Weather and exports affect expectations for soybean and corn harvests in Brazil

This week's Grão Direto bulletin highlights the influence of several factors on expectations for the soybean and corn market in Brazil. The behavior of prices, weather, exports and international demand are the main elements analyzed.

Soy: how did the market behave? 

Brazilian harvest - Currently, the climate is a key factor in making projections about the next harvest here in Brazil. The scenario is one of expectations of consistent rainfall only in October, as indicated by meteorological maps.

Price movement - after recurring declines, Chicago indicates the region of US$10,00 per bushel as important support for soybean prices.

Interest rate - Last week was marked by a 0,50% cut in the US interest rate, on the same day that our interest rate rose by 0,25%. As a result, the dollar fell as expected.

In Chicago, the November 2024 soybean contract closed at US$10,13 per bushel (+0,70%). In the Brazilian physical market, there were mixed movements due to low volatility, with the dollar closing down 0,90%, at R$5,52. The contract maturing in March 2025 also rose, to US$10,45 per bushel, representing a 0,58% increase.

What to expect from the market? 

Harvest in Argentina - Argentina has projected a harvest of 55 million tons for 2025 through the Bolsa de Cereales, with a total of 40 million tons of bran produced. This scenario puts pressure on the premiums of the new Brazilian harvest, since with this production expectation, together with Brazil, Paraguay and the USA, 30 million more tons of soybeans will be placed in the Americas.

Climate projections - The EC (Euro-Cordex), a European climate model, has indicated a high chance of rain in the north and center-west of Brazil in the coming weeks. A delay in rain will result in a delay in planting, taking soybeans out of the ideal window. This risk is being priced in by the market. If rains appear from next week onwards, producers will start planting, and at that time the market will be alert to the need for replanting, should this occur.

Chinese Demand - Feed demand in China is below the levels seen last year. This is a reflection of the lower growth in the number of sows and piglets. The Chinese pig herd is the largest consumer of soybean meal, so a significant reduction in this consumption base will put downward pressure on premiums for the new crop.

Therefore, observing the trends indicated previously, we could have a week of low volatility, with mixed directions of prices in the different regions.

Corn: how did the market behave last week?

North American exports - the pace of exports remains slow for corn, putting pressure on prices in Chicago. On the other hand, this opens up opportunities for sales at more attractive prices.

Brazilian exports - according to the Foreign Trade Secretariat (Secex), the volume of corn shipped up until last week was only 35,16% of the volume shipped in the entire month of September last year.

Brazilian harvests - The second crop harvest was officially completed last week, according to Conab. The focus now is on the harvest with 12% progress, mainly in the south of the country, 3 percentage points below the same period last year due to the lack of rain.

Chicago prices ended the week at US$4,01 per bushel (-3,14%), for the contract expiring in December/24. On the B3, corn rose just 0,07%, worth R$67,85. On the physical market, the movement was mixed, with some regions positive and others negative.

What to expect from the market?

Quotes in Brazil - The beef cattle market and the corn ethanol industry are showing signs of strengthening. The price of beef cattle, traded on the B3, rose 3,06% last week, marking the fifth consecutive increase. As noted in previous analyses, the dynamics of Brazilian corn prices have been impacted by the growth of the corn ethanol industry in the Midwest. With the recent burning of sugarcane fields, an increase in ethanol prices is expected, further favoring production from corn. This scenario, combined with the increase in the price of beef cattle, is generating better margins for livestock farmers, especially with current corn prices, which should continue to support prices, especially in the Midwest region.

Corn second harvest - According to Imea (Mato Grosso Institute of Advanced Studies), considering the current prices of fertilizers and second-crop corn futures, producers' margins are negative. This leads the market to believe in a reduction in the planted area. It is still too early to confirm reductions, but it is estimated that approximately 55% of the fertilizers needed for the second-crop corn are still outstanding.

Record harvest in China - Driven by a record 2024/25 corn harvest, its fourth in a row, China is facing pressure on corn futures prices in Dalian. The nearest-maturity corn contract on the DCE has fallen in 13 of the last 16 sessions, hitting its lowest level since July 2020 last week. This scenario reflects the low levels of corn imports by the Asian country. The USDA projected that China would import about 21 million tons in the 24/25 season, but so far the country has purchased only 13 thousand tons. Weak Chinese demand should continue to pressure corn prices on the Chicago Board of Trade.

Faced with uncertain international demand, we could have another negative week in Chicago, but not accompanied by the Brazilian domestic market, which could rise following domestic demand.