Stimulus and railroads

Well, we can sure feel the election promises today.

Gov´t announced mega funding for continued low interest loans
to buy tractors via Moderftota program.  4.5% money with
8 payments and 2 years to skip a payment too.

Various farmers associations are rallying to not support Dilma for
re-election.

This week President Dilma will be inaugurating the North/South
railroad from Palmas to Anapolis, Goias. 27 years after it was
first announced.

Gov´t officals are in China this week looking for money to
fund the new railroad projects that were announced 4 years ago !!!!!!!!

Hail in Sao Paulo today.

It rained here in Goiania today. Very rare but welcomed.

Lots of bus strikes.

Protesters are organizing for June.

Police also want to strike!!!!

Let the games begin!!!!!!

Morning chat with Yara Fertilizer dealer

It has been a tough transition for my buddy that used to sell fertilizer for Bunge.

Since the Yara merger, there have been many changes.

Supervisor and personel changes that have not been beneficial.

His old supervisor was put in charge of fertilizer sales to Sugarcane mills.
Thus, taking all his old clients.

Yara sends in a new young hot shot with an attitude problem to be his new boss.
The young buck calls his old soybean clients and sells fertilizer direct to them at
a price R$ 90/ton less than my buddy even knew was possible.

Problem: Young buck sells fertilizer on the cheap and forgets to tell the
client that the fertilizer must be taken now. The client assumes he could take
delivery in August like he always has. Tempers begin to flare-
A new soap opera starts.

Yara has taken a large percentage of regional fertilizer market this season.

Off topic comments:

Kory, there is something funny in the air in Brazil this time. It has me worried.
You have not experienced this in the 10 years you have been here.

Take a look around Kory. Look at the amount of crime. Look at the number
of thefts. Look at the number of stikes going on in the country. It is like a fuse
has been lit. But we don´t know what is on the other end?

The stealing continues on government projects. The World Cup is a mess.
God forbid Brazil does not win the World Cup. The population will burn
the country to the ground. It is good you will be in USA he says.

Combine all of this with what we know. Inflation, high interest rates,
increasing the minimum stipen for the family purse(welfare), election,
Petrobras economics that make no sense, and a middle class that continues
to pay more taxes and sees little in return. The health system is on verge
of collapse and yet all people worry about is how to buy a ticket for the
final match of World Cup valued at R$15,000- R$ 20,000/ seat.
In some cases higher.

For the first time in a long time, this all has me worried. It is different
this time he says. It smells different.

There is something in the wind..........

Enjoy the show,

all for now

Kory

Conab as expected

Thursday´s Conab report was as expected.

The soy production numbers continue to increase after the
sharp drop in March. They went too far too fast.
Subscribers were forewarned of this months ago.

On Wednesday this week our Ag minister has been quoted
saying that Brazil crop is 89-90 mmt.

We have yet to see reliable numbers as to how much
2nd crop soy has been planted.

I think 1.5 to 2 mmt tons of "Bonus soy" or "Mario Bros power up"
bonus soy will be harvested in June. This will add a few gold coins to the hopper.

This will take the Brazil crop to about 88 mmt for a final tally.

The dry season has kicked in on time and this will hurt the late
planted corn in Mato Grosso. Lighter soils will burn up before
complete ear fill.

Thank you for all the loyal subscribers. Many have renewed this
week after being with me since the beginning. The newsletter is
going on 8 years old now after very humble beginnings.

http://www.brazilintl.com/states/matogrosso/korymelby/kory_newsletter/km_newletter.htm#.U2zZl4FdWE4

It is appreciated.

I am headed to USA at the end of May.

Mickey, Nasa, Mall of America and Minnesota lake country
are on deck.

I will keep tabs on things the best I can.

Personal comment: With the massive surge is Brazilian soybean area
the past three seasons, I am looking for a plateau at this level for a bit.
The soy economics do not justify the rampant expansion of area going forward
as we have seen in the recent past.

Monitoring.....

Bigger Brazil soy crop

Informa came out today with a revised Brazilian soybean crop at 87.4 MMT. + 650,000 tons
All I can say is Amen.

I have been saying for weeks that I thought the earlier estimates of 84-85 mmt
by some were too low.

We are still looking for more data as per how many hectares of 2nd crop soybeans
have been planted. The ranges are from 200,000 ha to 745,000 ha.
My opinion is more to the latter.

I think next week Conab will increase their estimate of soy crop also.
They went too far too fast back in March.

I think back to short crop years in the USA. The markets lost their minds
when we heard of 1 or 2 boats were on their way to Wilmington, DE from
South America. Boom soybeans down 30 cents.

Now we have a situation of just in time soybeans headed north. We are now looking at 20+ boats of soybeans and meal. Rumors of 30+ boats by the end of the day(i.e. summer 2014).

75 to 90 million bushels of imports of soy equivalents from Canada, Brazil and Argentina are
now possible and likely. Say that three times and click your heals together Dorothy, this
ain´t Kansas anymore!!!!!

What used to be the bare bones minimum for USA soy supply carryover is now coming
from the Southern Hemisphere!!!

This is a paradigm shift. Chicago and cash bids now need to adjust themselves to incentivize
imports from SA via direct bookings or China cancellations.

We are also doing this with ethanol.

