Soybean market reacts to interest rates in Brazil and Trump's victory

The grain market is experiencing a new wave of volatility, driven by the reduction in the estimate for the soybean harvest in the United States and the recent victory of Donald Trump in the US elections. According to the Analysis of the Expert Grão Direto this Monday (11), these factors increase uncertainty about the trade relationship between the US and China, a scenario that could benefit Brazilian exports of the oilseed. Check out the full analysis: 

Soy: how did the market behave?

Supply and Demand Report - US soybean harvest increased from 124,7 to 121,4 million tons, impacting final stocks. This result caused a lot of volatility in Brazilian prices.

Brazil and USA interest rates - during the week, Brazil raised interest rates to 11,25% per year and the US decided to reduce them by 0,25 percentage points (pp), to the range of 4,50% and 4,75%.

US elections - the US elections were being watched by the market in general, and the Republican Party candidate, Donald Trump, was elected.

In Chicago, the November 2024 soybean contract closed at US$10,17 per bushel (up 3,35%). The contract maturing in March 2025 also recorded a significant increase of 3,47%, closing at US$10,44 per bushel. Brazilian soybean prices had less significant appreciation, due to the 2,21% drop in the dollar, which closed the week at R$5,74.

What to expect from the market?

Concentrated planting - planting of the 2024/25 crop is progressing well in several regions of the country, with a high concentration of activities in a short period. According to Conab's weekly bulletin, released on 04/11, approximately 53,3% of the total area has already been planted in about 20 days, a faster pace than in the same period last year. This soybean will be harvested almost simultaneously, which may generate congestion in warehouses and ports, negatively pressuring premiums, as occurred in the 2020/21 crop during the harvest.

USA vs China - Donald Trump's victory reinforced some market forecasts, especially regarding Brazilian agribusiness. If a trade war between China and the US materializes, good opportunities could arise for the trade of Brazilian soybeans and corn, since China could retaliate against US tariffs by reducing its purchases of grains from the US. In this scenario, prices on the Chicago Stock Exchange would tend to fall, but, on the other hand, premiums and the exchange rate could appreciate, opening up new sales opportunities for Brazilian producers.

Evolution of planting and climate - Planting is progressing significantly and should exceed 60% of the total area this week. The state of Mato Grosso should reach close to 90% of the total area. If the current pace continues, the country could be close to completing planting in the main regions by the end of November, with development being closely monitored. Weather forecasts indicate a favorable scenario, with expectations of regular rainfall, especially in the central region. In the southern region, rainfall may be less frequent next week, but is not a cause for concern for now.

Graphical Analysis - The previous week was marked by volatility in soybeans. After the USDA's announcement, with the announcement of the reduction in US harvest forecasts, the F25 contract (January 2025) reached US$10.44/bushel and closed the week at US$10.30/bushel. The US$10.30 region is technically important and showed such importance when the price reached it for the first time this year, on July 18. Based on the current scenario, we have the upside targets that can act as price resistance at: US$10.55, US$10.77 and US$11.07/bushel. If the price works below US$10.30, we can consider the downside targets, which can act as price resistance at: US$10.06, US$9.93, US$9.83, US$9.70. Given these factors, the market will continue to keep an eye on the relationship between the US and China. The dollar will continue to be pressured by Brazilian fiscal uncertainties and the strengthening of the currency worldwide. Chicago will continue to be pressured by the evolution of the Brazilian harvest. Therefore, Brazilian prices should experience few variations throughout the week.

Corn: how did the market behave last week? 

Supply and Demand Report - US soybean harvest increased from 1217,19 to 1219,40 million tons, impacting final stocks. Brazilian production is still estimated at 127 million tons.

Decrease in planted area - Imea predicts a reduction in the corn planting area in Mato Grosso due to climate uncertainties and lower profit margins, which discourage cultivation.

Trade War - Trump's victory has increased expectations of a new trade war between the US and China, which could favor the price of corn in Brazil, with the Chinese directing more of their purchases to the Brazilian market.

Corn ended the week quoted at US$ 4,31 per bushel in Chicago, registering an increase of 3,86% for the contract expiring in December 2024. In Brazil, on B3, the price of corn also appreciated, with an increase of 1,11%, closing at R$ 73,86 per bag in the November 2024 contract. In the physical market, prices varied, with a combination of highs and lows throughout the country, with highs predominating.

What to expect from the market?

Brazilian exports - Brazilian corn is currently the most expensive among competing countries, which explains the slow pace of exports so far. The accumulated total up to October is around 30% below that recorded in the same period last year. If this pace continues, Brazil could end the year with just over 40 million tons exported, below the volume of the 2020/21 harvest. Despite this considerable drop, the total should still exceed the average of the last five years, which was approximately 40 million tons.

North American exports - Although Brazilian corn is not very attractive commercially, US corn is currently one of the cheapest on the world market. This price advantage has boosted US exports, according to the USDA's weekly report. According to the department, the US has already committed around 28,5 million tons for the current crop year, compared to 19,2 million in the same period last year, representing a growth of 40%. The US is expected to end the harvest with 59 million tons, reinforcing its global leadership in the sector. We could have another positive week for our corn, following the trend of last week.