By Alastair Stewart
DTN South America Correspondent
SAO PAULO, Brazil (DTN) -- Brazil's soybean market picked up last week on the major rally in Chicago futures, but players remain cautious amid continued political volatility.
Farmers across southern Brazil sold soybeans last week after local prices jumped.
Soybean hit 83 Brazilian reals per 60-kilogram bag ($15.27 per bushel) at Paranagua port on Wednesday, up from 77 reals the week before and 75 reals a month ago. However, prices subsided on Friday and Monday and business slowed along with it.
While the key southern states of Parana and Rio Grande do Sul witnessed business, Mato Grosso and the rest of the center-west remained fairly slow despite the bump in prices offered by the rain damage to the Argentine crop.
With a good portion of the 2015-16 crop already sold, Brazilian growers are not in a huge hurry to sell their soybeans.
Brazilian farmers had already committed 60% of their 2015-16 soybean harvest for sale at the end of March, ahead of the 53% registered at the same time last year, according to AgRural, a local farm consultancy, and sales will have moved on from there.
Political and economic uncertainty continues to undermine business, though, with everybody reticent about doing deals with prices to be fixed at a future date.
With it looking increasingly likely that President Dilma Rousseff will face impeachment proceedings and be forced to step aside, at least temporarily, investors are looking to the future.
Vice President Michel Temer will take over if the impeachment process starts.
He has promised more market-friendly policies, but it remains unclear whether he will have sufficient support to bring in the changes needed to kick-start the economy.
This uncertainty directly feeds into the grain markets via the exchange rate.
If headway looks like it's being made in bringing Brazil out of its current slump, which will likely see the economy retract a combined 8% in 2015 and 2016, the real will strengthen and trim Brazil's advantage.
However, if the political deadlock continues, then Brazil's economic funk worsens and the real weakens.
The real strengthened from 4.01 reals to the dollar on March 1 to the current level of 3.56 reals to the dollar on the prospect that impeachment would go through.
Alastair Stewart can be reached at astewartbrazil@gmail.com
Follow Alastair Stewart on Twitter @astewartbrazil
(CZ/AG)
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