Wednesday, April 18, 2018

April 18 blog update

Exciting month eh?

USDA crop report, and China tariff talks gave the soybean market
a heart attack  March 29, April 2 and 4th.

Argentine soy crop seems to be 18 mmt light.

Where would we be trading today with a bumper ARG crop?

I find it funny that all those that were bearish soybeans are now
bulls nibbling on short grass.

As I have told subscribers since last fall, I am a bull with small
testicles. We are headed higher, the catalyst is the unknown today.
This was written back in Sept.

For the Brazil farmer, this is like a dream.

Record soybean crop, port bids going thru the roof all at peak
harvest. Can this be true?

The crushers are bidding against the Chinese at same time.
This is like a once in a lifetime event.

As I look back at the growing season, I too am impressed at how the
crop size shook out.

Brazil expanded 1 million hectares: 40% from 1st crop corn area reduction and
60% came from new areas.

Brazil the last two years has increased soy production from 95 mmt to 114 mmt
to maybe 117-119 mmt at the end of the day.
They did this with not so great soy economics.
Profitable yes, but no adrenaline rush to feed the animal spirits.

Three years ago was the drought- that distorted things a bit.
Now we have had two back back ideal growing seasons and productivity
was in overdrive. Much of that was due to new varieties and Intacta technology.

What is going through my mind for 2019 is that if we added 20 million tons
of soybeans in two crop cycles post drought with so-so soybean econ, what
can Brazil do now that animal spirits are well fed by rampant demand for
Brazil soy from crushers and China at same time and the USA shooting itself
in the foot on a weekly basis?

You talk about Optimism !!!! The cup overfloweth here at the moment.
At least in the ag economy.....

A couple of items that need to be mentioned:

Even though Parana and RGDS expanded soy area in 2018, their
productivity was decreased and they actually produced a bit less than
year before.

The Presidential elections are up in the air here. There is a caution
in the air when it comes to investing in economy here.

The World Cup starts in June and will disrupt Brasilians attention.

The dollar is at 3.40:1 which is better than we expected for this time frame.

A new President that is left leaning would be bad for Brazil econ but
good for Brazil ag.

A centerist or right leaning candidate would be good for Brazil's economic
future, but FX likely to drop to 3:1 and thus take a little of the testosterone
out of the Brazilian ag bull.

The big item that favors huge soybean area expansion is that fact that producers
are trading for 2019 crop inputs now at good ratios. There is enough time to
lock in a profit and yet prep land for 2019 planting.

This tariff talk and high premiums at port came at the right time for Brazil
farmer to react with gusto.

Last week, the Rio Verde, Goias ag show reported an increase in business
of 46% over last year and a 90% increase over two years ago.
This tells me that farmers are buying new toys.

I will be at big ag show in Sao Paulo state at the end of the month.

Rains keep coming for 2nd crop corn. Even though it was planted late,
the Mato Grosso 2nd crop corn is about 40% made at the moment.

The next 30% needs a couple more weeks of rain.

That last 30% needs to see rains into May to see decent production.
Subsoil moisture is good at moment.

I will update subscribers as things become clearer.

The bottom line to all of this is that Brazil will likely surge in planted
area of soybeans for 2019, but can she maintain the lucky streak of
good weather from the Amazon to RGDS and all points in between?

777  one more time?



keywords: Chinese soy tariff, Brazil soy expansion, elections, 2nd crop corn, machinery sales


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