Much of the financial world yesterday was abuzz over Brazil’s surprise rate cut. While those trading Brazil Real futures contracts (with a whopping volume of… wait for it… 19 as of 11 AM CST today) might care about how the about-face impacts the value of the currency, the bigger question rattling around the futures world is how this might impact the price of sugar.
Brazil is easily the world’s largest sugar producer, responsible for over 20% of the world’s sugar production. Unfortunately, rumors have circled that this year’s crops are weaker than usual, and the surprise rate cut during a time period where Brazil has supposedly dedicated itself to battling inflation has some wondering whether or not the crop is even more meager than we’d initially thought. Sugar, so far, has reacted to the news by sliding ever so slightly after treading water yesterday. Where it goes from here is anyone’s guess.
Brazil may be known to most for Carnivale, Christ the Redeemer looking down over Rio, and their reliance on ethanol to fuel their cars, but to those trading futures, it’s one of a dozen or so nations with the ability to sway the markets, either by policy, report or being plagued by violence and weather. These kind of macro movements are monitored closely by traders, as they can quickly swing the price of a contract in one direction or another. Who/what has the muscle to cause a movement? Let’s look at it by contract:
||Ivory Coast Upheaval
||Violence in April
||South American Weather and Politics
||Chavez Coffee Takeover, Irene
||America, Russia, Australia, Weather
||Russia Lifts Export Ban, Drought
||America, Japan, Weather
||Dry Growing Conditions, Japan Demand
||America, Weather, World Demand
||Ethanol Policies, Export Sales Forecast
||Politics/Violence (Mid. East/Africa), Demand
||Libya, Global Demand Slide
This list, while not exhaustive, gives you a glance at all the moving pieces a pro has to keep track of while trading. These kinds of indicators are, by nature, usually unpredictable, so while they are important to track, even the discretionary managers on our roster still rely on technical indicators in addition to the macro perspective.
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