Sunday, July 26, 2015

Dollar 3.30, El nino, and more soy

Dollar is at best levels since 2003. 3.30:1 is a gift from Heaven for Brasilian farmers. Cost of production will be at a record high for soybean growers this next season. They will need every "Real" they can get, but 3.30 makes this a whole lot easier than 45 days ago. Reports are for up to a 4% increase in soybean area on the 1st main crop. This just might happen. Fertilizer sales are running 10% behind last year´s pace. This needs to be watched as we go into planting. El nino? What does that mean for Brazil? I do not know. Does this automatically mean a 96 mmt soybean crop without any effort? Or does it mean there could be a 10 million ton hiccup along the way and we keep this interesting? Last year Brazil planted 700,000 ha of double crop soybeans. (soy behind soy) This gave us 2 million bonus tons late in the season. Talk is for widening the no-plant window for 2nd crop soy in 2016. If this happens, there will be less 2nd crop soy. Corn crop is fantastic. Prices are about R$1.80/bushel in Mato Grosso. They will make a little money on the corn given the above average yields. President Dilma Rousseff´s approval rating has dropped to 7.7% positive. More and more demands for her resignation or impeachment. High level corporate execs are being arrested and thrown in jail for corruption through the years. The PT party has a nasty odor in Brasil at the moment. Every week we get closer to the top of the corruption pyramid. The cost of food, electricity, services, "shaving cream", and a host of other products are getting out of control. Inflation is moving into 3rd gear now. When will the turbo kick in? The poor are getting worried. Lack of jobs with unemployment up 2% this past year. I feel that it is actually more than that. More and more "contacts" of mine are asking for a little help. Kory, could you loan me a little money. I am short this month. I am happy to buy some bread or a pack of cigarettes for someone. But now a couple of friends want me to deposit money in their account. I have not experienced this for a long time in Brazil. I know things are getting tight. For the near term, I am watching the potential for cool air to descend into the American Midwest in late August. This could provide fuel for the markets later this fall. If so, the South American producers will be grateful.