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Soybean producers: Increase 2024-crop sales... Soybean futures have rallied sharply amid fund short-covering during the last eight trading days of 2024. While funds continue to hold a sizable net short position, there’s no guarantee the corrective buying will continue with the flip of the calendar as Brazil is starting to harvest its record crop. We advise soybean hedgers and cash-only marketers to sell another 10% of 2024-crop production to get to 30% sold in the cash market. Be prepared to make more aggressive sales if the corrective rebound extends into early 2025.
If you want to maintain more upside price potential (and more risk) to cover several events, such as the January crop reports and prospective plantings, you could buy a May call option against these sales. However, this is not part of our official advice.
New Year’s schedule... All markets and government offices are closed on Wednesday, Jan. 1 for New Year’s Day. There will be no Pro Farmer updates on Wednesday. Grain and livestock markets reopen at 8:30 a.m. CT on Thursday, Jan. 2. Pro Farmer wishes you a prosperous 2025!
Soyoil use for biofuels jumps in October... Soybean oil used to produce biofuels in the U.S. rose to 1.227 billion lbs. in October, up from 1.076 billion lbs. the previous month, according to the Energy Information Administration. That was the third highest monthly figure behind June and the July 2023 record. Biofuel usage included 709 million lbs. by biodiesel plants and 518 million lbs. by renewable diesel facilities. Usage for biodiesel plants increased 36 million lbs. while renewable diesel plants used 115 million lbs. more soyoil than in September.
Brazil’s real worst performance among major currencies in 2024... Brazil’s central bank made another intervention on the final trading day of the year to stabilize the real, which has plunged nearly 22% against the U.S. dollar in 2024 — the worst performance among 31 major currencies tracked by Bloomberg. Despite spending $20 billion in reserves this month, including $1.8 billion in spot sales on Monday, the currency remains under pressure, reflecting investor skepticism over President Luiz Inácio Lula da Silva’s ability to address Brazil’s ballooning budget deficit, now at 10% of GDP. The selloff has spread across markets, with bond yields hitting their highest levels since 2016 and the Ibovespa ranking among the worst-performing equity indexes globally. Analysts caution that without meaningful fiscal reforms, the real may weaken further, with projections of a 13% drop by early 2026.
The falling real has nearly offset weaker U.S. prices. While U.S. soybean prices are down nearly 25% in the past year, soybeans priced in the real are down just 5% due to the relative dollar strength. That incentivizes Brazilian soybean production.
Brazil’s grain exports continue shifting to northern ports... From January through November, 47.2% of Brazil’s corn exports moved through the Northern Arc of ports compared to 41.6% in 2023. The Port of Santos accounted for 41.6% of Brazil’s corn exports followed by Sao Francisco do Sul at 5.4% and Paranagua at 3.3%.The main exporting states of corn are Mato Grosso, Goias, Parana, and Maranhao. The Northern Arc of ports are gaining market share for soybean exports as well. The southern ports of Santos accounted for 28.9% compared to 30% the previous year and Paranagua accounted for 13.9% compared to 14.1% the previous year.
For the 2024-25 growing season, Itau BBA estimates Brazil’s exports at 105 MMT for soybeans and 42 MMT for corn. Brazil is also expected to export 35 MMT of sugar and 23 MMT of soybean meal bringing the 2025 total exports of these four products to over 205 MMT, which would be 10 MMT more than 2024.
South American consultant Dr. Michael Cordonnier says Brazil has invested billions of reals on new ports and port expansions, but it has not been able to keep up with increasing production of soybeans and corn. Record grain exports in 2025 will stress Brazil’s ports.
Suez Canal revenue plunges amid Red Sea disruptions... The Suez Canal has seen a staggering 60% drop in toll revenue this year, translating to a $7 billion loss for Egypt. The decline is attributed to attacks on shipping in the Red Sea and escalating regional tensions, President Abdel Fattah al-Sisi revealed without elaborating further. In 2023, canal tolls accounted for $9.4 billion, approximately 15% of Egypt’s foreign currency income.
Since late 2023, Houthi attacks on vessels in the Red Sea have forced major shipping operators to divert routes around the Horn of Africa, significantly increasing costs and boosting shipping rates. A multinational naval force has since patrolled the area, providing some security. However, the Iran-backed Houthis have shifted focus to targeting Israel amidst the Israel/Hamas conflict. Observers anticipate the resumption of Red Sea shipping services no earlier than mid-2025.
Meanwhile, the Suez Canal Authority announced the success of a two-way vessel transit test, part of a dredging project aimed at increasing canal capacity. This initiative could mitigate risks of future shutdowns, such as the 2021 Ever Given incident.
China’s Xi pledges more proactive economic policies in 2025... China’s 2024 gross domestic product (GDP) is expected to exceed 130 trillion yuan ($17.8 trillion), President Xi Jinping said in his New Year’s address, adding that the country would implement more proactive policies to promote growth in 2025. In a televised speech, Xi said China had responded to the impacts of the changing environment at home and abroad and adopted a full range of policies to help it pursue high-quality development in the past year.
“Current economic operation faces new challenges, including challenges of uncertainties in the external environment and pressure of transformation from old growth drivers to new ones,” Xi said. “But we can prevail with our hard work. As always, we grow in the wind and rain, and we get stronger through hard times,” he added. “We must be confident.”
In another speech at a New Year event, Xi said China’s GDP is expected to have grown by around 5% this year, suggesting the country is set to meet 2024’s official growth target.