Sunday, June 5, 2022

Mato Grosso and 2nd crop corn


I will be in Mato Grosso next week for circa two weeks.

I will be posting photos and videos on either Twitter, Facebook or Instagram from time to time.

In Parana state, Cigarrinha do Milho (corn leaf hopper) is spreading a disease called Enfezamento. Basically, it destroys the plants ability to translocate nutrients and fill the cob. The corn plants are dying too early while still in milk stage. There seems to be only a few varieties that are resistant to the disease. There are many factors such as sanitary concerns with volunteer corn, pesticide applications, seed treatment, and climate variability. One variety that is resistant in Mato Grosso might be very susceptible in Parana, for example. Insurance companies are saying they will not pay for the losses. Reports are coming out saying up to 30-40% of Parana 2nd crop is lost due to this disease. 

Meanwhile, early corn yields in Mato Grosso are very good. Some reports as high as 180 sacs or 170 bu per acre are being reported on small tracts. This shows the potential with good varieties, proper rainfall, and planting dates. 

The later we get into harvest the lower the yields will be. IMEA will be out with a new corn crop size estimate for Mato Grosso Monday evening. I will send that out too subscribers. 

There was record area of 2nd crop corn planted in Brazil this year. We have some spots that have not seen a drop of rain for 60 days. These spots will be hurt for yields. But, all in all, given the early start to the dry season, the 2nd crop corn will still be a new record for the country. At one time, we were thinking 90 MMT+. It will likely shake out in the 85 MMT area with a risk of 80 MMT if the Parana losses are confirmed. Last year's drought corn was only 60 MMT for 2nd crop. 

Corn prices have weakened in recent weeks as harvest has started. B3 Sao Paulo corn is trading R$ 90 per sac and spot Sorriso, MT corn is R$ 68/sac. 

I fear for lots of fires again by August. The Cerrado is very dry again and it will be a tinder box by August. 

I find it interesting we have estimates for Brazil's 2023 soybean crop at 148 MMT. I would argue that Brazil will expand very little in the year ahead. Crop input prices are a disincentive to risk too much on new lands. However, the price of land in Brazil has exploded. 

Recent 2022 soybean crop estimates are increasing a little bit from their low point. We seem to be in the 124/125 MMT area for a final tally. This past year, we started with a 143 MMT soybean crop potential, but I think the true potential was more like 148 to start with. We can say that Brazil lost 24/25 MMT of its original potential. Brazil has never seen a production hit of that magnitude in soybeans. 

After two years of being beaten over the head by climate, I would think southern Brazil can count on a big crop in 2023. They are due a big one.

However, it has been about 7 years in a row of "Feast" of the Northeast quadrant of Brazil- aka MaPiToBa region. I would not be surprised that the "drought" returns the the Northeast in the coming years and other parts of Brazil will be above normal in productivity again. MaPiToBa produces 17 MMT of soybeans these days or equal to a Parana or RGDS. I remember when the region only produced 5 or 6 MMT cumulative. The region might have one or two years of average and then drop into a "Famine" phase of 2 or 3 years. This seems to be the ebb and flow of the Northeast. 

As we get into August to October timeframe, it will not only be the climate that will be hot, but also the politics in Brazil. In October, Brazil has a Presidential election. I am a gringo and I do not vote. It is not appropriate for me to comment one way or another on the candidates. 

Given my agro interests in Brazil, I and my friends are heavily biased towards the current administration. However, as I talk with locals not in "Ag", I am surprised at the high percentage of Brasileiros that want to go back to the epoch of 10-15 years ago. I do not pretend to understand this. I am only commenting on what I hear on the street talking with the common folk and lower middle class. I think those with investments in Brazil need a strategic plan to deal with possible changes ahead for 2023 and beyond. 

In October, as the rainy season starts again, I see the potential for many political Gremlins to get wet in Brazil. High food prices, high fuel prices, inflation, and high interest rates will all be hot button issues this fall. The world needs a "recession" to tamp things down, but I have no idea on what a soft landing entails. The wealthy can handle an asset set back. However, the poor will need assistance during this correction and that only leads to more demand. It is a perfect Catch 22 ahead. Damned if you do and damned if you don't. The world sure did not need a war at this time. It just exacerbated the problems. 