We read about the Chinese being expert traders. I sometimes wonder as we look at how the
last 6 months has played out. China bought every last soybean they could from USA. At the same
time double booking Brazilian soybeans. Brazil ports performed perfectly this year and we end up drowning
the super duper Chinese ports and crushers. Sure looks like a case where the right hand does not know what the left hand is doing.

The end result is soybeans being shipped backwards up the Mississippi to get to the crushers
for just in time crushing. Crazy as a jelly bean policy.

In closing we need to give credit where credit is due. The Bunge/Maggi JV that built a dry port
in Para state and between trucks and barges got soybeans to the mouth of the Amazon to load
a Panamax this week. Well done.

We will see more and more of this in the coming years. Mato Grosso soy and corn headed
north now. Cargill blazed the trail 10 years ago at Santarem. They endured many protests
and judicial injunctions. Now Bunge and Maggi have added to the options. I expect more
in coming years. Mato Grosso soybeans must go north. It is only logical.

More roads and railroads will mean easier logistics to China, Europe, and USA on the years
with sub par soy production. Emergency soybeans to the rescue. They will be a hop, skip and a jump away.

Twenty years ago with NAFTA etc, grain going across country borders was considered a sin by many.

Today, it is normal operating procedure.

Imagine another 20 years ...........

Northern soybean route picks up steam

Soybeans shipped north by truck to the Tapajos river and then barged to Belem
were loaded on a Panamax ship and headed to Spain this week.
Most likely non- GMO soy.

This route is said to be ready to handle 2 million tons in 2015.

8 million tons by 2018.

We need to get a little more asphalt installed in Para state the next 12 months.
With that road in place, trucks should be able to roll north with more ease
than the mud stricken history of the road.

In the time, the basis will inverse in central and northern Mato Grosso.

The port on the Tapajos is a Maggi Group and Bunge JV.

Looking ahead into May

Easter holiday April 18- April 21 here in Brazil.
Everyone is traveling it seems.

I will be going to Agrishow next week in Sao Paulo state.
It is South America´s largest ag show.
I will be talking to many equipment dealers and taking many photos.
I plan to send out a May special edition newsletter after I get back.

Subscriber link:
http://www.brazilintl.com/states/matogrosso/korymelby/kory_newsletter/km_newletter.htm#.U1Op6j1dXSs

Rainfall has been beneficial lately for 2nd crop corn and sugarcane.
2nd crop corn that is planted on high clay content soils will likely make it.

We still need to watch early May rains. If rains shut off next week, as per normal,
30% of 2nd crop corn will be at risk. If the rains keep coming, they boys will get lucky
one more time.

As the saying goes for Northern Minnesota, late Easter = late planting.
As they say in Brazil, late Easter = late rains and slow start to dry season.
"Kinda interesting huh?"

Land market seems stable at moment. Sellers do not need to sell and buyers are
reluctant to chase land values. World Cup soccer starts in June. Combine this with
presidential election in October, many are taking a wait and see attitude.

Cattle prices have posted a record high in Mato Grosso last week. Maybe the cowboys
are winning vs the soybean farmers at the moment?

I really really hope central Mato Grosso can break ground on something in coming months.
Be it and a corn ethanol mill or the railroad. If we dilly dally one more dry season and maybe
change presidents in October, that means a cabinet change by January and maybe a review
of everything again. The clock ticks and ticks and ticks...........

Conab came out with a report saying that Brazil is 40 million tons short on crop storage
space. Mostly in southern Brazil and Northeast. Once upon a time the Coops told farmers
not to build grain bins, we will take care of you. Now the Mega Coops look like multi-nationals
and do not have the best interest of their patrons in mind. Everybody is steel bin crazy at the moment just like in USA with lack of rail cars. I have been through this before in the early 80´s when we built bins like wind breaks. We over did it. I expect the same will occur at some point again.

Inflation is running at 7% and for those investing in hard assets it makes one feel good.
For those trying to make a living, it is like cancer.

I think inflation is the best drug mankind has ever created. So many get caught up in the illusion.
In the end, inflation gets us all.

Rains, April, Sugarcane, Econ

For mid- April, the rains have been strong in some spots.

Mato Grosso and Goias have had localized flooding. This will
sure help the 2nd crop corn make it too the finish line.

With 30% of the 2nd crop corn in Mato Grosso planted
after the ideal planting window, May rains will be paramount in order
for the crop to reach its potential.

Sugarcane harvest has started. Many mills will not be opening this
year due to continue financial troubles. Conab released their first
sugarcane crop size forecast this past week. When one looks
at the numbers, one has to ask What drought?
This is obviously the potential estimates for the crop.
With new data in coming months, the sugarcane crop will shrink
down to current estimates put out by various consultants.

The Brazil economy has my attention more so than normal.

Auto manufactures are starting to lay off workers. We have the
police evicting homeless people in Rio. We have inflation above
acceptable levels. We have a REAL that has gotten stronger while
it should be weakening, and Brazilian interest rates are on the increase.
Foreign money is coming in distorting reality and or a safe haven for
Russian dollars looking for a temporary home.

Throw in a national election in October and we have the makings
of a perfect storm - economic and political uncertainty. Add in a few
protests here and there we will have the making of a good movie.

Abracos

Kory