Friday, February 24, 2017

Feb 24 blog crop size, rains and Carnival

It now looks like the Brazil soy crop is at least 104/105 mmt.

What looked like the ceiling is now a floor.

Rain makes grain.

I do feel that the numbers coming out this week above 107 mmt
and talk of a 110 mmt are getting close to irrational exhuberance.

The NE and RGDS benefitted much from the recent rains.

I still must caution that planted area of soy could be a late
season surprise that could pull the final production tally down a bit.

We are working with a + 500,000 ha YoY increase in planted area.
That may very well be true.

But, depending on the final tally of 1st crop corn production and
planted area, we could drop soy area down a tad.

Also, Parana, MGDS, Goias, MT, MG, and SP all have a ban on 2nd crop
planted area of soybeans. In years past, this has been as much as 400,000 ha
nationally. This has helped push the production higher.
RGDS still has 2nd crop soy as it is planted after wheat.
But, it still is only the one crop of soy per year. It just gets planted
into January and acts like a 2nd crop.

Whatever the final tally, Brazil has record soy crop hands down.

Increased fertilizer usage, more use of Intacta genetics, and precision
ag combined with normal to even above normal rainfall helped Brazil
rebound from last year´s set back.

Mato Grosso has a phenomenal soy crop. Recent rainy weather has caused some
losses to accrue. A few hundred thousand tons have been been lost due to seed burn,
mold, and sprouting issues. I am not sure if we subtract from 31 mmt or maybe at one time
32 mmt. 9.3 M ha X 3.5 tons/ha =  32 mmt+.
It seems like everyone had at least 60 sacs per ha soy.

Transport is the big issue. Mud - mud and more mud. Beans are trying to go north
but hundreds of trucks are stranded in Para state. It was forecast that 9 million tons
could have been shipped north to Amazon this year for both soy and corn.
With conditions like this and a return to normal rainfall patterns, this is now in question.

The plus side of the drought last year was cheap freight and good road conditions.
Today we have the flip side.

This means more grain will likely be routed to Santos and Paranagua.

Carnival the next few days in Brazil. In March, Brazil will come back to life.

We have talk of opening up BR land to foreigners again. Let us see what the details
will be. I have been waiting for this day since August 2010. This is when they slammed
the brakes on foreign investment and the start of Brazil´s demise into political and economic
no man´s land. It is time for a new cycle to begin.

If the government would not have interrupted things back in 2010, we would not
be dealing with the logistical questions yet today as per roads and railroads.
(At least to a lesser extent than we see today)

The global powers are trying to find out a workable solution to the new world
we find ourselves in. China cannot get caught with her pants off as per protein needs
over the next decade. Brazil does not want to give up national sovereignty to other
country´s that want to suck her dry and call her dusty. Meanwhile, USA is pounding
the nationalistic drum so the whole world can hear it. Listen to ME !!!!!!

Bottom line to all of this is that China is working on a 50 year plan.
USA is looking 3 to 6 months ahead.
Brazil does not have plan.

How do we get these three capital and food producing powerhouses on the
same page so none of them feel taken advantage of?

China wants to help with BR infrastructure. Let them.
Let BR farmers produce the grain that they do so well.
Let China help ship it via rail and port systems.
Let USA supply cheap capital and precision ag products so we can
produce more with less area and, in theory, it will be a win win win for
everyone and the environment also.

Happy Carnival

Kory






Sunday, February 5, 2017

1st Successful Farming Brazil issue in Portuguese

I picked up the new Successful Farming magazine in Brazil this past week. It is in Portuguese.

It has the same layout as to what we are accustomed to in USA.

Articles on who produces the most soy per hectare, who has the best cow, articles on bug control, ethanol, and drones. A heavy focus on technology. An article on Mato Grosso fish farming and another from Minnesota regarding uniform shit spreading as the key to good yields.

Several images of Donald Trump and also an article on chicken farming.

Bigger, better, faster, more efficient are the themes.

These are "Gringo" fabrications. In Brazil, sometimes these business
models do not apply well.
Much of the Brazilian ag sector is very 21st century. However there are areas that lag behind,
and are not into "high productivity."
Many are in survival mode, but do it on a grand scale so they can get by with that model.

One thing the Brazil farmer does well is efficiency. He knows how to get things done with the least amount of investment possible. When interest rates are 10-12-18%/ year or more, one does not add bells and whistles to a combine or tractor just because the neighbor has it on his.
The new add on must pay for itself.

