External environment puts pressure on exchange rate in Brazil

The Brazilian currency devaluation, now breaking historic levels, has an impact on the international environment. Since Brazil is strong in commodity exports, a weaker real favors exports in comparison to the United States, for example, which is now suffering from a very strong dollar. This combination is not good for CBOT prices for corn or any other commodity, including the soybean complex. Furthermore, rainfall in South America continues to be very comfortable, beginning to suggest a possible record soybean crop and a corn crop that has progressed well so far. Of course, there are trade conflicts that could create a new environment for global price formation and premiums from January 20.

US exports will continue to be the main focus for the first half of 2025, given Brazil’s difficulties in meeting the minimum possible flow of shipments. Weekly US sales have returned to the standard of 1 mln tons but have already accumulated 32.5 mln tons in the first three months of the 2024/25 business year. This represents more than half of the sales projected for the year, currently at 59 mln tons indicated by USDA. In other words, the United States could sell 27 mln tons between December/24 and August/25, that is, basically 3 mln tons a month. This level is quite low for the period, and we believe that USDA will likely raise this projection at some point in its next reports.

The consequence is a reduction in stocks, as there are no signs of a decline in domestic sectoral demand in the United States that could offset the increase in exports. That is why premiums in the Gulf of Mexico are higher, which should also help Argentina’s corn crop in the first half of the year and the start of exports of Brazil’s 2025 second crop.

In Argentina, the weather is very good, and planting is gradually progressing in the сore areas, that is, Cordoba, Santa Fé, and Buenos Aires. Leafhoppers have appeared in the earliest crops in the north of the country, but there has been control to prevent greater damage to crops. For now, there has been no clear sign of any loss of production potential yet. Planting has reached 52% of the projected area this year, and the production potential is 51 mln tons.

As the first harvests will only begin in March, there is still a long way to go before defining this 24/25 Argentine crop. If premiums start to rise due to strong US exports in the first half of the year, Argentine sales could accelerate and inhibit very low prices at harvest in the event of good production. Brazil’s absence between February and June is a factor that benefits the exports of both the United States and Argentina.

The issue of Brazil’s 2025 second crop is an additional point in this external variable. Brazil is the second-largest exporter in the world, and global demand now depends on this origin for its supply. With planting more concentrated in February/25, the Brazilian second crop should only start to help global supply from July. June and July may see greater competition between domestic and foreign demand for the early harvest of the 2025 second crop.

Tags: Production, crop, stocks, shipments, currency, demand, second crop, exports, Brazil, United States