Conab report and seed consult

At 9 am Conab will be out with their updated grain production report for April.

They are also sending out a new sugarcane report.

I will be sending out a special Conab highlights report to subscribers by 9:30 am Brasilia
time today.

I will then prepare for an afternoon consult today. A research firm from
Washington state is looking at how Brazil soybean seed market functions and
the rate of increase for RRII Intacta technology for 2015 crop year.

I plan to be near Brasilia this weekend.

I will be at Ribeirao Preto Ag show April 29th. I will prepare a May
special edition newsletter from that experience.

Drop me a note for more info.

agturbobrazil@yahoo.com

Kory

Just in time beans

Thinking aloud to myself. I can´t help but chuckle at the scene in New Orleans this week. We have a Brazilian panamax arriving loaded with soy. In the next dock over there is liable to be a ship being loaded from Mississippi barges of soy and on their way to China simply because of CIF booking verses FOB. These same barges could possibly be loaded with soybeans and pushed back up river for crushing in May or June. "Just in time soy" or peak protein continues to get more and more interesting.

2015 Brazil soybean area

There have been some 2015 Brazil soybean area forecasts in the news this past week.

General consensus is that 29.7-29.8 million ha were planted this past season.

We will also have about 800,000 to 1 million hectares of 2nd crop soybeans
planted for harvest in May and June 2014.

I have talked to several large operators this past week. The business
model is to continue to increase soybean area for 2015.

The idea of another 1 million hectares planted to first crop soybeans
for 2015 is a bit optimistic. Cost of production to grow a crop is still
at record high levels. Only the well capitalized are still expanding.

Parts of MaPiToBa have been whacked with two years of drought.

I think some in those areas will need to lick their wounds for a year or two.

Subscribers to newsletter and flash updates will be the first know.

I am watching fertilizer sales for 2014. This will be the leading indicator
as to how many soybeans get planted at the end of the day.

My personal feeling at this time is more of a stand pat scenario for 2015 and
not one of expansion.

Link to payment sites:
http://www.brazilintl.com/states/matogrosso/korymelby/kory_newsletter/km_newletter.htm#.U0BCLT1dXSs

http://www.brazilintl.com/states/matogrosso/korymelby/kory-cs/km-cs.htm#.U0BAhz1dXSs

Railroad dreams for Mato Grosso in freehand

4 railroads would be the ideal:

http://www.estadao.com.br/noticias/impresso,gigantes-do-agronegocio-se-unem-para-investir-nas-novas-ferrovias,1144031,0.htm

Agribusiness giants unite to invest in new railways

 Bunge, Cargill, Dreyfus, Maggi, responsible for 70% of grain exports in the country, form company to dispute the auctions of railways and to propose changes in government railways that will be offered as federal grant

March 23, 2014 

Four agribusiness giants - Bunge, Cargill and Dreyfus Maggi - and structuring business Presences of Light Station (EDLP) intend to join to create a logistics company to participate in the auctions railroad concession. Together, they account for 70% of grain exports from the country

These companies are willing to build and operate new lines in Mato Grosso. The main target of the company, however, is to act as an independent carrier for rail freight. It is a figure that does not exist today in Brazil, but will be created based on the new model for railways proposed by the government.

The plan was informed on Tuesday the Minister of Transport, César Borges. Should be detailed in the coming days to President Dilma Rousseff, who was already informed of the general studies. "The companies are committed to being leaders in the process," said licensed Maggi (PR-MT) Senator.

With the plan of the new company, the group presented a proposal for change Borges lines that will be offered as a federal grant in Mato Grosso. The project, called Pirarara, plans to invest  R$ 10 billion to R$ 15 billion.Pirarara is a fish that can reach 60 kilos and 1.5 meters, found in Rios Amazonas, Tocantins and Araguaia.

