Sunday, July 14, 2019

July 15 Looking ahead to 2020

Corn harvest is zipping along. Mato Grosso planted
a record area and also a record yield this year - 31 mmt is
the forecast.

One corn ethanol mill is running at full throttle and
pumping out 1.5 million liters per day from corn.

Two more will fire up in coming months. Sinop
in August and Sorriso by Feb 1, 2020.

The Nova Mutum mill project is on hold at moment.
Mato Grosso is pondering the elimination of ethanol
tax incentives within the sate. This is a silly move on their
part, but we will know the status by July 31. The incentives
need to be extended by then. I think they will find an alternative
to this, if they do not, that will choke off the corn ethanol expansion
within the state.

With the late planting and potential crop losses in USA, corn
prices have been quit firm the past month. Many farmers are
selling  2020 crop too.

Conab finished out the soybean crop at 115 mmt. Private
forecasts and USDA are at 117-118 for this past year.
I said back in late Janaury, I expect to drop to 115 and
then stand pat. Given the dry weather at the time, I dropped
to 114. Many others were thinking  101 to 108 to 110.
Given a crop size potential in the 123 to 125 mmt at the time,
we need to becareful with these lowball numbers. Rule of
thumb is that when a region of Brazil is going through
a crop loss, it is difficult to lose more than 10 mmt in any
given year. Another region tends to compensate and that
is what happened this year. RGDS came in at  19 mmt.
Who wudda thunk?  Impressive gains from previous
drought where they only produced  6.8 mmt.

If corn prices start to rock and roll in the coming weeks,
it is the southern states that can reverse trend and switch
from soy to 1st crop corn. The July newsletter outlined
that potential.

Land clearing and expansion is occuring in northern
Mato Grosso. It is legal. 20% of a given area is being
opened. 1st crop tends to be rice.

Pension reform is moving right along. Brazil stock market
is at record highs and FX is back to 3.75 after trading
4.10:1 not too long ago.

BR 163 is looking good. The tough spot where trucks
have been spinning out upon a long incline has been
paved. Soybeans will move smoothly to the north
this wet season in February 2020. I doubt we will
see videos of stuck trucks again.(at least not along
BR 163)

Lots of talk about  railroads and extensions.
All of this has been talked about in newsletters.

The 1st half of 2019 has been a flop for Brazil
economy; (.8% growth in GDP). If not for ag,
Brazil would be going backwards.
The 2nd half of 2019 should show some growth.
Good machine sales and closed financing contracts
combined with factory orders.

I keep hearing reports that the limit on land that
can be owned by foreigners will be overturned
yet this year.

Some land sales have been confirmed in Mato Grosso.
Turn key farms and also forest and land clearing

Pork sales have been brisk to Russia and China
in June.

I have received a 420 page report that outlines the
future production potentials of crops and volumes
to be moved by road, rail and water.
It is in Portuguese. I will use snipets of this
document in future newsletters.

Upward and onward.

good luck with harvest

soy crop size, corn harvest, corn ethanol, Brazil econ,
new land clearing and future production and shipping volumes.