Friday, July 28, 2017

August 1 blog

Happy August

I cannot believe how fast this year is progressing.

Thank you for all the consults this month and annual renewals.
Always appreciated.

I sent out in my April newsletter on how I expected the year to play
out as per soybean prices. So far, we are tracking well.
Drop me a note if you would like a free copy of the April
newsletter. I will send you a copy.

I am expecting cool air to drop down early in September for Northern plains.
My guess is we will put in a low in early September and then
start to rally again. More on this in future newsletters.

The political environment in Brazil continues drive a normal
person batty. The leaked tape of JBS owner recording
the current President was something right out of a 007 movie.
But, since no legal action has been taken as of today, it seems more
like an episode of twilight zone.

I then turn my attention to USA and I want to scream at times.
Six months have gone by and what? What is it I am am supposed to
be impressed with?

I tend to return to my own little world of soybeans and corn. Even though
they have seen better times, at least they seem more rational and predictable.

The USA drought has taken the top end off the crop this year. By no means
a disaster, but at least gives us something to base off of going forward.

The Brazilian farmer has zero incentive to produce 1st crop corn this
next season. This means more soybeans. Maybe a lot more beans.

If we use a five year average for BR soybean yields, 2018 crop will
look much like last year. If we use last year's record yield, then we
will have a soybean crop several million ton larger than the current USA
crop. CME, China and BR will have to deal with this new reality.
We are trading beans in Chicago that are being produced south
of equator and headed to China. It will be more and more difficult to
square the circle with logistics always lagging the production surges.

It is looking like an early start to rainy season. It has been unusually
cool for this time of year. Last year we were baking in dry heat and
this year Brazilians are wearing jackets.

Elections are scheduled for Oct 2018 for Brazil. The field is wide open.
The BRL FX remains mysteriously strong given all the upheaval of late.

Outside of the ag economy, the REAL economy of Brazil really sucks.
The amount of small businsses that have closed their doors in city's
like Goiania is surreal. Many of the younger generation have given up.
Just as well leave the country is the motto.

Much talk of railroads in recent weeks. Let us hope so.
With a big 2018 soybean crop followed by a large 2nd crop
corn again, Brazil continues to bury herself in commodities.

Brazil is playing a dangerous game longer term with her corn production.
The 1st crop continues to disappear and is replaced by soybeans.
The 2nd crop area continues to expand fueled by rotation needs and
goverment minimum pricing. An early frost in southern states combined
with an early dry spell in Cerrado states will spell disaster for domestic corn
production in the future. There will be no cushion to work with- only sharp
increases in domestic corn prices to cull demand quickly. Not an optimal
business model.

For the next 12 months, there is no shortage of corn anywhere.

There will be a fair amount of shifting away from GMO soy and corn seeds
in 2018. A nice R$ 10-12 per bag premium to grow non GMO soybeans.
And the technology is breaking down as per bug resistence for the GMO
corn seeds. The price for seed does not compensate for the advertised benefits.
Back to a basic RR corn and apply insecticides as needed.

Cut the seed costs will be the mantra.

I will be in Mato Grosso next week. I will send out updates as I learn more.

I will attend the inauguration of the 1st 100% corn ethanol mill in Mato Grosso.

Much talk of amending production to increase the amount of flex-mill capability
of the existing sugarcane mills in Mato Grosso. The idea is to produce
ethanol from corn during sugarcane off season. There are three mills that do this
on a small scale so far.

Happy harvesting in Northern hemisphere.

Planting will likely begin early this year and on time circa Sept 15th for
Southern hemisphere.


Keywords: newsletter, politics, Mato Grosso, ethanol, railroads, GMO seeds