Friday, October 19, 2018

Oct 19 Blog update


Election #2 is Oct 28th. It is not proper for a foreigner to comment on
BR elections, therefore, I will wait until later to comment on new President.

The recent polls show a  20 point lead by one of the candidates and I believe
that is correct given round 1 election results.

2019 is a new day for Brazil. The question is will Brazil change or
will it be the same scenario with new faces?

I think I will stick to what I am good at - soy, corn, and some
infastructure comments.

Soy planting is off to a great start. 30%+ planted for Mato Grosso.
Rains are good in central part of country and 10 day forecast looks good.

All of this bodes well for early harvest and ideal planting of 2nd crop.
Brazil has had two years of back to back of high productivity. This is what has
pushed us from 100 mmt to 120 mmt.

Brazil is on deck to use record amounts of fertilizer. This also bodes
well for planted area and productivity.

95 day soy will be ready Jan 1 in Parana and Paraguay. Mato Grosso
shortly thereafter.

Ports will have new crop beans by late Jan.

2nd crop corn will go in during the ideal window.
Much different than last year.

Brazil should produce 115-125 mmt of soybeans.
115 mmt if we have lower productivity due to lack of sunlight or
some such event.
If we increased more than 1 million hectares with high productivity,
we will be closer to 125 mmt next April.

I expect 2nd crop corn to be a record and total corn at or near
100 mmt in 2019.

The new administration has many challenges in early 2019.
I hope they can break some ground on some new ag projects
in 2019. It has been a three year holding pattern.

The new president to be is pro-Chinese infrastrutcure investments
such as railroads. He is, however, anti-Chinese land ownership.
The new president to be is very pro-American. 
Welcome Welcome with open arms.

Clients of mine have done very well with owning Rumo Railroad
stock the past year. Right place and right time. (truckers strike was rail positive)

Ethanol demand is also running at record levels.

The sugarcane industry continues to struggle with lack of
reinvestment. The future is still unclear. Renew-Bio is still
in project phase.

Corn ethanol production and plant expansion continues
in Mato Grosso. It continues to be the shining star in Brazil.
Clients continue to expand mills.

Recent pull back in BRL FX from 4.20 to 3.70 has sudued soybean and corn
prices domestically.

So long as the truckers do not get out of hand during harvest, Brazil
is looking at fantastic start to 2019, nice port premiums due to trade war,
rampant Chinese soy demand, and FX in the mid 3 to 4 handle range.
Figure 3.50 going forward.

Machinery sales, ag shows, new projects should all be on the radar
in early 2019.

Brazil has closed out this 16 year political experiment and this
multi-volume set of history books will be studied for decades of what went right
and what went wrong.

A new special edition set of books will start to be written Jan 1, 2019.
It could be the best of times and then again we could be going back
in time to the mid-1960s as some intellectuals much older and wiser
than me have opined about in recent Brazil columns.

Many in the country are enthusiastic to start a new chapter in Brazil.
Others are cringing at this new reality.

I do not know.

I will ride the wave as to where it takes me. The odds have been against
me since 2003. I am still here. Many others have come and Brazil spit
them out and sent them packing. Brazil burped with Gringo acid -reflux
and sent them home. Bascially, Mama Brazil said you ain't ready yet,
come back when you are.

The next cycle is likely to start now. Brazil ag is strong. So long as the
new administration does not do anything stupid or too restrictive,
there will likey be a new wave of pioneers to try their luck.

Less bureaucracy, less taxes, less tariffs, a more open economy.

Dollar 3.50:1 is a lot more leverage than back when we were 1.60:1 back
in 2012.

Buy when everyone else wants to sell.

Sell when everyone else wants to buy.

The 2020's should keep us all on our feet.


Key words: Soy, corn, 2019 BR admin, foreigners, FX, New day for Brazil

* Drop me a note if interested in newsletters or VIP services.
I will likely increase the prices starting in 2019.