Saturday, December 1, 2018

Dec 1 blog update

Happy Holidays from Brazil

2018 is coming to an end. From my perspective it cannot
come soon enough. The year has flown by, but jumping from
crisis to crisis all year gets old.

I have been in Mato Grosso and Sao Paulo states the past two weeks.
The crop looks great.

The week ahead looks wet. I am sure we will start to hear about
rust issues  etc. Most will apply 3 or 4 fungicide applications.

I do not lose any sleep over rust. Brazil farmers are too good at what
they do to worry about that.

The new President and Admin will take office Jan 1.
Many are optimistic about the start of 2019.

The soybean crop will be big as will the 2nd crop corn.
Sugarcane crop looks stable for 2019 but with a switch
back to more sugar than ethanol production.

Machinery sales should be good again in 2019.

As I write this, we will all be waiting for a tweet from Trump
sometime Saturday night. With all the option activity this past week,
Sunday night proves to be a big move.

A gap higher, we could say the lows are in and we have a market again.

A gap lower, then I fear we have another leg lower to go and we need to
find some sort of capitulation this winter to discourage soybean production.

A deal in early 2019 would not be good for Brazil farmer. Port premiums have
already retraced and would likely decrease even further. If the USA would start selling
beans again at peak harvest pressure for Brazil farmer, things could get ugly here in a
hurry if the Dollar:Real would revert back to 3.30 instead of 3.80:1.

Dollar at 3.85:1 is a life insurance policy for BR farmer for the medium term.
Jan thru March.

Are we 50-60 cents higher next week or 50-60 cents lower.
This will set the tone for the next few months I think.

USDA production reports in January. USA crop insurance guarantee pricing
in Feb. March 31 planting intentions and a 500 million or a 1 billion
bushel carryover. PNW freight pricing and storage space at ports?
Booking of ocean freight?

This is starting to look like a multi-year issue to chew through all of this.
A private BR consultant is at 125 mmt for BR with outside chance of 129 mmt
of soybeans. Uff-Da
The drought year 3 years ago we were at 95 mmt.
I would have never thought we could be at 130 mmt so quickly.

Many Many moving parts. I do my best with info from China, ARG, BR, and USA
everyday.

Look for a few early soybeans to be ready about Dec 25th.(cotton ground)
The next block will be ready Jan 5th. By Jan 15th, Parana and MT will be in
full harvest mode.

Drop me a note if you are interested in becoming a subscriber at one of the
levels listed on my site.

Happy New Year to all,

Kory

Keywords: BR soy, prices, rust, G-20, Trump Tweet, soy gaps

* I will send out special Conab highlights report Dec 11th.

Friday, October 19, 2018

Oct 19 Blog update

Hi

Election #2 is Oct 28th. It is not proper for a foreigner to comment on
BR elections, therefore, I will wait until later to comment on new President.

The recent polls show a  20 point lead by one of the candidates and I believe
that is correct given round 1 election results.

2019 is a new day for Brazil. The question is will Brazil change or
will it be the same scenario with new faces?

I think I will stick to what I am good at - soy, corn, and some
infastructure comments.

Soy planting is off to a great start. 30%+ planted for Mato Grosso.
Rains are good in central part of country and 10 day forecast looks good.

All of this bodes well for early harvest and ideal planting of 2nd crop.
Brazil has had two years of back to back of high productivity. This is what has
pushed us from 100 mmt to 120 mmt.

Brazil is on deck to use record amounts of fertilizer. This also bodes
well for planted area and productivity.

95 day soy will be ready Jan 1 in Parana and Paraguay. Mato Grosso
shortly thereafter.

Ports will have new crop beans by late Jan.

2nd crop corn will go in during the ideal window.
Much different than last year.

Brazil should produce 115-125 mmt of soybeans.
115 mmt if we have lower productivity due to lack of sunlight or
some such event.
If we increased more than 1 million hectares with high productivity,
we will be closer to 125 mmt next April.

I expect 2nd crop corn to be a record and total corn at or near
100 mmt in 2019.

The new administration has many challenges in early 2019.
I hope they can break some ground on some new ag projects
in 2019. It has been a three year holding pattern.

The new president to be is pro-Chinese infrastrutcure investments
such as railroads. He is, however, anti-Chinese land ownership.
The new president to be is very pro-American. 
Welcome Welcome with open arms.

Clients of mine have done very well with owning Rumo Railroad
stock the past year. Right place and right time. (truckers strike was rail positive)

Ethanol demand is also running at record levels.

The sugarcane industry continues to struggle with lack of
reinvestment. The future is still unclear. Renew-Bio is still
in project phase.

