Nov 11 The week the world changed

As recently as last week I was reading economic reports from
various banks and they were lowering their dollar:real forecast for
2017. They were thinking 3.15 was the new norm. We are long the Real
they said. From experience, these longer term FX forecasts never work
out as planned in Brazil.

On Tuesday, the dollar was 3.17. Everyone knew Hillary was going to
be the next President.

In two days, the dollar touched 3.50 and settled the week 3.40:1.
I had just written a couple quarterly reports for Brazil investors and
I forecasted that I thought the REAL would drop back closer to
3.50 for the 2017 season. This was based on rising interest rates
in USA and declining rates in Brazil. I never dreamt the forecast
would come true in a few days.

Trump shook the developing world to its knees. Wednesday it seemed
like everyone was in shock. It took until Thursday for the globe to
figure out what does this all mean?

Major global banks were caught on wrong side of FX trades. Position
liquidation fueled the moves.

In addition the the northern hemisphere drama, Brazil was creating a new
one for herself. Someone found a bribe check for R$ 1 million
made out to President Temer for a project. Maybe, he will be impeached?

All of this came at a perfect time for the Brazil farmer. We have 10 dollar
soy in Chi-town and a weaking FX. All this after they bought inputs at
3.20:1 is what doctor ordered going into a whopper bean harvest.

It sounds like Trump is serious about bringing home circa 2 trillion
dollars trapped in other countries. I think smaller developing countries
sense a massive sucking sound of dollars leaving their banking systems
in 2017. Cayman Islands, Mexico, Hong Kong, Ireland to name a few.

If and when all these dollars come home, they will be looking for a new home.
I think the next two to three years will be inflationary beyond our wildest dreams.
I think all of those things that Jim Rogers was touting back in 2008/2009 during
the crisis and stimulus packages are now going to come true.

Inflation is the best drug man ever created. The artifical sense of wealth
and prosperity. More than likely debt driven, it will lead us to even a greater
bubble.

These dollars are finding their way into commodities again. Even if some
commodities are not bullish per se, they are receiving the liquidity and
giving us wild moves when there seems to be no fundamentals to justify it.

China has been sniffing this out for months. China does not want to deal
with a USA that is bi-polar. They cannot risk a trade war and free
flow of food.

China has been buying Brazil and Argentina. This is the biggest fundamental
change in global agriculture taking place right now.

They are buying ports. They are buying soy and corn warehouses. They
are buying majority stakes in grain trading companies in Mato Grosso.
They are buying sugarcane mills in Sao Paulo state. This past week
Brazil and China formed a R$ 1 billion Real infrastucture developement
fund to help get projects off the ground in Brazil. Railroad concessions are
first and foremost on their list for 2017.

China is hedging her food sourcing options away from an unstable USA
environment in the future. I am not predicting a trade war or embargo
type scenario, but China is making damn sure she is not caught with her
panties off in case someone gets cute.

This is super bullish for South America in the coming years. I hope Brazil can
keep herself on the recovery path and not fall off the bar stool again.
Temer and company have a long way to go and a short time to get there.

I will be in Mato Grosso the next week or so. I am hearing that early soybeans
could be ready by December 15th.

If the Amazon rains do not hit during peak soy harvest in late Janaury and
early February, Mato Grosso could have 5 million hectares of soybeans harvested
of her 9.2 million hectares by Feb 15th. This is like a really big deal dude.
This eludes to a massive 2nd crop planted area during the ideal window.
Keep an eye on this.

Looking at politics: During Obama´s first two years, he placed all his chips
on Obamacare. In hindsight, he maybe should have done things differently.

Trump has two years. Let us give him a chance. I realize the vote was more of
a FU to Washington DC. They needed it.
The worry I have coming from an ag background that has needed so many subsidies
in the 80´s and 90´s to survive via govt payments, crop insurance, CRP, disaster
payments, and emergency ag loans, that I fear that sometime in the future when we
least expect it and we need help the most, we will get the same vote back to us in rural
America. FU2 will be the response to our plea for help.

I think we need to be ready for that sometime in the future.

The game has changed. The rules have changed.

