Corn harvest approaches while the market waits for export flow

While markets have reduced their attention to tariffs, following the preliminary agreement between the United States and China last week, the focus is now on the war in Ukraine, the situation in the Middle East, and economic indicators. As the dollar is rebalancing in the international environment, there is still a cause for concern, and that will depend greatly on the decisions of the central bank from now on. Meanwhile, the planting of the 2025 US crop is proceeding at a great pace, containing bullish expectations despite the exceptional local exports of the old crop. In Brazil, attention is on inflation, the arrival of the corn second crop, and now the new case of bird flu, in this case with little impact on the real demand for corn. Should a more drastic situation occur with chicken farming, impacting corn, exports will be the natural path. The domestic market is awaiting the start of a faster flow of Brazilian exports, given a really huge corn second crop, with only two ships scheduled for June thus far. Even so, prices are adjusting to the export account, and this will be the basis for corn prices in the 2025 second crop.

After the pre-trade agreement between the United States and China, markets seem to have found a different configuration, that is, reducing tensions a little on the matter of “tariffs” and returning to monitoring ongoing factors, such as US inflation, the war in Ukraine, the situation in the Middle East, and the US crop development.

As the data on inflation has steadied in the United States, the market focused on the speech by the Fed’s chair. In his speech last week, he stated that we may find ourselves in a challenging scenario in which our objectives may not be achieved. If that happens, the Fed will consider how far inflation is from its 2% target, how weak the labor market is, and how long it might take for those two variables to improve when deciding how to adjust interest rates. We would consider how far the economy is from each target, as well as the potentially different time horizons over which those gaps are expected to close, Powell explained. He also said that the tariffs imposed by President Donald Trump have reached a higher level than expected even in the “most extreme” scenario. Powell’s remarks pointed out that the Fed is, above all, focused on ensuring that the public perceives the price highs as temporary, even after some costs increase as a result of the tariffs.

This statement was important in containing the accelerated revaluation of the dollar, in the first jump of the year. After reaching its lowest level since mid-2022, 99 points, the dollar index rose again to 102 points, awaiting a greater risk of the Fed using interest rates to contain inflation, apparently temporary as a result of the tariffs. After the statements, the dollar settled back to around 101 points and awaits new indicators. A rebalancing among many global and internal tensions in the United States.

Even though we have a very worrying level of expectations regarding the Brazilian fiscal situation, this steadying of the dollar abroad and the Fed’s view of interpreting possible inflation as temporary and non-inertial, the real has not generated more significant speculative spasms at this time, despite the terrible domestic political and legal situation. The Brazilian fiscal situation is still compromising due to the assessment of industry analysts who point to government expenses that are not being computed or their accounting delayed in the monthly assessment of the fiscal deficit. We must imagine that the government will try new tax attacks to equalize the situation. Furthermore, there is an imminent risk for Brazil’s Central Bank’s decisions from now on. The desire to cut interest rates, increase credit, and satisfy demand for 2026 is a curve that cannot be ignored in an election year—and 2026 has already begun.

The real remains protected by an arbitrage range of almost 3.5%, which is healthy enough to attract a good capital flow. Of course, Brazil is an unstable country internally and externally at the moment, and the current international political alignment may weigh on investor decisions to drive resources to the country. Institutional political stabilization would be essential to ensure a good foreign exchange flow to Brazil this year. Unfortunately, this option seems quite distant.

Tags: China, exports, corn, Brazil, United States, Middle East, crop, demand, markets, tariffs, Ukraine