Brazil’s soy and sugar prices get lift from Middle East war

When oil prices rise, demand for soybean oil increases because it is used to make biodiesel, a renewable fuel alternative when fossil-fuel products such as diesel become more expensive. According to Valor Data, soybeans ended March up 4.2%, with the average price of second-month contracts, typically the most liquid, reaching $11.85 a bushel.

Supply-and-demand fundamentals had suggested soybean prices would fall, but geopolitical instability was so intense that the opposite happened, said Marcela Marini, senior grains analyst at Rabobank.

“If not for this geopolitical factor, soybeans could be trading lower, in response to the supply-and-demand backdrop,” she said. “Brazil is harvesting a record crop and Chinese demand is not rising in the same proportion as supply,” she added.

The biggest gain in Chicago was wheat, which ended the month up 8.5%, with an average price of $6.02 a bushel. Élcio Bento, an analyst at Safras & Mercado, said that expectations of a smaller U.S. wheat planting area were key to that increase.

U.S. farmers are expected to plant 17.6 million hectares of wheat in the 2026-27 season, which, if confirmed, would be the smallest area since 1919, according to the U.S. Department of Agriculture. In the previous season, planted area totaled 18.33 million hectares.

Bento noted that the Middle East conflict spilled over into the wheat market especially after the Houthis, the armed group from Yemen, said they could join the war in support of Iran and threatened to disrupt cargo flows through the Suez Canal.

“That raises logistics costs for wheat coming from Europe, Russia and Ukraine. On the other hand, it benefits other major producers using different routes, such as Argentina and Australia, as well as the United States, which may see stronger demand and firmer prices,” he said.

Corn prices also rose in Chicago. Futures climbed 5.7% to an average of $4.64 a bushel. According to Rabobank’s Marini, strong demand for U.S. corn, with record shipments and higher biofuel consumption, helped lift prices.

Sugar rises with oil

In New York, the sharp rise in oil prices had a direct effect on sugar, which climbed 8.1% to 14.93 cents a pound. More expensive oil directly affects sugar supply because it tends to improve ethanol’s competitiveness against gasoline in Brazil. That encourages Brazilian sugar mills to divert more cane toward biofuel production, reducing sugar output from the world’s largest producer and exporter.

“The consolidation of oil above $100 and the lack of signs that we will see a ceasefire are making the market increasingly aware that gasoline will become more expensive. At the same time, ethanol is becoming more attractive in the production mix relative to sugar,” said Marcelo Filho, a market intelligence analyst at StoneX.

Cotton also rose alongside oil. Futures for the fiber gained 6% in March, averaging 68.29 cents a pound. When oil becomes more expensive, synthetic fabrics also rise in price, which opens the way for stronger demand for natural fibers such as cotton.

Also in New York, frozen concentrated orange juice rose 3.4% to an average of $1.82 a pound. Arabica coffee ended the month up 1.2%, at $2.94 a pound.