Sunday, July 26, 2015
Dollar 3.30, El nino, and more soy
Dollar is at best levels since 2003.
3.30:1 is a gift from Heaven for Brasilian farmers.
Cost of production will be at a record high for soybean growers this
next season. They will need every "Real" they can get, but 3.30 makes
this a whole lot easier than 45 days ago.
Reports are for up to a 4% increase in soybean area on the 1st main crop.
This just might happen.
Fertilizer sales are running 10% behind last year´s pace.
This needs to be watched as we go into planting.
El nino? What does that mean for Brazil?
I do not know.
Does this automatically mean a 96 mmt soybean crop without
any effort?
Or does it mean there could be a 10 million ton hiccup along the way
and we keep this interesting?
Last year Brazil planted 700,000 ha of double crop soybeans.
(soy behind soy)
This gave us 2 million bonus tons late in the season.
Talk is for widening the no-plant window for 2nd crop soy
in 2016. If this happens, there will be less 2nd crop soy.
Corn crop is fantastic. Prices are about R$1.80/bushel in Mato Grosso.
They will make a little money on the corn given the above average yields.
President Dilma Rousseff´s approval rating has dropped to 7.7% positive.
More and more demands for her resignation or impeachment.
High level corporate execs are being arrested and thrown in jail for
corruption through the years.
The PT party has a nasty odor in Brasil at the moment.
Every week we get closer to the top of the corruption pyramid.
The cost of food, electricity, services, "shaving cream", and a host of
other products are getting out of control. Inflation is moving into
3rd gear now. When will the turbo kick in?
The poor are getting worried. Lack of jobs with unemployment up 2%
this past year. I feel that it is actually more than that.
More and more "contacts" of mine are asking for a little help.
Kory, could you loan me a little money. I am short this month.
I am happy to buy some bread or a pack of cigarettes for someone.
But now a couple of friends want me to deposit money in their account.
I have not experienced this for a long time in Brazil.
I know things are getting tight.
For the near term, I am watching the potential for cool air to descend into
the American Midwest in late August.
This could provide fuel for the markets later this fall.
If so, the South American producers will be grateful.
Friday, July 17, 2015
Pantanal Adventure
I have been in Pantanal the past 10 days.
Lots of wildlife and fishing.
Here are a few photos.
You tube video here:
https://www.youtube.com/watch?v=gkiT4V7KXSw&feature=youtu.be
Friday, June 26, 2015
Solving the soybean ghost acre puzzle
Did Brazil really expand 1.7 million hectares last year?
This question has been bugging me for two months.
We knew about 400,000 hectares were switched from 1st crop
corn last season. That still left us with 1.3 million new hectares.
Given the dollar exchange rate last year at this time and the tight
cashflows, it made no sense for Brazil to keep the pedal to the metal.
I think about 300,000 hectares that Conab found in remote areas of
Para and Rondonia were actually "catch up" hectares. These were areas
being prepped back in 2013 for 2014. They may or maynot have been
planted. Maybe the 1st crop out of pasture was so-so at best. But those
hectares came on line with robusta in 2014/15.
This leaves us with about 1 million new hectares on a year over year basis.
This is slower than the previous 2.5 million hectare increase year over year,
but still respectable none the less.
An article was published June 25th at the 7th Congress of Brazilian soy.
Here they were discussing the continuing agronomic problem of planting
soybeans on soybeans in Brazil. In Mato Grosso they have extended the
no plant window. Yet, many producers squeezed in a 2nd crop and planted
their own seed again.
In Parana state, the increase of soybeans on soybeans was up 21% year over year.
Crop scientists are concerned about the ineffectiveness of fungicides in the future
if we continue to push the limits on soybean rust resistance. In a few years, we might
not have the tools to control rust effectively and within a reasonable cost parameters.
The datapoint that stood out for me was that 680,000 hectares were planted to
a 2nd crop soybean this past year. With a yeild of ~2.8 tons/ha, this is about
2 million tons of bonus soybeans this past crop cycle.
With the June Conab report showing production of 96 million tons of
soybeans this past season, we can now see that the 1st crop or main crop
was circa 94 million tons. This makes sense now.
I wish Conab would give a 2nd crop soybean designation so we could all get
a better grasp as to what hectares are coming from crop switching, pasture conversion,
and double crop of soy.
There is talk of widening the no plant window even further for 2016.
If so, we may have see the peak of soy/soy area.
