Global food price fall: can Brazil benefit?

Savita Iyer-Ahrestani – ThinkAdvisor, 9/21/2015

Those investors keeping close tabs on global weather patterns know that a stronger than usual El Nino is developing. Experts say it’s the strongest in 20 years, and expect it to peak in November and continue into 2016, dumping, among others, colossal amounts of rain on the main corn and soybean producing areas of North and South America, notably Brazil—a country that for multiple reasons, is probably the least favorite emerging market, but could, some say, stand to benefit from the El Nino effect.

Recently, Standard & Poor’s downgraded Brazil’s credit rating to junk status. The Brazilian real has suffered a massive El nidepreciation and the dramatic fall in commodity prices has impacted Brazil, a major exporter, in a bad way. The Brazilian economy is battling inflation and political tension in the country is rife.

But Brazil accounts for much of global food production and is slated to produce 40% between 2015 and 2020, said Michael Underhill, co-founder of agribusiness investment firm Capital Innovations. As such, increased precipitation as a result of the El Nino effect and subsequent increased production could provide a “tailwind” to the economy.

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