Friday, February 28, 2014

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,