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Those Louco Brazilians | Agweb.com

Those Louco Brazilians

May 19, 2017

 

Market Watch with Alan Brugler

May 19, 2017

Those Louco Brazilians

According to Google Translate, Louco means crazy, mad or insane in Portuguese, the language spoken in Brazil. It is, of course, a variant of the Spanish loco. It also pretty accurately describes the currency market on Wednesday night and Thursday when claims circulated that Brazilian president Temer might have been involved in a bribery/hush money situation and that tape existed. The Brazlian Real plunged more  than 7.6% in a few hours vs. the dollar, as resignation or impeachment of Temer would put at risk a number of efforts to fix the Brazilian economy. You are all pretty currency savvy, so you know that a 7.6% drop in the Real would accomplish two things. 1) Make Brazilian exports cheaper and more competitive in dollar terms and 2) boost the payout in reais to Brazilian producers for commodities sold in dollars. At the intraday BR low, if US soybean prices had not begun to react, the Brazilian farmer would have been looking at a 67 cent per bushel rally in soybeans. They did what US producers holding too many bushels would do in the face of such a gift. They sold. Estimates vary wildly, but the grain companies may have purchased up to 2.5 MMT, and sold up to 1.5 MMT in the export market on that single move. Of course, profit taking then set in, the Real rallied, the dollar dropped to a new low on Friday and US grain prices recovered.  If the US had been seeing any extra export business due to tight farmer holding in Brazil, this moment of madness likely put an end to it. 

Corn futures finished Friday with a 1 ½ cent gain on the week after a dip in the bearish pool on Thursday. A drop in the Brazilian Real on Wednesday night had an impact on prices this week. Corn planting came in at 71% complete as of last Sunday, which blew by expectations and passed the 5 year average of 70%. Of the Crop planted, 31%…

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