Alexander Campbell
· Campbell Ramble
· May 04, 2026 at 11:51
· ⏱ 18 min read
| Read on Substack ↗
Summary
The article argues that the consensus surplus in sugar is already gone because Brazilian mills are allocating an unprecedented share of cane to ethanol, not sugar, driven by high energy prices. This sets up a potential sugar rally to the low-to-mid 20s or higher, with multiple catalysts through summer 2026.
•Brazil's first UNICA report showed 75% of cane allocated to ethanol vs 44% last year and a 53% 15-year average.
•Ethanol pays mills a 58% premium over sugar at current frozen gasoline prices, making sugar uneconomical to produce.
•Each percentage point of ethanol share above 52% removes about 850,000 tonnes of sugar from the global market.
•At a 60% ethanol crush, the global sugar deficit would be 4–6 million tonnes, wiping out the consensus surplus.
•India's below-normal monsoon forecast (92% of average) and potential ethanol policy shift add upside tail risk.
•Historical analogs show deficits ≥5 million tonnes produce at least 50% price rallies; the current setup mirrors 2009 (sugar went from 11¢ to 30¢).
•The March 2027 18-cent call option volatility has not repriced for ~$110 Brent crude, leaving cheap optionality.
•UNICA biweekly reports, the IMD monsoon forecast, and October elections in Brazil are key catalysts through November.
Read time18 min
Length18,803 chars
Categoryfinance
Trade Ideas
Alexander CampbellFounder & CEO, Rose AI; ex-macro investor, Bridgewater
Author expects a sugar supply deficit due to Brazilian mills diverting cane to ethanol at record levels, combined with potential weather shocks in India and high energy prices, driving sugar prices hi
Author expects a sugar supply deficit due to Brazilian mills diverting cane to ethanol at record levels, combined with potential weather shocks in India and high energy prices, driving sugar prices higher from current 14.95 cents.
Alexander CampbellFounder & CEO, Rose AI; ex-macro investor, Bridgewater
Author states Petrobras's gasoline price freeze is 'mathematically unsustainable' and costs $20B/year. If the freeze breaks after October elections, domestic gasoline would jump to international parit
Author states Petrobras's gasoline price freeze is 'mathematically unsustainable' and costs $20B/year. If the freeze breaks after October elections, domestic gasoline would jump to international parity, further boosting ethanol demand and sugar prices, while also improving PBR's earnings and cash flow. The freeze is the main factor holding back even more aggressive ethanol diversion.
Risk: Lula's political calculus may keep the freeze in place longer, delaying the catalyst. Petrobras could also be forced to absorb losses if government caps prices permanently.
This newsletter, published May 04, 2026,
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discussing SB, PBR.
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