March 6, 2014
Marvin G. Perez – Bloomberg, 3/5/2014
Coffee futures topped $2 a pound in a surge to a 24-month high as drought conditions that started in January eroded prospects for crops in Brazil, the world’s top producer and exporter.
Rain will ebb after a cold front this week in Brazil’s coffee areas, Somar Meteorologia inSao Paulo said yesterday. The southeast including Minas Gerais, the top producing state, is having the driest summer since 1972, the National Institute of Meteorology in Brasilia has said. Wolthers Douque, a U.S. import company, cut its crop forecast this year by 10 percent.
Futures for arabica beans, favored by specialty companies such as Starbucks Corp. (SBUX), have surged 83 percent this year, the most among the 24 raw materials tracked by the Standard & Poor’s GSCI Spot Index. Last year, coffee tumbled 23 percent in the third straight annual loss, the longest slump since 1993, amid Brazil’s bumper crops.
March 6, 2014
Filipe Pacheco – Bloomberg, 3/6/2014
Brazil’s swap rates climbed after the central bank said that it would be appropriate to keep adjustinginterest rates given persistent inflation.
Contracts due in January 2017 rose five basis points, or 0.05 percentage point, to 12.33 percent at 11:34 a.m. in Sao Paulo. The real advanced 0.5 percent to 2.3080 per dollar today, the strongest level on a closing basis since Dec. 10.
The central bank, which slowed the pace of interest-rate increases to 25 basis points last month after six straight half-point adjustments, said in minutes of the meeting published today that it considers “the continuation of the adjustment of monetary conditions under way” to be appropriate. Policy makers have raised borrowing costs 350 basis points since April to 10.75 percent. Consumer prices jumped 5.65 percent in the year through mid-February, above the bank’s 4.5 percent target.
“The minutes show there will be a change of 0.25 percentage point in the next meeting,” Solange Srour, the chief economist at ARX Investimentos in Rio de Janeiro, said in a phone interview. “It showed that there still are concerns regarding inflation.”
March 6, 2014
Matthew Malinwoski & Raymond Colitt – Bloomberg, 3/6/2014
Brazil’s central bank signaled today it will continue tightening monetary policy as above-target inflation remains persistent. Swap rates rose.
Policy makers led by bank President Alexandre Tombini voted unanimously on Feb. 26 to slow the pace of rate increases, raising the benchmark Selic rate to 10.75 percent from 10.5 percent after six straight half-point increases. The central bank’s monetary policy will help offset inflationary pressure from a currency depreciation, officials said in the minutes of their Feb. 25-26 meeting published online today.
The central bank considers “appropriate the continuation of the adjustment of monetary conditions under way,” according to the minutes. “Currency depreciation constitutes a source of inflationary pressure in the shorter term.”
March 5, 2014
Alexandra Wexler, Jeffrey T. Lewis & Leslie Josephs – The Wall Street Journal, 3/4/2014
Brazil’s worst drought in decades is decimating crops but breathing new life into battered commodity markets.
It hardly has rained in some of the South American country’s top farming regions since the start of the year, a period when precipitation is usually the heaviest. Traders, analysts and government forecasters who were calling for record harvests in coffee, sugar and soybeans as recently as December are cutting production estimates, triggering a spike in futures prices that may translate into higher costs for consumers later in the year.
Futures prices for the arabica coffee variety are up 67% since the start of the year. Raw-sugar prices have risen 8%. Soybeans, which have been affected by drought in some areas and too much rain in others, also are up 8%.
March 4, 2014
Louie Grint – Daily Finance, 3/3/2014
Adding to the uncertainty that most emerging markets are experiencing, a local event is stirring up volatility in Brazilian stocks. Presidential and legislature elections will take place in the country in October, and three candidates have real chances of taking office. The favorite is current President Dilma Rousseff, who is running for re-election, and then we have Aecio Neves and Eduardo Campos.
How does this matter to Brazilian ADRs?
