Brazil's forward sales of commodities such as grains and sugar have nearly ground to a halt as producers, trading companies and consultants assess the impact of the possible impeachment of President Dilma Rousseff.
After a year-long boom in sugar and corn exports, commodity merchants and farmers are bracing for continued strengthening of the real if Rousseff is ousted, reducing the price advantage of Brazilian commodities and possibly curbing foreign sales.
The Brazilian currency has rallied in recent weeks, despite a deep economic crisis, amid investors' hopes the left-leaning Rousseff will be replaced by a more business-friendly administration.
"Sellers and buyers are basically just waiting to see what is going to happen," said Fabio Meneghin, senior analyst at Agroconsult, a leading Brazilian consultancy. "Except for spot deals, there is not much going on."
Meneghin said that prices for a large share of forward deals for Brazilian grain were usually set on delivery, adjusted for fluctuations on the Chicago Board of Trade (CBOT) and in the local real currency.
"Obviously nobody wants to take that kind of risk right now," he said.
Brokerage and consultancy firm INTL FCStone said in a report on Wednesday that a change of government in Brazil, with market-friendly Vice-President Michel Temer taking over, would lift the real to 3.10 to the dollar, compared to 3.54 currently.
The firm said if the impeachment is rejected and Rousseff stays on, the real could fall to 4.10 to the dollar, increasing the price advantage of Brazilian exports.
For soybeans, FCStone says total exports this year could fall from the current estimate of 54 million tons to 50 million tons if the government changes and the real appreciates, shifting some buying to the United States.
In the alternative scenario, Brazil could export as much as 56 million tons.
For sugar, FCStone says impeachment could reduce the sweetener's profitability in export deals, encouraging local mills to increase ethanol production to sell the fuel locally.
The brokerage also said an ousting of Rousseff would boost the current trend of corn imports, since foreign shipments would become cheaper for Brazilian pork and poultry producers that are suffering from tight local supplies of corn.
Agroconsult's Meneghin also said producers are worried the political crisis will freeze the process of setting the next crop financing package - usually announced around May or June - as the government is completely absorbed with fighting the impeachment process.
The last package for the 2015-2016 season was more restrictive, with higher interest rates.
Brazil's lower house is expected to vote on Sunday on whether she should be tried in the Senate over accusations she broke budget laws. Should two thirds of the lower house vote in favor of impeachment, the process would go to the Senate and Rousseff would be suspended while she faced trial, with Temer taking her place.
Tarcilio Rodrigues, head broker at Sao Paulo-based Bioagência, expects a currency swing to have limited impact on some commodities, such as sugar.
"At least 80 percent of the exportable surplus has been sold and hedged with sugar futures and currency contracts, essentially fixing the mills' price for sugar this year", he said.
A similar situation happened with soy and corn, with producers taking maximum advantage of the real's slump in 2015 to export record volumes.
Although potentially losing out on expected currency movement if Rousseff's impeachment is approved, many producers support the ousting.
The National Agricultural Confederation (CNA) is organizing a tractor "invasion" of the capital Brasilia on Sunday to pressure congressman to vote for impeachment.
Famato, an entity representing producers in top grains state Mato Grosso, said they fear a continuing deterioration of the economy if Rousseff stays, it says.
