Thursday, October 22, 2015

Oct 22 update The heat is on

I now know what it feels like to live in Baghdad. It seems like from time to time we see remote areas of the planet with heat readings of 150 degrees F. That has been the heat index in the sun for many spots in the Brazilian Cerrado this past week. Sun, no clouds, no wind- pure heat!!!! Last year at this time we were having much the same weather. Rains started about Oct 20th and saved the day. Last year the loss potential from dry weather was about a million tons. Western Mato Grosso and SW Goias were hardest hit with early planted soybeans. This year we are off to a slow start in Mato Grosso with replanting very likely in some locations. The risk of soybean seed burnout is very high. Goias has not planted anything yet. A few fields might be planted, but they are under pivots. At this time it is futile to forecast Brazil soy crop potential. At this time, a 100 million ton crop is likely. But if we are still dealing with erratic weather on November 15th, we can start subtracting from that number. Last year the rains came in the nick of time to save soybean potential in the Bahia and Minas Gerais region. Tocantins, a frontier state, had record soybean yields. They were the "Garden of Eden" last year. This year feels different to me. The past two weeks records have been broken going back 75 years in some locals. Mato Grosso has had soybeans now for about 30 years. In the heart of Mato Grosso, soybeans are 20 years old. How do we deal with 75 year old records when the crop we are trying to forecast has a 20 year history? We all know we don´t kill soybeans in June in USA. We kill them in August. This year was a perfect example. From June 15th to July 15th, we were killing the USA crop. In the end, damn nice crop. It is much the same here, we will kill the Brazil crop in January- if it is going to happen. We are pushing the bulk of the harvest into February now. February better be nice, or we will have a real mess. It better not rain for two weeks straight in February, or everyone will lose their minds. I read today that some are expecting a 13% increase in 2nd crop corn area. I don´t see it. They will be damn lucky to maintain last year´s area. I will know more in November after my Mato Grosso trip. I cannot help but think to myself- what if this year is 180 degrees different than last season? We could knock 10 million ton off the soybean crop and the 2nd crop corn could be a disaster....... Am I forecasting this today? NO..... But, there are things in play today that are out of everyone´s control and the calender will dictate what can and can´t be done by March 5th. I expect 1 million ha of 2nd crop soybeans up from last season´s 680,000 ha. If 1st crop soy is nipped by drought, my guess is that many will plant soy again and skip 2nd corn. This is the last year for them to do a soy/soy, it just might happen, especially with FX in their favor. Lots of variables as of today. I can build a soy story ranging from 90 mmt to 102 mmt tons, depending on the soybean gods. Six percent decrease in fertilizer sales, expected area to increase by 3%, late planting, insects, poor germination, strong FX, and murphy´s law all come into play for the next 90 days. Let us see if Monsanto can collect royalties on saved seed in February? What was looking like a boring season back in June is rapidily becoming "Thriller 2.0". Subscribers will be the first to know. Thank you all, Kory

Friday, October 9, 2015

Oct 10 update

The start of soybean planting is off to a slow start. The center-west region of Brazil remains hot and dry. It looks like a repeat of last year. Late planting concerns will be the hot topic the next couple weeks. Conab report came out with a 100-102 million metric ton soybean crop for 2016. With 2016 the last year farmers can legally plant soy/soy, they are probably correct with their estimate. 2017 will start the no planting of a 2nd crop of soybeans from January through September each year. The dollar has traded 4.25:1 two weeks ago and as I type this the dollar is 3.75:1. If we drop back to 3.50:1, farmers will start to complain they will lose money in 2016. For those of you that have come down on a tour in recent years, you know how much things cost when the dollar was below 2:1. If anyone is interested in a winter tour this season, we could probably add in a couple nights in Rio for the same prices as three years ago. It depends on the group size obviously. The bottom line is that US$ 5000 will get a you a little more bang for your buck than three years ago. A few days in Mato Grosso with either a Foz do Iguacu or Rio add on to your tour. We are likely in a 3.80-4.20:1 trading range with the Dollar/Real in the coming months.