Sunday, March 3, 2019

March 3 blog update

Happy Carnival

Brazil is in party mode for a few days.

People seem to forget the dam collapse just a month or
so ago. The situation was handled terribly.
Many still unaccounted for.

The rains have returned and thus the soybean crop
has stabilized. I am at 114 mmt. Others are thinking
115+ and yet others are down in 106-108 area.
We need to keep in mind that the potential was 125
back in December. Therefore, even a 115 number
is 10 mmt off the highs. That is still 360 million
bushel gone from the peak. The drought was significant
in various regions. Historically, it has to be really bad
to lose more than 15 mmt. Those that were thinking as
low as 101 mmt in January were seaking headlines.
I outlined all of this in newsletters and flash updates.

Yields out of Argentina are fantastic. Rain makes
grain. Look for soy and corn numbers to increase even
more down there.

There has been flooding in Mato Grosso and Para state.
This means the early planted 2nd crop corn will be beyond
fantastic this year. Early corn is ready to tassle. With rains
of up to 8 inches in last two weeks, much of the crop
is already in the bag.

Brazil 2nd crop corn

65 mmt crop is already in the bag
70 mmt is likely
75 mmt is not outside the realm of possiblity
80 mmt is being whispered about by some.

80+ 25 = 105 total   maybe ???

Cotton area expanded by 33% so that has inhibited corn's
ability to shoot the moon. Bottom line: there will be
plenty of corn.

With the excess rains, BR 163 has turned into a 70 km long
truck stop. Some trucks have been sitting for 5 days.
No food and all they have to drink is rain water.
Tempers are flaring now.

The military did pave 45 km last season of the last
90 km to get to Mirituba. From Mirituba to Santarem,
there are a few more KM that need to get covered.
They stopped because of lack of material.

Three weeks ago, the new Minister of Logistics went for
a truck ride himself to see the conditions. The drought
was still intact so he was still able to move.

As the truckers say, come out here now, take another
ride and sit with us out here for a week with no food.

The Mayor of Novo Progresso is pleading with Mato Grosso
grain shippers to stop sending trucks. There is no room.
3000+ trucks are stopped.

It is 70 reais a ton cheaper to send soy north compared to
Santos via rail. Either way the grain buyers lose money.

Demurrage going north or higher freight going south.

Farmers are holding on to 2nd half of soybean crop.
They want higher prices.

Port premiums rallied last week and then backed off.
End of trade war has grain buyers worried.
Port premiums might need to go negative in order
to compete with USA and China bids.

I will be going to Mato Grosso March 25th for a week.
The BR 163 Show Safra will be record large again.
I am curious to see the pace of equipment sales
given the crop came in a bit light and cost of
production is on the way up.
Dollar FX  3.75:1

In early April, I will send out a special newsletter
as per my trip. Drop me a note to subscribe.

Thank you for all the kind notes in recent weeks.
Much appreciated.


Key words:  Mato Grosso soy, BR 163, trucks, rains,
Show Safra 163, 2nd crop corn size

Sunday, February 10, 2019

Feb 10th blog update

Back to trend line yields

Harvest is zipping along in Brazil. The hot December 

and January took its toll on some fields. The general 
commentary from producers are that yields are 
coming in 10% less than last year's record productivity.

The USDA is still too high as per Brazil 2019 production.

But they are a lagging indicator especially when the 
government was not working for a month.

2018 was a late planting year but ideal weather made for a 

record crop.
2019 was ideal planting date but late season stress mixed with 
an above average amount of early season soybeans nipped 
them in the 8th and 9th innings. More than likely the 2nd 
crop corn and cotton will make up for the shortfall of the 
first crop.

Bottom line is that from the drought of three years ago, 

the sudden rise in soybean production from 95 mmt to 
122 mmt was the outlier not the norm.

The Brazil stock market has been trading at record highs. 

The Dollar has been weaker in Brazil until this past week. 
The dam break was not good for Vale. President Bolsonaro 
is back in the hospital for a follow up procedure due to his 
stabbing during the campaign. The fear is that this
will delay negotiations on the social security reform bill. 
Brazil has ambitious ideas to try and cut ONE TRILLION REAIS from budget over the next 10 years. This will be a heavy lift.

The big news in the media this past week is the continued talk that

Brazil will overturn the limit on foreign land ownership that was
implemented under Lula to help Dilma back in August of 2010.
In March, it will have been 8.6 years since this policy shift.
Cyclically, this is interesting as we might be on the cusp of another
policy shift. With the Dollar FX at 3.70:1, this does make Brazil assets
seem cheap again to foreigners.

The Bolsonaro position is that Americans are welcome. Brazil is also waving the need for tourist visa for Americans this summer. 
From June 1 through September 18, tourists from the US, Australia, Canada and Japan will be able to enter Brazil for up to 90 days without a visa.

Mato Grosso implemented an updated FETHAB witholding tax for soybeans,corn, cotton, and cattle on Feb 1. Farmers are not happy with quick application of a new tax that actually seems like double taxation for many on the same hectare.

There is also much banter in media that the "Grain Railroad" will be approved in 2019. This the rail from Sinop to Mirituba, Para. The Minister of Logistics took a ride in a soybean semi-truck on BR 163 to see the condition for himself.
He promised that BR 163 paving will be completed in 2019. This is a huge factor for 2020 grain movement to the north. 