Corn ethanol production and plant expansion continues
in Mato Grosso. It continues to be the shining star in Brazil.
Clients continue to expand mills.

Recent pull back in BRL FX from 4.20 to 3.70 has sudued soybean and corn
prices domestically.

So long as the truckers do not get out of hand during harvest, Brazil
is looking at fantastic start to 2019, nice port premiums due to trade war,
rampant Chinese soy demand, and FX in the mid 3 to 4 handle range.
Figure 3.50 going forward.

Machinery sales, ag shows, new projects should all be on the radar
in early 2019.

Brazil has closed out this 16 year political experiment and this
multi-volume set of history books will be studied for decades of what went right
and what went wrong.

A new special edition set of books will start to be written Jan 1, 2019.
It could be the best of times and then again we could be going back
in time to the mid-1960s as some intellectuals much older and wiser
than me have opined about in recent Brazil columns.

Many in the country are enthusiastic to start a new chapter in Brazil.
Others are cringing at this new reality.

I do not know.

I will ride the wave as to where it takes me. The odds have been against
me since 2003. I am still here. Many others have come and Brazil spit
them out and sent them packing. Brazil burped with Gringo acid -reflux
and sent them home. Bascially, Mama Brazil said you ain't ready yet,
come back when you are.

The next cycle is likely to start now. Brazil ag is strong. So long as the
new administration does not do anything stupid or too restrictive,
there will likey be a new wave of pioneers to try their luck.

Less bureaucracy, less taxes, less tariffs, a more open economy.

Dollar 3.50:1 is a lot more leverage than back when we were 1.60:1 back
in 2012.

Buy when everyone else wants to sell.

Sell when everyone else wants to buy.

The 2020's should keep us all on our feet.

Abracos
Kory

Key words: Soy, corn, 2019 BR admin, foreigners, FX, New day for Brazil

* Drop me a note if interested in newsletters or VIP services.
I will likely increase the prices starting in 2019.




Wednesday, August 29, 2018

Aug 31 blog Something I never thought I would see in my lifetime

Hi

It has been awhile.

Politics in Brazil has been the center of attention.
Impossible to predict at this point.
Left vs Right.

More erratic behavior by the FX will be the norm through Oct.

I was sending out 2019 new crop price updates to clients today.
Then it hit me.

I am experiencing something I never would have thought possible.

I first visited Mato Grosso in 2001- pioneer and land clearing days.
I remember price of soy was R$ 18-20 per sac back then.
Soy was about US$4.50 in Chicago. LDP's were the mantra and double Amta payments.
We were putting land into CRP and these lunactics were clearing forest and expanding
in Mato Grosso. Cash price was about US$ 3.75 per bushel at the time in MT.

This does not compute I told myself.

This was all pre-Asian rust so production costs were much lower than today's
high tech ag methods.

I come from Northwest Minnesota. Generally speaking, the cash price
of soybeans in Sorriso,MT has been the same or a little less than my local price
in US dollars per bushel.

FX, freight rates, port premiums have tweaked that from time to time.

We have all seen the challenges to get Mato Grosso production to port either
via Amazon or southern ports- sometimes trucks and sometimes trains.

What grabbed my attention today is that new crop 2019 soybeans for
January delivery in Sorriso is R$67 per sac or US$ 7.40 per bushel.

NW MN cash soybeans today are US$ 1.80 under Chicago.
The net price is about US$ 6.60 per bushel today.

We now have Mato Grosso beans worth more than NW MN and
ND beans. Tap your heels together 3X Dorothy, you ain't in
Kansas anymore. 

We all know MT beans need to travel via covered wagon, through
the rivers, and past the alligators, anacondas, and natives on muddy
roads. And still the beans are worth more than if they took a leisurely
ride on a train to Portland.

As I said above, I never thought I would see the day that beans grown
in Mato Grosso will be worth more than beans from Canadian border.

Ponder that

Just think what happens when these Mato Grosso farmers get one
of those swanky new choo choo trains.

All aboard !!!!

Enjoy the ride !!!!

I expect it to be very scenic the next 60 days!!!

Kory

keywords: MT soy, prices, NW MN, basis, MT history





Tuesday, July 3, 2018

July 3 blog update

Much has happened since last blog update.

Two  dollars lower in Chicago.

Trucker freight rates are still in dispute

Freight rates are circa 50% higher.

