Sunday, May 13, 2018

May 14 blog

Conab new record high soybean crop, punted on 2nd crop corn, dry weather continues

Conab 117 mmt of soybeans. Mato Grosso 32 mmt and NE states of MaPiToBa at 13 mmt
made up for small losses in Parana and RGDS from the prior year record volumes.

Land is being prepped for 2019. Soybean sales are being made. Corn sales for 2019 are also being made. Machinery is being purchased. There is a renewed sense of optimism in Brazil.

There will be some that will sit on their hands for a while yet. The crop losses in 2nd crop corn are starting to add up in Parana, MGDS, Goias and Sao Paulo state. SE Mato Grosso is also affected.

Conab chose to wait with their estimates. IMEA should be out soon with a new crop size for MT.

I sense MT should shake out at  24/25 mmt. The national 2nd crop will likely drop to 55 mmt +/-.

This will put a floor underneath the domestic corn market for the next year.

This season, the 1 million ha expansion came 60% from expanded area and 40% from
1st crop corn switching. For 2019, the new soybean expansion will be 100% from new areas.
I am sensing this could be more significant than we can imagine.

Could we get some interest in planting more 1st crop corn in the Southern states?

If we think back to 2012 and 2013 for USA, that was the peak of the euphoria. Brazil at that time had a FX of 2:1.

Now we have dollar 3:60:1. We have credit available. We have the animal spirits energized.
The last few years Brazil has been able to expand when the cash flows were so-so at best.
Now we have real profits from the previous crop and 2019 looks fantastic as per the bottom line.
We now can start to think in terms of how many deviations beyond the norm as per production potentials. 120 mmt?   125mmt?
No weather problems?  katie bar the door?

When soy leads the way, corn will not be too far behind.

If we can get started planting in Sept 2018 and not get delayed until into Oct, we can become very aggressive with soy production potentials for 2019.

China continues to buy interests in petroleum refinerys, energy sector, and ports. Brazil is trying to release concessions for various railroads yet this year.

Cofco grain trading is expanding their presence in Mato Grosso and Cerrado. They are picking former traders from Bunge, ADM, and Dryefus. They are going directly to farmers to lock in sales.
Chinese are very aggressive in Brazil.

Meanwhile, Multigrain which used to be partnered with CHS, has announced they are winding down
their grain trading buisness in Brazil. Mega losses in recent years.

South Korean grain trading firm CJ bought Goiania based Selecta a few months back. Non GMO soybean processing and sub products. Many south Korean familes are moving to Goiania.
A very strange mix I must say.

I would say China and a few others are in the right place at the right time to keep picking up distressed assets. Now is the time to be expanding in Brazil as the cycle turns upward again.

World Cup and Elections are next up. The field is wide open. No one is sure what will happen.

From recent polls, the public seems to want a political "outsider" this next cycle. Does not bode
well for those old political operatives with name recognition. Thus the markets and FX are a bit spooked as much of what they thought Temer and current Congress had agreed too might have to start from scratch again in 2019. This delays Brazil's fiscal situation and GDP potentials.

But in these grey time periods, that tends to bode well for the ag sector in the transition.
Brazil ag accounts for 27% of BR  GDP.

BR Ag has its MOJO back.

Now we need to start looking for the next Kryptonite meteor on the horizon.


Wednesday, April 18, 2018

April 18 blog update

Exciting month eh?

USDA crop report, and China tariff talks gave the soybean market
a heart attack  March 29, April 2 and 4th.

Argentine soy crop seems to be 18 mmt light.

Where would we be trading today with a bumper ARG crop?

I find it funny that all those that were bearish soybeans are now
bulls nibbling on short grass.

As I have told subscribers since last fall, I am a bull with small
testicles. We are headed higher, the catalyst is the unknown today.
This was written back in Sept.

For the Brazil farmer, this is like a dream.

Record soybean crop, port bids going thru the roof all at peak
harvest. Can this be true?

The crushers are bidding against the Chinese at same time.
This is like a once in a lifetime event.

As I look back at the growing season, I too am impressed at how the
crop size shook out.

Brazil expanded 1 million hectares: 40% from 1st crop corn area reduction and
60% came from new areas.

Brazil the last two years has increased soy production from 95 mmt to 114 mmt
to maybe 117-119 mmt at the end of the day.
They did this with not so great soy economics.
Profitable yes, but no adrenaline rush to feed the animal spirits.

Three years ago was the drought- that distorted things a bit.
Now we have had two back back ideal growing seasons and productivity
was in overdrive. Much of that was due to new varieties and Intacta technology.

What is going through my mind for 2019 is that if we added 20 million tons
of soybeans in two crop cycles post drought with so-so soybean econ, what
can Brazil do now that animal spirits are well fed by rampant demand for
Brazil soy from crushers and China at same time and the USA shooting itself
in the foot on a weekly basis?

You talk about Optimism !!!! The cup overfloweth here at the moment.
At least in the ag economy.....

A couple of items that need to be mentioned:

Even though Parana and RGDS expanded soy area in 2018, their
productivity was decreased and they actually produced a bit less than
year before.

