Brazil and Commodities

Monthly Chart Brazilian Real

Brazil is the largest country in South America. It occupies almost half of all of the territory of the continent of South America. With a growing population of over 210 million, it is the sixth-largest country in the world and it has the world's eighth-largest economy. Brazil is a rich country in terms of natural resources; it is an important and major commodity-producing nation. It is the largest Portuguese-speaking nation in the world and the only one in the Americas.

Brazil has a thriving mining industry, with iron ore accounting for almost 10% of the countries exports with a value of $23 billion. The nation is also an important producer of energy. Perhaps Brazil's largest commodity output comes from the agricultural sector, with soybeans as the top export, generating over $26 billion in 2019. The climate in Brazil puts the nation in a unique position and makes the nation the largest producer in the world of several important agricultural staples.

The currency of Brazil, the real, is truly a commodity currency. As such, the value of the Brazilian real is highly correlated with commodity prices. During the secular bull market in commodities that began in around 2002, the value of the real soared. Recently, as commodity prices have moved lower so has the Brazilian currency. The value of the currency of the huge commodity producer more than doubled between 2002 and 2008. The global economic crisis of 2008 caused the real to move sharply lower, only to recover and make new highs in 2011 as the secular bull market in commodities peaked. Since then, the real has had its ups and downs, most recently trying to recover from the economical effects of the 2020 COVID-19 global pandemic.

Brazil is a major player on the world commodity markets. Their production spans a number of different sectors:

Mining

The most significant mined commodity for the nation is iron ore, the chief ingredient in the manufacture of steel. As of 2019, iron ore is Brazil's third most exported product, making it the second-largest iron ore exporting country in the world. According to The World Gold Council, the country is the world's tenth-largest gold producer. Although copper production is minor, when it comes to aluminum, Brazil is a major force on a global basis. The chief component of aluminum production is bauxite. In 2019, Brazil was the fourth-largest producer in the world behind Australia, Guinea, and China and it has approximately 9% of the world's bauxite reserves within its borders. Brazil was also the third-largest producer of alumina in the world, another key component of aluminum production.

Energy

Brazil is the world's tenth-largest producer of crude oil. In 2019, Brazil became the thirteenth-largest exporter of crude oil, which was its second-leading export. Over recent years, discoveries of energy reserves offshore could increase Brazil's presence as an oil producer and even as a producer of natural gas in the years ahead. Brazil is an important player in biofuels by virtue of its position as a huge producer of agricultural products. Due to its position in terms of sugar production, Brazil is a significant producer of sugar-based ethanol.

Agriculture

Brazil is the world's largest producer and exporter of sugar cane and the leading coffee bean producer. According to the most recent figures, Brazil produced around 23% of the world's annual supply of sugar cane, surpassing India, the world's second-largest producer, by over 8,000 metric tons.

Brazil produces approximately 38% of the world's coffee beans, more than double the second leading coffee producer, Vietnam. In 2019, the nation became the world's largest producer of soybeans with soybeans also the most exported product. These are just a few of the agricultural commodities that Brazil produces. Pineapples, cashews, oranges, papayas, tobacco, beef, chicken, corn, and palm are also major agricultural products of the South American nation.

As one of the world's leading agricultural commodity producers, the weather in Brazil plays an important role in food prices around the world. A drought in Brazil in 2014 resulted in coffee prices more than doubling in just a few months. When it comes to raw material markets, Brazil is an important force on world markets.