Macro Environment Brazil’s economic performance in the second quarter showed solid growth, with GDP expanding by 1.4 percent on a quarter-on-quarter basis. The positive surprise in second-quarter activity, coupled with expectations of sustained performance for the remainder of the year, prompted the Finance Ministry to revise its growth forecast upward to 3.2 percent for the year. FX and money market Brazil’s Central Bank raised its benchmark interest rate by a quarter-point to 10.75 percent, signalling the start of a new monetary tightening cycle. This decision aligns with Brazil’s efforts to control inflation but contrasts with the monetary stance in the United States, where rates have recently been lowered. Exports Brazil’s export performance in September was mixed, with notable variations across key sectors. Iron ore exports rebounded after a dip in the previous month, totalling 36.9 million tonnes, representing a 3.68 percent year-on-year increase. In contrast, corn exports saw a sharp decline, totalling 6,421 thousand tonnes in September, a 26.58 percent decrease compared to the same period last year. Imports Brazil’s demand for chemical fertilizers surged in September 2024, with volumes reaching 4,661.6 thousand tonnes. This marks a robust 17.2 percent year-on-year increase, highlighting strong domestic agricultural demand as Brazil continues to be a key player in global agribusiness.
Macro Environment
- Brazil’s economic performance in the second quarter showed solid growth, with GDP expanding by 1.4 percent on a quarter-on-quarter basis. Year-on-year, the GDP posted a notable 3.3 percent increase, reflecting steady momentum in economic activity.
- In response to these positive indicators, Brazil’s Finance Ministry revised its growth outlook upwards in early September, raising its economic growth forecast to 3.2 percent for the year.
- The ministry’s economic policy secretariat calculation marks a sharp upward revision from the 2.5 percent estimate in July, incorporating both the positive surprise in second-quarter activity and expectations of stronger performance for the rest of the year, albeit at a slower pace.
- Brazil’s external trade data also contributed to this favourable outlook. In September, exports totalled $28.78 billion, while imports reached $23.43 billion, yielding a trade surplus of $5.36 billion.
- This represents only a marginal 0.82 percent increase over the past month.
- On an annual basis, exports in September were 0.3 percent higher than last year, while imports rose by 19.9 percent.
Price Environment
- Brazil’s Consumer Price Index (CPI) rose to 4.42 percent year-on-year in September, marking a slight acceleration from the 4.24 percent annual increase in August.
- On a month-on-month basis, the CPI rose by 0.44 percent in September, reversing from a 0.02 percent decline in August.
- This monthly figure, however, fell short of market expectations, which had anticipated a 0.46 percent increase. Among key components, housing prices surged, while food and beverages saw a more modest rise.
- Producer Price Index (PPI) increased by 0.61 percent in August, marking the seventh consecutive month of growth.
- Notably, 19 out of 24 sectors recorded price increases, according to data from the Brazilian Institute of Geography and Statistics. Among the largest movers was the tobacco manufacturing sector, while the extractive industries experienced the sharpest decline.
- Compared to the same period last year, consumer prices had dropped by 0.75 percent.
FX And Money Markets
- During its 265th meeting on September 18, the Monetary Policy Committee decided to raise interest rates from 10.5 percent to 10.75 percent, marking the first recorded rate increase since August 2022.
- Although this increase had been anticipated, it runs counter to the global trend of declining interest rates, highlighted by the U.S. Federal Reserve’s decision on September 18 to lower rates by 0.5 percentage points.
- Private sector economists surveyed by Reuters predict two additional 50-basis-point hikes this year, likely to occur during the November and December meetings.
- In September 2024, the BRL/USD currency pair exhibited volatility influenced by a range of factors, particularly U.S. and Brazilian monetary policies.
- The divergence between U.S. and Brazilian monetary policies created resistance to the U.S. dollar’s strength against the Brazilian real, maintaining the exchange rate in a high range of approximately 5.54 to 5.60 throughout the month.
- By the end of September, the BRL/USD exchange rate settled at around 5.58, reflecting the ongoing balance between the opposing monetary policies and market dynamics.
Exports
- In September, Brazil’s iron ore exports rebounded after a downward trend last month, totalling 36.9 million tonnes.
- This figure represents a notable 7.58 per cent increase compared to the previous month.
- Additionally, September 2024’s exports were 3.68 per cent higher than the same month last year.
- Conversely, soybean exports in September amounted to 6.1 million tonnes.
- This marks a continued decline following the spring-summer peak, with total exports down by 23.75 per cent compared to August.