The FS energy corn ethanol mill at Lucas do Rio Verde has completed its doubling of capacity. They should be at 400 million liters per year now or the 100 million gallon size. Construction has started on the 2nd mill at Sorriso. This will also be a big one.

Impasa mill at Sinop was approved for increased warehouse capacity at thier site.
They are now building 3 - 200,000 ton warehouse to store corn. That is 24 million
bushel of onsite corn storage. Mato Grosso corn in the future will stay in the state and be made into fuel and DDG's. It is truly a paradigm shift. 
Mato Grosso will likely produce 1.1 billion bushel of corn this season again. 

The Ag shows have started with Show Rural in Parana this past week.
I am eager to hear results.

The Show Safra 163 in Lucas do Rio Verde is the last week of March. It will be record large. I know CASE IH Brazil has sent a record large 
order  to Steiger Tractor in Fargo, ND for 2019 for their 4 wheel drive articulated tractors. The modernization of the BR fleet continues. 

Producers are very happy with the new administration. However, the late season drought and the application of new taxes has a catch 22 feel about it. 

The vicissitudes for the Brazilian producer continue. It is an occupational hazard. There are so many positives on the horizon, but there always seems to be a counter force that keeps things in check. 

Keywords: BR soy crop, Grain Railroad, Fethab, Budget,Corn ethanol, Case IH

Sunday, January 13, 2019

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.

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

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

Monday, December 24, 2018

Dec 24th update

Parana received some rains over the weekend.

This will help later planted soybeans. Early soybeans
have been hurt by three weeks of drought.

I think the new mega crop for Brazil is overstated.
I think we have a crop size similar to last year on deck.

It would take a dry January and Feb in Northeast to subtract
more from current potential.

9.71 on the SX19 contract proves to be resistence for now.
If one looks at historical charts, it makes sense.

Dollar remains at the 3.90 level. This seems more to do
with international events than domestic.

Brazil seems like it will ship out 84 mmt in 2018.
If so, 2018 crop was likely larger than published.
Some of the extra came from Paraguay.

The crushing industry had to submit to the export bids
this year and throttle back.
This adds pressure to chicken and hog sectors in Brazil
as per feed rations.

At the moment Brazil and USA are at par for new crop
export bids.

With the declining hog herd in China, I think if China
buys circa 5 mmt of soybeans from USA, that stabilizes their situation for

Brazil will have exportable supplies in two weeks with early burn down
of the 90-95 day soybeans that were planted. This was a mistake
for many, but they will make it back with early planted 2nd corn.

So long as Brazil has 80 mmt to export in 2019, China really does not
need anymore beans until Oct/Nov/Dec 2019. Remember, Argentina
will rebound 15 mmt+ this season also.

What if??

Yes other countries will pick up some of the slack. But China was a 32 mmt
customer for USA, if that drops to 5 mmt, that leaves 27 mmt that needs a 
new home. Let us say 7 mmt finds a new home.

20 mmt = 740 million bushel needs to be carried forward.......

If we are optimistic and USA and China pull off a mega deal and
China buys 20 mmt this spring, then 20 mmt will be added to
Brazil balance sheet for 2020.

In the end, someone is going to be holding 20 mmt?? Who will it be?

The American soybean payment could also be looked at as a nice storage
payment like in the 80s - paid to store grain for years. But it looks like
this is a one off payment. A farmer could take a loan on the beans
this winter which would get him to Sept 2019 before delivery.

SX19 needs to tell American farmer to tap the brakes.

If USA farmer does not, then March 2020 contract needs to tell
Brazil farmer to tap the brakes?
Brazil farmer at moment has 3.90:1 dollar working in his favor.
If that drops back to 3.30, Brazil farmer no longer has life
insurance policy for 2020.

It's going to get interesting. There are going to be tears somewhere.
Who will it be?

There is a tsunami of soybeans out there. If no deal, American farmer
is the last one standing when the music stops with no chair to sit in.

If there is a deal, then it will be the Brazilian farmer standing with no
chair to sit in this year at Carnival when the Samba stops.
Carnival is late this year. March 1-5th  wink wink

I watched a Netflix series this weekend. It was called Pine Gap.
As in Pine Gap, Australia. The secret USA/Australian base
that monitors communication and movements globally.

In the program there was a Chinese businessman trying to do
a natural gas deal in Alice Springs. He made a comment in the last
episode that made me chuckle.

"In the USA, you teach your children to play Chess. The winner is who
can get the others King as quickly as possible."

"In China, we play a game called GOL. The winner is who can amass
the most territory and keep it the longest."

I thought this was an appropriate analogy for the current trade war.
Of course there are many things more important than soybeans at the

I sometimes wonder if Brazil and USA even realize the game they are in?

However, I think China has USA and Brazil by the short hairs going forward.
Both countries have become too dependant on China- each in their own way.
China is going to have cheap beans one way or another for the foreseeable

Brazil has a 120 mmt crop. Maybe a bit more.
Even with a late season drought and a drop to 115 mmt, Chicago will
not care.

Ideally, USA and Brazil would each drop 10 mmt each of soy for 2019/2020,
but I fear both are too stubborn to do so.

Happy New Year


Keywords:  Soy, trade war, USA, China, Pine Gap, drought, soy econ

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

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,


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


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.


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


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!!!


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