The Presidential elections are up in the air here. There is a caution
in the air when it comes to investing in economy here.

The World Cup starts in June and will disrupt Brasilians attention.

The dollar is at 3.40:1 which is better than we expected for this time frame.

A new President that is left leaning would be bad for Brazil econ but
good for Brazil ag.

A centerist or right leaning candidate would be good for Brazil's economic
future, but FX likely to drop to 3:1 and thus take a little of the testosterone
out of the Brazilian ag bull.

The big item that favors huge soybean area expansion is that fact that producers
are trading for 2019 crop inputs now at good ratios. There is enough time to
lock in a profit and yet prep land for 2019 planting.

This tariff talk and high premiums at port came at the right time for Brazil
farmer to react with gusto.

Last week, the Rio Verde, Goias ag show reported an increase in business
of 46% over last year and a 90% increase over two years ago.
This tells me that farmers are buying new toys.

I will be at big ag show in Sao Paulo state at the end of the month.

Rains keep coming for 2nd crop corn. Even though it was planted late,
the Mato Grosso 2nd crop corn is about 40% made at the moment.

The next 30% needs a couple more weeks of rain.

That last 30% needs to see rains into May to see decent production.
Subsoil moisture is good at moment.

I will update subscribers as things become clearer.

The bottom line to all of this is that Brazil will likely surge in planted
area of soybeans for 2019, but can she maintain the lucky streak of
good weather from the Amazon to RGDS and all points in between?

777  one more time?



keywords: Chinese soy tariff, Brazil soy expansion, elections, 2nd crop corn, machinery sales

Saturday, March 17, 2018

March 18 update

I will not be attending the Lucas do Rio Verde ag show this year.

I will be attending the Ribeirao Preto, Sao Paulo ag show this year.
April 30-May 5th.

I will send out a special May newsletter after that trip.

The soybean market has been tracking as to my expectations laid
out two months ago. 

After we digest the March 29th report, I think we will resume our

The Brazil soy crop situation seems to want to get bigger.
High flyers are at 116-117 mmt.

Conab has been conservative and I would tend to agree.
However, I do expect Conab to increase their crop size again
in April. Remember, they are a gov't arm. If they have the data,
they would love to report a new record high soybean crop size.
If they do not go bigger than last year, that also speaks volumes
in my mind.

The Brazil corn situation remains dynamic. The low prices last year combined
with late soy planting and a wet harvest should have pulled planted acres lower
this year. However, the crop looks fantastic in central and western MT. 
This all comes down to rain in May. The indications are there that these rains
will come this year. This means the BR corn producer is going to get lucky
planting late. Prices are on the rise. The spot market is short of corn.
Brazil seems like it exported plenty again. Maybe a bit too much.
There is talk of importing a few boat loads into southern BR.

At the moment the worst case scenario of 80 mmt for BR total corn is
off the table. The crop should be 85 mmt+.

I have seen photos of corn by Lucas do Rio Verde that is denting.
It was planted Dec 17th. This is an exception to the rule, but there
will be new crop corn being harvesting in late April in MT. 
Nice spot price at the moment to deliver into. 

Parana and MGDS are still at high risk for early frost damage. If no frost,
they too will produce some corn and this will stabilize everything.

Argentina is the wild card. We sure have a wide range of crop sizes again.
I see images of terrible soy and corn and then I see a guy harvesting 100 bu per acre soy. 
Yes  soybeans !!!

I shake my head.....

I think we trade lower in and through the March USDA report until the combines
get rolling in ARG. The yield reports should allow the market to base and then rally
again. We have just enough of a problem to keep things interesting.

The ARG losses were larger than BR's ability to compensate.

We also have some losses in Uraguay and Paraguay that add up too.

Rio is a war zone these days. This will likely disrupt the politics nationally
too. The Presidential race is wide open. Lula is down for the count.
And the World Cup in the middle with Neymar recovering from knee surgery
makes this an intense time for the Brazilian male.

Thank you for all the subscribers that responded to my query for feedback
on the newsletters and technical updates.  Much appreciated.

I will put together an April newsletter in near future. I will recap things
as to how things played out in Brazil as per acreage switch and an update
on how I see things post USDA report.

Drop me a note if any questions.

keywords: BR soy, BR corn, BR agshow, Argentina, 

Sunday, February 18, 2018

Feb 18th blog

Hi everyone,

The past two weeks have been kinda exciting.

The trucking crisis on BR 163 lasted only one week compared
to one month last year. The military helped a lot there.

A few spots received too much rain and caused some soybeans
to sprout and mold. Nominal losses.

Parana is so very slow to harvest.

Parana moved the 2nd crop corn planting deadline for crop insurance
from Feb 10th to Feb 20th. This made sure at least a few hectares got planted.

Some will likely plant 2nd corn into March with idea of getting lucky
with May rains. Farmers have short memory's.

Soybeans have rallied as expected from the Jan 12th low.
I believe that was a significant low.

I am still looking for higher prices.

It looks like Argentina will come in at least 10 mmt less than
original expectations. We can probably knock a million ton
off of Uraguay and Paraguay too.