There is not a cloud in the sky these days in the Brasilian Cerrado. The morning sun rises and evening sun sets are breath taking. It is the calm before the storm. 

Drop me a note if any questions. 

I will be doing a couple Brazil/Mato Grosso tours in January/Feb 2023. At least I think so. There is demand again for this, but Covid tests, fuel prices, and logistics could put a damper on things. I do not know today. Any trip to Brazil will be very expensive and subject to travel hiccups along the way. One will need patience or do not come. period........

Thank you



Brazil soybeans, Brazil corn, MaPiToBa, general comments 

Sunday, April 17, 2022

From Peak Pessimism to Peak Optimism

Sept 18th, 2018 November soybeans made a low at 8.12 per bu.

At the time, the USA had 1 billion bushels of soybean carryover and China was
sucking Brazil dry as quickly as possible. (Peak Pessimism)
I would think in the next 60-70 days, we should be reaching
"Peak Optimism". 

By June 18th, 2022, 45 months will have elapsed since the 8.12 low.
November beans are toying with 15.20 per bu and the recent high has been
15.55 per bu.

The 2008 high in Nov soybeans was 16.36 per bu on July 3rd, 2008.
2022 is 14 years from 2008.

A "doubling" of the 8.12 low is 16.24 per bu. 
The 2012 high in SX beans was 17.89 per bu.

Are we headed there again?

Well, the stage is sure set. With 35 million tons lost
in South America and the war in Europe, if there is
a chance to check out the old record high prices, it is in the
near future. 

Brazil's 2nd crop is in good shape. Mato Grosso will
produce a record large corn crop of 40 MMT+.
If there are drought problems in the coming weeks,
it will be in the Goias, MGDS, and Minas Gerias regions.

At this time, I am not worried about 2nd crop corn.
We have record planted area and most of it went in the
ground 4-6 weeks earlier than last season.
There was some late planted corn again this season.
These acres are at risk, but nominal volumes in the whole 
scheme of things.

Soybean planted area is puzzling to me in Brazil.
Obviously, we increased area year over year.
Conab says we are at 40.8 million hectares of soybeans
in 2022. There are analysts that believe the real planted
area is closer to 43 million hectares. 

Given the cost of production for 2023 soybeans, I doubt
Brazil will expand soybeans for the next season.

However, if more acres are found, that will look like
Brazil is increasing year over year. 

There are up to 1.5 million "ghost soybean hectares" in Brazil.
If Conab and others increase their soybean planted area
again for 2023, I would argue that those same acres were
planted during this past season too. 

I will continue to argue that this past season's crop
likely had a larger starting point than what has been
in the media. We need to keep this in mind as we look to
2023. We maybe should penciling in 148-150 MMT for
Brazil for 2023 and not numbers closer to 140. 

I cannot prove this. The only data point I have that
supports this argument are the fertilizer volumes
delivered to producers in 2021. The amounts were
up 12-14% Year over Year. 

For 2022, we will likely see fertilizer decreases of
20% Year over Year. 

If the Brazil farmer can apply some extra "lime"
or calcario, he can buy some time before the lack
of fertilizer affects his productivity. 

It is paramount that the USA produces at least
an average crop of soy and corn for the year ahead.
If we have any hints that the current crop will come in
below trend line, it will be difficult for the world to
"catch up" again regarding global stocks of corn, soy,
and their derivatives. 

If I had to guess as to how things play out in the
coming months, it would be something like this:

Wheat, corn and soybeans make a significant market
top by the 4th of July, 2022.

We have a multi-month sell off and form a new
base at higher levels. 

We then rally again into February 2023. 

This bull market commodity story is likely to last
until early 2024. 

The trend should continue upwards with periodic
3-6 month sell offs. 

Back in November, I was saying you need to be a bull here.
I was shitting bricks at the time.

As we get into June, I need to pivot to being a bear, and 
yet again, I can see myself shitting bricks once again. 

As Top Gun II is finally ready to come out, I feel like
I have been waiting for this movie for three years !!!!.

I think the soy, wheat, and corn markets are about to
experience a higher level of G-forces. Strap in and have
a puke bag handy. We will likely need it this June and July.

