I’ve talked extensively as of late about the concerns in Brazil and how producers may not plant as many soybean acres (as the trade originally thought) if the moisture levels don’t start increasing. There is also some concern that producers in Argentina might ease back as well. Beside the “weather” there is also some political concerns in both nations. The Presidential election in Brazil this Sunday (October 26th) could go either way. This is causing the Brazilian markets to be extremely volatile. Each poll or survey that is released showing the pro-business challenger Neves gaining momentum causes the Brazilian real to rally. Each survey or poll showing current President Rousseff gaining ground causes the real to slump. Remember, many global investors believe Rousseff has caused four years of sluggish growth and heavy-handed economic policy, so the thought of a NEW government is giving ALL Brazilian assets a boost. In Argentina, with prices so low, some producers are simply saying they don’t want to take the risk in planting alongside all of the “unknowns” being handed down from the government.
Ports in the US, Brazil and Argentina have ramped up entry procedures for ships sailing from West Africa as they aim to prevent the potential spread of Ebola. The stricter regulations are expected to add delays to vessels traveling from West Africa as port official try to determine if there are any infected people on board, including not just ship workers but stowaways as well. The US Coast Guard announced it will start screening individuals coming into the US from Ebola hot spots. Brazil says any ships having docked in Ebola affected countries within the last 21 days must undergo an analysis of medical records and logs showing medicine used before being granted clearance to even dock in Brazilian ports. The origin countries are Guinea, Liberia, Sierra Leone, Nigeria and Senegal. Argentina’s new clearance criteria are similar. If Ebola is diagnosed, the ships will be placed under quarantine. The Panama Canal last month actually began monitoring the last 10 ports of calls of all arriving vessels. Any ships found having an Ebola case on board will be placed in quarantine until Maritime Sanitation officials declare it is safe for boarding. (Source: Reuters)
Argentina’s peso has remained mostly stable since the end of March, but in the past few days, the country’s central bank (BRCA) has allowed it to start weakening again. This follows a steady reduction in interest rates that’s been ongoing for the last month, which now stands 26.9%, far below the inflation rate, which most analysts believe is close to 40%. It’s thought that Argentina will once again try to patch things up by devaluing the peso even further. This in turn will likely lead to the familiar scenario of farmers holding onto their crops as a hedge against the anticipated devaluation of the currency. Hence the thought of fewer soybeans and particularly less soymeal being available to the US or the rest of the world. I should also note the Argentine harvest of both corn and soybeans is running 20-25% behind last years pace and is adding to the excitement. Bottom-line, take a big chunk of the Argentine soybean production out of the equation and global ending stocks immediately go from a large surplus to a more concerning situation.