- Chicago markets have continued to ease lower with January ’15 soybeans trading below $8.60/bu support and March ’16 corn testing last week’s $3.70 low. Interestingly, wheat has been trying to hold on fund short covering but it too has turned lower in sympathy with corn and soybeans. Volumes are unimpressive with many reluctant to enter into new net positions in advance of the holidays and, more crucially, the Fed’s expected rate hike due later today.
- The Real has fallen sharply today, back around 4.1 vs US$. The fall is based around political uncertainty and ongoing pressure on President Dilma to resign or face impeachment. Brazilian finances remain under scrutiny with deficits on the rise and a test of the summer lows of 4.2 vs US$ is possible. Any such test will help the Brazilian farmer maintain profitability and the fall in the Real is more than offsetting Chicago’s fall in soybean prices (so far).
- Rumours continue to grow on Argentine devaluation being imminent, possibly later today, which together with the Fed’s announcement later on today is creating nervousness in markets. The potential for Argentine grain and soybean exports to grow, and maybe sharply so, looks very real today.
- Overall an Argy devaluation looks as if it could further damage US export competitiveness leaving it in a difficult position, consequently our cautiously bearish stance remains.