2024 has shaped a characteristic of divergence in Brazilian production projections. At first, an internal information standard that is not accepted by serious and coherent institutions, both internally and abroad, for soybeans. From disparate production numbers to the most recent statement that “there will be a shortage of soybeans,” the Brazilian domestic market has been lost in its standard of information and harms the growers themselves, who are unable to correctly manage their trading. This procedure now appears to be advancing for corn as well, with exaggerated production cuts, including official data, and with the same striking sentence: “there will be a shortage of corn.” We understand the situation of Brazilian agribusiness in its difficult context this year and the attempt to generate some impact to recover the prices of both commodities. However, growers should not be led on an erratic trajectory, based on information that collides with reality. This month, Safras & Mercado updated its soybean crop estimate to 149 mln tons, with the most possibly realistic outlook for the Brazilian crop. Last week, we updated the corn crop to 125.8 mln tons, also with the same strict criteria and without deriving from the current media environment. The cut in the summer crop stems from the lower productivity averages obtained in the south of the country. The predicted cut in the second crop area is taking shape, even though the rain is offering excellent planting conditions in all regions of the country. A country that will have 45 mln tons to export in 2024 cannot suggest a supply shortage. However, of course, we are only in February and still depend on the weather ahead for the Brazilian crop and the outlook for the 2024 US crop.
A week full of US economic data that moved assets more aggressively. The main ones are the still high employment indicators, for a seasonal adjustment period. Employment continues to rise in the country, thus supporting demand. This employment behavior supports the services sector and impacts the inflationary curve.
The US Consumer Price Index (CPI) rose 0.3% in January compared to the previous month, already discounting seasonal factors, according to data from the country’s Department of Labor. The forecast was for an increase of 0.2% on a monthly basis. In December, the index rose 0.2% over the previous month. In the 12 months to January, the CPI rose 3.1%. The forecast was for an increase of 3% on an annual basis.
In the monthly comparison, the core consumer price index, which excludes changes in food and energy prices, rose 0.4% in January, after rising 0.3% in December. In the 12 months ending in January, the core consumer price index rose 3.9%. The Fed’s inflation target is 2% in twelve months.
These indicators eliminate the possibility of a bias toward interest rate cuts by the Fed in March, and the market is now beginning to suggest the possibility of a cut only in June. Some cut is only likely to appear on the eve of the US elections. The data also appreciated the value of the dollar in the international environment along with the rise in interest rates on US bonds. Without lowering interest rates, the curve for the dollar is still supportive. Thus, the dollar index maintained levels above 104 points last week, offering room for devaluation of several currencies.
It is the point that is influencing the Brazilian currency to try to break the level of BRL 5.00/dollar. The Brazilian financial market, in turn, ignores the fiscal holes in Brazilian public accounts and the capital flight itself in the pricing of the real. The stock exchange is on the rise while the dollar is not strengthened in Brazil, a picture that does not represent the chaos present in national public accounts.