Sunday, November 26, 2017

Nov 26th blog update

Everything is peachy.

Nice general rains from time to time.

There are a few problem spots, but in the whole scheme of things, minor.

Argentina sure has had their share of problems.

The past two years were floods. A very cool spring time with snow.
Lately Cordoba state has been dry.
On Nov 24th, they had a fairly serious frost in Buenos Aires province.
Very very strange weather.

Does this prelude to El Nino or a dry 2018?
I do not know.

Brazilian farmers in the south talk about when the season starts
with weather coming out of the south, it is never a good year.

I think for the next 4-6 weeks, we sit back and relax.
If there are going to be problems, they will manifest from February onward.

Much talk this past week about railroads in Brazil. Much of this is political.
I have sent out special report in December newsletter to subscribers pulling all
the data points together from the past year.

BNDES showed a 25% increase in machinery loans in 2017. This is the same
number John Deere published last week as per increase in South American sales.

I am looking at a 10-15 million ton pullback in BR corn production. First crop
will come in 5-6 mmt less than last year. 2nd crop will come in 10 mmt light.

I expect a reduction in BR corn exports for 2018.

Soybean crop remains a 110 mmt potential. The range could be anywhere
from 105 to 115 mmt. A crop size less than 106 mmt would be bullish.
A crop size above a 110 mmt is bearish.

FX sunk last week to 3.22:1 down from 3.30:1 on the idea they have cut some
spending for the 2018 budget.

I still think political risk for FX is a factor for 2018.

Dollar: Real FX trading less than 3.20:1, bullish for soybeans.
Dollar:Real FX greater than 3.30:1 bearish for soybean prices.  (CME)

Keep an eye on November continuous soybean chart.
Last week's SX18 high was 10.09 1/2. That shows higher highs
and looks constructive. I think there are some hints in the SX18 chart to
give us hope.

(Previous highs basis SX17 were 9.94 and 10.03) If we can trade 10.15
or 10.17 1/2 basis SX18, that would be a positive nugget for the future.

If we go down and trade 9.80 or close below 9.60 basis SX18- look out below.

But for the next few weeks, I expect sideways to lower prices.
Early 2018 should be a low.

Happy Holidays from Brazil,


keywords: BR railroads, climate, BR soy and corn production, soybean prices, machinery sales

Saturday, November 4, 2017

Nov 4 blog update

In memory of Andre Luft.

I learned yesterday a day a friend of mine had passed away. I cannot say we were close.
We kept in touch and Andre would help me from time to time with a project or tour etc.

Andre was a giant of a man. He was almost 7 feet tall. Gentle as a lamb.
He spoke perfect English. He was well educated and always looking for
opportunities and adventure. He left behind his wife and two sons. His mother
is a renowned author in Brazil. I believe his son's are studying abroad in California
and New Zealand.

Andre passions were agriculture and surfing. He had managed farms in Bahia, worked
in the seed business for sweet sorghum for ethanol production. The last three years he
moved to Mozambique with his wife. They worked for group setting up a farm from scratch
there. From nothing to something. They literally had to build their own semi-mud hut to
live in when they got there. Today there are houses, silos, machinery, corn, soybeans,
edible beans, and sunflowers growing.

He did not need to this project in Mozambique, he wanted too !!!!

He wanted to see where life would take him.

He loved to surf. In the last couple months he did return to Brazil
for heart surgery. He was given the OK to be physically active again.
He grabbed his surf board and headed to the beach in Mozambique.
It is there his heart gave out. He died doing what he loved the most.
Andre Luft left us at 51 years old. Too young

When I think of the size of Andre, I told myself this must be what
Zeus looks like. Hands that were huge and a heart even bigger.

His facebook page in Mozambique below:


Rains have returned to the dry areas. We are still below normal, but planting
is zipping along now. Parana is too wet and that looks to continue.

Dollar:Real is 3.30:1

This is increasing soybean sales.
Soybeans are now at a higher price than they were in July at the peak.

Soybeans were down 11 cents and with FX up 4 points Friday, the
cash prices in Brazil actually went up.

