Porto Alegre, January 9, 2024 – The soybean market begins 2024 surrounded by uncertainty, once again bringing a challenging environment for Brazilian growers. The main uncertainties come from the new Brazilian crop, which will soon be reaped.
The climate problems caused by a strong El Niño phenomenon, affecting a large part of Brazil from October 2023 onward, have quite impacted the development of crops in several states of the country.
The North, Northeast, and most of the Midwest regions suffered from a less moist climate and high temperatures during much of the planting and crop development, which has led to reductions in the potential yield of the new crop. What initially looked like a new record crop, with a potential of over 160 mln tons, is now revised downward, no longer able to reach it. We started the year with a production estimate of 151.3 mln for the Brazilian crop, well below the 163 mln initially estimated.
In any case, the market is not just about Brazilian crops. This year, a major player regains importance in the international market. Argentina, which in 2023 posted a historic decline in its production, once again has a production potential of nearly 50 mln tons, which once confirmed will result in the recovery of approximately 30 mln tons compared to 2023.
Such production could be decisive for the market in the first half of the year, because if Argentina confirms such a production level, the South American crop should be larger this season, even with production problems in Brazil. This possibility is what weighs most on futures contracts in Chicago at the moment and that could keep putting pressure on prices in the coming few months.
Furthermore, the return of Argentina with greater volume to the export market could impact Brazilian shipments of soybeans, soymeal and soyoil, also reflecting export premiums, which are a key factor in price formation.
Given this, SAFRAS expects a first half of the year with tight margins for Brazilian growers, with prices lacking the strength to recover. Only the increase in losses in Brazil and/or important losses in Argentina could change this situation, barring any surprise.
For the second half of the year, attention will turn to the new US crop, which will begin to be planted in April/May. Although it is still early to make definitions related to area and production, the initial trend is for some growth in the soybean area again, which would also lead to an increase in the US production potential. But nothing is certain at this point.
For Brazil, SAFRAS estimates the second half of the year must have less pressured prices in the domestic market, given the lower availability of soybeans induced by production losses. However, what happens with the US crop will also be a decisive factor for the last months of 2024. So, over the year, attention must be redoubled, especially in a market that is about to have the return of a major international player.
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