Soybean and corn market: dollar and climate dictate trends

The rising dollar, stable soybean planting and good weather conditions marked the agricultural market last week. While corn is facing advances in planting and price fluctuations, the soybean market is impacted by the rising dollar and favorable weather prospects, requiring producers to pay attention to marketing strategies. Learn more about the scenario in the Grão Direto Specialist Analysis of this Monday, December 2: 

Soybeans: how did the market behave? Dollar - the announcement of cuts and the exemption from income tax for income up to R$5 increased fears about the public deficit, causing the dollar to hit R$6,11 throughout the week.

Crop conditionsEstablishing a strong counterweight to the high dollar, the planting pace of the crop and production expectations, both in Brazil and Argentina, stabilized prices in the domestic market

War in Ukraine - In the last week, the conflict between Russia and Ukraine has taken on new dimensions. The positioning of some countries and NATO members indicate that the conflict could spread and force the involvement of Europe and the United States. In Chicago, the soybean contract for January 2025 closed at US$9,91 per bushel, up 0,61% on the week. The dollar rose 3,27%, closing at R$6,00, reaching and renewing record prices here in Brazil throughout the week. Despite this, the physical soybean market did not consolidate its highs, with lows recorded in some regions, reflecting the lack of support in prices. What to expect from the market? 

Weather conditions - Last week, the weather was favorable for crop development in most of the country. However, some areas, such as the center-south of Mato Grosso do Sul, are facing difficulties due to the water deficit. Conab highlighted that, in general, the producing states have excellent conditions for crop growth. For this week, the forecast is for regular rainfall in the main producing regions, with the exception of MS and Bahia, which may face challenges in vegetative development due to the lack of water.

CBOT Price - With the harvest in the United States complete, the Chicago Stock Exchange has maintained prices below US$ 10,00/bushel for nine consecutive trading sessions, reflecting the high volume of the North American harvest and the reduction in international demand. With Brazil approaching the harvest, favorable weather conditions here could further pressure prices, even below US$ 9,00/bushel. Therefore, producers should consider this scenario when planning their sales strategies, since additional pressure on prices is expected with the advancement of the Brazilian harvest.

Dollar - fiscal instability and political movements in Brazil led the dollar to reach R$6,00 last week, in addition to increasing the slope of the futures interest rate curve. For the grain market, a stronger dollar against the real could be a positive factor for the competitiveness of Brazilian soybeans in the international market. However, this also intensifies the downward pressure on prices on the Chicago Stock Exchange, due to the increase in the global supply of Brazilian grains. This scenario creates a dilemma for producers: while a strong dollar increases profitability in reais, the impact on international prices could limit gains. The recommendation is to closely monitor regional premiums and the dynamics of the international market to find good trading opportunities.

Based on the points presented and given the good weather outlook, we could have a negative week in Chicago and, unsurprisingly, a dollar also falling throughout the week.

Corn: how did the market behave last week?

Summer corn - the grain suffered negative pressures this week with the planting rate exceeding last year's numbers.

Price direction - the corn futures curve showed successive declines last week with good expectations about the planting window for the second crop, despite recovering numbers towards the end of the week.

Planting progress - Conab estimated the planted area at 58,7%. Of the main producers, only Rio Grande do Sul was a cause for concern, with reduced rainfall and high temperatures.

Corn ended the week at US$ 4,23 per bushel (-0,7%) in Chicago. In Brazil, on B3, the corn contract for January 2025 fell 0,65%, closing at R$ 71,65 per bag. In the physical market, corn also showed a decline in prices, reflecting the falling scenario in the futures market.

What to expect from the market? 

Planting progress - summer corn continues to advance consistently, with southern Brazil leading the production of the first crop, followed by the southeast region. Weather conditions continue to be very favorable, allowing progress in planting and crop development. Conab is expected to announce this week the completion of planting in the southern states, as well as in São Paulo. In Minas Gerais (MG), the estimate is 85%. This progress reinforces the positive scenario for the summer harvest, offering good prospects for producers in these regions.

Planting window - although there is discussion of a possible reduction in the area of ​​second-crop corn due to lower prices, recent events indicate a different scenario. Lower futures prices have not had a significant impact on the physical market, where prices for available corn have suffered more than futures contracts. The good soybean harvest and the favorable planting window increase optimism regarding second-crop corn and tend to move prices until this consolidation.

Beef cattle - the increase in the price of beef cattle has boosted corn prices, both in the physical market and on the B3. Despite this, the improvement in livestock farmers' margins has not yet been fully reflected, as the financial impact of the rally in beef prices takes time to consolidate. This movement should gain momentum after the rainy season, around April, when livestock farmers are more capitalized and will need corn due to the scarcity of pasture. This increase in demand will coincide with the entry of second-crop corn into the market, generating a scenario of greater pressure on corn prices. This dynamic should be closely monitored for marketing.

In a more stable scenario, corn may not have such a significant week, with prices following the trend from the end of last week and recovering part of the recent losses.