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Production will fall more than 40% in corn and in soybeans it will be a regret. The south of Brazil has been besieged by intense heat waves, as well as the north and center of Argentina

Good morning Good afternoon Good night. A pleasure to greet. The title seems somewhat alarmist, but there are climatic reasons that undoubtedly have us up in the air with the productive expectations in Brazil and Argentina.

Paraguay, even though it is not a productive titan, adds several million tons to the productive concert and with temperatures above 40 degrees Celsius, and low or no rainfall.

Production will fall more than 40% in corn and in soybeans it will be a regret. The south of Brazil has been besieged by intense heat waves, as well as the north and center of Argentina. The state of the crops is deteriorating and even though help is on the way, for some areas it will be too late.

What started as the South American productive promise is closing as a suffocated reality and various analysts have taken the route of reducing the productive expectation to the races, less and less production in the opinion of more analysts.

For now, the heat stress has been broken with rainy systems that in one way or another seem to at least stabilize the crops, however, the enigma will be to know in what real state of productive capacity these rains find the South American countryside that has suffered everything. The climatic accompaniment has been very erratic, and that follows from volatile reactions in prices.

If only the interpretation of agricultural markets were only the effect of the fundamental forces of yesteryear, the reality is different.

Today it is not only the fundamental issue that influences price action, today the force of the external has an enormous specific weight, and it is prudent to highlight at least a couple of causes.

We start with the geopolitical and if that is the case, the first line of opinion is in the Black Sea. Russia is the largest exporter of wheat. In recent times the Russians have had to be very cautious with their exportable balances, the reason behind this is, among several others, the link to inflationary pressure.

The comrades are paying more for bread, domestic wheat prices rise and to avoid the above, Moscow designed a sliding export tariff with the aim of reducing competitiveness in the export market and leaving surpluses in the local market that would end up putting pressure on the domestic market declines.

Like any government plan, it sounds very good on paper, however, in practice, the Russians forgot to combine the exchange effect with the sliding tariff. The Russians have seen a ruble strengthen thanks to oil prices, however, this strength of the ruble ceased to be true once the tension between Russia and Ukraine has taken more power.

Ukraine is a major exporter of corn and wheat, Europe, China and North Africa are natural markets for both nations, so a conflict between the two would cut off to some extent the movement of various goods in the Black Sea area, and that It is the fear of the moment.

If the Russians invade the border area trying to annex this no-man’s land, just as they did with Crimea, the West would end up tearing its hair out in recrimination against the Russians, who will most certainly be financially sanctioned by the Western bloc.

At least in theory, since the Russians have been able to live in the sanctions zone and would most certainly seek to further open the field with China, Iran and annexed nations.

Europe has a complicated issue, because even when it is in favor of the Ukrainian defense, no European citizen is willing to leave their blood for Kiev, nor lose the status of economic privilege for them either.

The reality is that, in the winter, the last thing Europe wants is to run out of fuel, and Russia has a lot to contribute to this.

The theory is that Russia lives better from the threat to Ukraine than from the warlike reality of attacking them, however, the tension is there, and any mistake could cause both trenches to start shooting.

The potential sequestration of trade in the Black Sea undoubtedly leaves the supply of the world’s primary food demand, which depends on import flows for conversion to animal protein, in the hands of a few exporters. That is where the history of war between Russia and Ukraine could be connected to the hit to yields stemming from the hostile climate in South America.

To all of the above, we must add the rapacious action that the United States Federal Reserve will presumably use to try to reduce the existing inflationary pressures.

International financial markets are hesitant, and we have seen a significant flow of money migrating, leaving stock markets and taking refuge in raw materials.

If inflation is a constant, buying raw materials is a hedge and there come those large flows that, when they arrive, represent demand without being consumption. The effect on the price then becomes bullish.

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