Kory

Brazil China relationship status *updated*

São Paulo, 10/13/2016 - The Chinese trading Cofco Agri acquired two warehouses in Mato Grosso, according to a statement by the company. One of them has a capacity of 72,000 tons and is located in Itanhangá; the other can receive up to 60 thousand tons of grain and is in the Novo Mundo. Cofco Agri also purchased land to build a new warehouse in the city of Marcelândia, which will house a warehouse with 70 thousand tons. This warehouse will receive the 2nd crop corn harvest next year. The company did not report the value of the investment. Subsidiary of COFCO International, Cofco Agri operates in trading and agricultural processing products originating in various regions such as South America, South Africa, Eastern Europe, India and Australia. It also operates in the supply regions with high demand, such as Asia and the Middle East. Last August 23, the International Cofco announced the acquisition of 100% of Nidera.

Northern Mato Grosso is the focus area.

Kory

Brazil China relationship status

The past 6 or 7 years Brazil and China have been doing a lot
of dating.

A Chinese delegation arrives and does a tour. A couple months later
a Brazil delegation makes a visit to China.

Many headlines have been made. Many letters of intention have been
signed by countless politicians and businessmen from both countries
with regards to ag and trade.

Time goes by, not much has changed.

This past year we have had a couple of equity deals done with
Ag business in Brazil and the Chinese.

It seems like we have moved into the "let´s live together awhile and
see how it goes" phase of the relatonship.

If it does not work out, it is still simple to go our separate ways.

Much talk lately of a Brazil/China fund to finance projects.
This catches my ear, but until I see something, all it is is a headline.

If we hear that China is going to help fund one of the railroad projects that
never seem to break ground, I will have to amend the relationship status
to "We are now engaged". No wedding date has been set yet.

If sometime in the next couple years we actually have the Chinese "laying some track",
I will have to say we have a wedding date in mind.

When I see Choo-choo trains zipping back and forth to Amazon hauling beans,
I will say Brazil and China are now married.

Until death do you part ;>)

This is all a ways off but I am getting query´s about this and I need to
act like a daddy here and make sure you love my daughter first.

You only get access to the soybeans after you marry her.

In this case, the daughter is Mato Grosso.

The wedding invitation has not been mailed yet.

Kory

Sept 17th blog update China visits

Hot and dry at the moment.

Forecast is for rains to start end of Sept. The 30 day forecast
is for irregular rains. We will need to watch this as per if this
affects planting. At this time, not a big deal.

I am working on Oct newsletter. I have some new corn production
graphics to include. As I stated earlier, the headline for the season
will be the amount of 1st crop corn that gets planted and the lack of soybeans.
Soybean area will look very much like last year.

The impeachment process went smoothly and now it looks like they will nab
former President Lula also. Compared to USA politics at the moment, Brazil
looks rational at the present time.

Brazil sure seems to want to open itself up for investment again.
Foreign ownership of land and many infrastructure projects are all on deck
to be bid on by private sector.

President Temer and Sec of AG, Blario Maggi, have spent time in China the
past two weeks. Blario continued onto Vietnam also.

We have had Chinese delegations in Mato Grosso, Tocantins, and Goias recently.

One must wonder why?

It seems like Brazil is serious this time about letting foreigners participate
in infrastructure ptojects. They are printing the consessions to be bid on both in
English and Portuguese. In the past, so many things i.e. details, got lost in translation.
It does no good to bid on a railroad if the environmental impact study has not been
completed.

President Temer and Blario Maggi remind me of the Smokey and the Bandit theme song,
"we have a long way to go and a short time to get there."

They have two years, maybe less, when one considers the election politics of Brazil
for 2018. They need to make hay in 2017 or we will look back in 2.5 years and say they
were nothing but place holders or bench warmers for the new team to come in early 2019.

This new team will be a wild card. We could swing hard left or hard right again depending
on the economic temperment of the populous at that time. At the moment, most everyone
is hurting. Sales, production, and services are much lower than three years ago and at the
same time everything costs more. My electricty bill made a new record high for Sept.
10 years ago the bill was 150 and now it is 800. I am not sure how the average joe
can keep up with that.

There are reasons to be optimistic. But so much of this optimism depends on China, FX,
and cheaper credit in the future. If there is a hiccup in any of these factors mentioned,
it ripples through the whole economy and another year goes by without much change.