Currently, the federal program provides for only one extension in the state, a stretch of Railroad Integration of the Midwest (I am), 883 km, out of Lucas do Rio Verde and following eastward until Campinorte (GO) where it will interconnect with the North-South Railway. From there, follow the load to the sea through the port of Itaqui (MA).

After studying 40,000 routes flow of grain in the country, the group concluded that the ideal would be to shorten the line at 500 km. She would start further east in Agua Boa and end in Campinorte. This small extension is being called "Fico East".

Moreover, two railways would be created. The main fare from central Mato Grosso, Sinop, and follow by 1000 km to the port of Miritituba in Rio Tapajós, Pará.

 There, follow the load for over 1000km of waterway to be exported through the ports to the north, as Vila do Conde and Santarém.

This line, dubbed the Grain Train or Ferrogrão, would the output channel to half the production of soybeans, corn and meal from Mato Grosso, which is expected to reach 50 million tons in 2020. Today, it is 30 million tons. Because of the strategic position Itaituba, which Miritituba is a district already has almost all the big agribusiness.

A third extension would leave the west Sapezal (MT) and follow to Porto Velho (RO), on the shores of Madeira. The path is part of the old studies I am, so it's called "I am the West". From there, the cargo would by river to the Port of Itacoatiara (AM) or to ports of Para

Economy. Maggi explained that the group is not against Fico as is proposed by the government. However, studies have indicated that the best solution is different from what has been analyzed and it was almost a consensus among stakeholders. Great entrepreneur of industry and former governor of Mato Grosso, he pleaded surprised with the findings.

"In relation to the situation we have today, the freight would be cheaper by R$ 40 per ton," said the president of EDLP, Guilherme Quintella. It was up to him, who is chairman for Latin America, International Union of Railways, make such studies. Built three branches, 98% of the production of soybeans, corn and meal of the State would go by rail.

The group asked to open Borges Process Expression of Interest (PMIs) suggested for the three lines. That's the way the government is hiring economic studies and engineering projects, after the virtual monopoly of structuring Brazilian Project (EBP) was asked by the Court of Audit

March 15 update

Things I am watching:

1. 2nd crop soy area
2. Machinery sales at upcoming ag shows
3. Condition of sugarcane crop as harvest starts
4. Early yield results coming out of Argentina
5. Quantity of Chinese soy cancellations or roll forwards
6. Election potentials for Oct and reshuffle of cabinet. (already started with new Sec of Ag from Mato Grosso)
7. Land values as we start a new season of transactions
8. China economic tremors

Conab gave us a very interesting report this week. I did not expect them to drop 4.6 million tons
in one month. I have been saying since the beginning of the crop year that Brazil had a 93 million ton
potential. With this new info, we are circa 8 million tons dis-counted from the full potential.

As I think back to the 2012 drought, Brazil had a 75 million ton potential and after the drought
we had 68 million tons. A drop of 8 million tons.

Since 2012, Brazil has expanded 2 million hectares for the 2013 crop and another 2 million hectares
for the 2014 crop. The expansion has come from aggressive conversion of pastureland and the switching from 1st crop corn to soybeans.

It seems as though the law of diminishing returns are kicking in for Brazil. One could make the argument for both soy and sugarcane.
Brazil keeps expanding area of each crop, but the amount of gain using national averages keeps getting harder to achieve.

Last year Brazil had a mini drought in Northeast. A few million ton of potential were lost. This year we expand 2 million hectares (5 million acres) and we add 4 million ton to the tally year over year.
We need to clarify that the new lands are not the yield lag. The new lands are doing quite well.
The irony is that the more Brazil expands new areas, the lower the established yields are in the
old "baseline" states. This is a direct influence of unusual weather patterns.

Now we have a situation where farmers are planting a 2nd crop soy instead of corn or cotton.
This is terrible agro-nomics, but it sure helps put a band aid on a "light' first crop. Farmers plant their own seeds again with a nominal cost of production, and in many cases the 2nd crop soy will be the better return than the first!!!!!

