Grain margins show signs of recovery, but financial pressure persists

The estimated operating margins for the 2024/25 soybean and corn crops show signs of recovery compared to the previous season. In the case of soybeans, this improvement can be attributed in part to the rebound in productivity in certain regions, as well as the favorable impact of the exchange rate on commodity prices.

Despite this apparent improvement, the figures do not show what should be the focus of attention. A deeper analysis of the financial results reveals that producers continue to operate under high levels of leverage, a reflection of the debts accumulated between 2021 and 2023. The credit environment in Brazil remains tight, pressured by a cautious market considering rising payment delays, increased requests for judicial recovery, and persistently high interest rates.

These factors have strained producers’ financial conditions beyond operational performance, representing the main point of concern. It is important to note that this is not a reality exclusive to Brazil. In our 2024 Field crop margin outlook, we analyzed the scenario faced by key countries in the sector. One of the conclusions at the time was that this margin-compression cycle could extend for two to three crop seasons starting in 2024.

For the upcoming season, our initial estimates point to an increase in operating production costs, particularly due to rising international fertilizer prices, which would result in a reduction of operating margins. Therefore, the focus for producers in the next season should be on reducing leverage, which will be essential to navigating this period of tighter operating margins. Another challenge producers face is the uncertainty stemming from geopolitical developments that continue to disrupt global markets. Given all these conditions, our analysis suggests that this tighter margin scenario will potentially last until mid-2027.