Marketing

[Faust100F]

I need to put his harpy to rest!  I have been listening to the commission houses, brokers, and all those who attempt to stampeed the muppet farmers over the buffalo jump.  So I have been doing a little reading, and as expected, the fear instilled by these speculators and brokers regarding the Brazilian Corn Crop being exported and driving down corn prices is . . . in my opinion . . . a Red Herring!  

I have a few comments regarding the problems Russia faces in "really competing" with the U.S..  The infrastructure and port facilities are not up to snuff, to compete with the United States.  

Sooooooo . . . here is the inside skinny from the mouth of a Brazilian trade official, as published in the Financial Times in August of last year.  To wit:

1. The big headline was that Brazil is now the #2 exporter in the world, replacing Argentina!

2.Brazil believes it will export 15,000,000 tons of corn this year or . . . 525,000,000 bushels.

3. Brazil believes it will export 20,000,000 tons of corn next year or . . . 700,000,000 bushels.

I don't know how to put this but, that is like a gnat on an elephants ass!

So, according to my calculations, forget about Brazil and the hyped threat to the world market price.  They have a long, long way to go.   They still have to get it loaded.  I have been reviewing the Baltic Dry Index and other shipping reports to find out if Brazil does in fact have a problem with exporting their record coffee crop, their record sugar crop, and have shipping available to ship their "record" (LMAO!) soybean crop, and last but not least that corn crop that is going to drive American Farmers into Bankruptcy.   

There you have it.  That is what I learned today.  Adios Amigos. john

here is the complete article- you may have a problem accessing it. 

http://www.ft.com/intl/cms/s/0/f9ff6b8e-e6f6-11e1-af33-00144feab49a.html#axzz2IFdD5y5Q

Well . . . what about shipping and the ports that export soybeans and other agricultural products.  Read for yourself, and formulate you own conclusion of the threat of Brazil to American farmers.   

Porto de Paranaguá – PR

Porto de Paranaguá is the largest Brazilian port exporting agricultural products, with emphasis on soybeans and soybean meal. However the port is currently saturated, and is not following the growth of the Brazilian agriculture. The port lacks structure to handle the current volume of exports.

Other related problem is the access routes that lead to the port, where the trucks wait in line for days until they get the opportunity to ship. Some of them even wait for a month.

Also, the port has been receiving several complaints of its irregularities when it comes to the compliance with the environmental and sanitary measures.

As the second largest Brazilian port, it mainly receives ships from United States, China, Japan, South Korea and Paraguay.

Porto de Rio Grande – RS

Privileged by its geographic features, the Porto de Rio Grande has consolidated its position as the port of the Southern Cone of South America. The port is public and administrated by the Rio Grande do Sul state government.

Among its major commodities exported, are soybeans, soybean meal, wheat and rice. The main export destinations are China, Spain, Holland, Japan and France. Among the main imported goods are urea, granular potash, natural calcium phosphate and sulfuric acid. On import, the main source countries were Argentina, Morocco, Lithuania, China and the United States.

Rio Grande is one of the most developed ports in Brazil counting with good logistics and projects for expansion. The port is also one of the few in the country that is not saturated, and that counts with a long wharf. That is the reason why importers and exporters are preferring to flow its production through Rio

Grande instead of Paranaguá.

So what about the Russians?  Are they going to take over the world grain trade?  I do not think so!  they have the same problems as Brazil.  

GRAIN TRANSPORTATION PROBLEMS (taken from World Grain published a year ago)   FAS analysts noted that actual port capacity will not be a problem this year, as the real bottleneck is in getting grain to the ports as a result of poor management of railway logistics, high cost of transportation from Siberian regions, and competition with grain from Kazakhstan (for markets, for Russian grain cars, etc.).   According to FAS, Russian railway officials complained that in October 2011 Russian railways shipped 500,000 tonnes less grain than they could have if traders had loaded and unloaded railcars faster and avoided detention of cars. These delays are due to inadequate management and lack of forward planning, the poor conditions of grain handling facilities at railway stations, and delays in preparation of shipping documents.   For transporting grain in trucks, the shipper needs to receive only one document (permit) from the state regulatory bodies. But for shipping grain by rail, the shipper needs to receive nine documents from government officials, which usually work only five days a week. As for the cost of rail transportation, grain in Russia is considered a product of the second tariff group (not socially important, unlike ore, coal and concrete), and as a result freight rates are high. FAS also noted that the poor condition of the Russian railway cars fleet is also a problem, although this situation has improved and RusAgroTrans, the leader in railway grain shipments, has been purchasing new cars in 2010 and 2011. At present, this company owns 30,000 grain cars, or 90% of the Russian grain cars’ fleet, but it has been reported that the company leased out 5,000 cars to Kazakhstan for transporting Kazakh grain to export terminals.   As for trucks, when the grain embargo was introduced, many truck companies switched to non-grain cargoes. When exports renewed, they increased transportation fees. Traders complain that in some cases the fees increased by 30% to 50% compared with fees in the summer of 2010.   The cost of shipping grain from Siberia to European ports is the major constraint for increasing exports of Siberian grain. Siberian provinces produce approximately 18 million tonnes of grain on average, but domestic consumption of grain in these provinces varies from 11 to 12 million tonnes. The annual grain surplus may amount to 6 million tonnes in certain years, but due to the high cost of transportation, it is very expensive to ship this grain to export points.   According to analysts, the delivery of Siberian grain to export terminals varies from 1,500 rubles ($50 [1]) to 2,000 rubles ($67) per tonne. For comparison, transportation of grain from the Southern European Russia and even from the Volga Valley to the export terminals usually does not exceed 500 rubles ($17) per tonne. Also, the returns from grain production in Siberia are lower than in Southern European Russia, as input costs are higher and yields are significantly lower. Although quality is typically higher as spring wheat is produced in Siberia, the price premiums for high baking quality of Siberian grain have been very small. FAS noted that this year there is a large grain crop in Siberia, and grain farmers complain that they do not have enough storage capacity to store all grain because Siberian elevators still store intervention grain. Distances from ports and this shortage of storage have dampened domestic prices in Siberia, but even with these lower prices, exports of Siberian grain have not been feasible, although this may change with new railroad tariff decisions. http://www.world-grain.com/News/News%20Home/World%20Grain%20News/2012/2/Russias%20grain%20transporta...

[llakmf]

Faust, I have two things I have learned about trading South America. It is a good way to go broke and the second is the first  liar never had a chance.