Sugar and gasoline don’t have a lot in common, unless you’re in a sugarcane mill in Brazil, in which case they’re literally the same plant. Usually that’s a fun fact, but right now it’s a problem.
Brazil is the world’s dominant sugar exporter—roughly 45% of everything traded globally. Every harvest, mills decide how much sugarcane goes to sugar and how much goes to ethanol. When oil prices are low, the math favors sugar. When oil spikes, ethanol gets more profitable, and cane gets pulled away from sweetener production.
The Strait of Hormuz disruptions have now tipped that math, as oil is hovering around $100 a barrel. The government is considering raising the maximum ethanol blend in flex fuel from 30% to 35%, a move that would funnel significantly more sugarcane away from sugar and into fuel.
At the same time, Brazil’s truckers threatened to strike this week over high diesel prices — and the government scrambled, cutting fuel taxes and drafting proposals to let states slash fuel levies. The last time Brazilian truckers walked off the job, in 2018, it paralyzed Latin America’s largest economy for days: fuel shortages, and empty supermarket shelves abounded.
If a strike happens, the timing couldn’t be worse. Sugarcane, when it’s harvested, has to be immediately trucked from fields to mills, then trucked from mills to ports. A trucker strike would halt that process during the most critical time of year. Brazil’s new sugarcane harvest starts April 1, and the first three months are when the bulk of the crop is processed. That means the decision about how much cane goes to sugar versus ethanol is being made right now, as the Strait of Hormuz is a war zone.
“If this is a problem for the next few months, with the war and oil prices being high, then the majority of the biggest bulk of the harvest is going to swing to ethanol, away from sugar,” Judith Ganes, an independent commodities analyst with four decades in soft commodity markets, told Fortune. Six months from now, when 75% of the crop is already in, it wouldn’t matter that much, she added.
Sugar prices are already anticipating that mix. White refined sugar in London hit $451 per ton on Friday—-its highest since October and up 8% since the war in Iran began. Ganes sees raw sugar heading to 18 to 19 cents per pound, up from the 13- to 14.5-cent range where it had been stuck for “months and months and months.”
The logistics of it all are making it worse. Persian Gulf refineries that import Brazilian raw sugar and process it into refined products for the region are seeing their expected shipments delayed or rerouted as the Strait of Hormuz remains largely closed.
That makes the problem two-sided: refined sugar gets scarce across the Middle East, East Africa, and parts of Asia, while raw sugar backs up at its origin in Brazil with nowhere to go.
“It creates a tightness in refining of white sugar and shortfall in the region, but then leaves the exporter with—uh oh, where’s the sugar going?” Ganes said.
At the 18-cent price range, she doesn’t imagine consumers will feel any effect. Sugar prices were already depressed all year, and cocoa prices have also come down hard after some tariff relief, easing some pressure on manufacturers of baked goods.
But beyond the war, the longer-term picture isn’t reassuring. Ganes flagged a strong probability of an El Niño weather pattern in 2026/27, which would bring drought conditions to Southeast Asia and threaten production in Thailand and India—the other two pillars of global sugar supply. Replanting has already slowed after years of depressed prices. In a scenario of a severe El Niño, “Any cushion is done,” she said.
At the Federal Reserve on Wednesday, Chair Jerome Powell acknowledged the broader commodity bleed from the Iran war. He noted that oil and its derivatives feed into production and transportation costs across the economy, with effects that “leak into core” inflation. But he stressed the uncertainty: “We’re right at the beginning of this, and we don’t know how big this will be and how long it lasts.”
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