Saturday, August 29, 2020

Sept 1 I've given her all she's got Captain

When I think ahead to the 2021 crop year for Brazilian farmer, I cannot help but think of Scotty in an old Star Trek episode: "I've given her all she's got Captain." 

I must say I am most impressed with Brazil ports this past season. They pumped out 70 mmt of soybeans in record time- even with Covid.

The Northern Arc ports keep taking market share from the south. 

Rumo rail is dropping their freight rates for 2021 and 2022. This is giving grain traders some help with locking in margins selling corn and soy ahead for 2021 and 2022. 

Soybean and corn demand is red hot. This past week we have seen new record high prices for both corn and soybeans. This took place while Conab found extra tons from the last few years- even the drought year was bigger than we expected. 2021 we will blow the bin doors out with photon torpedos loaded with soy. 

I get asked questions from non-subscribers as to why? how ? what are the factors for this fantastic Brazilian profitability. Subscribers have been well versed on this the past couple years as I broadcast on all channels regarding FX and BRL above 4:1. The CME no longer matters when FX is 4.50:1, 5.0:1 or 5.50: 1. 

This is not just a language barrier. This is not a Lost in Translation movie. To understand this, I have come to the conclusion that the North American onlooker needs to understand not only Portuguese and Madarin, but also Klingon. 

I say this facetiously with a twinkle in my eye. 

We have seen a dollar rally in soybeans recently. We are above 9 bucks again. I think we have turned the corner from this long term downtrend in soybeans. However, with soybeans trading R$ 130 per sac(old crop), R$ 100 per sac (new crop), and corn R$ 50 (old crop) and R$ 40+ for new crop in Mato Grosso and Parana, I feel like I am on the Halo-deck. What soy and corn fantasy can I create today?

For the Brazil farmer, it feels like 2012 or 2013 did for the USA farmer without the drought. It feels like they are selling 7+ dollar corn and 16 dollar beans. With the help of FX, i.e. strong Chinese Yuan and cheap BRL, they can still compete with USA looking two years out. The only limiting factor is not enough production. Prior to the Iowa wind storm, the USA farmer was looking at a different Halo-deck experience. Brazil remains competitive in dollar terms. 

Brazil farmer has costs under control for 2021. However, these FX costs will come into play in 2022 for crop inputs and machinery pieces that are imported.

It all seems so surreal. With only minor crop production problems in Parana and RGDS, how can domestic markets be at record highs?

In conclusion, as I try to explain this to clients and possible new clients, I feel that not only am I translating Portuguese to English, but at times it seems other worldly. It seems like USA farmer is in one solar system and the Brazilians are in another. I will let the reader decide who the Klingons are? I could make a good case for both given the last few years politics. 

One needs to contemplate as to when the Klingons will decloak? At some point the Federation might have a brief moment to gain some market share? Change in FX? Natural disaster? Change in admin? Inflation and commodity fund interest given the trillions injected by Fedpedos?

Is it too precocious of me to sign off as the Soy Jedi Master? Or is that too much of a leap? Too much of a juxtaposition for the reader to handle?

Good Luck with harvest

Good luck with planting- It will begin in a few days

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Closing thought: At what point does one acquire enough wealth that one can trade in his Tri-axle struggle bus for a single axle? 

Keywords: Brazil soy and corn 2021, Record high prices, BRL, USA/BR ag econ comp, hidden fundamental changes to the market