cause. The two most relevant factors were the high debt accumulated during a period of accelerated expansion and worsened by the sharp increase in interest rates, in addition to climate shocks that reduced sugarcane production. In the case of Raízen, there were also investments that did not deliver the expected returns, such as second-generation ethanol.
It is important not to confuse financial crisis with structural weakness. Companies with lower leverage emerged stronger from the latest harvests. The problem faced by indebted mills is real, but it does not signal sectoral weakening. In fact, it points to the need for a financing model more suited to the cyclical profile of the business.
AgriBrasilis – What can be expected from the sugar-ethanol sector over the next 5 to 10 years?
Jacyr Costa – The outlook is positive. Brazil has built a unique platform: technological mastery of sugarcane, consolidated ethanol infrastructure and a regulatory framework pointing toward sustained growth in biofuel demand.
One of the most promising drivers is productivity gains. CTC inaugurated in Piracicaba, State of São Paulo, the world’s first synthetic sugarcane seed factory, with the goal of doubling the productivity of Brazilian sugarcane fields by 2040 without expanding cultivated area.
New markets are also emerging: Sustainable Aviation Fuel (SAF), e-bunker fuel for maritime transport, biomethane and corn ethanol are diversifying revenue sources far beyond sugar and automotive ethanol.
Brazil has the vocation, technology, and assets to lead global bioenergy over the next decade. The conditions for this have never been more mature.
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