But with cheap corn prices, the ability to replant your own seed, and the
profitability of soy/soy, one cannot blame the farmer for trying.
The increase in Brazil soy area basis is first crop was more like 3% YoY
and not 5% as previously thought.
The pace of expansion is slowing.
With the recent rally in soybeans, this puts many areas back in the black for
2016 in the interior of Brazil.
80 cents X 2.2 X 3.10 = R$ 5.50/sac of soybeans X 50 sacs = R$ 275 direct
to the bottom line. This has happened in two weeks.
This helps firm up the 2016 planting intentions for Brazil.
Will we expand again? stay tuned- monitoring
This question has been bugging me for two months.
We knew about 400,000 hectares were switched from 1st crop
corn last season. That still left us with 1.3 million new hectares.
Given the dollar exchange rate last year at this time and the tight
cashflows, it made no sense for Brazil to keep the pedal to the metal.
I think about 300,000 hectares that Conab found in remote areas of
Para and Rondonia were actually "catch up" hectares. These were areas
being prepped back in 2013 for 2014. They may or maynot have been
planted. Maybe the 1st crop out of pasture was so-so at best. But those
hectares came on line with robusta in 2014/15.
This leaves us with about 1 million new hectares on a year over year basis.
This is slower than the previous 2.5 million hectare increase year over year,
but still respectable none the less.
An article was published June 25th at the 7th Congress of Brazilian soy.
Here they were discussing the continuing agronomic problem of planting
soybeans on soybeans in Brazil. In Mato Grosso they have extended the
no plant window. Yet, many producers squeezed in a 2nd crop and planted
their own seed again.
In Parana state, the increase of soybeans on soybeans was up 21% year over year.
Crop scientists are concerned about the ineffectiveness of fungicides in the future
if we continue to push the limits on soybean rust resistance. In a few years, we might
not have the tools to control rust effectively and within a reasonable cost parameters.
The datapoint that stood out for me was that 680,000 hectares were planted to
a 2nd crop soybean this past year. With a yeild of ~2.8 tons/ha, this is about
2 million tons of bonus soybeans this past crop cycle.
With the June Conab report showing production of 96 million tons of
soybeans this past season, we can now see that the 1st crop or main crop
was circa 94 million tons. This makes sense now.
I wish Conab would give a 2nd crop soybean designation so we could all get
a better grasp as to what hectares are coming from crop switching, pasture conversion,
and double crop of soy.
There is talk of widening the no plant window even further for 2016.
If so, we may have see the peak of soy/soy area.
But with cheap corn prices, the ability to replant your own seed, and the
profitability of soy/soy, one cannot blame the farmer for trying.
The increase in Brazil soy area basis is first crop was more like 3% YoY
and not 5% as previously thought.
The pace of expansion is slowing.
With the recent rally in soybeans, this puts many areas back in the black for
2016 in the interior of Brazil.
80 cents X 2.2 X 3.10 = R$ 5.50/sac of soybeans X 50 sacs = R$ 275 direct
to the bottom line. This has happened in two weeks.
This helps firm up the 2016 planting intentions for Brazil.
Will we expand again? stay tuned- monitoring
Tuesday, June 16, 2015
2016 Brazil soy crop size - tide is turning
The paradox continues:
I must say the past month has been confusing.
Conab increased the size of the 2015 soybean crop yet again.
About 300,000 ghost hectares were found in remote areas of
Brazil.
I ask myself: did Brazil really expand by 1.7 million hectares last year?
Could this number actually be a catch up number for two years?
Maybe the 2014 crop was a bit larger than we thought after mini-drought?
I do not have an answer. I am trying to square the circle and look forward.
In the past week, I have read two Brazilian consultants forecast small
increases for the 2016 crop.
I scratch my head. Really? Are we so sure?
Credit is more expensive and the funds will be going out late.
In some locals, fertilizer and chemical sales are said to be delayed by 60-80%
compared to last year.
Fertilizer sales are lagging 2014 volumes. Brazil fertilizer stats delivered
to consumer are down 12% compared to 2014. Historically, this has
been a leading indicator to soybean expansion by this time of year.
(Special update sent out to subscribers)
The exchange rate is the incentivizer for 2016 soybeans. More so in the
Southern states where soybeans are still profitable. For the interior of Brazil
and Mato Grosso, it is all a crap shoot as per profitability for 2016.
Today I read that Agro-consult is forecasting a small drop in planted area.
I shouted "Alleluia" when I read the article.