The 2nd crop soy is less risky and will make it before a frost comes. The 2nd crop corn is always a crap shoot in the south due to frost and drought in the north.

I wish I has better data from the crop consultancy´s and government agencies when they talk about
total soybean production. When they say 85 mmt, is that first crop only?  Or total tally with
both crop potentials. The area of 2nd crop soy has now grown to such a number that it warrants
a 2nd crop classification in my mind. This is a new world. 2 or 3 million ton ghost tons could hit the balance sheet by May/June. I am not sure how many grasp that?

Same story with sugarcane. The frost and drought 2 and 3 years ago inhibited the sugarcane´s ability to rebound.
Add into the mix 5 and 6 year old stands that needed renovation, the sugarcane industry was
entering into a crisis situation. A new credit plan was announced to help renovate stands. Large multi-nationals that had capital invested heavily into new plantations. It takes 12 to 18 months to see the fruits of these investments. Companies such as Bunge invested heavily in new plantations. 2014 was the year they should be reaping the rewards for their efforts.

What happens?

A serious drought centered smack dab on top of the heart of the sugarcane region of Brazil.

In the season which they should be harvesting 120 tons per hectare, they will now be lucky to
grab 80 or 90 tons for year ONE of the crop cycle. They will harvest the cane later than normal
in order to get more growth. What happens for 2015? Can the stand rebound to full potential?
I do not know.

What I do know is that the grandiose forecasts released by some for sugarcane potential of
1 billion tons by 2020 is not going to happen.

Sugarcane and soy are doing the two- step. Two steps forward and one step back.

More and more money is being thrown at the two crops with diminishing return on the overall
crop size. This bares watching going forward.

We have various ag shows coming up. We have a new Mato Grosso BR163 Safra show at Lucas do Rio Verde, Mato Grosso at the end of March.

We have Rio Verde, Goias Agri show in early April.

We have the granddaddy of Agrishow´s the end of April and early May.
This show is at Ribeirao Preto, Sao Paulo. I plan to be there.

I keep my VIP clients up to date in real time as per the items mentioned above and other
market related happenings.

It has been a dynamic two weeks in the world.

Just when I thought the world was going to be awash in soybeans, we lose 8 million tons.
It is just enough to keep us on the edge of our seats for one more year.

I do not think you need to buckle up for 2014, but make sure your airbag is ready to deploy.

Those Texas dust storms sure look like the stories from 1936. Let us hope that is not our future.
High prices are great, but 25 dollar soybeans would drive us all batty ;>)

Good luck in 2014,

abracos

Kory

March 1 comments

Much has changed in the world soybean market dynamics the past two weeks.

Early in the SA growing season, I was a proponent of a 92 or 93 million
ton soybean crop for Brazil. I believe at one time this was valid.
The question now is: Do we subtract 5-6 or 7 million ton from the
original potential? The soybean market has been sniffing this out since early February.

The warning signs were all there. Early dryness, Helicoverpa caterpillars, some
Asian rust , etc....

Each item by itself was a non issue. Together combined with late flooding
in Mato Grosso, we came to a point of no return on the size of the Brazil soybean crop.
We had agro-political types shouting in Mato Grosso that the size of the state´s crop
was two million ton under stated. My thinking in mid-February was that if this is true,
we can handle a couple million tons loss in other regions.

Farmer friends of mine in Parana were screaming at me. Kory, you have no idea how
bad the heat and drought is. It is worse than 2012.

As I think back to 2008/09 and 2012 droughts, they both started out dry. Then in late
January the rains came and saved the potential. This drought started mid-season.
The whole country was off to a great start with just a few exceptions. Then in January
and February there were 4 to 6 weeks of scourching heat and no rain in Southern and
Eastern Brazil. This took its toll on coffee and sugar plantations. We need to keep in mind that
a lot of coffee is irrigated.

The reservoir outside of Sao Paulo dropped to 17% of capacity. A record low.