From what I read, it looks like a 2nd corn ethanol mill will be built
at Sinop, MT. Ready July 2019. Paraguay group

Lots of talk about railroad concessions for 2018.
2018 is an election year so there will be much talk about
projects again. Let us keep an eye as to where the boots on the
ground are. At this point it is the BR military on BR 163 in Para state.
Paving crew is installed and they are hiring workers from the area to
run graders  etc. One problem, the rainy season now starts !!!!

2018 proves to be interesting here.

50% of the population want Lula in jail. 50% of the
population want him back as President.

The next most popular guy is Bolsonaro. Very far right.
Wants everyone to have a gun.

Many candidates in between.

Unless I start to see soybeans on fire, I will not worry too much
about Brazil bean crop in coming months. Big area planted with
lots of fertilizer. It was planted late so results will be different
than last year.

February is crucial for 2nd crop timing and harvest of
1st crop. We don't have any more days to burn because of rain
delays for example.

I also read that Maranhao state is having some financing issues.
Less soybean area and less fertilizer on some areas. Nominal area,
but these are carryover problems from the 2015-2016 drought
that still linger in frontier areas. Last year did not heal all wounds.

Thank you for all the renewals the past month.
Newsletter and VIP level. All are appreciated.

Keywords: Andre Luft, soybeans, railroad, BR 163, politics, corn ethanol,
   dollar:real FX

Sunday, October 8, 2017

Oct 8th blog update

The clock is ticking

High and dry in Cerrado states and too much rain in southern Brazil.

It is too soon to kill the BR crop.

It is difficult to bet against the new soy seed technology.

We have seen many times the past two years where we have an
early dry spell and then a shot of rain at the end makes for fantastic
bean yields- in both hemispheres.....

Mato Grosso cotton producers are now flipping to a super short
season soybeans. 85-90 day soy

This now pushes us into mid- January for harvest. This can be risky
as per timing to get cotton in the ground in the ideal window.

The forecast is dry for another two weeks. Some producers may opt
to forego planting soybeans ahead of the cotton with the idea of planting
a single crop of cotton in December and maximize the yields on that crop
instead of trying to deal with a half a crop of soybeans ahead of the cotton.

This next week is a tipping point as to making these decisions.

Conab is out on Tuesday morning with their first look at 2018
planted area and production.

BR range for soybeans is from 106.5 to 114.5 mmt so far.
Last year at this time we were looking at 102-105 mmt of potential.
End result was 114 mmt.

Now we are looking at planting at least another 1 million hectares compared
to 2017. Unless we start to pull acres away in favor of cotton.

Argentina looks to be planting 1 million hectares less soybeans than last year.
Flooded areas and corn are changing the mix.

We now look to USDA on Thursday. After two months of yield increases
will they choose to decrease the avg yield?
With all of the yield reports I have heard, no one is saying the USDA is wrong anymore?

I will send out a Conab highlights newsletter to subscribers after the Conab report

This year is starting out exactly opposite of 2016-2017. It is eerily similar
to the 2015-2016 crop year and also the 2010-2011 crop year.  Late start
with droughty tendencies.

China continues to be in the news every week in Brazil. In my mind, the
Chinese are playing a much bigger game in South America than most
of us can imagine today.

China needs South America's food. If anyone decides to get cute in future,
China needs an Ace or two in the hole. If the soybeans get cut off, maybe
Brazil's power grid will undergo a sudden maintenance period. Maybe Brazil's phone
and internet system will have a black out. Maybe Chinese beans at port will
take priority over another country's shipment of soy.

I think the Quid pro Quo dynamics between China BR and ARG have just begun.
Add in some war and economic sanctions with North Korea, things get really
interesting as per how China handles this.

Brazil seems destined to shift hard left or hard right in next election. Brazil
might look like USA in one year. 50% of the population is pissed off all of
the time. This seems to be the new norm !!!!

Have a great week,


keywords: BR soy, Conab, China, crop size, acreage switch, short season soy

Friday, September 15, 2017

Sept 15 blog update

Hot and Dry and more of it.

It looks like another 3 to 4 weeks of hot and dry.
No one is planting.

This year looks to be different than last year.

For Brazil, planting soy in October does not mean reduced
production potential.

