The International Sugar Organization (ISO) has lowered its forecast for India’s fuel ethanol production in 2026 by 750 million litres to 11.3 billion litres, citing constraints linked to the blending mandate rather than production capacity.
The revision comes as the ISO expects India’s sugar diversion towards ethanol to fall sharply to 1 million tonnes in the coming season, compared with its earlier estimate of 2.8 million tonnes. The lower diversion is expected to increase the quantity of sugar available for the domestic market, although the ISO noted that Indian sugar prices had reached record highs during the intercrop period, prompting the government to issue import permits.
The ISO, in its August 2026 Quarterly Market Outlook, also highlighted developments in Brazil’s ethanol market. Brazil introduced a 32% mandatory ethanol blend (E32) in gasoline from August 1, 2026. The move is estimated to increase domestic ethanol demand by around 1 billion litres annually.
However, the organisation said the economics of ethanol production in Brazil could change depending on sugar prices. The hydrous ethanol-to-gasoline price ratio fell to 61.5% in July, its lowest level since September 2018, improving the relative competitiveness of ethanol for consumers.
Sugar or ethanol?
The ISO said Brazil’s sugar-ethanol mix will remain an important factor for global sugar supplies. Higher sugar prices have recently made sugar production more attractive than ethanol, potentially encouraging Brazilian mills to allocate more cane towards sugar during the 2027 crushing campaign.
At the same time, a shift in relative prices could reverse this trend and encourage greater ethanol production. The ISO warned that a developing El Niño event could further influence Brazil’s cane allocation and production.
Globally, fuel ethanol production is forecast to rise 6% to 130.1 billion litres in 2026, while consumption is projected at 127 billion litres, leaving an estimated surplus of 3.1 billion litres.
The ISO has also reduced its estimate of the global sugar surplus for 2025-26 to 1.1 million tonnes, from 2.2 million tonnes projected in May. Lower-than-expected sugar production in Centre/South Brazil during the first half of the 2026 harvest was the main reason for the revision.
For 2026-27, the ISO expects a marginal global sugar production deficit of 0.2 million tonnes, while consumption is projected to increase to 180.4 million tonnes.
The outlook suggests that ethanol economics and government blending policies will remain key factors influencing the global sugar balance, particularly in major cane-producing countries such as India and Brazil.