Ten days ago the skies opened up and the rains came. 12 inches of rain came in
central Mato Grosso; i.e.soybean ground zero on the planet.

This caused much hardship with getting the 2nd half of the soybean crop harvested
and 2nd crop corn in the ground.

What now?

In my opinion we have lost from 5 to 7 million tons of soybean potential
throughout Brazil. Many will argue that it is more.

Argentina contacts tell me that crop is at least 53 million tons. The heart of the
soybean triangle will have record yields in Argentina. A triangle drawn from
Rosario to Cordoba and back to Venado Tuerto is some of the most perfect land
on the planet. The bulk of Argentine soy production is there. When the rains came there
in early January, I knew Argentina would be OK. SW Buenos Aires and La Pampa
were nipped hard this year with lack of rain.

This should be simple right?

One adds  87 million tons for Brazil and 53 million for Argentina. End of story correct?

Well, not so fast young sky walker.

Chinese demand is rampant. Many predict 70 million will be imported by China in next 12 months.
Sources tell me that China is stocked up on soybeans at moment and do not need the amount
they have on the books. Who do I believe?

Brazil sources tell me that the final tally of the Brazil soybean crop could be only
80 million tons. If so, we have a new global soybean crisis to deal with. The USA
is soon out of beans and Brazil plans to export 45 million ton and crush 35 million tons?
That is 80 million ton. We run out of cushion.

Everything I have been saying is 1st crop soybeans only.

We now have a robust 2nd crop soybean crop potential to deal with in Brazil.
In the past these production numbers have been 500,000 tons or less.
But, with soy prices begging for more production, we now have more and more
farmers planting a 2nd crop of soybeans. The area could occupy more than 1.5 million
hectares of 2nd crop soybeans in the states of Mato Grosso, Goias, and Parana.
These hectares all come at the expense of a 2nd crop corn.

Will these soybeans yield 2 tons or 3 tons per hectare?

Now we just found a 3 to 4.5 million ton shot in the arm. 87 million tons becomes
90 million tons again. 85 million tons becomes 88 mmt +.

Will Brazil pull off two soybean crops before the USA farmer even plants his next crop?

50 bushel + 40 bushel = 90 bushel per acre by May 2014.

Soybeans at 14 bucks,  why not?

I have outlined all of these potentials to clients over the recent weeks.

I will continue to update subscribers in real time.

For those looking for free info, please do not ask for a newsletter sample
and then disappear. It is extremely shallow on your part.

Thank you for all the loyal subscribers through the years.
It is appreciated.

For now, it is Carnival and Brazil will be quiet the next 5 days as per
news and updates.

Ate mais,

Kory

Hot and dry concerns

I have received many calls and emails today.

There is a hot/dry pattern stuck in the NE and SE Brazil.

If this pattern lasts another 10 days, I would consider cutting
the size of the Brazil soybean crop a bit.  

At this time, the hot dry weather does not concern me much.
It makes for great harvest weather.

We need to keep in mind that Mato Grosso is understated
when it comes to crop size this year. Mato Grosso can offset
some losses in other locals.

The hot dry scenario affects the following in order of seriousness.

1.  Coffee
2. Sugarcane vegetative growth
3. Late planted soybeans in Parana, SP, MG, and NE(MaPiToBa)
3. Amount of 2nd crop corn planted

If this hot dry spell lasts another 10-14 days in Parana,
this will start to influence how much 2nd crop corn gets planted.
After the 20th of Feb, the frost risk is very high planting after
this date.

Thus, farmers will switch to wheat- if they can- seed supply??

The biggest influence on sales at the moment is the recent rise to
2.45:1 basis US dollar. A soybean rally and a strong dollar is just
what the doctor ordered. Sell and sell some more.................

Conab report will be out on Feb 11. I will send out special report
to subscribers. Let us see how big the crop size potential is
based on January data and then we can make some adjustments
lower due to regional drought spots.