Sept 14 blog update

Soybeans are being planted in Parana state. Mato Grosso remains dry but soybeans are being planted under pivots. Conab will come out with initial crop size forecasts for 2016 Oct 9th. The Dollar is now 3.88:1. 4:1 seems to be around the corner. Last week I sent out a forecast to subscribers that a Dollar/Real FX of 5.80:1 in the next 18 months is possible. I was in shock reading the predictions. It seems other worldly. The FX at 1.60:1 twice, back in 2008 and 2012, seems so rediculous in hindsight. The Brazilian farmer has already sold a good portion of the 2016 crop. 30-40% is common. The rest he will likely use as a currency hedge. It is better to have soybeans or dollars than Reais in a bank. This is the mantra. People with money have taken their money out of the banks and bought livestock, land or apartments as a way to preserve wealth. This makes it harder for banks to make new loans. Fertilizer deliveries are running way behind schedule. Some fertilizer dealers are not giving quotes. They want the farmers to beg. The farmer will pay anything for fertilizer at the last minute in October or November. We know there will be expanded area of soy. We still do not know if a 2nd crop of soybeans will be allowed in some states. We know crop inputs will decrease this year. Could this affect final productivity? When one reverse calculates current soybean prices back to dollar 2.50:1, today soybean prices in Brazil feel like US$ 13.00/bushel in Chicago. Soybeans look better than corn, edible beans, cotton, rice and sugarcane at the moment. Soybeans are equal to 100 dollar bills anytime. All the other commodities require a waiting period to get paid. What do you expect a Brazilian farmer to do? Soybean producers in USA and Argentina need to be alert for a Dollar/Real greater than 4:1. Above 4:1, no one can compete with Brazilian farmer with regards to exports at port. At 5:1, things get even more interesting. One could assume Brazil could compete all the way down to US$ 6 dollars per bushel in Chicago. The caveat will be the imported products such as fertilizer, chemicals and Ag machinery pieces. Key items I will be watching in the next 90 days are saved seed royalties and how they plan to collect them, 2nd crop soy area- if any, soy no-plant dates for 2016, and delayed fertilizer delivers and thier impact on final yields. Thank you all for your interest in the newsletter of late and the phone call consults. I appreciate your confidence. Abracos Kory

Sept 1 blog update

In a few more days producers will start planting soy in western Parana. A few days after that, circa Sept 10th, producers will start to plant soy in Mato Grosso. We have had a few sprinkles in Goiania. This is a bit early but a nice break from the heat. Dollar is trading 3.58:1. I think circa 30% of the 2016 Mato Grosso soybean crop has been priced at higher levels. The strong Dollar/Real realtionship protects Brasilian farmers from lower prices in Chicago. FX trumps CME at the moment. We need to watch legislation to see if 2nd crop planting of soy behind soy will be allowed in Parana and Mato Grosso. They want the no-plant window widened. If they can plant in early September, there will be time to harvest and still plant a 2nd crop soy and harvest it by the no-plant dates. If planting gets delayed, many producers will likely run out of time and plant 2nd crop corn. Last year 700,000 ha were planted to a 2nd crop soybeans which bumped the national production upwards. These will be the swing hectares that will determine if Brasil produces 96/97 mmt in 2016 or the national total rubs up against 100 mmt. El Nino will likely keep us on the edge of our seat during Christmas in one local or another. It will likely be too dry in one region and too wet in another. This may affect 1 or 2 million tons of potential again. Fertilizer sales are said to be 3-4% lower than last year. This is odd since area is said to increase by 3%+ this year again. Could this affect productivity at the end of the day? Intacta II soybean area will likely be 35-40% of the total area in Brasil. These varieties have been yielding very well the previous two seasons. This technology is increasing the trend line yields in Parana and Mato Grosso. Instead of 52 sacs per ha, the average is now closer to 55 sacs per ha. Newsletter subscribers and VIP clients will be the first to know as current events unfold this crop year. Drop me a note if you have any questions. Kory

Dollar 3.45, 25 days until planting, saved seed and planting soy on the moon

Greetings from warm and sunny Brasil....... We are about 25 days from the start of the 2016 planting season. Some corn is being planted in Parana as we speak. The Dollar:Real is trading in the 3.45 area. It seems surreal even for me for type the number. When the dollar was 1.55:1 back in 2012, I told myself that if the dollar gets back to 3:1, I will ____________ fill in the blank. Well here we are. The Brasil gov't wasted so much time and money trying to control the currency back in 2013 and 2014. The illusion of 2:1 and trying to keep inflation under control was 100% political. What will happen to President Dilma Rousseff? I do not know. If I were Brasilian, I would burn Brasilia to the ground and start over. This sounds like terrorist activity. I am not. This leaves us with the more rational option of hoping aliens attack Brasilia first and take the PT party back with them from where ever they came from. They surely are not from Earth. The one thing I do know is that, in the short term, the more chaos there is economically and politically, the better it is for the Brasilian soybean producer. Today the dollar is trading at levels seen back in 2003. But that is only half the story. If one factors in the inflation of the dollar over 12 years, the Real should be trading 4.88:1. I will make one prediction. If the dollar trades 4.88:1 in 2016, we will see Brazilians co-venture with Elon Musk and Space X and the first soybean seeds will be transported to the moon for planting. The question will then be: Does Monsanto have royalty rights on the moon? What if it was saved seed? Does the lunar market prefer Non-GMO or GMO soy? So many new questions arise when the dollar hits 4.88:1 !!!!!!!!!! The 6-10 day forecast shows rains starting to form in western Mato Grosso. This bodes wells for early planting. The big issue to be watching in coming months is how Monsanto and farmers deal with the potential for 7.5% discount at point of sale for saved seed royalties. I will take calls privately by appointment only in the coming months. It is a sensitive subject and will have a political solution in the end. I am working on September newsletter and I will feature stats from the amount of soybeans moving north through the Arco-Norte region of ports. There will be wall to wall soybeans in 2016 in Brasil. We need to keep an eye out for a droughty pattern but as per last year's results, as long as it rains by the end of January, in most cases the crop can be saved. Fertilizer sales remain slow and late to be delivered. Drop me a note it any questions. Kory agturbobrazil@yahoo.com

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.

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

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

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)

http://www.brazilintl.com/states/matogrosso/korymelby/kory_newsletter/km_newletter.htm

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