Brazil: A New Day

Brazil's new President has taken office.

He has made some policy moves that favors the rural coalition.
He made good on some campaign promises to help farmers deal
with environmental issues and Native Indian lands.

This will help him with votes he needs later regarding pension
reform and budget cuts etc.

The Dollar:Real FX has dropped from 3.90:1 to 3.70:1 in recent weeks.
Soybean bids have also dropped with advance of harvest.
Banks think the Real can trade at 3.80 for most of 2019.
Technical analysis shows a possible break to 3.20:1.

The Conab report came in as expected for me. I have seen this before that,
when there is a drought, they tend to wait until February before any
significant adjustments. Most of the data they had was based on December
and most of the last 30 days people have been on vacation.

The yields I hear out of Parana indicate 50% of a crop in the western
1/3 of the state. This region accounts for about 40% of Parana total.
Parana crop conditions are 50% Good, 30% average, and 20% poor.
It is said that in several counties that soybean harvest will be wrapped
up in the next 10 days. The 2nd crop corn is going in very early.
Parana's true soy crop size will show up in the February Conab report.

Mato Grosso: Western 1/3 of the state has fantastic yields.70 sacs per/hectare
or 63 bu per acre is common.

The BR 163 corridor is coming in 10% light on early beans. In general,
if the yield was 60 sacs last season, they are coming in at about 54 sacs
this year. Later beans should be back to normal.

Goias things are going quite well. It sure is a wet drought. Two weeks ago
it rained every other day. This past week was dry and then Saturday
evening a very nice rain again. State wide?  No
But it is raining.

Forecast is dry thru end of the month. Bahia and points to NE need
to be watched. This is a critical month for them.

Mato Grosso taxes:

On December 31, the Fethab II regional witholding tax was retired.
This, in essence, increased the net price to Mato Grosso soybean
producer by 60 centavos per sac for 2019. Good news.

However, Mato Grosso is in dire need of new revenue. The new
Governor has proposed a new elevated Fethab tax rate for cotton,
soy, cattle and corn. Corn is a new addition to Mato Grosso witholding.
There are two levels to this tax. One for domestic sales and one for exports.

I will be keeping various VIP clients that have vested interests in Brazil
updated on this. If there is a new Fethab, I do not think it will be applied
until the July 1 Fethab update. That means it will be more of an issue for
corn and cotton marketing than soybeans.

Soybean crop size and technical prices to watch:

SX 19 soybeans made a high at 9.64 this past week. So far 9.71 is
strong resistance as well as the 200 day MA. A trade at 9.72 1/2 tells
me we are moving higher. A trade at 9.70 or less and a reversal lower
tells me we need another wave lower. If we do make a run at 10 bucks,
make damn sure you sell it. 2018, 2019 and even look at 2020.

Clients know where I am at on crop size and where I think we will be
in two weeks.

We have a range from 104 mmt to 119 mmt among experts.
115 mmt- market does not care
110 mmt will have markets attention
below 110 mmt- we have a story for 2019

I think what is confusing to many is that the past two years
we had near ideal weather conditions combined with application
of the lastest genetics and precision ag. This allowed for two back to
back 10 mmt increases. Some assumed this the new norm.
Thus 130 mmt was mentioned a month ago.

We have expanded area, but maybe not quite as much as we thought
earlier. So now we start to cut productivity on a very large base.
Whoosh- the millions of tons disappear that once were thought to
be baseline.

Thus, the last two years I have been conservative on the way up
and have been wrong. Example: last year I was thinking 113 mmt
with outside chance of 115 mmt.  Final crop size circa 120 mmt and
given exports for 2018, the crop was likely 122 mmt+.

The maximum potentials were already dialed in last year.

I have been hesitant to drop to low too quickly as per experience
in the USA the past two years. We have a drought or flood and we
produce record yields. The stress did the beans good.
Thus, we need to be careful here too on the way down.

Brazil has damn good farmers and they have invested heavily into the
newest technology. This crop will not give up easily.

The issue in Parana and MGDS was not so much lack of rain but
the combination of intense heat at pod fill and a root fungus
that caused the beans to die early. It was like the soybeans were
micro-waved. This gave the illusion that beans were killed early-
intentionally- they were not.

I will update more to my subscriber list.

Drop me a note if you are interested in more real time info
and not info that is 2-3 weeks old by the time it comes
out in general media.

agturbobrazil@yahoo.com

Thank you to all the VIP renewals for 2019.
Much appreciated

keywords:  BR soy crop, Mato Grosso tax, weather, crop conditions, yields