I enjoyed the new corn ethanol article for Mato Grosso. The data in the article is not new news per sey. It has been well known about for one year in Brazil.

I live in electronic/digital world. The only time I even consider picking up a magazine in Brazil is when I pass through the airport. The number of news stands continue to decline in this recession.
A few major park areas in the city have news stands and in shopping malls are about it.

The modern/dynamic Brazilian farmer does not live on his farm in Brazil. He lives in the city.
The manager and workers are at the farm. The modern Brazilian farmer is well connected via several smart phones and in some cases video links to the farm to keep tabs on everyone. Well organized mega farms know what all employees are doing at all times and even have the plan for tommorrow mapped out.

I remember back to the 80´s when I looked forward to walking to the mailbox and getting the newest ag magazine to read through. It was our connection to the world.
By the time the 2000´s came, we wished they would stop sending all this crap. It was 80% advertisements.

Today, why do we even need print media?

A Brazilian farmer does not walk to his mailbox to get the mail like a farmer from the midwest
USA might do each day. It is a different market- a different way of doing things here.

The modern dynamic BR farmer is not easily accessable unless you have his WhatsÁPP number.

Those smaller subsistence family farmers in Brazil are so damn stuck in their ways for the last 60 years, you cannot pay them to change. They take what the land gives them. They refuse to pay for anything. And in some cases, even if you could get them to look at modernizing something, their local church might consider it evil and prohibit the family from doing it !!!!!
I have family members that I have brought Disney clothes and toys from Orlando for the kids.
The church prohibits them from wearing it !!!!

I would imagine driving a new John Deere would be the same !!!???

It is a mindset and a cultural thing that is difficult to explain until you witness and see it first hand.

Brazil is a difficult market for newcomers to the ag market to understand. You don´t just drive into someone´s yard trying to sell something. It is best to make an appointment ahead of time. And even if you did find interest at a given farm site, the person you encountered does not have authority to make a decision.

The dynamic farmer does his own research on technology and efficiency. When he decides to move forward, he jumps on a plane to Germany or USA and buys the technology direct. He does not wait to read about it in a magazine. More often than not, the journalists come to him to learn what he is doing -often 10-20 years ahead of everyone else.

I hope Successful Farming can find their nitch. It might work in RGDS, Parana, and parts of SP.
But out here in Goias,Bahia, Mato Grosso, it will be something found at the dentist office from time to time. The go getters do not have time for it, and those more laid back, will be afraid to touch the magazine and they will never buy it unless it is given to them. The only reason the dentist has it is because he passed through the airport while he flew out to the farm for the weekend and saw the magazine !!!


Friday, January 13, 2017

Jan 13 blog update

On January 1, I put out a newsletter with my ideas as to soy prices in 2017.

So far, it is holding up well.

By Nov 17 soy holding above 9.80 this week, I have told clients
to expect higher prices.

I do not believe the Brazil soy crop is 104 or 105 mmt.

However, I do believe it to be above 100 mmt.

Until we get below 100 mmt, it kinda does not matter much.

NE Brazil must have rain in the coming days.
Even with rain, early planted soy losses are 30% in some regions.

The end of January and February look to be below normal rainfall.
This is of concern.

Argie is a mess. I think the crop is 50-52 mmt as of today.
Much smaller than what is being forecast.

The two events give us some hope in coming months for
sustained prices.

More info in upcoming newsletters and flash updates.

Thank you to all the VIP renewals in January.

I plan to attend a couple ag shows in the coming months.

As the President of New Holland said so nicely this week.
Ag business is the hen that lays the golden eggs in Brazil.
Things are really looking up as per ag machinery sales in
coming months.

Oldtimers in Brazil look at the ag economy as a leading indicator
to the overall economy. If the ag economy is strong, the overall
economy is right behind as per growth prospects.

Not a hotel room to be found in many locals for the ag shows.

I think this is a leading indicator that all ag sales teams will
be out in full force.

Dollar at 3.20 is not ideal. We would like to see 3.50:1,
but that will depend on politics here.

Sounds like interest rates will drop to 10% in 2017.
13% after this weeks cut.

Drop me a note for more info in services.

Links at top of page.

Kory




Saturday, December 17, 2016

Optimism in the air

As one walks around the shopping malls and watches how
consumers are acting this holiday season, optimism is not
a word that comes to mind.

