Brazilian corn market seeks reaction without port support

When the domestic market attempts to react without considering the factors supporting prices, the movement ends up being temporary, returning to lows as soon as domestic supply resurfaces. This is what we are experiencing domestically right now. On the one hand, producers are holding back corn and seeking better prices, which is perfectly fair. On the other hand, consumers are trying to avoid raising prices, as the port is not experiencing a surge, and competition in the interior is not becoming fiercer, which is also normal. The risk is that domestic market prices will begin to rise significantly above port levels, and trading companies will shift operations to meet domestic demand rather than new export vessels. Last week’s weaker exchange rate helped reduce CBOT pressures on port prices. Rainfall is beginning to advance in more regions of the Center-South this week, signaling a more favorable window for planting the 2026 second crop, but so far, it has not been problematic.

Summer crop planting is progressing well in the South of the country thanks to the October rain. Most crops are still in vegetative development and should reach pollination and silking in November/December. The most advanced crops, as always, are in the far west of Rio Grande do Sul, a region that could suggest harvests beginning in January. In the other regions, only the South, São Paulo, and Minas Gerais have made some progress in planting, and in the rest of the country, only in areas with pivots for summer corn.

Other regions saw rainfall, including much of Mato Grosso do Sul, northern São Paulo, and south-central Minas Gerais, with some progress in soybean planting. Goiás, eastern Mato Grosso, and Matopiba will still need good rains in the second half of October. Serious risks for the 2026 second crop cannot yet be determined at this time, but there are certainly concerns about soybeans going forward, given the weather in the second half of October and the second crop window in several key regions. Paraná, midwestern Mato Grosso, and parts of Mato Grosso do Sul may have had a good second-crop window so far.

There has been plenty of information about the confirmation of a La Nina, a certain and unavoidable occurrence for this 2025/26 cycle. Well, at this point, the U.S. Weather Service has not confirmed any La Nina, only putting the chance of this phenomenon occurring at 65%. However, at this point, there is no La Nina in the Pacific Ocean temperatures. It is worth remembering that confirmation of a La Nina depends on a three-month sequence of temperatures below -0.5°C in the Nino 3.4 region of the Pacific. And this does not yet exist.

The market, of course, is trying to use this rain delay to boost prices. However, it is clear that, as soybeans are sold and availability dwindles, producers’ cash options tend to shift to corn. Many producers are still purchasing inputs, particularly fertilizers, with difficult and expensive credit. Corn sales decisions are ultimately normal in the domestic environment. Domestic consumption is providing its usual internal liquidity. The harvest of summer crops should occur in the South in the first quarter of the year, while the Southeast will have later harvests. Therefore, the supply of much of the country’s corn in early 2026 will still be made up of corn from the 2025 season.

The issue at this turn of the year also revolves around export flows. We have now reached 28 mln tons committed for exports, leaving 14 mln tons to reach the 42 mln-ton target for the business year. From November to January, Brazil will need to export approximately 5 mln tons per month to achieve that goal. So far, Brazil has been operating at a rate 2 mln tons above the previous business year, with shipments of nearly 38 mln tons this year. As we have already assessed, lower-than-expected exports will lead to larger carryover stocks, and vice versa.

The issue is that, due to the large global supply, particularly from the United States, premiums cannot rise above their current levels of 120/130 cents a bushel for Brazil. The alternative would be an uptrend on the CBOT, which seems out of the question until further notice. The exchange rate was the main indicator of corn’s high at the end of 2024 and drove corn to highs that lasted until May. We saw a sharper devaluation of the real against the dollar last week, with the market attempting to return to the rate of over BRL 5.50/dollar. However, traders cut premiums and held port prices at BRL 66 to 68. The exchange rate will need further increases, breaking the level of BRL 5.60 to help port prices, perhaps resulting in a new influx of exports and an improvement in domestic prices. On the other hand, without an increase in exports, trading companies may see the domestic market as an opportunity to shift their supply destination and knock down regional prices. The fact is that the indicators we had in 2024 for a year-end hike are no longer present

