Poor rainfall and global conflicts raise risks for grain harvest

In the most recent analysis by Grão Direto, released today (7/10), the challenges faced by soybeans and corn are highlighted, with climate, geopolitical and economic factors dictating price fluctuations. The last week saw distinct movements in the markets, with soybeans facing uncertainties related to planting in Brazil and corn dealing with the impacts of a North American harvest within expectations, in addition to Brazilian exports at a slow pace.

Soy: how did the market behave?

2025 Harvest - while planting is progressing slowly in Brazil, due to the lack of rainfall, climate maps differed on the actual start of these rains in the country, raising concerns.

Port strike - Last week, a strike began at US ports, with serious impacts expected. However, with pressure from the White House and a new wage offer, it ended without major losses.

Conflict in the Middle East - with new attacks in the Middle East, the price of oil reacted positively, which is reflected throughout the commodity chain. Soybean oil followed this movement.

In Chicago, the November 2024 soybean contract closed at US$10,38 per bushel (-2,63%). In contrast, in the Brazilian physical market, movements were mostly positive, following the rise of only 0,37% in the dollar, which closed at R$5,46. The contract maturing in March 2025 also closed down 2,28%, closing at US$10,71 per bushel.

What to expect from the market?

Brazilian climate conditions - The dry and hot weather has been extending through the first week of October, with rain forecast for the Southeast and Midwest regions starting in the first half of the month. In the last harvest, significant delays in planting were caused by the delay in rain, which resulted in replanting and significant losses. The market is starting to prepare for a similar scenario by observing the curve of future premiums, which rises as the days of delay increase. Last week, premiums sustained positive prices in Brazil while Chicago fell.

Conflict in the Middle East - the escalation of the war between Israel on one side and Hezbollah, Hamas and now Iran on the other, brings great uncertainty regarding the supply and logistics of oil in the world. Israel may attack refinery structures in Iran and, in addition, Iran has already imposed restrictions on the flow of cargo through the Strait of Hormuz, a stretch through which approximately 20% of the world's oil passes. For soybeans, the impacts may be twofold: an increase in soybean oil prices in Chicago, due to biodiesel, and an increase in logistics costs.

Chinese economy - The Chinese government has scheduled a press conference for next Tuesday to explain all the economic stimulus it announced two weeks ago. The market will be paying close attention to the announcement, as it tends to measure potential demand for all commodities. There may be volatility in the morning, at the time of the event.

Based on these fundamentals presented and observing price trends, Brazilian soybean prices could have a positive week in the face of an adverse scenario.

Corn: how did the market behave last week?

Brazilian exports - Anec projected corn exports at a rate below the 2023 figures. Current results already pointed to this reality, but this projection points to a continuation of this scenario.

Quarterly stocks - along the same lines, slower exports are corroborated by current stocks above those observed in 2023.

North American harvest - The North American corn harvest continues without setbacks and maintains satisfactory crop performance, all within expectations.

Corn closed the week at US$4,25 per bushel (+1,92%) in Chicago, for the contract expiring in December 2024. In Brazil, on B3, corn fell 1%, closing the week at R$68,01 per bag. In the physical market, prices followed an upward trend, in line with the movement observed in most regions.

What to expect from the market?

Livestock and corn demand - as highlighted in previous analyses, beef cattle are one of the biggest demanders of corn, maintaining a direct correlation between the prices of the arroba and the bag of the cereal. In recent weeks, the arroba has appreciated by around 30%, contributing to the rise in corn prices. Although the improvement in the farmer's margins does not indicate an immediate explosion in demand, the scenario opens up new perspectives for the next winter harvest. The expectation of a significant reduction in the planted area for the next off-season is beginning to weigh on the balance between supply and demand for corn.

Corn offer - with the harvest practically over and the focus on the supply of the next cycle, the delay in planting the crop may compromise the second corn crop window, looking at the possible need for replanting. This situation should cause significant delays in the chain, especially considering the second corn crop, taking producers away from the ideal planting window. As a consequence, a significant reduction in the area planted with the cereal is expected, directly impacting the supply of corn in Brazil, which is already on the pricing radar.

North American harvest - The satisfactory harvest should continue to put pressure on prices against more significant increases, considering that last week corn closed positive. This is the most influential factor in the short term that is on the global market radar.

Given the low demand for the grain, looking at historical figures, the pessimistic scenario remains for corn. Impacts that could increase grain prices more quickly are usually projected for next year. As a result, we may have another negative week.