Soybeans and corn are at their lowest point since 2021 as China’s growth slows. Terms of exchange of LATAM countries rely heavily on primary goods. Scarcity of dollars may trigger problems.
Soybeans and corn represent a significant portion of LATAM’s exports, being some of the most important exports of Brazil, Argentina, and Paraguay.
Soybeans reached a price of $419 per ton today, the lowest value since January 2021. Corn is following a similar trajectory, with a price of $160 per ton.
These prices correspond to the Chicago market, the Chicago Mercantile Exchange where futures contracts for these commodities are traded.
The declines today are approximately 0.4%, deepening the problems and revenue collection for Brazil, Argentina, and Paraguay.
The production and export of soybeans and corn often constitute a significant portion of the Gross Domestic Product (GDP) of the mentioned Latin American countries
The demand for soybeans and corn is primarily driven by countries like China, which uses soybeans for both animal and human consumption, as well as for the production of soybean oil and other derivative products.
The revenues generated from soybean and corn exports are necessary for domestic economies, whether through investments in infrastructure, education, or social programs. This holds especially true in LATAM countries.
The fiscal revenues of many Latin American countries largely rely on income generated from commodity exports. When commodity prices are high, fiscal revenues tend to increase, which can help improve the fiscal outcome and finance social programs and infrastructure projects.
Conversely, when commodity prices fall, fiscal revenues may decrease, negatively impacting the fiscal outcome and the government’s ability to finance its expenses.
China’s diminishing demand for soybeans amidst its phase of sluggish growth will significantly impact Latin America, particularly its economy.
In the last few years, the second-largest economy in the world has grappled with a multitude of challenges. These encompass a record decline in real estate, mounting debt, a declining birthrate, and a shrinking workforce.
As a result, countries in LATAM, primarily Argentina and Brazil, have experienced a significant economic stagnation phase.
An additional significant factor fueling the ongoing bear market in the Chinese stock market is the worsening of relations with the United States and the broader West.
