Embattled Brazilian president, Dilma Rousseff, lost an impeachment vote on Sunday in the country’s lower house of Congress and could be outsed by early May, which may boost agri commodity prices.
The Brazilian real shot to its highest value against the US dollar in eight months last week after a congressional committee said the vote could go ahead. If a Rousseff exit drives further appreciation of the Brazilian currency, grain exporters from the US and other nations could see more profits as Brazilian exports lose some of the competitive edge the devalued real has given them.
Sunday’s vote in the lower house just gained the two-thirds majority needed to put impeachment to a vote in Brazil’s Senate, where a simple majority would spell the end of the Rousseff administration.
Brazil has been hit hard by the downturn in the commodity cycle, a corruption scandal involving the state-run oil company and prominent politicians, mostly from Rousseff’s Workers’ Party. The economy has been contracting for two years and the currency was sent tumbling.
Observers have told Agri Investor that scandals engulfing the president and other prominent members of her governing party have created an atmosphere of intransigence that makes it nearly impossible for any political remedy to the economic situation to move forward.
Removal of Rousseff and her party could clear the way for more proactive policy efforts to bring the economy under control.
Reuters and FCStone, a consultancy and brokerage firm, predicted in a report last week that impeachment could drive the real’s value up to R$3.10 to the dollar, a level not seen since spring 2015. The report also warns a failed impeachment could push the real to its lowest value in more than a decade.
Stabilisation of the real would be good news for corn and soy growers outside Brazil. The declining value of the real has powered a surge in Brazilian exports of corn and soy. In February 2016, soy exports from the country were more than double what they were the previous year and corn exports were nearly five times those seen in 2015. Meanwhile, the US agri exports are projected to fall by more than 10 percent, according to the US Department of Agriculture (USDA), with stark drops in both corn and soy exports.