Political clashes in Brazil are already affecting agricultural commodity markets, and not to mention the real’s recent fall. Soya beans, corn, sugar and coffee went cheaper on the market.
Political clashes affect Brazil grains
Brazil’s current status had a major negative impact on the prices of agricultural products, given the fact that Brazil is a major grower of these agricultural commodities.
Due to the risk off attitude by traders caused by the tumble of real, grain markets fell on the spot. As a leading producer and exporter of sugar, coffee, soya beans and corn, the abrupt fall of real (Brazil’s currency) signals that exportation will increase since they can get a lot from their money.
Data from Intercontinental Exchange reveals that July Arabica dropped by 3.4 percent, July sugar plummeted by 1.4 percent, whereas corn went down by 1 percent and lastly, soya beans decreased by 2.3 percent. The weaker real wounded the value of such crops in terms of the dollar.
Political clashes caused by Temer’s bribery issues
President Michel Temer of Brazil has found himself in the hot seat. Reports uncover that a business magnate was permitted to bribe an ex-congressman in jail to keep his silence. However, Temer refuted the allegations amidst quick market reaction.
The reports came from a certain recorded conversation which got leaked indicating the permission of the Brazilian President to continue paying the ex-congressman. However, there had been no formal statements released yet by the parties involved. The copy of the recording was immediately submitted to Brazil’s Supreme Court.
People cry out for Temer’s resignation
The whole country is in cosmic shock. There have been protests against the Brazilian President to resign from office, or if not, be impeached from position. A Brazilian chief economist even mentioned that the President ruined the support from lawmakers and Temer’s government is done.
It has been almost a year since Temer assumed office after impeachment proceedings versus Ex-President Dilma Rousseff. Investors thought that after the impeachment of the ex-president, a more pro-business government would rise under Temer’s leading. But as the news went out by Wednesday, it instantly sent Brazil’s stock market declined by 8.6% and its currency down by 7%.
Brazil likelihood of stability
The 7% drop in the real’s value means that agricultural products of Brazil just got cheaper. It then posted a bearish pressure with United States agricultural products and the latter needs to compete completely in the export business to be able to keep up with the rise of Brazilian agricultural products demands in the market.
U.S. soybean exports are doing well before the dropping of the Brazilian currency. Soybean shipments even increased by 18% from last year.
However, with the long process of corruption investigation, the government of Brazil returning to its previous stability does not seem plausible at the moment. The real may continue to stay even lower. Investors have a reason to be skittish for the whole year since the current situation of Brazil, indeed, puts a bearish weight on the United States agricultural market sector.
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