Porto Alegre, August 27th, 2024 – With the US crop entering the maturation phase, the risks of weather-induced losses are much lower. Therefore, from now on, the market should turn its attention to demand factors. Weekly exports and domestic demand in the United States will be used to generate specific volatility between USD 3.70 and 4.20/bushel. To break this accumulation range, the market will need new facts involving oil, wheat, or South American crop. In fact, the South American crop begins the 2024/25 season with a strong reduction in the area to be planted in Argentina and a discreet summer crop in Brazil, which is good for US exports in the first half of 2025.
Corn in the United States is now entering the maturation phase and the beginning of the harvest in September. Storms and excessive rain could be indicators of risk for crops at this stage, of course, always rarer and more difficult. So, 384 mln tons of corn will start arriving on the local and global market from mid-September, with the beginning of the harvest. The Pro Farmer’s crop tour, which ended last week, confirmed a high average yield in the 2024 crop for both corn and soybeans. A corn crop that should be very good and will only not have a record volume due to the reduction in planted area. For soybeans, the numbers will likely confirm a new record.
This picture shows a composition of more comfortable stocks that should continue to be confirmed in the next USDA reports. Comfortable stocks of 52 mln tons, the largest since 2018, means that corn prices will continue to seek alignment with the minimum US reference price of USD 3.70/bushel, a level that the December contract on the Chicago Board of Trade tends to seek in the coming few days, depending on the pace of the local harvest.
With this configuration, the market tends to bet on a few variables for price volatility. The first represents exports, a number that USDA remains optimistic about for this 24/25 business year, with 58 mln tons. At this point, the reduction in Argentina’s 24/25 corn crop in favor of soybeans, due to the leafhopper, establishes an interesting theme for global demand to converge more toward US corn and less toward South America in the first half of 2025. Brazil, in turn, will have a first half of the year with a summer crop that is more in line with its domestic consumption and with difficulties in finding volumes for exports in a competitive manner. Therefore, South America should have a smaller flow of exports during the semester, offering more room for demand in the USA, perhaps even accentuating the USDA projections.
So, weekly exports will be important to try to take prices back above USD 4.00/bushel after the US harvest. If there is any surprise in terms of weather in South America, there will be a positive variable for prices on the CBOT. The second variable concerns factors outside the corn market, such as the possibility of the end of the war in the Black Sea, oil prices, or new facts that may arise in the future and that are not yet predictable. The end of the war in Ukraine could restore the transit conditions of goods, exports from Ukraine, and lift economic embargoes on Russia. Perhaps, due to this possibility, wheat prices reached new lows last week, price levels before the Pandemic and showing that, Even with the harvest nearly finished, wheat still does not seem to have the strength to recover internationally.
Among these variables, the dollar is an important factor in determining new downward pressures on prices or signs of stabilization and even a high. A weaker dollar on the international market makes US exports more competitive and can be a factor in balancing commodity prices. To achieve this, importers’ currencies need to appreciate proportionally, including the Chinese currency, which has not yet managed to break the 7/dollar barrier. When this happens, it could become a positive factor for some commodities, such as soybeans, oil, and beef.
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