WASHINGTON (DTN) -- Brazil's agricultural economy faces competing pressures following President Luiz Inacio Lula da Silva's reelection, as a weaker currency offers potential support for exports while high debt, interest rates and costly imported inputs weigh on its producers.

The election results initially rattled U.S. soybean markets. Futures fell more than 20 cents following the results before recovering some ground. The Brazilian real also weakened about 11% against the U.S. dollar.

DTN Lead Analyst Rhett Montgomery described the initial market reaction as an "initial headline algorithm" before soybean markets returned their attention to market fundamentals.

While a weaker real would raise the domestic cost of imported agricultural inputs, including fertilizer, it also "makes Brazilian soybeans less expensive to world buyers," Montgomery explained. One Brazilian real equals US$0.18.

He also pointed to underlying anxiety that Lula's victory could keep Brazil closely aligned with China, while Bolsonaro had closer political ties with President Donald Trump.

On Oct. 25, Lula defeated far-right challenger Flavio Bolsonaro in a closely contested runoff election, winning 51.79% of the vote to Bolsonaro's 48.21%, according to Brazil's electoral authority. Lula had finished second in the Oct. 4 first round but secured a fourth, nonconsecutive presidential term.

Agribusiness and farmers now face another four years under Lula's center-left Workers' Party (PT), which has emphasized government spending on social programs, land redistribution and environmental protection.

The "Ruralist Caucus" supported candidate Flavio Bolsonaro, son of former President Jair Bolsonaro, whom producers saw as the leader of a golden age of Brazilian agriculture. The caucus controls a significant bloc in Congress, and agribusiness has a well-known, outsized lobbying influence over its leaders, making the recent loss a sting for farming companies, two employees of agribusiness associations told DTN.

Lucas Costa Beber, farmer and president of Aprosoja-MT, one of Brazil's largest soybean growers' associations in Mato Grosso, told DTN in March that "farmers will always prefer the candidate who talks about reducing interest rates and guaranteeing legal certainty."

Following the election, Costa Beber told the farm publication Globo Rural that the results should be respected, despite calls from Bolsonaro supporters to challenge the outcome.

"The election results must be respected. Democracy presupposes that, once the election is over, the interests of Brazil are above political disputes," he said.

He also put the country's broader economic conditions ahead of some agricultural policy priorities. "The next government should not only think about how to make Brazil produce more, but about how to make Brazil prosper more with what it produces. And, above all, it needs to understand that there is no strong agriculture without economically healthy producers," the statement said.

Ingo Ploger, president of the Brazilian Agribusiness Association (Abag), told DTN the administration should focus on "production costs, access to inputs, rural development and competitiveness."

WILL CURRENCY SHIFTS AFFECT EXPORT COMPETITION?

Brazil's economic challenges could create a different form of competition with U.S. agriculture.

A U.S. Department of Agriculture analysis of Brazil's 1999 currency devaluation found that a weaker real improved the competitiveness of Brazilian agricultural exports. The report also identified similar effects from devaluations in 2001, 2009, 2015 and 2021, which helped accelerate the sector's shift toward export markets.

"Depreciation of the Brazilian real relative to the U.S. dollar reduces the dollar price of Brazilian products sold in foreign markets, thus promoting export sales," USDA said in the October report, "Land Use, Conservation Policies, and Agricultural Production in Brazil and the United States."

Still, currency movements do not necessarily translate into sustained changes in commodity markets. Montgomery said recent movements have had a limited influence compared with broader supply-and-demand fundamentals.

"On Oct. 6, when the Brazilian election officially went to a runoff vote and Bolsonaro looked to be ahead -- the Brazilian real spiked to five-month highs in one day and November soybean futures traded over 20 cents higher that session. However, the spark quickly faded, and soybeans went back to trading fundamental concerns such as the advancing U.S. harvest, giving back all of that rally over the next four sessions and lower since," he said.

CHINA'S SOYBEAN TRADE SHIFTS TOWARD BRAZIL

China has increasingly favored Brazil as an agricultural supplier amid trade tensions with the United States.

China imported 74.6 million metric tons (mmt) of soybeans from Brazil in 2024, compared with 22.1 mmt from the U.S., according to World Bank trade data. In 2025, Brazilian shipments rose to 82.3 mmt, while U.S. shipments fell to 16.8 mmt.

The shift has compounded challenges for U.S. growers, who have lost market share in one of their largest export markets.

The U.S.-China Business Council estimated soybean growers accounted for $1.5 billion of the $9.2 billion in agricultural export losses in 2025. Farmers recovered just 16 cents for every dollar lost by redirecting sales to other markets. According to its recent export report, Illinois and Iowa each exported at least $1 billion less in soybeans globally.

However, expanding domestic soybean crush for biofuels has reduced U.S. reliance on export demand.

"With the rapid expansion of global crush due to the biofuel boom, the U.S. is not as reliant on export demand as in years past and can still have a bullish balance sheet as long as drastic cuts like the ones seen in 2018-2019 and 2025-2026," Montgomery said.

Soybean industry leaders have sought to expand into additional markets rather than remain overly reliant on China, though the country remains a critical export destination.

Looking ahead, Montgomery said competition will depend largely on the relative prices of U.S. and Brazilian soybeans and Brazil's next harvest.

"From what I'm hearing, China has quite the supply of soybeans currently, so I don't have high hopes for an export program above the 25 mmt trade truce goal, which I think will be hit but not much beyond that. However, that will depend on Brazil's production as well. If Brazil should have a crop failure in 2027 then we could see an extension of the U.S. 'window' into February, March, April ... which is typically Brazil-dominated," he said.

TRUMP'S RELATIONSHIP WITH BRAZIL

Lula's victory denies Trump a potentially important ally in Latin America's largest country, though the two leaders have maintained a complicated relationship.

Trump has criticized Lula while maintaining close political ties with the Bolsonaro family. At the same time, his administration has pursued trade with Brazil, including increased imports of Brazilian beef as the U.S. seeks to lower domestic prices.

Trump questioned the legitimacy of Brazil's election Monday, saying it "looked like another rigged election" without providing evidence. He also said he had not endorsed either candidate and spoke positively about Lula.

"I like Lula. I get along with him very well," Trump said, according to The Associated Press.

Since the election, Flavio Bolsonaro has left Brazil for Miami with his family amid Brazilian authorities' efforts to secure his passports as part of ongoing investigations.

See, "What's Next for US-China," https://www.dtnpf.com/…

U.S.-China Export Report: https://www.uschina.org/…

USDA Land Use Report on Brazil: https://www.ers.usda.gov/…

DTN Political Correspondent Jerry Hagstrom contributed to this report.

Jake Zajkowski can be reached at jake.zajkowski@dtn.com

Follow him on social platform X @jzajkow

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