Brazilian real depreciation drives surge in soybean, corn sales

The recent devaluation of the real against the dollar has fueled Brazilian soybean and corn sales, as the American currency’s appreciation is expected to continue through 2025, making commodity prices in reais favorable for exports.

Brandalizze Consulting reports that 33% of the 2024/25 soybean crop has already been negotiated, surpassing the usual average of 30% for this period. “The weakened real favored business, and producers took advantage of the opportunity,” said Vlamir Brandalizze of Brandalizze Consulting. For the 2023/24 harvest, 78% of soybeans have been sold, leaving 32 million tonnes on the market. “Today, deals in the industry go for R$150 a bag. For the new crop, the value is R$144 a bag for delivery in July 2025, and the market remains firm.”

In off-season corn, 86 million tonnes have already been sold, with 29 million tonnes remaining until the summer harvest in February. “Corn prices have also strengthened. Paranaguá prices are between R$73 and R$75 per bag, up from R$60 to R$62 in October. Industries are paying R$75 a bag domestically, up from R$65 last month,” he notes.

Paulo Molinari, analyst at Safras & Mercado, attributes corn’s price boost mainly to high demand. “Domestic industries and exporters are both seeking supply, and the exchange rate devaluation supports prices.”

Mr. Molinari expects firm corn prices through the first half of 2025 due to limited supply following a lower summer harvest. “The domestic corn market will stay highly active until next year’s off-season,” he adds.

As for soybeans, Luiz Fernando Roque of Safras notes that global supply from major producers—the U.S., Brazil, and Argentina—will influence prices more than exchange rates until the South American harvest in early 2025. He anticipates Chicago soybean prices at $10 per bushel, with Brazilian soybean premiums dropping as much as 50 basis points per bag. “In Brazil, prices could decline by R$15 to R$20, perhaps more,” he says.

With the FX rate trading above R$5.5 per dollar, exporters stand to benefit. The Central Bank’s Focus Bulletin forecasts an average rate at R$5.43 in 2025 and R$5.5 by late 2024. “For the FX rate to fall below R$5.4 per dollar, Brazil’s fiscal outlook would need to improve, relying on promised government spending cuts,” the analyst states.

Sinop-based soybean producer Marcos Feldhaus, who had already sold 60% of his production before the FX rate’s recent surge, says the currency’s rise has had minimal impact on his strategy. “I learned long ago not to lock soybean prices in reais. You can’t control the premium, so I calculate better in dollars. Only those with substantial margins sell in reais,” he explains.

Mr. Feldhaus says he will monitor weather conditions before deciding on further sales. “Even though I have a warehouse setup, I rarely store soybeans because Brazil’s export market is highly dynamic. Given the macroeconomic climate, any shift can make immediate trading more attractive than storage,” he explains.

Meanwhile, soybean producer Márcio Sechele in Mormaço, Rio Grande do Sul, has planted 20% of his area for the 2024/25 cycle but hasn’t started selling his future crop. He plans to negotiate about 10% of production by month’s end once he completes sowing. Until then, he’s holding off on locking in prices.

“I’ve followed this approach for years as part of my risk management strategy. Last year was challenging with excessive rain, and we’re still uncertain about the weather ahead of harvest. Since I’m committed to physical delivery, I prefer not to be exposed to market uncertainties,” says Mr. Sechele.

In the international market landscape, eyes are on a potential new trade conflict between the U.S. and China. President-elect Donald Trump pledged to impose taxes on imports during his campaign. In his first term, the Republican administration raised tariffs on Chinese products, benefiting Brazilian soybean exports to China. “At that time, Brazil exported an additional 10 to 15 million tonnes of soybeans to China,” notes Mr. Roque. For the 2024/25 harvest, Safras projects Brazilian soybean exports at 107 million tonnes, which could rise if another U.S.-China trade war materializes.

Analyst Luiz Carlos Pacheco from TF Consultoria adds that renewed U.S. sanctions on Chinese products could favor Brazilian exports to Asia. “That is if Brazil isn’t hit with sanctions itself, as its agriculture sector competes directly with the U.S.,” says Mr. Pacheco.

Translation: Todd Harkin

Source: Valor Internacional

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