Porto Alegre, January 28th, 2025 – Dry weather in Argentina has led entities and analysts to revise the country’s production. This week, the Buenos Aires Cereals Exchange reduced its estimate to 49.6 mln tons. There is also concern about the lack of rain in Rio Grande do Sul and the excess rainfall in Mato Grosso, where the harvest is delayed.
On the Chicago Board of Trade (CBOT), contracts maturing in March showed an accumulated high of 1.84% in the week ended last Friday morning. The bushel was quoted at around USD 10.53, after reaching levels close to the six-month highs during the week.
Traders also remain focused on the first moves of Trump’s administration. So far, the new US president has adopted a moderate stance regarding his tariff policy, signaling a 10% tariff on China, but the market sees Trump as more inclined to negotiate.
In Brazil, the beginning of the week saw a more heated trading movement, with the high in the futures contracts providing some support to the physical market. However, the most favorable deals occurred with short-term deliveries and payments. Those who held product available for immediate delivery took advantage of rising prices. For deliveries and payments from February onward, the price dynamics changed considerably.
Prices have been sharply impacted by the negative curve of premiums, following the logic of export parity. In addition, freight rates for March and April onward also influence prices, as high costs are putting pressure on the buyers’ prices. In this scenario, trade has become slower. The arrival of the crop should exert logistical pressure, with the need for outflow and higher freight costs, which could result in a significant decline in premiums.
Moreover, many trading companies with positions covered until March, for example, have no reason to indicate firm prices and are waiting for the crop’s arrival to negotiate better prices. On the other hand, sellers do not accept indications at these levels, which results in a slower market.
The dollar has shown significant and firm lows over the month and week. The rise in interest rates and new signals of an increase by the Monetary Policy Committee (Copom) should improve arbitrage in the short term, making government bonds more attractive and encouraging the entry of dollars into the country. However, in the medium term, the high cost of debt and a fiscal policy without significant spending cuts may generate high risks for government lenders, which may lead the market to seek greater protection in dollars, offering significant support to the US currency again.
Safras News