Someone is actually thinking. I have been the conservative voice with these numbers
in recent months, and I have been proven wrong time and time again by one
agency or another.
I have been saying for 12 months that the numbers i.e. cashflows do not
justify accelerated expansion in many regions. It is time for Brazil to take
a break- tap the brakes and make sure China needs all these damn beans.
The fertilizer sales needs to be watched in the next 60 days.
We could be on the cusp of a big surprise come October.
Monitoring
Kory
Saturday, June 6, 2015
Where are the Maserati´s?
Seems like yesterday when soybeans made their 1st run to US$ 16.50/bu in 2008.
Jim Rogers was everywhere talking about farmers driving Maserati´s and New York
investment bankers will be driving taxi´s?
I wanted to believe this as much as anyone.
We had a 2nd run in 2012 and soybeans touched US$ 18.00/bu. I told myself at the
time that if 18 bucks does not get Iowa farmers into Maserati´s- nothing will......
I know a few guys that drive around in Porche´s, but I do not know of one American
farmer that drives a Maserati yet???
Farmers are farmers, they buy new US$ 60,000 diesel crew cabs in multiples.
I look at cash corn price´s for NW MN and NE ND and I see LDP type prices
going forward. I do not think a Maserati dealership in Iowa or North Dakota will
be successful in the near future.
I see more Chevrolet Camero´s imported in Brazil these days. I even see them in
farm country. But no one drives a Maserati.
I did see one Maserti while I dropping my son off at school recently. I thought maybe he
bought it, but a few days later he was back in his SUV. Must have been just a
loner car. * 6/8 update: The Maserati was at school again today. It is his.
Batman of Goiania is on Patrol this morning.
When I saw it, it jarred my memory- where are the Maserti´s I asked myself??
Just to be clear, the guy driving it was not a farmer.......
Jim Rogers was everywhere talking about farmers driving Maserati´s and New York
investment bankers will be driving taxi´s?
I wanted to believe this as much as anyone.
We had a 2nd run in 2012 and soybeans touched US$ 18.00/bu. I told myself at the
time that if 18 bucks does not get Iowa farmers into Maserati´s- nothing will......
I know a few guys that drive around in Porche´s, but I do not know of one American
farmer that drives a Maserati yet???
Farmers are farmers, they buy new US$ 60,000 diesel crew cabs in multiples.
I look at cash corn price´s for NW MN and NE ND and I see LDP type prices
going forward. I do not think a Maserati dealership in Iowa or North Dakota will
be successful in the near future.
I see more Chevrolet Camero´s imported in Brazil these days. I even see them in
farm country. But no one drives a Maserati.
I did see one Maserti while I dropping my son off at school recently. I thought maybe he
bought it, but a few days later he was back in his SUV. Must have been just a
loner car. * 6/8 update: The Maserati was at school again today. It is his.
Batman of Goiania is on Patrol this morning.
When I saw it, it jarred my memory- where are the Maserti´s I asked myself??
Just to be clear, the guy driving it was not a farmer.......
Sunday, May 24, 2015
What have we learned from 2015 crop year?
As I think back to last October and the hot dry conditions,
we read countless emails and articles about how this will
affect the soybean crop and eventually the 2nd crop corn.
I was in the heat of it with my opinions about crop size and
potential losses.
I remember watching the canal rual ag show in mid-November
interview a farmer from western Mato Grosso. He was adamant
that soy losses in western Mato Grosso would be 30%. I calculated
this and told clients that Mato Grosso has likely lost 1 million tons
of potential already.
At the end of the day, Mato Grosso had a bumper crop and record
production. The average yield for the state did drop about 1/2 bushel
per acre from 2014. This is an indicator that the drought and late planting
did have an affect, but with the increase in planted area of 5%, the overall
production was still an increase year over year.
January was record hot and dry for Goias state and areas to the Northeast.
It was easy to see that Goias would lose 1 million tons of potential. The question
would be if the state would lose 2 million tons???
Bahia, Piaui, and Maranhao states did remarkably well considering the conditions.
They increased area and productivity came in higher than 2014. I was not expecting
this to happen.
The two states that stand out this year were Tocantins and Para state. Tocantins had
Garden of Eden conditions. Tocantins increased area by 10% and production by 15%.
Para expanded area and production by 27%. We need to keep in mind that these
increases come from relatively small base lines. But the expansion in these areas cannot
be ignored. Two crop years go by and all of a sudden there is another million tons
of production that very few on the planet are aware of.
