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My name is Jade Delafraye and I am the head of the global agriculture team at Argus. My colleague Nathalia Giannetti joins me today to discuss what is happening in the Brazilian soybean and corn markets. For more insights into these markets, we produce a daily AgriMarkets report and a weekly Chinese supplement, focusing on global grains, oilseeds and vegoil markets. Our fundamentals forecasts and balance sheets are presented in our AgriMarkets Outlook service on a weekly and monthly basis.
So, let’s get to it. Nathalia, my first question to you is: Can you tell me more about the farmer selling pace for 2023-24 soybeans volumes?
Since the 2022-23 crop, we are seeing here in Brazil a historically slow pace for farmer sales. That begun around late 2022, when producers believed that prices would maintain an upward trend during the harvesting months of the 2022-23 soybean crop. That is between January and May.
But the oversupply of the international market, with a record Brazilian soybean crop that year, pressured prices and discouraged farmers from selling since then.
Producers are seizing moments when the circumstances are more economically favourable for them, such as when the exchange rate is rising, to sell their crops. But that does not provide a steady rhythm of negotiations.
For example, in January they sold only 2mn t throughout the whole month, while sales totalled about 15mn t in April.
Now, the gap between the actual farmer selling pace and what market participants consider ideal has narrowed. But it is still pretty much significant, of about 4mn t until the beginning of July. The 2023-24 soybean crop ended June at about 96mn t sold, or 65pc sold.
Right I see… And what about 2024-25 volumes? Is any information available already on the new marketing year?
The numbers for the next soybean crop are still a little bit uncertain, Jade. But what we know so far is that up to 20mn t were already traded until the beginning of July. If we consider the current USDA outlook for the 2024-25 crop, that would be about 12pc already sold, which is roughly in line with 2023-24 sales a year ago, but below the average of 20pc negotiated.
Thank you Nathalia, I am sure a number of market participants will keep monitoring the selling pace of Brazilian farmers. Now, what about the farmer selling pace for corn? Is the selling pace also delayed?
Yes, Jade. Corn sales are even more delayed than soybeans. Similarly to what happened with soy, farmers expected corn prices to continue rising in early 2023. They started holding back sales for the 2022-23 season during the first half of last year. But the global oversupply continued pressuring prices down since then and discourages producers from maintaining a steady pace of sales.
What makes the situation even worse for corn is that when the exchange rate or grain prices are going up internationally, producers prefer to sell soybeans, which has much higher prices, delaying corn sales even further.
Brazil’s 2023-24 winter corn crop, which is its larger crop and the one it exports most, was about 35pc sold by the end of June. That compared with 40pc sold a year ago for the previous crop and an average of approximately 60pc sold for this time of the year.
Thanks Nathalia for this overview of the farmer selling pace, which is clearly well below long-term averages. I wonder… doesn’t this risk causing logistical bottlenecks or exceeding the Brazilian storage capacity? How would farmers respond to that?
It should, Jade. But, so far, we are not seeing any hurry in the corn and soybean sales related to that. But some market participants already expect that farmers may have to accelerate sales very soon, as the soybean harvest was already finished last month, and the corn harvest is approaching its end in most of its main producing states.
And with the soybeans harvest completed, what is the current official forecast from Conab for the 2023-24 crop?
Conab currently estimates 147.3mn t for the cycle and will consolidate the numbers for 2023-24 in September. But, until then, it is unlikely the production outlook will change by much. Of course, there are still some revisions to be made, related to planted area, the higher yields registered in the centre-western states late in the cycle and the flood that hit Rio Grande do Sul a few months ago.
I see — how does this forecast compare with the initial outlook for the season?
The 2023-24 soybean crop was initially projected by the national supply company Conab to produce a record 162mn t, but all of the five main producing states suffered from bad weather conditions this past year. The centre-western region where Mato Grosso – the largest soy producer – Goias and Mato Grosso do Sul – which rank fourth and fifth in the national ranking – are located was under the influence of the El Nino weather phenomenon between December and January. During these months, above-average temperatures and extremely dry weather conditions hampered yields in these three states.
Besides that, Parana, that was initially expected to be the second-largest producer and now places third, suffered from excessive rainfall during the planting months and extreme drought at the beginning of the harvesting season.
And most recently, Rio Grande do Sul, which is the second-largest soybean producing state, was hit by an unprecedented flood between the end of April and beginning of May. The flood completely soaked the 25pc of areas that weren’t yet harvested at the time. Some crops lost all of their productive potential.
And looking out to 2024-25, what do we know for now about planting intentions for soy and corn in Brazil? Are farmers likely to favour one over the other?
For soybeans, planted area is expected to rise in 2024-25 once again, as has been the case for the past 17 years. But the increase may be lower than what we have seen in latest seasons because of the current lower international soybean prices. Farmers planted 46mn hectares (ha) in 2023-24 and the first forecasts for the next crop are of approximately 47mn ha.
As for corn, there isn’t much information about it yet. But it is likely that the low prices will discourage farmers again this next year. We already saw a retraction of planted area for the first and second corn crops in the 2023-24 season because of that. Since then, prices dropped further. Producers are likely planting less than the almost 21mn ha from this season.
Even with the unfavourable weather conditions in this past season and prices discouraging farmers, Brazil harvested a very large crop this season and is likely to do so again in 2024-25. Where are all these volumes going? Where is demand mostly coming from?
Conab forecasts that Brazil will export 92.4mn t of soybeans this year, of which 75.4mn t were already shipped in the first half of the year, according to the national association of cereal exporters Anec. Exports were higher this year than in the first six months of 2023, which reflects the more accelerated pace of negotiations at the end of last year, when prices for next-year shipments were favourable.
China received 75pc of these volumes and is the main buyer of Brazilian soybeans. The country is also likely to continue to prefer the Brazilian product in the next few months. The Brazilian origin has been more competitive for now than the US origin. In addition, as the US gears up for its next presidential election later this year, Chinese traders are cautious on buying US new-crop soybeans because of uncertainties around US-China trade flows under a new administration. Market participants report that China booked 31mn t to arrive between July and September, with most of it coming from Brazil.
For corn, Conab expects exports to total 33.5mn t, while Anec estimates that 9.3mn t were shipped so far. Brazil’s corn exports usually pick up in the second half of the year. But the real highlight of the season is domestic demand, with both the animal feed and the corn-ethanol sector likely to reach record-high levels. Brazil is projected to produce 6bn litres of corn ethanol in the 2023-24 season, a 36pc increase on the year, according to a survey by corn ethanol union. So watch this space.
We definitely will! Nathalia, thank you very much! Have a great day!
Thanks Jade. Bye bye
