Brazil’s unprecedented growth in soybean production is slowing down as macroeconomic and geopolitical headwinds pile up, while strong corn and sugar production are feeding the country’s demand for ethanol amid global fuel market volatility, Andy Duff, head of RaboResearch Food & Agribusiness for South America, told AgNavigator.
At the time of publication, Brazil is wrapping up its second-crop corn harvest. This year, Brazil is estimated to produce 138 million metric tons total of corn, with 29 million coming from first-crop corn, according to Rabobank projections.
As they shift from harvesting corn to planning soybean, Brazilian farmers are facing numerous challenges projected to slow down soybean production, while U.S. soybeans remains competitive, Duff explained.
Historically, Brazilian soybean production has been “robust,” growing 3-4% year-over-year, but “that’s going to slow down considerably,” Duff said. Rabobank is forecasting a 2026/27 harvest of 178 million tons, down from 182 million tons in 2025/26, he added.
Brazil’s ag sector is bracing for El Niño-related impacts, which typically interrupts planting and harvesting due to increased rainfall, impacting specific parts of the country in different ways, Duff explained.
The El Niño in late 2015 and early 2016 impacted soybean and corn production across Maranhão, Tocantins, Piauí, and Bahia (i.e., the MATOPIBA region), while Mato Grosso soybean production was hit in 2024 from an El Niño, he added.
Brazil’s ethanol market fueled by strong corn, sugar production
Although El Niño creates challenges for planting and harvesting, the additional rainfall can help sugar cane in the field, with sugar cane expecting another good year in 2026/27, Duff said.
Brazilian sugar cane production is estimated to reach 675 million metric tons in the 2026/27 marketing year, a 2.3% increase year-over-year and down slightly from the peak of 705 million metric tons in 2023/24, according to data from Brazil’s Ministry of Agriculture and Livestock.
Sugar and corn are crucial inputs for Brazil’s ethanol industry, with nearly 80% of the country’s vehicles running on a flex engine. This month, Brazil’s National Energy Policy Council raised mandatory ethanol blending from 30% to 32%, temporarily for 180 days.
“The ethanol market is swamped at the moment because as well as having a large crop and a larger mix for ethanol, we’ve got an ever-increasing output of corn ethanol here. So, we really do have a flood of ethanol. Ethanol prices now are pretty low. I don’t think there’s much margin there at the moment,” Duff explained.
He added, “We are waiting for the data to come out to have a view on this. But in theory, we would expect the consumer to respond. The car fleet is 80% flex fuel these days, and the price relationship between the prices of ethanol at the pump and gasoline at the pump are very much in favor of using ethanol for economic reasons. It’s below 60%, which is a very low ratio, and now we have to wait until the monthly fuel sales figures come out.”
The macro factors impacting Brazil’s ag economy
On top of weather-related challenges, the Brazilian ag economy continues to grapple with high interest rates and higher input costs, driven in part from the Iran conflict.
“Anybody who had leveraged themselves up and made bold investments in the good years is now maybe finding themselves with high costs of debt services,” Duff noted.
In global trade, the U.S. is imposing reciprocal tariffs on various Brazilian goods due to a host of reasons from the Trump administration, ranging from the country’s electronic payments systems (i.e., the state-run Pix) to illegal deforestation. Major Brazilian agricultural goods like beef, coffee, and orange juice were exempt from the 25% tariff, but sugar and ethanol were not exempted.
