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By Raphael Galo, Head of Agribusiness and Structured Operations at A7 Capital
For anyone in Ohio watching South America at the end of January, the spreadsheets still look reassuring. USDA’s January WASDE and the latest official Brazilian and Argentine surveys describe a 2025-26 season with abundant soybeans and corn flowing out of the Southern Hemisphere. On paper, global stocks are rebuilding, export programs look strong, and the world balance sheet appears “comfortable.”
Yet behind that word lies a South American summer marked by volatile weather, rising local costs, heated domestic demand, and farm margins that feel much tighter than the global numbers suggest.
Brazil remains the center of this story. In its fourth 2025-26 crop survey, CONAB projects another record soybean harvest, with planted area close to 49 million hectares, and production around 176.124 million metric tons (down from the third survey, which expected 177.601 million tons), a few percentage points above last season and broadly aligned with USDA’s slightly more optimistic 178-million-ton projection. Soybean planting is practically complete, with official data showing more than 99% of the intended area sown by late January and harvest already advancing over early fields, led by Mato Grosso and Paraná. The heart of Brazil’s soybean belt in the Center-West, especially Mato Grosso, has benefited from a much more regular rainfall pattern since late December after an uneven start, and stand establishment in most regions is described as good. There are reports of replanting where heavy early rains compromised emergence, and in some pockets that faced brief dry spells, but nothing that materially changes the national story so far.
The weather map, however, is far from uniform. Short- and medium-term forecasts for the next 10–15 days (Jan. 27 to Feb. 11) continue to show a classic South American summer pattern: frequent showers and thunderstorms over northern Mato Grosso, Goiás, Matopiba and the Amazon basin, but more irregular rainfall and stronger temperature anomalies from central Brazil into parts of the Southeast and, especially, the South. In practice, this means most of the Center-West and Matopiba should retain enough moisture to finish soybean pod-fill and start planting safrinha corn in good condition, even if some locations face brief breaks in rainfall. In contrast, western Rio Grande do Sul and parts of the interior Northeast remain more exposed to dry episodes, with above-average temperatures and a higher risk of yield losses in late soybeans if February does not bring more generous rains.
On top of agronomic uncertainty, Brazilian producers are dealing with an economic squeeze. Even after the correction in fertilizer prices and some relief in seed and chemical costs, total soybean production costs in key states such as Mato Grosso still hover around the equivalent of R$ 8,000 per hectare once land, machinery, labor, logistics, and financing are fully accounted for, which works out to roughly USD 1,500 per hectare at recent exchange rates. State-level cost surveys show that direct operating (cost of production) expenses have risen again compared to the previous season, driven notably by crop protection and financial charges, while total operating costs are also up. In this environment, the drop in Chicago soybean futures after the WASDE, the erosion of export premiums, and the behavior of the Brazilian currency have combined to produce farmgate prices clearly lower than a year ago. In many interior regions, especially in the Center-West, new-crop bids are below the levels growers consider attractive when they plug these updated cost structures into their spreadsheets. It’s no surprise, then, that forward sales of the 2025/26 crop are running behind historical averages, as farmers wait for a better mix of board price, basis, and FX.
If Brazil is “long” grain, it is also increasingly “long” domestic demand. Official and industry projections converge on a record soybean crush of about 61 million tons in 2026, reflecting both higher protein consumption and the expansion of biofuel use. Livestock statistics from IBGE show record or near-record cattle slaughter, growth in hog and poultry output, and a recovery in milk collection, all of which translate into solid structural demand for soybean meal from feedlots, integrators and dairy co-ops. At the same time, biofuel policy is quietly locking in a growing slice of soybean oil inside the country.
The mandatory biodiesel blend in diesel was raised to B15 in 2025, and volumes around 9.8 million cubic meters of biodiesel imply soybean oil use on the order of 8 million tons to meet that mandate and other uses. In parallel, the ethanol blend in gasoline was increased from 27% to 30%, reinforcing Brazil’s broader commitment to biofuels and indirectly tightening the domestic grain balance by pulling more corn into distilleries. The net effect is that an ever-larger fraction of Brazil’s soybean crop is absorbed domestically as meal and oil, even as the country maintains its position as the world’s largest exporter of whole beans.
