Sunday, September 21, 2014

Election in two weeks

The dollar is trading 2:38:1-  wow

President Dilma is campaigning on a platform "It could get worse, if you don´t vote for me!!"

The Twilight zone continues.

The election will be a defining moment for Brazil and specifically Brazil Ag.

If Dilma is re-elected, we will see a continuation of the status quo.
Stagflation:  Inflation with no growth

If Marina is elected, this could be good for a few sectors.
But I cringe to think of the paralysis in the Amazon regions.
I fear nothing will happen as per projects.

Soybean planting has started. Nice rains in Parana.
Farmers are fearful of their futures.

Mato Grosso is going with throttle up.
To where, we don´t know today.
We have US$ 7.00/bu soy locally out there.
It might be a situation where we are cooking with gas and burning wood.

or in other words:

We are dumping a lot of resources in the ground the next 90 days
and we might burn a lot of wood to dry wet soybeans the world
says we now have too much of.

Lots of questions in the next 2 to 5 weeks.

I sense more questions that answers. For everyone.
Rich, poor, middle class, land buyers, investors, speculators.

Now what?

Of my 13 years here, Brazil is the most nebulous I have ever seen her.

This could be two fold, Brazil is much more complex than 13 years ago.


I was blind and innocent 13 years ago, it all seemed so much simpler.
Ignorance is bliss?

I am less ignorant today?

I don´t know.

But sure am enjoying the show.

The one thing I do know with certainty, that if Brazil produces
95 mmt + of soybeans this year, they will wish on their tombstones that
they never did.

If only Brazil could have stand pat instead of expand.
God, I hope China is hungry. 72 mmt do I hear 75 mmt?
Going once, going twice, sold for ________________

Bidders number?


Friday, September 12, 2014

Twilight zone

I feel like I am in the Twilight zone this week.

USDA confirmed mega crop
Conab replaced the 500,000 tons of soy they took away in August
(net result: same as July report)
Soybean prices break into new lows
Multiple crop size estimates out of Brazil ranging from
94-98 mmt tons of soybeans for 2015
The dollar rallies to 2.35:1 on the likelihood that Dilma will
be re-elected and finish running the country into the ground
(This acts like a snorkel to help Brazilian farmer keep his head above water)
Soybean prices in Sorriso, MT are quoted at US$ 7.18/bushel.
(Satellite elevator receiving stations will likely have a 6 handle on price)
Brazil will increase Bio-diesel ratio to 7%
Brazil will increase ethanol blend to 27.5%
Conab held its 3rd corn auction this week and corn is hauling ass to
port to fill commitments  before USA crop comes online
Argentina is holding boatloads of old crop soy in silo bags
Brazil farmer is 11% sold new crop soy

What is wrong with this picture?  See previous blog post:

Everyone is hell bent to plant soybeans and lose money.
It´s like the Brazilian soybean farmer has been watching the Addam´s

The more money Gomez loses trading and growing soybeans
the hornier Morticia gets ???

2015 does not make sense under current dynamics.

I think everyone except maybe FC stone/Celeres is too optimistic this year.

It is a catch 22 scenario:

Farmers cut back on inputs and productivity goes down.
Low 90 mmt ton crop-  prices stabilize

Farmers shoot the moon(good weather) and we produce 98mmt.
Soybeans drop to 7 dollars in Chicago.

Blood in the streets everywhere...........

Either scenario is not optimum.

Conservative numbers will be my mantra in coming months

Sunday, September 7, 2014

Full speed ahead- into the black hole

The whole Brazil soybean expansion talk for the 2015 crop cycle reminds
me of an episode of Star Trek.

A scene where Captain Kirk is flying by the seat of his pants and
Spock is in the corner with a raised eyebrow saying that this action
is "highly unadvisable Captain."

Captain Kirk: "What is that up ahead?"
Spock: " It is a black hole Captain" (anecdotal reference to Brazil soybean expansion)
Captain Kirk: "Can we fly through it?"
Spock: " That would be highly unadvisable Captain."
Captain Kirk: "Scotty, can you give me warp 9?" (anecdotal reference to Brazil´s rate of expansion)
Scotty: " I can for a bit, but she likely come out the other side in pieces."
Captain Kirk: " Sulu, Warp 9 straight through middle."
Sulu: "Aye, Aye Captain"
Bones: "Are you bloody insane Jim? You gonna kill us all"
Spock: " Humans, highly illogical."

:Scene ends:

I sent out my September part II newsletter Saturday to subscribers.

I was trying to think of a colorful anecdotal reference to help describe the current situation
in Brazil with regards to soybean expansion.

Last night, I thought of an old Star Trek scene where Kirk risks everyone´s life,
"just because he can" type feeling.

The global soybean stocks will soon be back into balance and even increasing in size.
We have read many forecasts about how much Brazil will expand for the 2015 crop cycle.
The Ag minister is "guaranteeing 200 million tons" (soy,corn, rice, wheat, cotton seeds)
Lanworth says Brazil soy crop at 98 million tons  ???
Many reputable analysts are expecting a 1.5 milllion hectare soybean area surge-
on top of last years 2 million hectare surge.
USA has recently surged 8 million acres
Future soybean prices are telling us all to tap the brakes
But when I see and hear of many new areas that have been prepped in Mato
Grosso and elsewhere for 2015 soybeans, I feel like we are all headed into
a black hole and at very high velocity and no one is sounding the alarm bell
as to what it will look like on the other side.

Several years of 14,16, and even a glimpse of 18 dollar soybeans in Chicago
has been like a large dose of heroin to a farmer´s soybean glands.

Don´t worry, it will be ok, plant a little more..........  take another hit dude!!!!!

I am beginning to feel like Brazil is the starship Enterprise and if we go fast
enough through the black hole, it will be OK.

China will be there to pick up the pieces......

But what if the Chinese are really "Klingons" on the other side??!!!!!

If there was ever a year to hope for a drought somewhere, it is this one.
We need to whack 10 million tons off the South America production
potential, or look out below.

All I see are adequate to above normal rainfalls of late in Brazil and
Argentina. It is not looking "droughty" by any means.

Buckle up, we are going for a ride!!!!!

Wednesday, September 3, 2014

Corn ethanol mill for Mato Grosso

This project has been two years in the making.

Ground breaking should occur yet this year.

I think this mill will be the first of many for Mato Grosso.

With so many obstacles to investing in Brazil, it makes me
smile when I see success stories.

Good luck!!!!!