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BRAZIL UPDATE — WHAT TO EXPECT The Brazilian campaign has begun with the usual favouring of ethanol. The market completely overestimated the effect of the drought last season with (realistic) estimates of a crop as low as 540 mmt giving way to the reality of ~575 mmt. This season the market is calling for slightly higher at ~585 mmt, remembering at full swing Brazil can crush around 2.5mmt per day. Given the abundant rain this season, we are fully expecting the crop to be large, even surpassing market estimates...

AUSTRALIAN INTEREST RATES , AUD/USD … WHAT NEXT The Reserve Bank of Australia lowered the overnight cash rate to an all time low of 2% at the May board meeting. The bank has found itself in a difficult position with the terms of trade (the price of goods we export such as iron ore) falling, but offsetting that has been the property bubble of Sydney and a lesser extent Melbourne. Sydney accounts for 20% of the Australian market so it does bode for concern for the bank. Rather than the government using record low...