Sunday, September 13, 2015

Sept 14 blog update

Soybeans are being planted in Parana state. Mato Grosso remains dry but soybeans are being planted under pivots. Conab will come out with initial crop size forecasts for 2016 Oct 9th. The Dollar is now 3.88:1. 4:1 seems to be around the corner. Last week I sent out a forecast to subscribers that a Dollar/Real FX of 5.80:1 in the next 18 months is possible. I was in shock reading the predictions. It seems other worldly. The FX at 1.60:1 twice, back in 2008 and 2012, seems so rediculous in hindsight. The Brazilian farmer has already sold a good portion of the 2016 crop. 30-40% is common. The rest he will likely use as a currency hedge. It is better to have soybeans or dollars than Reais in a bank. This is the mantra. People with money have taken their money out of the banks and bought livestock, land or apartments as a way to preserve wealth. This makes it harder for banks to make new loans. Fertilizer deliveries are running way behind schedule. Some fertilizer dealers are not giving quotes. They want the farmers to beg. The farmer will pay anything for fertilizer at the last minute in October or November. We know there will be expanded area of soy. We still do not know if a 2nd crop of soybeans will be allowed in some states. We know crop inputs will decrease this year. Could this affect final productivity? When one reverse calculates current soybean prices back to dollar 2.50:1, today soybean prices in Brazil feel like US$ 13.00/bushel in Chicago. Soybeans look better than corn, edible beans, cotton, rice and sugarcane at the moment. Soybeans are equal to 100 dollar bills anytime. All the other commodities require a waiting period to get paid. What do you expect a Brazilian farmer to do? Soybean producers in USA and Argentina need to be alert for a Dollar/Real greater than 4:1. Above 4:1, no one can compete with Brazilian farmer with regards to exports at port. At 5:1, things get even more interesting. One could assume Brazil could compete all the way down to US$ 6 dollars per bushel in Chicago. The caveat will be the imported products such as fertilizer, chemicals and Ag machinery pieces. Key items I will be watching in the next 90 days are saved seed royalties and how they plan to collect them, 2nd crop soy area- if any, soy no-plant dates for 2016, and delayed fertilizer delivers and thier impact on final yields. Thank you all for your interest in the newsletter of late and the phone call consults. I appreciate your confidence. Abracos Kory