Friday, May 2, 2014

Bigger Brazil soy crop

Informa came out today with a revised Brazilian soybean crop at 87.4 MMT. + 650,000 tons
All I can say is Amen.

I have been saying for weeks that I thought the earlier estimates of 84-85 mmt
by some were too low.

We are still looking for more data as per how many hectares of 2nd crop soybeans
have been planted. The ranges are from 200,000 ha to 745,000 ha.
My opinion is more to the latter.

I think next week Conab will increase their estimate of soy crop also.
They went too far too fast back in March.

I think back to short crop years in the USA. The markets lost their minds
when we heard of 1 or 2 boats were on their way to Wilmington, DE from
South America. Boom soybeans down 30 cents.

Now we have a situation of just in time soybeans headed north. We are now looking at 20+ boats of soybeans and meal. Rumors of 30+ boats by the end of the day(i.e. summer 2014).

75 to 90 million bushels of imports of soy equivalents from Canada, Brazil and Argentina are
now possible and likely. Say that three times and click your heals together Dorothy, this
ain´t Kansas anymore!!!!!

What used to be the bare bones minimum for USA soy supply carryover is now coming
from the Southern Hemisphere!!!

This is a paradigm shift. Chicago and cash bids now need to adjust themselves to incentivize
imports from SA via direct bookings or China cancellations.

We are also doing this with ethanol.

We read about the Chinese being expert traders. I sometimes wonder as we look at how the
last 6 months has played out. China bought every last soybean they could from USA. At the same
time double booking Brazilian soybeans. Brazil ports performed perfectly this year and we end up drowning
the super duper Chinese ports and crushers. Sure looks like a case where the right hand does not know what the left hand is doing.

The end result is soybeans being shipped backwards up the Mississippi to get to the crushers
for just in time crushing. Crazy as a jelly bean policy.

In closing we need to give credit where credit is due. The Bunge/Maggi JV that built a dry port
in Para state and between trucks and barges got soybeans to the mouth of the Amazon to load
a Panamax this week. Well done.

We will see more and more of this in the coming years. Mato Grosso soy and corn headed
north now. Cargill blazed the trail 10 years ago at Santarem. They endured many protests
and judicial injunctions. Now Bunge and Maggi have added to the options. I expect more
in coming years. Mato Grosso soybeans must go north. It is only logical.

More roads and railroads will mean easier logistics to China, Europe, and USA on the years
with sub par soy production. Emergency soybeans to the rescue. They will be a hop, skip and a jump away.

Twenty years ago with NAFTA etc, grain going across country borders was considered a sin by many.

Today, it is normal operating procedure.

Imagine another 20 years ...........

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