Dollar:Real is trading 3.90:1

Brazil has won 3 games in World Cup

Fertilizer is stranded at Paranagua port- no trucks will come get it

Chinese are aggressive bidders for soybeans

Even with soy price correction and higher freight rates,
soybean prices in Mato Grosso are almost back to late
May prices when CME was US$10.50/bushel

Soybean premiums at port today are US$ 2.20.bushel over
CME with an upward bias  -basis August

Clickbait in todays BR media that Dollar:Real will trade 5.50:1
in 2019 if wrong President is elected- Bank of America projection

Brazil will expand 1 to 1.5 million hectares for 2019

Corn harvest is progressing

Corn crop size for national total looks to be 82 mmt
down from last year's 97 mmt

I expect mega hectares of corn to be planted in 2019

Brazil foods is selling off some assets

July is vacation month for Brasilians

World Cup will occupy everyones time

Much talk of more railroads since trucker strike- need to
speed up bidding process and construction pace

No reason at this time not to expect mega soy production
out of Brazil, ARG, and Paraguay in 2019

What do I expect for the next 90 days?

Chaos

Bom Jogos para todos
Bom Bar-be-que para todos

Enjoy the show

Kory


keywords: soy, corn, BR elections, FX, world cup, expansion, railroads



Saturday, June 9, 2018

June 9th blog update

If you would like a copy of my June newsletter, drop me a line
at agturbobrazil@yahoo.com. I think I did a pretty good job of
summarizing recent events in Brazil.

The trucker strike resembled something that looked like an
outtake from The Boston Tea Party meets The Lord of the Flies
and a hint of The Planet of the Apes behavior.

It looks like the freight tables have been updated and corn
and soy are moving again.

It is likely we will see other flare ups between now and October
elections.

I doubt Brasilians will protest much while the World Cup is being
played out.

On Tuesday, June 12, Conab will be out with updated 2nd crop
corn numbers. I look for a significant cut in production.

Brazil analysts have a wide range for this year's total corn crop.
78 mmt to about 84 mmt.
I am in the low 80s

Early Mato Grosso corn yields are fantastic. But this early corn
accounts for only about 8% of the area planted in late January.
The yields will drag lower as harvest progresses.

The biggest issue of the last week was the ability of the US$: BRL to
trade as high as 3.97:1 on Thursday. By Friday on the close, the central
bank was able to quash it back to 3.70:1.

For those that bought fertilizer and chemicals for 2019 back in March
when Dollar was 3.25:1, they are in the drivers seat. They can't wait
to plant the 2019 crop.

For those who have waited, they are crapping rubber nickels as to
what to do when the FX is swinging around 20 pts per day.
One day your a hero, and the next day you need a new sign.
The sign says:  I am a stupid.

Here is your sign.

I get the feeling that many will feel like this on a weekly basis
until the end of the year.

Brazil bought some time during the Dilma years by selling Swaps.
They did that again during impeachment process.

The central bank quashed the FX from 3.80 back to 3.10. They ended up
making money on the trade.

Two years have gone by and Brazil has not been able to get their fiscal house
in order. Many promises to resolve social security and retirement and so far nadda.

When the government folded their hand to the truckers, that really spooked
the financial markets. More red ink to pick up now with a diesel subsidy.

I think back to Indonesia FX crisis and even Russia. Argentina is also
an example of a fiscal situation gone wild.

It looks like Central bank was able to quash the speculation for now.
US$ 20 billion in swaps ready to dump at any time.

This acted as emergency coolant into the nuclear reactor core for now.
The international FX markets do not dick around. If they smell a hint of
BS or fear, they will tell you quickly to get your fiscal house in order,
or we will do it for you !!!!
Real Quick!!!!

The financial media articles quickly turned to how high the FX is going to
go in 2018 and 2019. Some say 4.40 to 1. Others say  5.50 to 1.

These pundits always seem to be wrong. They were saying that once Lula
was put in prison, the Dollar Real would be 3:1 by the end of 2018.
And 2.80:1 in 2019.

Given the cost of things in Brazil, that made me cringe. It seemed impossible
to be that we could be at 2.80:1. Things simply cost too much.
But at 4:1, things start to seem reasonable again.

I fear that if we do start trading above 4:1 again, the general public
will revolt. I have no idea how the average joe that makes minimum wage
can raise a family here. The Central bank knows this.

I do expect the Central bank to spend many billion in the coming weeks
trying to protect the Real.

Much of this will depend on who next president will be.

But, if the Central bank loses control of this as we pop to 4.50 to:1
and they start marking losses to their book for 2019 swap rollovers,
that also means more red ink for them to cover.

Will they play their hand correctly this time?

or is this the time the House needs to pay out-
and Pay out Big this time??

Much volatility in coming weeks.

So far, all of this plays very well to the soybean farmer for 2019.

R$ 70 per sac new crop soy bids in Mato Grosso meanwhile
CME is selling off.  ponder that

Kory

key words: BRL FX, Brazil soy, trucker strike, newsletter, swaps






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.

Kory






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?

maybe

Kory

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