What are the triggers that could change the corn market in the 2024/25 harvest?

Especially in the last three harvests, the agricultural commodities market reached high and historic levels of appreciation. However, after this wave, which was already expected not to last for long, the scenario began to lean towards “normal” equilibrium patterns. It was no different with corn, and the great challenge for producers in the 2023/24 harvest was to adapt to the significant price drops, a reality that is expected to continue.

Many farmers are already preparing for the 2024/25 harvest. Some summer corn fields, for example, are already being planted in regions of Rio Grande do Sul and Paraná where the planting window is earlier. This new cycle begins with a bias towards tighter margins. Therefore, the reading we have for the end of this year and the beginning of 2025 in relation to prices is a more challenging scenario for building margins.

This should happen due to some important factors, the first of which I would highlight is in relation to the international market. We have a significant surplus of corn on the international scene, important competitors such as the United States have been producing well, and I would also add Ukraine, which despite the geopolitical scenario, has been meeting European demand by exporting even to other Asian countries.

Brazil, despite some challenges, is harvesting a robust winter crop of over 100 million tons of corn. When all these supplies are added together, we have a scenario of excess stocks both domestically and abroad. That is why the end of 2024 should see this “hangover” of low prices.

Main triggers for change

In order to outline future scenarios, the first step is to know the main triggers that would lead to these changes. The first of these is the continued devaluation of the Brazilian currency, which directly impacts the formation of producer prices for corn or other exported commodities. This may continue to be a function of the domestic fiscal scenario or the external situation, such as the presidential election in the United States, market volatility, and conflict issues in the Middle East and Eastern Europe.

The second element, already thinking about the first half of 2025, is the intention of the North American producer in relation to a possible reduction in planted area. Since prices are also low for them, it would not be surprising if the area were reduced, which would limit supply and stabilize global stocks.

The third point is the climate. Regarding this item, our reading is of a neutral scenario with a low-intensity La Niña. Although the expectation is for less rain in the South region – where most of the summer corn is concentrated, the low intensity of the phenomenon may limit the negative effects on productivity and production in the region.

How to prepare?

In times like the one that is expected in the next low margin cycle, producers need to be efficient and not fall into the dilemma of reducing costs and producing less. Quite the opposite: they need to continue producing more using more technology. An important point is the strategy for purchasing inputs and also for selling production. Historically, those who buy well in the right windows, taking advantage of market opportunities, have managed to have greater longevity within the agricultural activity.

Another fundamental item is related to the internal management of the property and we have seen this importance in practice during audits with producers participating in the Getap productivity contest. When we visit those with good management, it is very clear how they present themselves. They have clear and precise property data and in fact have control over what they are doing, following administrative, financial and technical parameters. All of this together results in accurate decision-making.

Therefore, given this challenging scenario that is emerging, it is time to be efficient. In the last three harvests, prices were high, so all operations were successful. Now, when the margin is narrower, only those who are more organized will stand out. Since agriculture is a long-term activity, to remain in it, good planning and strategy are also needed in the long term.

By Enilson Nogueira, Swift Consulting