Kory

Screenshot of April newsletter 1st corn area etc

Here is a screenshot from the April newsletter looking at the potential for acreage shift for 2017.

I am monitoring this.

Starting Sept 1, I will be adjusting my hourly and VIP rates higher.
10%-20% increases.

Anybody interested should drop me a note ahead of this and we will work something out.

Corn has started to be planted in RGDS and soon SC and Parana states.

July 28th blog post

A brief blog post for early August.

I am in disagreement with those who think we can see an expansion of soy area
in Brazil for 2017.

It is more of a gut feeling I have lately. I am looking at domestic corn market,
(at near record highs),lack of credit/or very expensive credit, re-negotiations of contracts,
(land rent,physical delivery contracts, etc),trucks standing waiting to load
corn(lack of supplies), packers slowing down slaughter pace, crushers shutting down early etc.

And weather ......

I am expecting a late start to Cerrado states planting. If this is the case,
later planted areas, i.e. sandy areas, will likley to switch to corn.
1 crop only

Southern Brazil farmers have the economic incentive to flip to corn.

If its only 500,000 ha, Brazil will likley stand pat on soybean area
for 2017. Potential is there for decent crop and good yields.

If for some reason, the switch starts to look closer to 1 million ha from
soy to corn for 2017, expansion will not outrun switching and on a net net basis
Brazil will drop in overall soybean area.

This is not in the main stream.

I have outlined this in recent newsletters and special sendouts.

This is the "sense" I am getting today.

Better to do 1 crop correctly on the right ground than try and push
two crops and get burned on both.

www.brazilintl.com

Kory

July 1, 2016 blog

Dollar has traded 3.20:1
Soybeans have traded R$ 85.00/sac in Sorriso, MT
Corn has traded at record highs but market has now calmed
Edible beans are at record highs
Credit is tight, but multi-nationals are filling the void
Beans and corn are moving north to Amazon
Panama canal can now handle 100,000 ton ships of soy to China
Northern Hemisphere has record low interest rates while Brazil maintains 14.25% and
still can´t nip inflation in the bud.

If you would have asked me in February or early March where to Dollar:Real would be today,
I would have said 4.25:1. With the cost of living and utilities on the rise, dollar at 3.20:1
just does not seem possible. The only positive for this scenario is that a stronger Real tends to
hint at higher than average soy prices going forward.

In mid June, spot soybeans made a high at R$ 85.00/sac in Sorriso, MT. Recently they have
dropped to R$ 77.00 sac. New crop bids are in the mid-60´s per sac for March 2017.

Spot corn prices have dropped back to R$ 26.00/sac in Mato Grosso. New crop 2017 contracts
are being written for about R$ 21.00/sac.

Much talk lately of a few big farms in bankruptcy protection. This is more of a cashflow
problem than and overall debt problem. With the stronger Real and decent cashflows for 2017,
the situation is workable. With soybeans at or near US$ 12.00/bu, this is a lifeline
for many. If soy was 9 bucks today and sinking, I might be a little more negative.
For now, I remain optimistic.

The underlying problem for Mato Grosso and MaPiToBa regions are sandy areas that have
been brought into production in recent years. Anyone with sandy land last year,
that missed a rain, felt the lose in yield potential in soy and corn.

We can compare breaking up new lands and pasture to that of CRP in USA. The land has been lying
idle for 10-15 years. It needs heavy dose of fertilizers and lime.
It takes time for the nutrient saturation to build up in the soil profile.
Acidic soils cause aluminum toxicity. The more the
roots go searching for water; the plants literally grow themselves to death.
This is what happened last year in the drought areas. Satellite images
were showing green vegetation, but the plants were dying not only from lack of water,
but of toxicity. Soybean plants were experiencing their
own form of a sub-prime housing meltdown.
The plants formed pods but there was no one living inside them.
The insects came, ripped out the plumbling, and left. A negative feedback loop started.
The farmer saw his crop deteriorating by the day, so why spend more money on a dying crop?
The probability for disaster became a reality with or without rains.
The stage was set for lower and lower yield potentials very early on in my opinion.
A non- plant scientist missed that factor.
They assumed when rains came, all was peachy, and in many cases, it did not matter.
The plumbing was already at the junk yard and insects were at the beach having a Corona
talking about what a good year it was. "I have never had so much insect sex in all my life."
"I have laid more eggs than my grandparents could ever imagine." They would be proud of me.
Whenever I came to an Intacta soybean plant, I jammed my eggs in there but good.
I have faith in my children. My kids are going to be BT resistant is no time.
The first few might be a little bit retarded, but I know they will grow out of it.
Bring me another Corona.
Cheers Mate !!!!

