This could lead to Lower Prices
By Devin Lashley
Brazil is poised for a record-breaking harvest in the 2024/25 season, which could further depress the already low prices of soybeans and corn on the global commodity market.
Despite facing one of the worst droughts in recent history, Brazil's soybean production is projected to reach an unprecedented 169 million metric tons, surpassing the previous record of 154.6 million tons set two years ago.
This increase comes as Brazil's soybean planted area is expected to expand to approximately 47 million hectares, a slower pace of growth compared to previous years, but still significant in contributing to this massive output.
The impact of this harvest on global markets cannot be overstated. Brazil, the world's largest soybean producer and exporter, accounts for nearly 60 percent of global soybean exports. With this year's harvest expected to be the largest in the country's history, the market will be flooded with soybeans, exacerbating the current oversupply. Global soybean stocks are projected to reach an all-time high in 2024/25, with an increase of almost 22 million metric tons (MMT) compared to the previous year.
This surge in supply, driven largely by Brazil's output, is likely to push soybean prices even lower. The weather pattern remains dry, but its early, and the forecast is expected to turn wetter by the time of planting at the start of October for soybeans.
Corn prices are also expected to be affected by Brazil's record production. Although the current drought has impacted the early planting phase, which accounts for about 20 percent of the country's corn output, the second crop being more important and representing 75 percent of total output the overall production is still expected to be substantial.
Brazil's total corn production for the 2024/25 season is 127 mmt and Argentina at 51 mmt is anticipated to add significantly to global supplies. This will likely put further downward pressure on corn prices as well, which have been struggling due to favorable harvest conditions in other major producing countries.
The USDA forecasts that global soybean stocks will rise to unprecedented levels, with total stocks-to-use ratios barely shy of the record set in 2018/19. This glut in supply is expected to suppress soybean prices, U.S. soybean futures have already fallen to $9.55 per bushel in August 2024, the lowest in four years. This price drop was driven by the USDA's forecast of a record U.S. harvest, and weak demand.
China, the largest importer of Brazilian soybeans, will likely benefit from these lower prices. However, for producers in other countries, particularly the United States, the competition with Brazil's abundant supply will be challenging.
Brazil's dominance in the soybean market is further solidified by its expanding export infrastructure. Over the past decade, Brazil has nearly doubled its soybean export capacity, particularly through its northern ports, which now handle about 35 percent of the country's total soybean exports, up from 23 percent five years ago.
Brazil's corn and soybean production have grown significantly over the last 15 years, with soybean planted areas doubling to reach 46 million hectares in the 2023/24 season. This expansion has been particularly notable in northern Brazil, where soybean planting has increased nearly sevenfold in the past 15 years.
Despite this rapid growth, the current drought poses a risk to future planting and yields. However, if the expected rains arrive by mid-September to early October, Brazil's agricultural sector is likely to avoid major disruptions, allowing it to capitalize on the current favorable market conditions.
In conclusion, Brazil's anticipated record-breaking soybean and corn harvests for the 2024/25 season are set to flood the global market with supply, driving prices down even further. This increase in production, despite the challenges posed by the ongoing drought, will reinforce Brazil's position as a global leader in agricultural exports. However, the impact of this abundance will be felt across the global market, as prices for these critical commodities could remain depressed.
Photo Credit: USDA
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