Check our advice monitor at ProFarmer.com for our marketing plan
On Monday, Brazilian equities recorded one of their worst single-day declines in decades after left-wing incumbent Luiz Inácio Lula da Silva won the presidential runoff against right-wing challenger Flávio Bolsonaro. The iShares MSCI Brazil ETF (EWZ) closed down 19.8%, its second-worst session on record, trailing only the 23.1% drop in March 2020 during the COVID-19 crash. At one point during the session the ETF fell as much as 26%.
The local Ibovespa index finished roughly 13.9% lower, its steepest decline since March 2020, after trading was briefly halted by circuit breakers. The Brazilian real also weakened sharply, falling more than 11% against the U.S. dollar at its weakest point. Combined, the moves erased hundreds of billions of dollars in market value.
Market commentary highlighted how extreme the price action was by historical standards. Analysis from The Kobeissi Letter noted that the EWZ’s –19.8% move represented roughly an 8.4-standard-deviation event relative to the ETF’s 20-year history of daily returns (mean daily change of +0.04% and standard deviation of 2.36%). Under a normal distribution, a decline of that magnitude would have a probability on the order of 1 in 58 quadrillion—effectively impossible by conventional statistical measures. The same commentary observed the additional oddity that Brazil’s volatility index fell sharply even as equities collapsed, suggesting rapid position unwinding rather than a sustained rise in expected future volatility.
Individual stocks that had rallied most strongly on hopes of a Bolsonaro victory were among the hardest hit. Banco do Brasil shares fell nearly 30%, while several other financial and consumer names posted multi-decade single-day losses. Energy giant Petrobras declined more modestly. Trading in Brazilian government bonds was also disrupted, with the Treasury canceling scheduled auctions.
Investors quickly turned their attention to the composition of Lula’s economic team and the credibility of any fiscal adjustment path. Lula’s prior terms were marked by periods of both growth and rising public spending concerns; markets will now watch whether the new administration prioritizes fiscal discipline or expands social and infrastructure programs. Currency and equity volatility is likely to remain elevated in the near term as participants reassess political risk and the outlook for interest rates and public debt.
Treasury outlook clouds rate path...Wall Street expects the Federal Reserve to hold interest rates steady this week, but the outlook for Treasuries remains uncertain. After a two-month selloff that drove yields sharply higher from August, bonds have rallied on worries that financing strains in AI infrastructure could slow the artificial-intelligence investment boom supporting the U.S. economy. Yields have eased from early-October highs.
Persistent inflation, heavy government and corporate borrowing and midterm-election uncertainty continue to weigh on the market. The 10-year yield has risen 84 basis points this year, on pace for its largest annual gain since 2022, while 30-year yields are up nearly 50 basis points, their biggest yearly rise since 2024. Prices remain significantly lower for the year.
Christian Hoffmann of Thornburg Investment Management said the Fed is no longer fully in control, with the AI investment cycle and risk sentiment playing a larger role. Recent outflows from AI trades into bonds have resembled a flight to quality that can outweigh modest shifts in rate expectations. Most investors see a pause this week but still anticipate a possible December hike, supported by recent rises in consumer and producer prices. Even if rates stay on hold, longer-term yields face pressure from large deficits, rising Treasury supply and the roughly $40 trillion national debt. Analysts note that meaningful fiscal restraint appears unlikely regardless of election results, according to Reuters.
Deadlocked Election...Reuters reports exit polls indicated a deadlock in Israel’s election on Tuesday, with neither Prime Minister Benjamin Netanyahu nor rival Gadi Eisenkot on track for a majority in the 120-seat Knesset. The stalemate could leave Netanyahu in power as caretaker while parties attempt to form a coalition.
Record turnout marked the first vote since the October 7, 2023, Hamas-led attacks and subsequent wars. Netanyahu, 77, faces corruption charges he denies and criticism over intelligence failures. Eisenkot, 66, a former military chief who lost family members in the Gaza war, positioned himself as a centrist security alternative after quitting Netanyahu’s war cabinet.
Smaller parties may act as kingmakers. Failure to form a majority could mean prolonged talks or a new election.
A seven-year low...South African commercial corn farmers plan to plant about 2.4 million hectares in the 2027 season, the smallest area since 2019, according to the Crop Estimates Committee’s first intentions report. That is down 12.4% from the prior year and roughly 10% below the five-year average. White corn plantings are expected to fall 18.2%, while yellow corn acreage shrinks 3.1%, according to Bloomberg.
Higher input costs, driven by surging fertilizer and fuel prices linked to the Middle East conflict, plus expectations of an El Niño-induced drought, are prompting the cuts. Agricultural economist Wandile Sihlobo noted that a drought could lift food-price inflation by early 2027 and potentially affect interest rates. The central bank has said it will act to prevent fuel and food price pressures from raising inflation expectations.
A pork problem...The U.S. pork industry, already facing weak demand, is under further pressure from high gasoline prices that have surged since the start of the war in Iran, Smithfield Foods said Tuesday. CEO Shane Smith noted that persistent inflation and elevated gas prices have strained consumers and reduced consumption, including of bacon and hot dogs linked to driving and road trips.
Wholesale pork values have fallen to the lowest level in more than five years, according to the USDA, with weak demand weighing on bellies and hams. Smithfield reported an 8.3% drop in third-quarter sales, cut its annual guidance for a second time, and now expects adjusted operating profit of $900 million to $1 billion. It plans to reduce internal hog production by 900,000 animals through a new supply agreement while evaluating further acquisitions after closing its purchase of Nathan’s Famous.
Market recap:
● December corn fell 6 1/4 cents to $4.48 3/4 and hit a 3.5-month low.
● January soybeans dropped 9 1/2 cents to $12.43 – a two-month low close.
● December soybean meal fell $5.60 to $334.60 and hit a two-month low.
● December soybean oil fell 30 points to 66.71 cents.
● December soft red winter wheat fell 5 3/4 cents to $6.10 1/4, while December HRW fell 8 1/2 to $6.50 1/2 – both hit 3.5-month lows. December spring wheat fell 5 1/2 cents to $6.28 1/2.
● December cotton closed 100 points lower at 78.06 cents and hit a three-week low.
● December live cattle fell 35 cents to $230.85 and November feeders rose $1.475 to $350.025, a 3.5 month high close.
● December lean hog futures plunged $2.65 to $62.025, a new contract low close.