I was recently was told that this is the slowest Christmas sales
season in four years. That kinda makes sense since the Brazilian
economy has shrunk 10% in the last three years alone.

There are too many stores closed or for rent these days along the
major avenues in Goiania. It is going to take some time to
swing this ship around away from the headwinds and sail
downwind again.

The optimism I speak of comes from the ag sector in general.

With this massive soybean crop on deck, that will help stop
the bleeding in the economy and probably give us small
positive numbers.

It is about time.

The problem with that is that we are talking about a soybean based
recovery. Not an information technology recovery, a demand based
consumer recovery or a faith in the governmental system type of
recovery.

This recovery will be based on fairly good soybean prices, fantastic
yeilds, and Chinese demand for protein.

This was turbo-charged last month by Trumps election win.
China wants to hedge herself and combined with a weakening
Yuan, that bodes well for South America short term and probably
long term.

The kicker is: is this really the best way to run an economy?

Soybeans, great weather, and an X factor defacto "good luck" from the
election of Trump by pulling a straight soybean flush by drawing the
Queen of Soybeans on the "River Card".

There is Optimism in the Air in Mato Grosso and other soybean states.
We are not going to believe some of the soybean yields this year.

This optimism will start to be felt in machinery sales, parts sales, demand for
labor, fuel, seed and fertilizer.
I am already hearing of pent up demand for Urea for 2nd crop corn.

The ag sector is about to help Brazil stop shrinking. New honest dollars
are being created everyday. Sun, rain, and investment in themselves i.e. land
will help turn the corner.

Politicians need to recognize this and get on their knees and thank the
Brazilian farmer for sticking with the profession even though it has looked
bleak at times. Government needs to get out of the way of the productive sector.
Let the private and/or international financing of projects happen.

Brazil increased fertilizer sales 11% from last year. When one thinks of the
drought hit areas and lack of credit or damn expensive credit, this means
the farmer invested in himself one more time risking it all in some situations
that it would get better. Of course, record high soybean prices in June 2016
in Reals helped make that decision easier.

The cost of a few things are going down. A new crop of fruits and vegetables
are coming to market. The price of some products like rice and edible beans are
now cheaper than a couple months ago. Food inflation is less of an issue today.
Energy and LP gas bills are still high. Apartment prices are coming down.
The real estate market is stalled throughout the country.

Sugar and ethanol look like money makers in 2017. But it seems like most mills
have been shut down in recent years or in bankruptcy. It is time for a new cycle
to begin.

Brazil loves its 7 year cycles of boom and bust. A few years ago when Brazil
was at the top and could do no wrong, she thought she was immune to her
volatile past.

A few years ago, Rio de Janeiro was arguing about how to divide up all
the money from oil royalties. Today Rio cannot pay her public servants on time?
Whatever happened to all that oil money? The government through tax incentives
tried to stimulate oil and quash inflation. By doing so, they brought the sugarcane
industry to her knees. Today they want to stimulate cane and other
bio fuels again. For the next 5-7 years, bio fuels look like the place to be in Brazil.

There are "green shoots" on the horizon for Brazil in 2017. It is better than
nothing. It will be soybean i.e. AG driven recovery. This recovery can be
as fickle or "flush" as the whims of FX and CME will allow.

No blinds, No limits, Brazilian Hold´em 2017 has begun.

all in ?

Merry Christmas

Kory


Sunday, November 27, 2016

Nov 27 blog update MT and Goias trip

I see the previous blog post was very popular.
circa 2000 views

I was in MT last week. Not much more to say than what I put in
Nov part II newsletter. The crop is big. Lack of corn seed for
2nd crop is an issue going into 2017. Expect record area of planted
corn.

Dollar has rebounded back to 3.47. Soybeans continue to rally.
Life is good.

I will be in southern Goias this next week.

In have received photos out of Rio Verde, Goias. Ditto.
Soybeans are the darkest green ever.

Fertilizer shipments until October are 8% over last years pace.
This all bodes well for productivity.

Corn ethanol mill constuction in Lucas do Rio Verde is making
fantastic progress. Looks to be up and running by June 2017.

Chinese keep buying more businesses in Brazil.

I will include some photos I took from airplane near Sorriso, MT.
I think the photos tell the story.







Friday, November 11, 2016

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

Saturday, October 15, 2016

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