Brazilian woes weighing on Australia

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From the FT:

…the Brazilian real, which has depreciated almost 20 per cent against the US dollar since the start of the year, falling to an 11-year low…The real’s weakness is being felt by Brazilian farmers who have increased exports, as returns on dollar-denominated commodities rise in in local currency terms.

…In the coffee market, Brazilian exporters have continued selling on the world markets despite the fall in arabica prices. Since the start of the year, prices have declined 16 per cent to $1.40 a pound. In Brazilian real terms, however, the market is up 3.4 per cent.

It has been a similar story for sugar…The soyabean market is braced for the new crop from Brazil — and neighbouring Argentina — where harvesting of the oilseed is under way.

…The real’s fall may have an impact on iron ore prices, helping to reduce costs at Brazilian miner Vale, one of the world’s leading producers of the metal alongside BHP Billiton and Rio Tinto.

Well, it might have except Vale blew itself up with currency hedges. Even so, the currency will help in the longer run as the market share battle rages:

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However, I do wonder whether the giant Serra Sul expansion will require a little public assistance as well, being the last to a party already chock full of latecomers, especially when its bought its slab largely on credit:

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Deutsche is already recommending asset sales a la Fortescue. The Chinese are going to have their global pick of assets!

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.