Harvest and exchange rate influence soybean and corn market

In this week's expert analysis, Grão Direto points out the market behavior of soybeans and corn in relation to the progress of planting in Brazil and the effects of rain on crops. According to the document, the North American soybean harvest continues to accelerate, while Brazilian sowing has benefited from rainfall and continues to have good prospects. In corn, the scenario is similar, and even with a 5,4% reduction in area, the projection is for 4,6% growth in productivity for the summer harvest. Check out the full analysis: 

Soybeans - how did the market behave?

Rain in producing regions - there was significant progress in planting last week due to good rainfall volumes, with Mato Grosso starting the month of December with 79,56% of the area planted, according to Imea. 

North American harvest - with the accelerated pace of harvesting, the US is approaching 100% of the harvested area, while slower marketing exerts downward pressure on prices on the CBOT.

Dollar - the real depreciated against the dollar after a week of market tensions. The future interest rate (one-day DI) closed the week at 13,23% per year, and the exchange rate at R$5,89. In Chicago, the soybean contract for November 2024 closed at US$9,75 per bushel (up 0,98%). The contract maturing in March 2025 also rose 0,90%, closing at US$10,09 per bushel.

What to expect from the market

Farming conditions - Planting in Brazil continues to advance, and weather conditions remain favorable for good crop development in most producing regions. As previously warned, a good start to the harvest will exert downward pressure on future premiums, but as the harvest progresses and no problems arise, current conditions, if maintained, will lead Brazil to another record harvest. The expectation of 166 million tons projected by Conab remains realistic and may be adjusted upwards. 

Bran exports - Brazil is experiencing a rapid pace of soybean meal exports, with around 18 million tons exported in 2024, which represents an increase of 1,8% compared to 2023 so far. The reason for the boost in exports is the anticipation of purchases from the European bloc, due to the expected validity of the EUDR (European Union Deforestation Regulation), a law imposed by the European Union that will prohibit the import of products from deforested areas after December 2020.

It is worth noting that the law is set to come into effect on December 30, with the possibility of being extended for one year. This increase in demand has had a positive effect on spot soybean premiums.

Interest rate decision - Next Wednesday (6), the Central Bank of Brazil will decide on the interest rate for the next 45 days. The market expects an increase of 0,5 percentage points, raising the rate to 11,25% per year. The meeting will take place one day after the US elections, where, if Trump is elected, a scenario of faster reductions in the interest rate is expected. With the increase to 11,25% per year in Brazil and a possible reduction scenario in the US, the dollar may encounter resistance to continue rising; however, until this scenario is confirmed, even with the interest rate hike, the real tends to depreciate.

Based on the factors mentioned, we could have another negative week in Chicago, with the dollar mainly having to counterbalance the prices here in Brazil. In the interior, premiums should continue to appreciate for available grain. And the scenario remains pessimistic for our currency. 

Corn - how did the market behave last week?

Planting in Brazil - good weather conditions for summer corn have led to planting progressing, reaching 36,8% last week, according to Conab.

Planting in Argentina - Last week, the Bolsa de Cereales reported that corn planting was at 34,5%, an increase of 5,6% compared to the previous week, with 86% of the planted area under normal and excellent growing conditions.

Demand for corn - the domestic market continued to be the largest demander of cereal, but the pace of business remains slow, even with a significant improvement in prices.

Corn closed the week quoted at US$4,15 per bushel (up 1,22%) in Chicago, for the contract expiring in December 2024. In Brazil, on B3, corn continued to rise, closing 1,04%, closing at R$73,05 per bag in the November 2024 contract. In the physical market, movements were mixed, with highs and lows distributed throughout the country, with highs predominating.

What to expect from the market?

Crop monitoring - for the summer harvest, even with a 5,4% reduction in area, productivity is expected to grow by 4,6%, totaling a production of 22,72 million tons, which represents a drop of 1,1% compared to the 2023/24 harvest. For the second harvest, Conab projects an increase of 1% in area and 3,8% in productivity, with production estimated at 94,63 million tons, an increase of 4,8%.

Although there is greater availability, Conab projects that shipments may decrease by 2 million tons compared to the forecast for this season, of 34 million tons. On the other hand, consumption may increase by around 3 million tons in the 2024/25 harvest, reaching 87,03 million tons. Thus, 5 million tons of corn would remain until January 2026, a volume lower than the average of 9,6 million tons of the last five harvests.

Domestic demand - The largest consumers of Brazilian corn are the animal feed and corn ethanol industries. In the last thirty days, we have seen the prices of frozen chicken, pork carcasses and ethanol falling, but not the prices of cereals in the domestic market. The factor that explains the rise in cereals in the short term is the low sales by producers and the improvement in the margins of livestock farmers, one of the largest consumers.

In this scenario, the recent highs are a window of opportunity for those who have corn available, since, with the advance of the soybean harvest, both for capitalization and to free up storage space, corn sales should gain pace and high demand should put pressure on prices.

Brazilian and global corn supply - Conab indicated that total production for 2024/25 could total 119,74 million tons, 3,5% more than that of 2023/24. The USDA (United States Department of Agriculture) indicates that production for 2024/25 could total 1,21 billion tons, while consumption should reach 1,22 billion tons, resulting in a deficit of 20 million tons.

We could have another positive week for corn in Brazil, following last week's trend.