October began with progress in the U.S. harvest and the shutdown that halted the release of various pieces of information from the Department of Agriculture to the market. It was also marked by the announcement of new negotiations between the United States and China, now the first topic of discussion being soybeans. This is due to the fact that China has not shipped any US-origin product since May. However, U.S. action against buyers of Iranian oil and some conflict in the dispute over rare earths led to an unexpected end to the week, namely a 100% tariff high on Chinese products. China has not yet retaliated, and this promises a tense week for the financial market and commodities in the international environment.

While the U.S. President stated that China would quickly resume soybean purchases, he ended the week by imposing a full 100% tariff on Chinese products. The reason was said to be China’s move to restrict the export of rare earth minerals, which the United States depends on. This new tariff will take effect November 1. As the decision was announced after the markets closed, only from the beginning of the week will assets begin to reflect the mood of this new chapter in the trade war.

The question is whether this attitude is a negotiating stance, given that the presidents of both economies have a meeting scheduled for next Wednesday, or whether it reflects a new, more worrying climate in the trade war. Several events last week left markets more tense and highly volatile. The shutdown itself remains a key factor influencing the dollar. The pause in the war in the Middle East, or part of it, helps reduce pressures in the international environment relative to expectations. However, Ukraine is still at war, and perhaps an ultimatum will also occur regarding Ukraine and Russia. Last week also saw a decision involving companies and institutions that were doing business with Iran, oil, and gas. The sanctions could also affect countries that do business with Iran, such as China and perhaps Brazil. Could this negatively impact negotiations between these countries and the United States? Yes, it is likely. China, in turn, increased taxes on U.S.-flagged vessels docking at its ports, with a modest effect due to the low number of commercial vessels from this origin.

Thus, amidst this entire environment, the commodities trade remains. China has not shipped U.S. soybeans since May of this year. October is the month with the highest volume of purchases from this origin, close to 7 mln tons. The complete absence of this flow led the U.S. government to request a new series of meetings, the first topic of which would be soybeans. The government estimates spending close to USD 10 bln in compensation to U.S. producers due to the trade war and the lack of local harvest flow. It is believed that the 100% tariff imposed by the United States last Friday is part of this negotiation process, meaning no purchases, more tariffs.

During the U.S. harvest, that will clearly impact the U.S. supply and demand context as well as the flow of international trade. The United States will have storage problems for the 2025 crop, as it comprises 427 mln tons of corn and 117 mln tons of soybeans. If the harvests lack flow, soybeans will become a problem in warehouses. Last week’s lows on the Chicago Board of Trade reflect the progress of the harvest and this focus on the internal logistics situation. The trade decision will need to be made this month, and this could significantly impact on several other products, directly or indirectly, such as corn.

There is some concern about this global situation. Brazil could indeed have highly concentrated demand from China, as it already does, but the outlook appears to be to eliminate the United States from the flow of soybeans to China. This significantly impacts domestic prices in the United States and could substantially boost premiums in Brazil. The concern lies in the concentration of sales to a single buyer, given that other importers would have no reason to buy expensive product from Brazil given the wide premium difference. So, would Brazil sell to China, and the United States to the rest of the world? Trade flows in the 2026 season will determine this. However, October involves final negotiations on this soybean issue.

This could impact corn, as U.S. producers do not positively assess the current soybean export environment and the impact on prices on the CBOT. Currently, soybeans are still holding steady near USD 10/bushel, but without demand, could they lose support at USD 9.00? Will the low in soybeans impact the planting profile for the 2026 U.S. crop, perhaps leading to more corn plantings?

Could the rest of the world compensate for China’s lack of soybean purchases of around 20-25 mln tons this year? These are questions that may begin to be defined this month in bilateral negotiations.

