Rarely have two headlines published on the same day taken the hopes of American farmers on such a roller-coaster ride.
"FTSE 100 recovers, but US political tumult puts dollar on track for worst week in over a year," blared The Telegraph's May 19 headline (http://tiny.cc/…), tempting the thought that a weakening dollar could give U.S. ag exports a competitive boost.
But no. Because on the same May 19, the Rio Times headline read, "Market Plunges in Brazil, Dollar Surges Amidst Political Turmoil" (http://tiny.cc/…). Turns out the dollar is declining against a basket of currencies but rising against the currency of our biggest corn and soybean competitor, Brazil.
The ironic reason? Their political tumult is more tumultuous than ours.
Their tumult seems almost certain to topple the country's president, Michel Temer. He's been exposed on tapes encouraging the continued paying of hush-money bribes. Brazil had barely recovered from the scandal that led to the impeachment of Temer's predecessor when this development hit the news wires.
In the U.S., by contrast, what concerns markets is the danger -- which increases with each new revelation -- that Congress will be too distracted by the Russia investigation to enact a tax-cutting and regulation-cutting agenda. The word "impeachment" has been bandied about but there doesn't seem to be a serious possibility of it at this point.
The contrast between the possibility of a deposed government and the risk of a sidetracked agenda is sharp and ongoing. The dollar continues to strengthen against the real even as it weakens against other currencies.
And the dollar could continue to strengthen against the real, which is not good news for U.S. soybean growers. As DTN Grains Analyst Todd Hultman wrote, "Given the long, tangled web of the corruption investigation still unfolding in Brazil, a quick return to stable government does not seem likely, meaning that the real, which just broke to its lowest prices in 2017, is likely to stay lower" (http://tiny.cc/…).
Urban Lehner can be reached at email@example.com