Porto Alegre, November 1, 2022 – The result of the Brazilian elections does not please Brazilian agribusiness and raises serious concerns about the protection of the right to property, taxation on imports, and controls that go beyond the rules of the free market. This interpretation comes from the pre-election speech itself and the projection of events that can halt road traffic and agricultural trading over the week. This may be one of the variables for the week, besides the exchange rate curve that may reflect capital flight in the face of legal uncertainty and the national banking system. All these issues are arguments to generate some movement of attention to markets at least this week.
October ended with some retention on the part of growers and difficulties in trading due to fears of an unfavorable result for agribusiness in this second round of elections. Only exporters remained aggressive in their purchases, taking advantage of the exchange rate moment and the international demand that remains for Brazilian corn. The new government’s actions focused on protecting the free market, property rights, maintaining free exports, and plausible rules regarding the environment.
The maintenance of retention by growers, be it for the preservation of reserves depending on the attitudes of the new government, be it for maintenance of too many resources in the financial system that can be shaken with economic measures, could be a reality during this end of 2022. The panic about actions against agribusiness leads to this movement. At the same time, there is an expectation that capital flight could accelerate the devaluation of the real. Of course, this would have many implications for the country at this point.
One of them would be the resumption of the rise in fuel prices, implying an impact on the controlled Brazilian inflation and prices for the consumer sector. Another important variable for Brazilian commodities would be the decline in export premiums if the exchange rate actually sees a more aggressive devaluation in the coming few days. This could neutralize part of the impact of the exchange rate on domestic prices. The retention movement on the part of farmers, from fattened cattle to corn and soybeans, may generate some discomfort in terms of internal supply. We remind you that the proposal to tax meat exports in Brazil will strongly affect the retraction of Brazilian production and a future situation of high domestic prices.
For now, Brazilian corn exports continue at a good pace and move toward the level of 40 mln tons, at least. November has now reached 3.5 mln tons in commitments, and October is expected to close with 6.2 mln tons, a record for the period. In the accumulated volume of the commercial year, we have 33.8 mln tons, with data from November, leaving December and January to close the year’s data. Can sales exceed 40 mln tons? Of course they can, because there is external demand, there is still supply in Brazil, space at ports until January, and perhaps now a jump in the currency that leads to more competitiveness for exporters.
During the week, prices at ports were between BRL 90/94 for November to January and BRL 98/100 in Rio Grande for February/March. In the interior, little business in the face of expectations on both sides for the post-election period. The summer crop progresses regularly, with great rains in October in most of the growing regions. Southern Brazil has only one situation of attention in the south of Rio Grande do Sul. The Southeast region is getting back to normal, but with a strong advance in the planting in São Paulo and center-south of Minas Gerais. In the midwest, east and northeast of Mato Grosso, there are irregular rains, some delay in the soybean planting, and possibly some deterioration of the second crop corn area, in the case of those growers who do not extend the planting beyond the recommended dates.
There is the maintenance of the forecast of rain for the first half of November for practically all growing regions in Brazil. In Argentina, however, rains will continue to be irregular and sensitive to interpretations about the planting of the 22/23 crop.
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