- Year-on-year, soybean exports also declined, dropping by 4.66 per cent compared to the same period in 2023. This downward trend was expected as the market transitioned away from the spring and summer peaks.
- In September 2024, Brazil’s corn exports totalled 6,421 thousand tonnes, marking a 5.92 per cent increase over the previous month.
- However, despite this upward trend, corn exports were down by 26.58 percent compared to the same period in 2023, which recorded the highest export volumes in the past five years.
- For the first three quarters of this year, total corn exports reached 24,394 thousand tonnes.
- In the same month, Brazil exported 3,953.8 thousand tonnes of sugar, reflecting a remarkable 23.91 percent increase compared to September 2023.
- When compared to August of this year, sugar exports saw a slight uptick of 0.84 percent.
- September 2024 continued the trend of significant growth in Brazil’s sugar exports over the past five years. If this momentum persists, 2024 is poised to become the highest year for sugar exports in that timeframe.
- In September, Brazil exported 7 million tonnes of crude oil, reflecting a modest decline of 1.41 percent compared to the volumes shipped in August.
- When assessed year-over-year, crude oil exports in September 2024 were 9 percent lower than the same month last year.
- Throughout the first three quarters of this year, Brazil has achieved a remarkable total of 69.3 million tonnes in crude oil exports, representing a robust 15.6 percent increase over the corresponding period in 2023.
- In September, Brazil’s pulp exports reached 1,696.2 thousand tonnes, showcasing a striking 37.54 percent surge from August’s figures.
- In comparison to September 2023, pulp exports saw a remarkable increase, climbing 2.41 times higher this past month.
- While pulp exports maintained relative stability during the first half of the year, the last three months have been characterized by heightened volatility, a trend more in line with the fluctuations observed over the past five years.
Imports
- According to the Ministry of Development, Industry, Trade and Services, Brazil’s imports of chemical fertilizers reached an impressive 4,661.6 thousand tonnes in September 2024. • This figure marks a robust 17.2 percent increase compared to the same period last year, although it represents a slight decline of 5.03 percent from the imports recorded in August.
- Throughout the first three quarters of 2024, Brazil accumulated a total of 31,835.5 thousand tonnes of fertilizers, reflecting an 11.08 percent increase over the corresponding period in 2023.
- In September, Brazil also imported 592.1 thousand tonnes of wheat, an increase of 8.68 percent from the previous month of August.
- When juxtaposed with the same period last year, wheat imports saw a remarkable surge of 44.56 percent.
- For the first three trimesters of 2024, Brazil’s cumulative wheat imports totalled 5,151.7 thousand tonnes, representing a striking 61.99 percent increase compared to the same timeframe in 2023. While 2024’s import volumes have significantly surpassed those of 2023, they remain consistent with the levels observed during the 2020-2022 period.
Port Congestion
- In September 2024, the Port of Santos experienced an average of 49 vessels facing congestion, up from 47 vessel’s recorded in August.
- This marks a slight month-over-month increase in congestion of 4 percent.
- Despite this increase, congestion levels in September 2024 remain lower compared to the same month in 2023, when the average number of congested vessels was 57, representing a significant year-over-year decrease of 14 percent.
- Throughout September 2024, the combined congestion at the Ports of Tubarao and Vitoria averaged 23 vessels, reflecting a slight decrease from the 24 vessel’s observed last month.
- When compared to the congestion levels from the same month a year prior, where the average was 25 vessels, this year’s figures indicate a decline of 8 percent.
- By the end of September 2024, the total number of congested vessel’s at the Ports of Tubarao and Vitoria stood at 22.
Baltic Indices (Brazilian Trade)
- In September, the Capesize Baltic C 3 Index, which monitors the route from Tubarao to Qingdao, concluded at 28.14 USD/mt, with an average of 27.74 USD/mt for the month.
- This reflects a notable increase of 9.35 percent compared to August’s average of 25.36 USD/mt, highlighting a positive shift in this critical Atlantic trade route.
- Year-over-year, the index surged by 32.2 percent compared to September 2023, which recorded an average of 20.98 USD/mt.
- Conversely, the Panamax Baltic P8 Index closed September at 38.79 USD/mt, with a monthly average of 39.03 USD/mt.
- This marks a significant decline from August’s average of 41.59 USD/mt, representing a decrease of 6.14 percent.
- Year-over-year, the P8 Index recorded an 8 percent decline compared to September 2023, when it averaged 42.32 USD/tonne.
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