In May of 2019, the United States imported 2,390 cubic meters of Ipe lumber products (U.S. Census Bureau Trade Data). Brazil accounted for nearly all of these shipments (96.6%).

The total value of Ipe lumber product imports from Brazil in May of 2019 totaled US$ 5,961,000. About US$ 2,580 per cubic meter.

The USD/BRL exchange rate in April of 2019 (when these containers likely shipped) was about 3.90. This means that exporters in Brazil received about $R 10,000 per cubic meter of Ipe. 

A year later, at the time of this publication – May 14, 2020 – the USD/BRL exchange rate is 5.96.

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This means that a shipment of Brazilian Ipe priced to earn $R 10,000/m3 today would only cost US$ 1,678/m3. Compared to the year prior, this would be a drop of about 35% in US dollar terms.

$R10,000 in USD April 2019 vs May 14, 2020 (1)

Of course, exchange rates are only one factor in commodity prices. Supply shocks, like COVID-19 shutdowns of mills, or major seizures of timber, could mean less Ipe is produced and commercialized. Or, exporters could increase their margins to cover losses from demand destruction. (U.S. Ipe imports decreased 61% through February.)

And even when looking at the effect of exchange rates, it’s possible that an exporter’s debt is US dollar denominated, so they depend less on BRL and more on USD, making their prices tied closer to the USD.

That said, spreads (or differences) between Ipe prices are likely to increase significantly creating both opportunities and threats for traders of Ipe and Ipe substitutes.

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