Brazil can still crank out 110 mmt even if soybeans are
planted later.

The 2nd crop corn becomes the risk.

Carryover stocks of soy and corn in Brazil as of January 1, 2018 will
be much higher than in recent years.

As per soybean market action, I am now a bull.
I have outlined the reasons why in recent newsletters.

One thing we need to watch is that if this droughty pattern continues,
will be export loadings in January be affected?

Brazil will have carryover stocks to load ships in Janaury if the
market needs them.  But basis and or futures will have to pry
them out of farmers hands.

A possible bullish outcome of this weather pattern would be
something like this:

We plant late which means February harvest of soybeans.
Maybe February is wet?

Chinese increases year end buying more soy out of USA which
pulls down perceived carryover stocks for 2018.

For some reason or another Brazil comes in 5 mmt light
on her potential.

Chronic wetness causes problems for Argentina wheat and
corn planting.

Does that mean Argentina increases planted area of soybeans?

It is hard to bet against Argentina. Last yer we saw pictures of
flooding and there was talk of a 50 mmt soybean crop. In the end
the Argentina crop was 58 mmt and 40 mmt of corn.
What problem?  What flooding?

This year the flooding is much earlier. Will that mean the opposite
result this year?  Wet start and a dry end to the year?

The perfect storm is setting up for higher prices?

Way to early to be killing SA crops. I will wait until
January before I get to concerned on the loss of potentials.

But, I think we have higher prices going into the end of year.

The markets ability to shake off the last USDA report tells me
the lows are likely in.

I don't think the market believes the crop size and yields.

Another 30 days of dry in Brazil, the soy market needs to
add in some risk premium again.

We can't just assume a 115 mmt is in the bag for 2018-
not just yet .....


keywords: Brazil SA weather, late planting, crop size potential, bullish

Thursday, August 31, 2017

Sept 1 blog post

Hot and dry in Cerrado states.

This is normal for this time of year.
But rains should be starting by mid-month.
The forecast is for below normal rainfall until about Oct.

This may cause a bit later planting to soybeans than last year.
Southern Brazil is also worried about a late planting which then
increases the risk of 2nd crop corn.

The political and economic situation seems stable at the moment.
We would like to see more growth, but the economy is just
dilly dallying along. Business's continue to close and very few
new ones open. The ag economy is the GDP generator in the
economy. Without the massive ag production, Brazil would be in
deep doo doo.

China seems to be in the news every week. They are either buying
something or dealing on something all the time.
Even Korea bought a soy processor in Goias recently.

As per my April price forecast, I was expecting an early September
low in the markets. 9.03 is important for SX 17.

I will update again mid-month.

Brazil is going into the 2018 marketing year with massive amounts of
corn and soybean carryovers.

Br fertilizer delivery's are running slightly behind last year's pace.

Brazil meat exports are returning to pre-crisis levels.
Meat inspection at the packers are at record levels.

It looks like I will be in Mato Grosso again in September. I have
an international group coming in.

The Real:Dollar remains steady at 3.15.

If it were not for the lower dollar in relation to other international
currencies, I think the BRL would be closer to 3.50 today.

Elections for BR are in one year.  Oct 2018.
This will define BR's destiny.

Asphalting of BR 163 will finally get done in 2018. Look for more
harvest delievery problems going north again this rainy season.

Key words:  climate, politics, soy prices, BR 163, China

Friday, July 28, 2017

August 1 blog

Happy August

I cannot believe how fast this year is progressing.

Thank you for all the consults this month and annual renewals.
Always appreciated.

I sent out in my April newsletter on how I expected the year to play
out as per soybean prices. So far, we are tracking well.
Drop me a note if you would like a free copy of the April
newsletter. I will send you a copy.

I am expecting cool air to drop down early in September for Northern plains.
My guess is we will put in a low in early September and then
start to rally again. More on this in future newsletters.

The political environment in Brazil continues drive a normal
person batty. The leaked tape of JBS owner recording
the current President was something right out of a 007 movie.
But, since no legal action has been taken as of today, it seems more
like an episode of twilight zone.

I then turn my attention to USA and I want to scream at times.
Six months have gone by and what? What is it I am am supposed to
be impressed with?

