Tuesday, June 16, 2015

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

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)

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.