The numbers are starting to add up.

I have been thinking Brazil was between 112- 114 mmt.
The ranges have been from 112- 118 mmt.

A few high flyers have been thinking 116-117 mmt.

I think the Brazil soybean crop plateaued three weeks ago.

It is still a hell of a crop, but the high flyers will now need to
lower their numbers a little in the coming weeks.
Pyschologically reenforcing the Bull

Parana is coming in less than last year with low seed densities.
RGDS also is suffering drought along its southern border and
early soy yields are less than last year.

Mato Grosso still has a chance at coming in at 31 mmt.

Argentina farmers are in no hurry to sell. Each month they gain
1/2% with less export withholding taxes.

Brazil farmers are also looking for a bit more before they sell

I believe the old crop carryovers in USA will come down as crush
is increased and demand shifts back to USA.

I believe that China will not mess with USA in soybean trade war now
that Argentine crop is shrinking. There is no use to poke the Bear when
a Bull could awaken. They can still get 10.25 soybeans.
If they mis-step and Argie crop is much smaller and USA has a weather issue,
beans could be 13 bucks quickly, so why slap a tarriff on beans in a bull market??

The irony in Argentina. Bunge is/was in the middle of expanding the
Rosario crusher from 20,000 tons per day to 30,000 tons per day.
And now can't originate beans?

The early frosts in Argentina also have my attention. The climate is
acting goofy again. It looks like we need to be ready for the black swan
events moreso than assuming all is normal.

After I see how markets act on Tuesday, I will update technical
probabilities in soy market in the March newsletter.

Lucas ag show is coming up in March also. I am not sure if I will
go out then or wait until June and do a corn crop tour.

My son goes to school six days a week. The next 6 weeks until
Easter are intense here on a personal level.

The more important trend long term in Brazil is what will happen
in Oct this year. National elections are coming.
The military has taken over policing operations in Rio de Janeiro.
There is also movement to more enforcement in Goias also.

Brazil is moving to the RIGHT. The public wants order restored.
At what cival liberty cost?  Unknown today

How far Right can Brazil go by Oct is what everyone should be
asking when talking about Brazil and or doing buisness here.
Things could change fast in 2018.

* Keep an eye on Argentina for fires and lack of water for cows.


* Keywords: Brazil soy, Argentina soy, infrastructure, politics, weather, soy technical

Tuesday, January 30, 2018

Feb 1 update and Amazon rains

Hello all,

Happy New Year

Carnival is early this year. Feb 9th-14th
It always rains during Carnival.

The Brazil soy crop has been getting bigger in December and January.
Some say 114 mmt. It very well could be.
Given the forecast for the next 2 weeks, I will say that the crop has
plateaued here for now. If things get out of whack weather wise in
the coming weeks, we may even start to hear of small decreases in crop size.
Lack of sun, more disease, moldy beans, harvest loss in general.
Usually loses from too much rain are small compared to drought losses
which are now occuring in ARG.

I remember back to the early 2000's being out in Mato Grosso at the end
of January and early February. These are called the Amazon rains.
It can rain every day all day and all night for two weeks straight.

I remember when Sorriso area got 24 inches in two weeks. I believe
it was 2005.

Back in the 2000's MT was planting 5 million ha of soybeans and
maybe 1 million ha of 2nd corn.

Today we are at 9.5 M ha of soy and last year was 4.7 M ha of 2nd crop

Back in the 2000's everyone had smaller 6 row planters and small
front- wheel assist tractors pulling them. They could float on water.

Today we have bigger toys.  30 and 45 row planters with 370 - 500
hp tractors hooked to them. These are no-till conditions.
Will an Amazon rain event have a negative impact on planting pace?
JD 680 combines that weigh 40,000 lbs with 10 ton more in the
hopper a harvest issue later this month? We need to float this stuff.

The forecast is for 5-10-15 to maybe 20 inches in spots.

A rain in the morning and if the sun comes out, they can be harvesting
after lunch time. The beans might be 25-30% moisture, but they can go.

By 5 pm the beans are 17-18% again and rolling at full speed.

The Cerrado soils can take a lot of water- to a point.
The Tropical sun drys things out quickly.

But, the Amazon rains scares the bejesus out of the farmers out there
that have a lot of ground to cover and dirt roads to get production out.

The roads are much better than 2005. Many thousands of kilometers of
asfault have been installed.

I remember when BR 163 was washed out at 1 or 2 bridges at different times
going south. My van had to take a detour around through several farms, be pulled
by tractors for a distance and over a wood bridge being over flowed by water that
was a tributary of the main river that was flooding BR 163.
Crocodile Dundee mixed with a little Mission Impossible.

Thank you for all the annual renewals at the beginning of the year.
Many of you have been with me since the beginning in 2005.
13+ years now

I am positive to soy prices going forward.
All of this has been outlined in the newsletters since Oct.

I think Sept 12 low and Jan 12th low are long term lows.

I will try and update more in the future.



keywords: Mato Grosso rains, planting progress, machinery size, soy prices

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