Meanwhile, the U.S. harvest is estimated to be 30 to 35% complete so far, with much of the production still to arrive at warehouses, and this is one of the reasons for the CBOT lows last week. There is no way to sustain the CBOT with this production and the largest stocks in forty years. Very cheap wheat in the international market is another factor limiting corn’s price hike. Exports are uncertain, so this is a point of concern for when the USDA resumes releasing information. Productivity adjustments in the current crop will be normal until January, but this cannot be considered a bullish factor in this inventory scenario.

As efforts to find a solution to the Middle East conflict continue, the negotiation process between Ukraine and Russia remains without a positive short-term outlook, even potentially moving toward a more effective NATO participation in the conflict. In parallel, the United States announced a trade negotiation process with China this October, with soybeans appearing to be the main topic. However, sanctions on companies involved in oil and gas trade with Iran began to affect the U.S.-China relationship over the week. Subsequently, actions involving rare earth minerals intensified this conflictual environment. At the end of the week, the United States announced the implementation of a 100% tariff on Chinese products, effective November 1, despite a meeting between the two presidents scheduled for later this month. If there was any concern about China’s potential complete absence from purchasing U.S. soybeans, this situation could now become a reality or intensify negotiations for a solution. Pressing for negotiations seems to be a mark of the current U.S. administration, and the measure adopted on Friday could bring new solutions or definitively hinder trade between the two countries, with unavoidable repercussions for international agricultural trade. For Brazil, this situation, which initially seems favorable, becomes delicate for the continuity of grain trade. Would Brazil become completely dependent on soybean trade with China, while the United States does business with the rest of the world? This could affect planting decisions in the coming few years.

The shutdown of the U.S. government persists with no prospect of a solution. The federal government is beginning to grind to a halt, and many agribusiness reports are no longer being released, leaving the market, which has grown accustomed to working solely with the USDA data, without harvest references, weekly sales, or even some specific weather forecasts. The market, therefore, remains without basic USDA information for agricultural products, as well as basic information for the financial market for pricing short-term assets, and for the Fed’s setting of the prime interest rate.

On the 29th, the Fed will set the new prime interest rate. The main indicators guiding this decision are centered on unemployment and inflation data. Official unemployment data for September has not been released, nor has unemployment insurance claims data. We do not know if any inflation data will be released this week. The absence of this official information should bring a little more apprehension and tension to the Fed’s meeting at the end of the month regarding the interest rate decision, which could result in a further 0.25% cut.

Between the shutdown and the interest rate decision, the federal government needs resources for minimal State operations. Therefore, the U.S. Treasury returns to the scene, needing to absorb currency to finance the State. As a result, long-term bond yields rose steadily last week, as the government attempted to absorb market capital. The higher the interest rates, the stronger the dollar. The dollar even tested levels close to 100 points on its index, representing a sharp appreciation against other currencies. Until the Senate resolves the shutdown issue, the dollar may continue to fluctuate sharply.

The real appears to be beginning to take a more tense stance regarding domestic economic policy and the fiscal deficit. The volume of expenditure outside the fiscal framework may be approaching BRL 400 bln. The government is unable to generate fiscal surpluses even with record revenue. Congress’s decision to prevent tax increases implies that the plan to further squeeze the population and the private sector with taxes appears to be reaching its limit. This indicates that the government needs to cut spending, which seems unlikely to indicate any possibility in this direction, given that more absurd, theoretically “social” spending is beginning to be announced on the eve of an election year. In other words, 2026 will be another year of record spending without any revenue source.

The dollar jumped above BRL 5.40 last week, even though the dollar index fell sharply on Friday. Are these signs that the domestic financial market has begun to price in fiscal risk, and that the dollar will not have room to drop below BRL 5.30, even with high interest rates? This change in stance would be a healthy move for the economy, meaning the financial market would be working based on real situations and not solely tied to government support.

Tags: U.S., consumption, exports, corn, planting, prices, La Nina