Soybeans and Corn: the impact of climate, the dollar and expectations for the agricultural market

The Brazilian and Argentine agricultural markets experienced a mixed week, with good conditions for soybean planting in Brazil and progress in sowing in Argentina. However, the dollar continues to directly influence prices, and volatility on the Chicago Stock Exchange affects the international market. Demand for soybean meal is facing challenges, especially in China, while corn is also experiencing pressure on domestic prices, but with positive expectations for the second season harvest. What can we expect in the coming days? Experts from Grão Direto explain the factors that should move the market in the coming months.

Soybean, how did the market behave?

Planting in Brazil

Planting of the 2024/25 soybean crop in Brazil has reached 78,2% of the planned area, exceeding the average of the last five years (71,1%). While some regions, such as the Central-West, received favorable rainfall, others, such as the west of Mato Grosso do Sul, faced drought, with forecasts of significant return of rainfall only in December.

Planting in Argentina

Last week, the Bolsa de Cereales recorded an increase of 12,2% in the planted area, reaching 20,1% of the expected area. Conditions were favorable for the advancement of sowing.

Dollar

Last week, the dollar experienced volatility and closed at around R$5,79. The Federal Reserve's (Fed) stance, which indicated a possible slower reduction in interest rates in the United States, strengthened the dollar globally. This reduces the attractiveness of emerging currencies, such as the Brazilian real.

In Chicago, the January 2025 soybean contract closed at US$ 9,98 per bushel (down 2,35%). The March 2025 contract also fell 2,51%, closing at US$ 10,09 per bushel.

What to expect from the market?

Demand for bran

China increased pork production in the last quarter, but consumption did not keep up with supply, which reduced profit margins for pig farmers. With tighter margins, demand for soybean meal from producers has decreased. These same pig farmers are waiting for the seasonal increase in demand at the end of the year to try to improve their margins. After this seasonal period, the market may see a resumption in demand for soybean meal from Chinese pig farmers.

Good planting conditions

It is no surprise that most of Brazil is in good conditions for planting. With the rapid progress due to good conditions, the quality of the crops is good and excellent and this factor is already starting to have more weight in future premiums. With the accelerated pace and good conditions, the volume of soybeans that will enter the market between February and March will cause disruptions to the logistics chain.

Dollar

The resurgence of inflation in the US is causing concern in the market regarding interest rate cuts. Federal Reserve Chairman Jerome Powell had made clear in his recent speeches his intention to accelerate interest rate cuts, but recent reports on inflation and job creation have made this possibility more difficult. With inflation more persistent, the Fed is likely to adopt a more cautious stance regarding interest rate cuts, which has already contributed and will continue to contribute to the appreciation of the dollar against other currencies, especially those of emerging countries, such as Brazil.

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 with downward force for the future harvest.

Corn

How did the market behave last week?

The southern region of Brazil had favorable weather conditions for the first corn crop, with good soil moisture, allowing planting to progress.

Internal market

Despite the pressure on prices in Chicago, domestic corn prices in Brazil have shown some resilience. This was due to the depreciation of the real against the dollar, which supports domestic prices, and the slow pace of sales by producers.

Argentine harvest

Corn planting in Argentina has already reached 38,6% of the projected area. The first batches in the reproductive stage can already be seen in the North-Central regions of Santa Fe and Entre Ríos.

"Chicago spot corn closed at: 4,24 dollars per bushel, contract. Movement of -1,17% in the week. BM&F corn Nov/24 closed at 0,7453 reais per bag, which indicates a movement of -4,02%.

"Corn closed the week quoted at US$ 4,24 per bushel (down -1,17%) in Chicago, for the contract maturing in December 2024. In Brazil, on B3, corn continued the downward movement, closing at -4,02%, closing at R$ 74,53 per bag in the January 2025 contract. In the physical market, the movements were mixed, with highs and lows distributed throughout the country, with highs predominating.

What to expect from the market?

Planting window for second-crop corn

With the rapid progress of the Brazilian soybean harvest and good development, the market is beginning to rethink a possible reduction in the area of ​​second-crop corn. The cereal will largely have the ideal planting window and, unlike two months ago, cereal prices have soared in the available market and had a good reaction in the futures market. There is no scenario for a large increase in production costs, so the scenario that is beginning to take shape is of good expectations regarding the volume of second-crop corn.

planted area

For the 2024/25 harvest, planting of 3.756,2 thousand hectares is estimated, 5,2% less than that recorded in the last harvest. This reduction in area is due to the low price of the cereal on the market, forcing farmers to look for better options for growing other crops. Now, with a significant increase in recent weeks, the planted area, mainly in the southern region, is expected to be larger than initially estimated.

Demand

Domestic demand should continue to be the main driver of increases and support for prices in the physical market. The rise in beef prices and the appreciation in the price of other proteins such as pork and poultry are the main reasons. We could have another positive week for corn in Brazil, despite the drop last week.