I tend to return to my own little world of soybeans and corn. Even though
they have seen better times, at least they seem more rational and predictable.

The USA drought has taken the top end off the crop this year. By no means
a disaster, but at least gives us something to base off of going forward.

The Brazilian farmer has zero incentive to produce 1st crop corn this
next season. This means more soybeans. Maybe a lot more beans.

If we use a five year average for BR soybean yields, 2018 crop will
look much like last year. If we use last year's record yield, then we
will have a soybean crop several million ton larger than the current USA
crop. CME, China and BR will have to deal with this new reality.
We are trading beans in Chicago that are being produced south
of equator and headed to China. It will be more and more difficult to
square the circle with logistics always lagging the production surges.

It is looking like an early start to rainy season. It has been unusually
cool for this time of year. Last year we were baking in dry heat and
this year Brazilians are wearing jackets.

Elections are scheduled for Oct 2018 for Brazil. The field is wide open.
The BRL FX remains mysteriously strong given all the upheaval of late.

Outside of the ag economy, the REAL economy of Brazil really sucks.
The amount of small businsses that have closed their doors in city's
like Goiania is surreal. Many of the younger generation have given up.
Just as well leave the country is the motto.

Much talk of railroads in recent weeks. Let us hope so.
With a big 2018 soybean crop followed by a large 2nd crop
corn again, Brazil continues to bury herself in commodities.

Brazil is playing a dangerous game longer term with her corn production.
The 1st crop continues to disappear and is replaced by soybeans.
The 2nd crop area continues to expand fueled by rotation needs and
goverment minimum pricing. An early frost in southern states combined
with an early dry spell in Cerrado states will spell disaster for domestic corn
production in the future. There will be no cushion to work with- only sharp
increases in domestic corn prices to cull demand quickly. Not an optimal
business model.

For the next 12 months, there is no shortage of corn anywhere.

There will be a fair amount of shifting away from GMO soy and corn seeds
in 2018. A nice R$ 10-12 per bag premium to grow non GMO soybeans.
And the technology is breaking down as per bug resistence for the GMO
corn seeds. The price for seed does not compensate for the advertised benefits.
Back to a basic RR corn and apply insecticides as needed.

Cut the seed costs will be the mantra.

I will be in Mato Grosso next week. I will send out updates as I learn more.

I will attend the inauguration of the 1st 100% corn ethanol mill in Mato Grosso.

Much talk of amending production to increase the amount of flex-mill capability
of the existing sugarcane mills in Mato Grosso. The idea is to produce
ethanol from corn during sugarcane off season. There are three mills that do this
on a small scale so far.

Happy harvesting in Northern hemisphere.

Planting will likely begin early this year and on time circa Sept 15th for
Southern hemisphere.


Keywords: newsletter, politics, Mato Grosso, ethanol, railroads, GMO seeds

Saturday, July 1, 2017

July 1 blog, drought, bull again, acreage battle for 2018

I sent this out to subscribers back in Feb 12th, 2017

* One data point I am watching as per USA weather for 2017. As per seminars I attended 20-25 years
ago on weather and markets.

One major leading indicator for a midwest drought is a 60 degree temp in Des Moines for the month of
February increases the odds of a drought to 80%.

The forcast for 2/19 for Des Moines is 61 deg.

Last year I was watching for this and it did not happen. Even though there
were a few predicting drought for 2016, I felt the June high was solid and we
would head lower. For the most part that was correct. We never had an August
rally as it was hot and wet every day and record yields were the result.

2017 will be different if this data point holds next Sunday

1980 and 88 are analog years among others....  "


So far so good.

We do not have a drought per sey in the " Corn Belt", but the High Northern plains
are sure getting it full force.

The comparisons to 1988 are the key words I have been waiting for.

It is funny how bankers and crop insurance interrupt common sense sometimes.

NW MN and ND have switched to corn and soybean country in recent years. Long growing
seasons with great yields have changed the historic cropping rotations away from wheat and
sunflowers. Corn and beans are king. A few good years and most everyone has good APH's to
work with. This gross revenue protection is better than growing wheat for a loss.

At the end of April, when I saw the Kansas blizzard and the northern plains in the deep freeze,
I told myself, this is a wheat year- not a corn and bean year.