Corn is in a similar, though slightly tighter, position. CONAB’s latest numbers for 2024-25 still point to a large crop (141 million tons), falling to 138.9 million in 2025-26 as yields normalize, despite some second-crop area expansion. USDA is more cautious, estimating 136 million tons in 2024-25 and 131 million for 2025-26. Both agencies agree on demand: domestic corn use has surpassed 95 million tons and is set to grow, driven by feed needs and expanding ethanol. Corn ethanol output is now above 8 billion liters per year, and its share in total ethanol production should keep climbing as new plants open and higher gasoline blends are consolidated. In this context, export projections of 41 million tons for 2024-25 and slightly more for 2025-26 are no longer a comfortable surplus. Internal price behavior reflects this: in Center-West regions, cash corn often trades at a premium to export parity as distilleries and feed users compete for grain, supporting local prices even as futures and FOB drop.
Across the border, Argentina is trying to turn a series of better-than-expected rains and a friendlier soil-moisture profile into the largest grain harvest in years. Local grain exchanges, including Rosario and Buenos Aires, project total grain production for 2025-26 above 140 million tons, with corn as the main driver. Corn output in the 53–55-million-ton range is being discussed as a realistic target, and soybeans in the neighborhood of 48–49 million tons, even as soybean area contracts modestly. Planting progress has been strong: soybean seeding is essentially complete, corn is well above 90% planted, and many early fields of both crops looked promising as they entered the reproductive stage.
Yet here too, the atmosphere has reminded everyone that the game is not won on a spreadsheet. In recent weeks, several heat waves have pushed temperatures to around 40°C in parts of the Pampas, testing the resilience of crops that benefitted from abundant rains earlier in the season. Short-term forecasts still show irregular and at times limited rainfall in key producing provinces, raising the risk that early-planted corn and full-season soybeans will face some degree of stress during critical yield-formation windows.
That leaves Argentina in a familiar position: on paper, the country is on track for a historic recovery, with USDA’s January WASDE assigning 48.5 million tons of soybeans and 53 million tons of corn to the 2025/26 campaign, but in the field, yield outcomes are still very much at the mercy of what happens through February and early March. If the atmosphere stabilizes, the country will re-emerge as a major exporter of corn and soy products, injecting a large volume of meal and oil into world trade. If the heat persists and rainfall falls short of expectations, those optimistic projections will have to be revised, and the world will lose one of the safety valves it is currently counting on.
Paraguay, often treated as a footnote, is quietly becoming more important at the margin. After a shaky start to planting, December and early January brought regular, well-distributed rains across much of the country’s main soybean belt, especially in departments such as Alto Paraná, Canindeyú, and Itapúa. That allowed yield expectations to recover. Recent projections now see the main soybean crop near 9.5–9.6 million tons and, with a smaller second crop included, total production in 2026 may exceed 11 million tons. Most of that volume is export-oriented, either as beans shipped directly or via crushing in Paraguay and in neighboring Brazil and Argentina. In corn, Paraguayan farmers have also been aggressive marketers: a large portion of the most recent safrinha crop has already been exported, part of the 2026 production has been sold forward, and limited storage capacity keeps the flow fast once harvest begins. All of this adds up to a country that can no longer be ignored in regional balances. A full Paraguayan soybean crop arriving early in the calendar year adds seasonal pressure to prices just as Brazil’s harvest ramps up.
Layer all of this on top of what is happening on the demand side in China, and the global picture becomes more nuanced. China, still by far the world’s largest soybean buyer, imported a record volume of beans in 2025, somewhere near 110 million tons, with most of the incremental supply coming from Brazil. Port inventory data show soybean stocks at Chinese terminals rising to record levels for this time of year, often around 10 million tons or more in late October and mid-November, compared with about 5–6 million tons just a few years ago. Crushers are well supplied, soymeal prices have retreated from earlier peaks, and margins in many coastal plants have turned negative at times. In this situation, buyers have both the flexibility and the incentive to be price-sensitive and origin-selective. For the first half of 2026, that probably means continued preference for Brazilian origin, complemented by Argentine and Paraguayan supplies, and a more cautious attitude toward U.S. offers unless pricing or logistics shift the balance.
Taken together, these pieces define the real “comfort zone” for South American soybeans and corn. There is no denying that the region is on track for very large crops, and official numbers from USDA, CONAB, IBGE, and the main Argentine exchanges continue to support the view of ample global supplies. At the same time, Brazil’s growing appetite for its own grain through feed and biofuels, Argentina’s exposure to heat and La Niña-flavored volatility, Paraguay’s growing but still logistically constrained role, and China’s heavy stocks and tactical buying all work to narrow the margin for error. From a distance, it may look as though the world is safe and oversupplied. On the ground, on Brazilian, Argentine, and Paraguayan farms in the middle of summer, it feels much more like a big crop being produced and marketed on a surprisingly thin cushion.
See you,
Raphael Galo