For more info:

Thank you all


Keywords: Brazil soybeans, corn, prices, fertilizer

Sunday, February 13, 2022

You can eat soybeans in my bed anytime

"You took the words right out of my mouth"

At 9:01 Brazil time on Thursday, when the Conab report came out,  
I was speechless.(I thought of Meatloaf at the time)
Never in the history of Conab have they ever
cut more than 7 million tons from report to report. The last time
was 2012, when the soybean crop was half as large as today.

I recently penned a newsletter titled "I was a bull when being
bullish wasn't cool" paying homage to Barbara Mandrell's
hit from 1981 "I was country when country wasn't cool".

This blog will be named "You can eat soybeans in my bed anytime"-
assuming you still have any ;>)

I wrote this in an old newsletter several weeks ago. I know many
people get lost when bouncing back and forth between millions
of tons and billions of bushels. 

The USDA said last week that old crop soybean carryover
will be 300 million bu or 8 million tons. Pipeline is said to
be 150 million bu or about 4 million tons.

Brazil came into 2022 with 4 MMT of old crop soybean

Brazil was expected to increase from 138 MMT to 145 MMT
this year or another 7 MMT. This is long gone. 

Last week, Conab basically confirmed that 20 MMT of Brazil
soybeans is gone. I think we need to be weary of possible
found acres later on. If there are extra acres, they are up north.
(Could we find 1 or 2 mmt later? ). YES

Chronic rains in the north will keep pressure on soybean quality
in the month of February. 

The million dollar question is: will continued dryness
in RGDS pull the production numbers even lower?
Possible- yes 

The anecdotal item that has my ears perked up is the datapoint
that insurance companies in Parana are cancelling 2nd crop
corn insurance policies to farmers. Why?
Did someone poop in their pants when looking at continued
"La Nina" weather maps? 
Maybe someone's testicles have not dropped yet?
If so, they have no business being in crop insurance

With Paraguay talking 4 mmt which is down from 10-11 mmt
of potential. Uruguay will come in 1 or 2 million tons light.
Argentina is looking more like 40 MMT which is down
from 50 MMT to start with. 

Bottomline is: USA can plant as many soybeans as she wants
in 2022. The market can take it all. 

Brazil will likely only export about 80 MMT in 2022.
At one time, we were thinking 90 MMT.
With the profitable crush margins, Brazil wants to
try and crush 45-48 MMT in 2022 if they can find the

I think by Sept, USA will be down to pipeline stocks of
soybeans and by December, Brazil will have "Zero" beans
remaining in the country. Seed only.

Soybean market likely to be stimulated all year now.

There is no room for production hiccups
in USA in 2022. 

If any threat of crop losses, the markets will be explosive

I remember back to Nov 9th low in beans. I was saying this
should be a low and we should rally back to 13.15 at some point.
This seemed insane at the time.
Many experts were looking for 11,10, and even 9 dollar soybeans.

This next week, we will likely check out 14.80 again basis
Nov 22 soybeans. 14.80 always bothered me last year.
It did not act like a high.
If the high would have been 14.74 3/4, I would have been
the biggest bear in the world.
14.80 was a long term "hint". "I ain't done yet" 
This is what SX was telling us 9 months ago. 

There are always hints in the market. The problem is finding them
and looking for subtle signals that a novice overlooks as just
another fundamental number.

There are more to the markets than fundamentals. But, it seems
like it takes looking at charts for 30 years to be able to see them.

If we cannot trade 14.80 early in the week basis Nov 22, then I would
think a sell off is likely.

If we trade 14.80- that will be one thing.

If we close on top of 14.80 twice, then I think it is
a straight shot to 16.36 basis SX.

When do we get there?

Maybe March 3rd maybe 
April 4th. 

I think there will be many 50 cent and 1 dollar moves
up and down between now and mid June.

Keep the Dramamine handy, the soybean market
will likely do a few barrel rolls and maybe even
a few power on stalls. Let us hope that does not
put us into a death spiral whereas it is difficult to
pull out of. 

The next 120 days will likely be something to
tell the grand kids about. 

If you missed out on 2008 and 2012, the next
crazy train is about to leave.

All aboard !!!!

Please bring your roasted soybeans with you ;>)