by Gerson Freitas Jr. and Marvin G. Perez

Lawmakers preparing to oust Brazil’s embattled President Dilma Rousseff may end up helping to revive the fortunes of farmers as far away as Iowa and India.

An impeachment process in Congress has revived the Brazilian currency from a record low as investors bet that replacing Rousseff will help to end the worst recession in decades and a paralyzing corruption scandal. But a stronger real also would halt a surge in food exports that had been compounding global surpluses and keeping prices low, commodity adviser INTL FCStone predicts.

An impeachment process in Congress has revived the Brazilian currency from a record low. (Photo: rodrigobellizzi/Thinkstock)

Producers in Brazil, the world’s top exporter of sugar, coffee, soybeans, beef, chicken and oranges, had been boosting shipments to generate more income as the real tumbled 33% last year. Since the end of January, as Rousseff’s hold on power waned, the currency has risen 13%, and the gains probably will continue, according to analysts at Banco Santander SA and Rabobank.

“An impeachment seems very likely and probably would be a positive factor for commodity prices,” said Paul Christopher, the St. Louis-based head of international strategy at Wells Fargo Investment Institute, which oversees $1.7 trillion.

While Rousseff has pledged to fight impeachment, Senators are scheduled to vote next week whether to put her on trial for allegedly doctoring fiscal accounts to mask the size of the budget deficit. Polls conducted by newspapers Globo and Estado de S. Paulo last month showed as many as 50 senators plan to vote against the president on Wednesday, more than the simple majority of 41 needed. If she loses, Rousseff must temporarily step down for as long as 180 days and stand trial in the Senate. The chamber then would need support from two-thirds of its 81 members to impeach Rousseff and terminate her mandate.

Until now, Brazilian companies including pulp maker Fibria Celulose SA and meat producer JBS SA were profiting from the weak real as they boosted sales of commodities sold in dollars on global markets. The increase in supply helped send coffee futures in New York to a two-year low in January, while corn traded in Chicago tumbled to a 17-month low in April. Soybeans have declined for three straight years through 2015.

Exchange rate

The currency fetched 3.5419 reais to the dollar at 10:28 a.m. Sao Paulo time Friday, compared with 4.172 on Jan. 21. Leonardo Monoli, a partner at Jive Asset Gestao de Recursos in Sao Paulo, the biggest independent buyer of distressed assets in Brazil, says the currency may get as strong as 3 per dollar -- a 15% gain.

"The continued appreciation of the real would be positive for commodities as it makes Brazil a less-competitive exporter," said Vinicius Ito, an analyst at Ecom Agroindustrial Group in New York.

If the currency strengthens to 3.10 reais, soybean exports this year may slide to 50 million metric tons from 54.3 million in 2015, which may steer more importers to supplies from the U.S., the world’s biggest grower, according to INTL FCStone.

“That would directly benefit U.S. exporters,” said Thadeu Silva, an analyst at INTL FCStone in Campinas, Sao Paulo state. Brazilian corn farmers “would suffer the most,” he said, “because logistics costs are denominated in reais and account for a large share of the final price.”

Sugar deficit

A stronger real also would discourage sugar exports at a time when there is a widening global production deficit. Brazil accounts for more than 40% of the world’s exports.

"With smaller crops in India, Thailand and China, Brazil will dictate prices this year," Silva said. "We will see a very strong correlation between sugar prices and the real.”

Even 3.10 reais per dollar would be "super bullish to agricultural commodities,” boosting corn and soybean prices as much as 30% and coffee and sugar by as much as 40%, said Shawn Hackett, president at Hackett Financial Advisors in Boynton Beach, Florida.

The Bloomberg Agriculture Subindex, a gauge of nine agriculture prices, touched an eight-month high April 21 and is up 9.7% from a seven-year low on March 2, led by gains in soybeans, cotton and sugar. While concern over weather damage to crops also helped spur the rally, the move toward impeachment “has clearly been a positive factor,” Ecom Agroindustrial’s Ito said.

Related: ADM to expand export terminal in Brazil

Brazilian shippers

It’s not so positive for Brazilian exporters, who would lose some of the financial incentives to ship overseas, according to Joe Bormann, a managing director for Latin America corporate finance at Fitch Ratings.

Ousting Rousseff won’t be the cure-all for all the slowdown in South America’s largest economy, which still must find political consensus to enact reforms necessary for reviving public confidence and growth, according to Ilan Goldfajn, an economist at Itau Unibanco Holdings SA in Sao Paulo.

“Brazil faces a fork in the road,” Goldfajn said in an April 19 report. “If there is not enough political consensus to adopt tough adjustments and reforms, the economy would remain adrift, hoping not to run aground on a reef that could sink it. Deficits would remain high and debt would continue to grow, with uncertainty damping growth recovery.”

To contact the reporters on this story:

Gerson Freitas Jr. in São Paulo at [email protected]

Marvin G. Perez in New York at [email protected]

To contact the editors responsible for this story:

Simon Casey at [email protected]

Steve Stroth

© 2016 Bloomberg L.P