Brazil’s 140-Million-Ton Corn Harvest: Necessary, but not dufficient to cool prices

prices steadily higher over the past several months. Farmers’ strategy of holding grain in expectation of more attractive prices has worked. The ESALQ B3 physical index, a cash market benchmark for the Campinas region in São Paulo state, rose USD 0.83 per 60-kg bag (+6.88%) from October to November, climbing from USD 12.07 to USD 12.90. Through December 4, it added another USD 0.28 (+2.17%), reaching USD 13.18, its highest level since late May. Futures on Brazil’s B3 exchange, however, moved in an exaggerated fashion. Driven by what appeared to be excessive concern over early-season weather and soybean crop development, traders pushed the January contract to a peak of USD 14.34 per bag. At that moment, the spread between the contract and its settlement index reached USD 1,30, with only about 30 trading sessions remaining until expiration, a divergence difficult to justify based on fundamentals. By the second week of December, futures began correcting back toward the physical ...