When breaking up new land from degraded pasture, the operator will invest heavily the 1st year.
Likely little or no rent will be paid. Year two, he will pay 3 or 4 sacs of soybeans.
By year 3 or 4, the land owner wants his 8 or 10 sacs of soybeans for rent.

This is the time frame we are coming into for many of the new surge areas that have brought
us to the 100 million ton soy crop potential threshold. Can we break through it in 2017 is the question?
In a perfect world, yes. But

Many operators are threatening to give back the land they have recently brought into production.
They cannot afford a 8 or 10 sac rental payment for 2017. They are trying to keep thier costs
under control after accumulating lots of bills the last two seasons.

I think the land will be planted by someone. It will not be abandoned. There is too much potential
for 2017 to make money. Or in some cases make it all back. "All in on Black 17"

Fertilizer is cheaper and sales are zipping right along. We have the new issue of no planting of
a 2nd crop or anycrop crop of soybeans beyond Dec 31, 2016 in several major soy states.
With cash corn prices firm, a few may try to invert their planting and plant either edible beans
or corn 1st and then get that 2nd crop of soy planted by New Years. Basically that 1st corn and
soybeans will be counted as a first crop by Conab. If this would gain momentum, it makes for
wide swings in planted area estimates from beginning of season to end of season in 2017. I am
on top of it.

IMEA recently published that up to 34% of the January-May soybean shipments are now going
North to Amazon. This is an impressive paradigm shift. Add in the opening of the Panama canal
to 100,000 ton boats of 3.7 million bushel of soybeans per load, damn, the world is changing!!!!!
Good thing the Amazon is deep and wide !!!

The biggest risk factor in coming months is the FX. The Dollar:Real at 3.20:1 does not seem right.
Brazil needs a 3.50:1 or weaker currency to export her way out of this recession. At sub 3:1,
Brazil loses all her perceived competitive advantage on exports of many different commodities and
products.

The Olympics are on deck. It seems to me it will be a flop.

Zika concerns have gone quiet. I would not let this be a sole reason for not coming down.

Impeachment process seems to be moving forward, but expect some legal positioning and appeals
to Supreme Court in August to try and gain pole position by one side or the other.

Dilma says she is open to new elections to avoid this lack of leadership vacuum. If only there
was less EGO one year ago, the public would have accepted this offer. Today, the middle finger
goes up.

When she donated 650 tons of edible beans to Cuba at the end of 2015, and today, we have
pinto beans trading at a record high price. Even the poor folk shake their heads.
She is an economist?
It has not rained in months, and she giving away our staples. Public is pissed off and distraught.

Foreign ownership of land issue is stalled in Congress. The new President, Admin, and Minister
of Ag are all in favor of defining the rules for foreign funded Brazil company to function and
new increased limits. Some say as high as 100,000 ha per entity. I think we will get it.
But it takes time.

I know there is much interest in Brazil ag info in various sectors. I see the number of readers
of my blog and posts in the thousands. There are other sites out there doing the daily ag news in
English. As we start a new crop year in Brazil, I will be doing less blog posts and focus on my
subscribers and VIP clients and my own portfolio. I am happy to offer guidance where I can to
those really interested in understanding Brazil.

I have clients who have just renewed for thier 12th year with me. I am truly appreciative.

I will post the bubblegum of a soybean planter or combine working in a big field as I receive
them from time to time on Brazilintl Facebook page. If that is all you need. enjoy.

But for analysis on what this all means and where we are going, do not look for that
on the blog. That will be for the subscribers.

You know where to find me,

Have a great weekend and summer.

* Early 1st crop corn will attempt to be planted in certain locals as
early as August in Brazil. hint hint

Kory