Brazilian corn exports at a slow pace from November through January

Brazilian corn exports are progressing at a good pace this September, with the pace beginning to slow down in October. The concern that is beginning to reach the Brazilian domestic market is the pace of shipments for November to January, a period in which we will need to ship 5 mln tons per month to reach the annual target of at least 42.5 mln tons. Lower exports will result in an increase in carryover stocks and a restriction on potential price highs in the first half of the year and vice versa. With prices on the Chicago Board of Trade expected to adjust to the reality of the U.S. crop as the harvest progresses, and with the Brazilian currency still lacking the momentum for devaluation, it seems unlikely that the domestic market will gain support for highs, as in 2024, when external prices were higher and the dollar reached BRL 6.30 in December. There is, of course, concern about the weather during the summer crop and still-imprecise geopolitical variables, but the fact is that Brazil remains dependent on exports despite the growth of the ethanol sector. The focus is on the need to free up space and cash flow at the turn of the year, a combination that could limit upward movements in corn prices, without “new developments” in the domestic or international environment.

With the week ending with new U.S. tariffs on the pharmaceutical and furniture sectors, expectations for interest and exchange rates remain mixed. After the Federal Reserve’s decision to make the first interest rate cut of the current administration, economic indicators have become more favorable. Two weeks of lower-than-expected unemployment insurance claims, second-quarter GDP adjusted to 3.8%, well above expectations, higher-than-expected existing-home sales and capital goods, personal consumption up 2.1%, and producer inflation only 0.1% higher in August.

The interest rate cut is generated by a poor economic situation that requires a credit adjustment to avoid the risk of recession. As indicators are showing, however, the United States appears far from a recessionary and/or inflationary scenario, and the Fed’s statements indicated that tariff-driven inflation should be absorbed in the medium term. Therefore, discussions now involve the institution’s next two meetings, on October 29th and December 10th.

At this point, on this first Friday of October, we will have employment data, a key piece of information for this yield curve. Next, we will have September’s retail inflation. Depending on this priority information, the Fed may confirm another rate cut at the end of October. In case of positive data on falling unemployment and weak inflation, it would not be inappropriate not to cut rates in October, leaving a new decision for the December meeting. The point is that, with more tariffs, the U.S. economy will need significant investment to replace imports and many entrepreneurs. The challenge of the rate cut is to offer this productive investor the option of more affordable credit.

Thus, since the Fed meeting, there has been a certain reversal in expectations regarding the dollar’s movement. With the interest rate decline, new currency lows against other currencies were expected. However, with economic indicators showing positive results, long-term bond yields began to rise, pushing the dollar higher, above 98 points on its index. There is not much room for significant gains, but the employment and inflation data released in October will be crucial to this currency’s movement.

For the real, the market attempted to break through the technical barrier of BRL 5.29/dollar, but with the external movement, it eventually recovered to levels of up to BRL 5.36 this week. Furthermore, the dismal current account data of USD -4.7 bln and Brazil’s evident deteriorating fiscal situation highlighted the country’s economic risks, and the real resumed a short devaluation cycle. The volume of expenses outside the fiscal framework and/or the federal budget is alarming and proves that the implemented model is ineffective in understanding and reflecting the government’s real finances and their equalization. Many expenses are being created without a source of revenue, additional sharp tax hikes to cover uncontrolled growing expenses, and political transition risks in 2026 could bring strong volatility to the exchange rate, at a time when the Central Bank wants to reduce the Selic rate in 2026. The economic model will not change in an election year, and the exchange rate movement will be inversely proportional to the domestic interest rate cut. Financial institutions in the country, however, continue to price only arbitrage, ignoring national fiscal and economic factors at this time.

While the largest U.S. crop in history is being reaped, the market is seeking factors to inhibit price pressures on the CBOT. The first point is the attempt to impose a view of productivity cuts due to situations such as fungal attacks on crops in the Midwest. We find it unlikely that USDA agronomists failed to consider this condition in their productivity estimates. The second point concerns the pace of U.S. exports, now accumulating 11 mln tons above the record pace of 2024/25. This combination of factors is sustaining prices on the CBOT above USD 4.20/bushel amidst the record local harvest.

The biggest surprise of the week was undoubtedly Argentina’s decision to eliminate export taxes on agricultural and meat exports, with a 12% tariff on corn, until October 31st. The need to replenish dollar reserves to face the October election season led the government to make this sudden decision. In 48 hours, however, the country generated additional revenue of USD 7 bln from grain sales and halted the tariff reduction program, resuming tariffs on Thursday. As Argentina is the largest exporter of soymeal and soyoil, as well as a major exporter of wheat and the third-largest exporter of corn, the international market bought volumes in this one-off Argentine sales arrangement.

While Argentine soybean sales soared to 12.2 mln tons in the business year, a 19% increase last week, corn sales remained unchanged, with 24.5 mln tons and only an 8% increase last week. In other words, Argentina sold the soybean and wheat complex, but corn sales did not see significant growth. Thus, Argentine corn shipments now total 21.6 mln tons, 2.5 mln tons below the same period last year. Despite the good crop outlook, exports have remained slow so far, with significant volumes still remaining in the local market for sales through March 2026.

In this context, the momentary decline in tariffs in Argentina had virtually no impact on CBOT corn prices. Prices on the CBOT are now centered on two fronts: the strong pace of new-crop exports and the market’s attempt to create a production cut based on pest problems in the crops.

The market has been trying to confront the strong yield forecast imposed by USDA in the last two reports, verifying the beginning of harvest yields and suggesting that fungal attacks in crops in Indiana and Ohio would reduce the national average. In fact, private sector estimates are even above 190 bushels/acre, that is, above the highest estimate released by USDA to date. Therefore, we believe it is unlikely that a “bullish” shift in prices will occur until January, that is, with larger yield cuts. However, the harvest is only 11% complete, and verifying actual yields is a relevant point in this assessment.

Another factor the market is using to support CBOT prices above USD 4.20/bushel is the excellent initial sales in U.S. exports. So far in September, sales reached 25.7 mln tons, compared to 14.7 mln tons in the same period last year. In other words, sales are 11 mln tons above 2024/25, while USDA projects 4 mln more. Of course, we are only at the beginning of the business year, and many of these sales were made ahead of the harvest. Over the next few weeks, these volumes could reduce this premium compared to the previous business year. In any case, the volume is strong and helps justify some support on the CBOT despite the arrival of the largest crop in U.S. history.

We believe that as the harvest progresses, at an expected gradual pace due to the size of production, prices will adjust to this supply reality, with prices falling below USD 4.00/bushel or with premiums falling significantly in the coming few days. Currently, with a crop of 427 mln tons, the corn price is higher than in 2024, when the crop hit 377 mln tons.

Tags: exports, corn, Brazil, prices, yields, shipments, Argentina