"Sunday may prove crucial for the future of world farming"

From Agrimoney, Friday Oct. 24:

If you want an idea of what lies in store for agricultural commodity prices, keep an eye on Brazil's presidential elections this weekend.

This year has already issued a reminder to markets of the importance of politics to crop prices, with the rally in wheat which followed the onset of Russian-backed unrest in Ukraine – both countries being major exporters of the grain.

Sunday will provide another, when Dilma Rousseff, the incumbent, and Aecio Neves, viewed as the business-friendly candidate, contest premiership of Brazil – the top beef, chicken, coffee, soybean and sugar exporter, and a major force in corn and cotton too, besides being a large wheat importer.

The result will have big implications for both grain and soft commodity markets. Indeed, it is difficult to recall an election which could prove quite so significant for world agriculture.

Policy moves

The importance of the election result isn't just because of what the result will mean in terms of direct agriculture policy.

Mr Neves, for instance, looks more likely to unscrew the cap on gasoline prices enforced by Ms Rousseff to curb inflation, but which has had the knock-on effect of reducing ethanol values, in turn depressing sugar prices too.

(The impact on the finances of cane crushers into ethanol and sugar has been disastrous – as highlighted by Fitch Ratings today.)

Conversely, a rise in gasoline prices would, in lifting ethanol values, put upward pressure on sugar prices to secure the sweetener its cut of Brazil's cane crop.

Poll barometer

The result may also prove hugely influential for world farming even if the winning candidate leaves agriculture policy alone.

And that is down to the importance of Brazil's currency.

The real has in the last two weeks acted as a barometer of the Mr Neves' chances of winning the election, soaring 1.3% against the dollar on Friday after a Sensus poll put him as clear favourite to win the election, with 54.6% of the vote....MORE

The latest headline:
Polls close in Brazil's closely-fought presidential run-off election
Deutsche Welle