In summary, Brazil lost about 1 million tons of soybean potential this past season.
This occurred mainly in Goias state. The most recent Conab report stated that Brazil
produced 95 million tons of soybeans for 2015. Early on I was thinking more like
93 million tons should cap this crop.
Therefore, Brazil´s 2015 potential was 96 mmt. Period..........
Brazil expanded 1.4 million hectares this past season. I was not expecting that.
What can we divine from this for 2016?
I said last year that the more Brazil expands, the more she will contract later.
The dollar was 2.40:1 at the time - tight cashflows....
The FX currency exchange is the saving grace for the Brazil farmer for 2016.
The dollar at 3:1 keeps them in the game. Every hectare is a "blackjack".
Costs are going up. Fertilizer, chemicals and seed are higher in local currency
after they are imported. Some farmers are saving their own seed. Some are
cutting back on volumes of fertilizer. Will this affect productivity in 2016?
We do not know.....
A few that still had expansion plans are scrapping these projects. Conserve
working capital is the mantra at the moment. Banks are cutting back credit
lines and interest rates are on the rise.
At this time, I am not seeing Brazil expand for 2016. But at the same time,
she does not need to contract quite yet.
It is a "Check Mate" at the moment with Chicago. Who will flinch? Chicago,
Brazil soybean expansion, China, or will Argentina scare the daylights out
of everyone later in the year and bury the soybean market but good........
As long as dollar trades 3:1 to 3.30:1 between now and next February,
I think the Brazil farmer can tolerate these prices. If the dollar would drop to
2.50:1, the tears from all the farmers would flood the Amazon.
I will continue to monitor the situation and update clients in Real Time.
With decent weather and high 8´s in Chicago, Brazil can produce a damn
nice crop in 2016. We could be looking at 100mmt.
If soy prices drop to 7´s by October, could Brazil tap the brakes a little
bit and contract for 2016? answer- yes it is possible......
we read countless emails and articles about how this will
affect the soybean crop and eventually the 2nd crop corn.
I was in the heat of it with my opinions about crop size and
potential losses.
I remember watching the canal rual ag show in mid-November
interview a farmer from western Mato Grosso. He was adamant
that soy losses in western Mato Grosso would be 30%. I calculated
this and told clients that Mato Grosso has likely lost 1 million tons
of potential already.
At the end of the day, Mato Grosso had a bumper crop and record
production. The average yield for the state did drop about 1/2 bushel
per acre from 2014. This is an indicator that the drought and late planting
did have an affect, but with the increase in planted area of 5%, the overall
production was still an increase year over year.
January was record hot and dry for Goias state and areas to the Northeast.
It was easy to see that Goias would lose 1 million tons of potential. The question
would be if the state would lose 2 million tons???
Bahia, Piaui, and Maranhao states did remarkably well considering the conditions.
They increased area and productivity came in higher than 2014. I was not expecting
this to happen.
The two states that stand out this year were Tocantins and Para state. Tocantins had
Garden of Eden conditions. Tocantins increased area by 10% and production by 15%.
Para expanded area and production by 27%. We need to keep in mind that these
increases come from relatively small base lines. But the expansion in these areas cannot
be ignored. Two crop years go by and all of a sudden there is another million tons
of production that very few on the planet are aware of.
In summary, Brazil lost about 1 million tons of soybean potential this past season.
This occurred mainly in Goias state. The most recent Conab report stated that Brazil
produced 95 million tons of soybeans for 2015. Early on I was thinking more like
93 million tons should cap this crop.
Therefore, Brazil´s 2015 potential was 96 mmt. Period..........
Brazil expanded 1.4 million hectares this past season. I was not expecting that.
What can we divine from this for 2016?
I said last year that the more Brazil expands, the more she will contract later.
The dollar was 2.40:1 at the time - tight cashflows....
The FX currency exchange is the saving grace for the Brazil farmer for 2016.
The dollar at 3:1 keeps them in the game. Every hectare is a "blackjack".
Costs are going up. Fertilizer, chemicals and seed are higher in local currency
after they are imported. Some farmers are saving their own seed. Some are
cutting back on volumes of fertilizer. Will this affect productivity in 2016?
We do not know.....
A few that still had expansion plans are scrapping these projects. Conserve
working capital is the mantra at the moment. Banks are cutting back credit
lines and interest rates are on the rise.
At this time, I am not seeing Brazil expand for 2016. But at the same time,
she does not need to contract quite yet.