A key point here is the degree of government intervention. Investors sense that if President Dilma Rousseff is re-elected, government intervention will continue, damaging companies’ profitability level. The other two candidates are seen as more market-friendly, and they still have a chance, especially with the current slowdown in the economy. So let’s see how three ADRs are performing.
First, here’s a Brazilian forestry leader and the world’s largest producer of hardwood market pulp, Fibria Celulose . It has an annual production capacity of approximately 5.3 million tons.
March 4, 2014
Leslie Josephs – The Wall Street Journal, 3/3/2014
Coffee prices are getting an extra kick from Brazil’s Carnival.
Trading volumes have been lower during the annual festival as many Brazilians take vacation, and many farmers, who usually take the “short” end of a contract when locking in prices, are absent, traders said.
This situation has added fuel to this year’s sharp rally in the $11 billion arabica coffee-futures market. Investors and traders have been snapping up coffee futures on concerns that unusually hot and dry weather in Brazil’s key growing regions will dent coffee-bean output.
March 4, 2014
Ilan Goldfajn – O Estado de S. Paulo, 3/4/2014
It is uncommon to have low unemployment rates in a weak economy. In general, the slowdown of the economy affects the labor market, at least after a certain period. However, in recent years, Brazil’s GDP has grown around 2% percent, while unemployment rates continued to fall to 5 % percent. This is important. After all, unemployment has a unique relevance for society. In the economy, it affects purchasing power and consumption, as well as production. Hence, unemployment is crucial for politics, for it can decide an election. But what explains this paradox between economic growth and unemployment, and what are the consequences for the economy?
According to Ilan Goldfajn, chief economist at Itaú Unibanco, one important factor to explain this phenomenon in Brazil is demographic changes, along with a declined rate of youth participating in the economy.
To read original article in Portuguese, click here.
March 3, 2014
Kenneth Rapoza – Forbes, 3/3/2014
Drought in the center-south and heavy rains in the center west bread basket states of Brazil have taken a massive toll on the country’s all-important farm sector. According to agribusiness analysts, the country will lose at least R$10 billion (around $4.35 billion) in farm revenues this year because of the odd weather patterns.
The smaller than expected crops, while not an entire disaster, has an impact on the country’s inflation. Brazil’s inflation rate is around 5.6% currently and any increase would force the Central Bank to rethink monetary policy.
Major cash crops such as coffee, soy, citrus, sugarcane and even beef cattle ranching have been impacted by the excessive weather. Brazil is the world’s largest producer of all of the above except for soybeans, in which Brazil is second to the U.S.
February 28, 2014
Sergio Fausto, O Estado de S. Paulo, 2/28/2014
Challenges abound for the next presidential term. There are several symptoms indicating that the “new development model,” the “new paradigm of the political economy,” or all the other pompous names one wishes to assign to the policies of the current government, have not produced the expected results. There is a widespread feeling both here and abroad that we are improvising and kicking the can down the road. For how long will this last?
Given this situation, the following question is raised: Will the candidates for the Presidency present political platforms that allow the voter to understand their vision with regards to these challenges and learn about the political choices each one intends to make to address them? Or will we once again watch, as per the norm in recent disputes, a campaign devoid of programmatic content, reduced to propaganda based on real or alleged personal positive attributes of the candidates and vague proposals of distributing more benefits (fancifully without costs and without sacrificing any other desirable goal)?
It is true that political platforms must be translated into more accessible language to ordinary voters, and that in order for a campaign to be successful, it must mobilize feelings around a simplified driving idea. Or such is the conventional political wisdom in Brazil. This notion, however, not only inhibits voters from being more informed, but also weakens the mandate of the government elected by the voters.
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February 27, 2014
Matthew Cowley – The Wall Street Journal, 2/27/2014
Brazil’s economy accelerated in the fourth quarter of the year but growth remains fickle as key parts of the economy continue to sputter.
The growth suggests Latin America’s largest economy was in better shape than had been expected, after preliminary data from the Central Bank of Brazil had indicated that the economy may have flirted with a recession in the second half of the year.
Although the economy continues to underperform, signs of expansion may ease some of the gloominess that have made bankers and economists increasingly negative about the prospects for 2014.