Friday, September 15, 2017

Sept 15 blog update

Hot and Dry and more of it.

It looks like another 3 to 4 weeks of hot and dry.
No one is planting.

This year looks to be different than last year.

For Brazil, planting soy in October does not mean reduced
production potential.

Brazil can still crank out 110 mmt even if soybeans are
planted later.

The 2nd crop corn becomes the risk.

Carryover stocks of soy and corn in Brazil as of January 1, 2018 will
be much higher than in recent years.

As per soybean market action, I am now a bull.
I have outlined the reasons why in recent newsletters.

One thing we need to watch is that if this droughty pattern continues,
will be export loadings in January be affected?

Brazil will have carryover stocks to load ships in Janaury if the
market needs them.  But basis and or futures will have to pry
them out of farmers hands.

A possible bullish outcome of this weather pattern would be
something like this:

We plant late which means February harvest of soybeans.
Maybe February is wet?

Chinese increases year end buying more soy out of USA which
pulls down perceived carryover stocks for 2018.

For some reason or another Brazil comes in 5 mmt light
on her potential.

Chronic wetness causes problems for Argentina wheat and
corn planting.

Does that mean Argentina increases planted area of soybeans?

It is hard to bet against Argentina. Last yer we saw pictures of
flooding and there was talk of a 50 mmt soybean crop. In the end
the Argentina crop was 58 mmt and 40 mmt of corn.
What problem?  What flooding?

This year the flooding is much earlier. Will that mean the opposite
result this year?  Wet start and a dry end to the year?

The perfect storm is setting up for higher prices?

Way to early to be killing SA crops. I will wait until
January before I get to concerned on the loss of potentials.

But, I think we have higher prices going into the end of year.

The markets ability to shake off the last USDA report tells me
the lows are likely in.

I don't think the market believes the crop size and yields.

Another 30 days of dry in Brazil, the soy market needs to
add in some risk premium again.

We can't just assume a 115 mmt is in the bag for 2018-
not just yet .....


keywords: Brazil SA weather, late planting, crop size potential, bullish