It is a "Check Mate" at the moment with Chicago. Who will flinch? Chicago,
Brazil soybean expansion, China, or will Argentina scare the daylights out
of everyone later in the year and bury the soybean market but good........
As long as dollar trades 3:1 to 3.30:1 between now and next February,
I think the Brazil farmer can tolerate these prices. If the dollar would drop to
2.50:1, the tears from all the farmers would flood the Amazon.
I will continue to monitor the situation and update clients in Real Time.
With decent weather and high 8´s in Chicago, Brazil can produce a damn
nice crop in 2016. We could be looking at 100mmt.
If soy prices drop to 7´s by October, could Brazil tap the brakes a little
bit and contract for 2016? answer- yes it is possible......
Saturday, May 16, 2015
China investment ideas, reality, etc
May 16th
It was an "other worldy" week for me. Events unfolded personally and in the media that had no connection to normalcy or reality of the current conditions.
The pernsonal stuff is best left for a soap opera writer to deal with.
The common underlying theme with Brazil is that is operates on pure, raw emotion.
If you cannot deal with drama, Brazil is not for you.
I did blow a gasket this week as events unfolded. It had been a while since the last
head gasket sprung a leak. It felt good to vent. It cost me 2 packs of cigarettes to
say I am sorry to my security guard. He received much Viking rage. He was just the
messenger and not the cause of the problems.
Family, booze, cat fights, dealing with hospitals and energy company mistakes all
came together and twisted my shear pin. Period....
To dovetail with the above "trip", I have read two different articles this week talking
about China and railroad investment???? Huh???
The East/West railroad was approved and announced back in March 2010. Not one
spadeful of dirt has been moved.
The government has announced that all infrastructure projects will be put on hold
during this period of fical austerity.
In the media, licensing of the North/South railroad through Mato Grosso/Para has been
announced. Great, let the licensing begin !!!!!!!! Keep he shovels in the garage!!!!
Next up was the 50 billion dollar announcement that China will be investing in a transcontinental
railroad across South America. The countries included are Peru, Bolivia and Brazil.
I am not sure why all of these pie in the sky projects are being talked about now.
One would think an election is coming up soon. This is not the case.
It is like taking a pain killer to avoid the current reality. Let us talk about this over there,
while cuts, zero growth, and lay offs are occuring over here.
The articles make no sense at the current time.
These projects might become reality one day, but that is years from now,
not 2015.
In 2015, we need to find the money to fill the holes in the road. At the moment,
contractors with Dept of Transport are 90 days past due on their invoices
and they are shutting all projects down !!!!!!!!!!!!!
It was an "other worldy" week for me. Events unfolded personally and in the media that had no connection to normalcy or reality of the current conditions.
The pernsonal stuff is best left for a soap opera writer to deal with.
The common underlying theme with Brazil is that is operates on pure, raw emotion.
If you cannot deal with drama, Brazil is not for you.
I did blow a gasket this week as events unfolded. It had been a while since the last
head gasket sprung a leak. It felt good to vent. It cost me 2 packs of cigarettes to
say I am sorry to my security guard. He received much Viking rage. He was just the
messenger and not the cause of the problems.
Family, booze, cat fights, dealing with hospitals and energy company mistakes all
came together and twisted my shear pin. Period....
To dovetail with the above "trip", I have read two different articles this week talking
about China and railroad investment???? Huh???
The East/West railroad was approved and announced back in March 2010. Not one
spadeful of dirt has been moved.
The government has announced that all infrastructure projects will be put on hold
during this period of fical austerity.
In the media, licensing of the North/South railroad through Mato Grosso/Para has been
announced. Great, let the licensing begin !!!!!!!! Keep he shovels in the garage!!!!
Next up was the 50 billion dollar announcement that China will be investing in a transcontinental
railroad across South America. The countries included are Peru, Bolivia and Brazil.
I am not sure why all of these pie in the sky projects are being talked about now.
One would think an election is coming up soon. This is not the case.
It is like taking a pain killer to avoid the current reality. Let us talk about this over there,
while cuts, zero growth, and lay offs are occuring over here.
The articles make no sense at the current time.
These projects might become reality one day, but that is years from now,
not 2015.
In 2015, we need to find the money to fill the holes in the road. At the moment,
contractors with Dept of Transport are 90 days past due on their invoices
and they are shutting all projects down !!!!!!!!!!!!!
Subscribe to:
Posts (Atom)