We were hearing from many sources that this was the lowest planted area of wheat in
circa 100 years. Other comments from farmers saying this was the lowest percentage of
wheat we have ever planted on our farm were early leading indicators of "What if" there
are some weather problems? Here we are.

I must say the wheat rally strength is suprising. It is funny to see so many get bulled
up so quickly. A rally of some sort seemed likely, but with bins full of wheat from
last year yet, the fortitude of this rally is down right impressive.

Where I am from in NW MN, the wheat crop is perfect. Everyone is applying fungicide and
adding liquid N to bump the proteins. Many have 70 bu wheat on deck and I think some
100 bu wheat will be likely on a few fields. The problem is: only about 20-25% of any farm
is spring wheat. The balance of the farm is corn, soy, and canola and some sugar beets and
edible beans. I wonder how many 4th of July picnic table conversations there will be this
weekend of " I shudda planted the whole farm to wheat!!!"  I could have retired !!!!
One must feel for the central ND farmers that are baling up their wheat in order to save
their cow herds. Many hay buyers have been up to NW MN looking for any hay possible.
For them, it is a crop insruance year. Some of the same guys that sent hay to Oklahoma
a few months ago now need help themselves. Crazy how fast things change.

We all remember the 2008 rally in spring wheat to 23 dollars. Best drug ever created
for my area in NW MN. Everyone thought they were instant super heros.

The problem with the bull run of 2007/2008 and again in 2011/2012 was that no one
had any wheat to sell at the higher levels and cost of production was nuts.
That was hard to write checks for a tanker of diesel at 4 dollars per gallon and
fertilizer was circa 1000 dollars per ton. Wheat needed to be 8 dollars ++++ !!!

Since then, fertilizer and price of N have dropped significantly and diesel is
circa a 1.50/gallon again.

Also, back during the commodity boom, everyone was hedging production
on the way up. Some was sold at 8 bucks and more at 10 and 12 bucks.
So if wheat was 13 bucks, no one had any left. And new crop was priced
back at 8 bucks, so why sell that when spot is still 11 bucks was the mantra.

Produce and hold was the new biz model. Build more bins.
That worked until the recent 3.5 year bear market.
Six months ago, bankers were telling farmers to dump that wheat.
US 4.50/bu is good enough. Clean up your operating and let us get ready
for 2017 with corn and beans.

So a good chunk of last year's crop got sold at Christmas time.

Then boom:  a 3 dollar  rally and probably more to come.

The good thing about this year's crop being grown is that prices were so
low that no one has any sold. Why hedge 4.50 wheat? a guaranteed loss.
It is a produce and hold crop. It is a rotation crop.

So when I hear farmers harvesting early spring wheat and hauling direct
to elevator and getting 9 bucks off the field, it makes my heart sing with joy.
Congratulations dude, you deserve it after the last 3 years+ of being patient
and getting a corn cob rammed up your bottom side.

The net margin of producing a 70 or 80 bushel crop this year and selling
off the combine will be better than the margin back in 2008 in most cases.
Cost of production and lack of crop sold come together to line up the 7's.

So back to beans, are corn and beans next to rally back to decent levels?

I have outlined to clients since back in January of what I expect for the year.

The May low was on target.

The recent drop to 9.07 basis Nov 17 was a surprise and worrisome.

As long as 9.03 holds, we can be a bull.

Now in just 5 days, we are already back to 9.58.
A close above 9.82, I think we can rest assured that the
9.07 low was a significant low and we have better prices to come.

I will send out a special technical update in a week.

With a combination of less than optimal spring conditions,
mid season drought stress now in July, and a likely early end to
the 2017 growing season, I doubt we will produce the 4.2 to 4.3 billion
bushels of soybeans being projected.

SA will have plenty of carryover stocks and that will be a weight over
the market.

But, any hiccups in SA weather and the new acreage war about to start for
2018 between Spring wheat and Soybeans, we now have a story. We now have
something to talk about.

We have reason to be optimistic and bulls with small testicles again.

Happy 4th and enjoy your holiday.


keywords: spring wheat, drought, soybeans, acreage war