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.


Thursday, October 13, 2016

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.


Saturday, September 17, 2016

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

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.


Sunday, August 14, 2016

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.

Thursday, July 28, 2016

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.


Saturday, July 2, 2016

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

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


Thursday, May 26, 2016

Mid Year Turn

Seems like many things are flipping polarity from what we have become accustomed to
in recent months.

For months we heard the SA soy and corn crops would be big.
In the end they got smaller and continue to do so.

El-Nino is now offically neutral and flipping to La-Nina later in 2016.
This means SA weather will be 180 deg opposite last year´s experience.

Soybeans are trading 11 dollars in Chicago. Soybeans are trading at a
record high price in Brazilian Reals of $91.00/sac.
2017 prices are much the same. These prices in Reais are higher than
when soy was trading US$ 18.00 in Chicago Sept 2012.

Fertilizer sales are outpacing last year´s volumes. Lower FX
is pulling sales forward.

We have a new interim President. Everyone said that after Dilma
is gone, the Dollar:Real would trade 3.30:1. Yet today the
FX is closer to 3.60:1

Dilma said opposition was fabricating numbers saying the economy
was worse than it is was and using this as a reason to start the
impeachment process. Dilma is an economist. To the chagrin of many,
the budget deficit projected prior to impeachment was too small.
The number has jumped from R$ 100B to R$ 170B after the impeachment
votes. More and more money is needed just to maintain par muchless
come up with stimulus $$$.

We have chickens dying from starvation in Santa Catarina. We have
chicken packers shutting down in Parana May 31. Many coops are
90 days late paying their producers.

We have Brasil JBS wanting to domecile themselves in Ireland to have
cheaper access to credit. JBS made billions on their currency hedges
in 2015. Processing anything seems almost a secondary business now.

The new administration is looking favorably at overturning the limit
on foreign land ownership.

China has made some initial purchases in Brazil Agri-business,
and I would bet that is just the beginning.

The rains shut off on April 13th this year. Those who pushed the
envelope and planted 2nd corn into March 5th-10th like the previous
five years, now have corn of the cobless variety. Zero

This was forecast by many in late 2015. But with corn contracts at
R$ 18-R$ 19/sac and a short soybean crop, the will to keep planting something
to make up for losses overrode reason.

2nd crop cotton losses will be 30% on a widespread basis.

The current 2 dollar+ rally in soybeans has come at the right time
to help producers who took it in the shorts this year. They have some
positive cashflows to work with to deal with creditors and bankers
for the year ahead.

For the last 6-12 months in Brazil, it has been nebulous to try
and see the future. There were so many possible scenarios that
if one event happened it would unleash one set of events. If another
event happened, the end result would be 180 deg opposite the other possibility.
It has been frustrating.

But as we make the mid year turn, I feel like I see the sun is starting to
peak through the clouds as the fog slowly lifts. There are still many
things that can happen to drop the veil over us and keep us lost in the fog.
However, given the rise in prices, announcement of govt ag funding plan,
stable FX, and generally a peaceful transition of power, I think we
can start to be more optimistic as we go into fall.

Many will argue that I am 6 months to 1 year too early on this.
I may very well be.

But specifically the ag sector, we can see tremendous possibilites for
profit in 2017 with decent weather and production.

Sugarcane and coffee are good. Edible beans are at record high prices.
Soy and corn are at record high prices.

Barring any sudden changes in govt, riots, and FX moves, I think we can
start to see the Ag economy on a nice upturn that will seep into the
industrial sector and give us some positive GDP and growth again in Brazil.

I hope the govt does not start to tax soybeans either at a state level in
Mato Grosso or nationally as per an export tax. Both have been proposed
but so far do not have legs. If they start to tax the one sector that
can get them out of this mess, I may have to modify my optimism.

I believe we are in the mid-curve turn in Brazil. G forces are kicking in
and we know we are about to change direction. Let us hope we don´t hit the wall
as we pull out on the straightaway.

Thank you for all the renewals of late.
Thank you for your confidence.

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