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Senior Contributor

Re: Brazil Acreage Not Fazed By Prices

You have to think there are some livestock producers looking to expand their acreage.

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Honored Advisor

Re: Brazil Acreage Not Fazed By Prices

Brazil acres not fazed by prices?      Ha ha........that's a good one.......... 

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Honored Advisor

Re: Brazil Acreage Not Fazed By Prices

If we get to $2.75 corn and $8.50 beans the acres will still get planted here too.

 

The mix of crops might change a little BUT the acres will get planted.

 

I don't see why it would be any different there.

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Esteemed Advisor

Re: Brazil Acreage Not Fazed By Prices

Hobby and Shaggy...remember the new banking laws really change the dynamics of good ag lending.

 

A bank is precluded from lending operating money to a firm that cannot cash flow its principal payments, including land, even your house. In agriculture, due to its cyclic nature, almost no well managed farms can meet this standard throughout the entire 30 year cycle.  So, reducing principal payments might be required regardless of how stupid a move it might be. Selling land to reduce the prin payments might actually reduce capital as it might generate a large capital gain but that won't matter to the bank for this year (the tax is due next year remember and prices might improve). Banks have a long history of making horrendous decisions. This won't change.

 

On the other side is an interesting fiasco in that once you are a really large customer that is underwater they cannot afford to put you out of business. Almost no big hog or diary clients were forced out because the bank surely did not want to take ownership of a EPA cleanup site (burying a big dairy or hog farm cost more than any amount they might loose over the next 12 months, AND a used hog or dairy facility is virtually unmarketable most of the time).

 

Be big, or be liquid, being in the middle is the only group they can come after.

 

On the acreage thing, when you can still sell $11 beans, there is a long long way to go before you put it back in pasture for cattle :-)

Our non-land direct costs for beans are around $3 a bushel. $11 is a long way from $3. Everything else is a decision about where the difference goes, living costs, land rent or payments, equipment, etc. The bloated USA cost structure can easily be shifted IF cashflow is reduced.

 

btw...many of the BTO probably have sold alot of the corn for $5 and beans for $12 anyway. Doubt they are all completely unprotected.

 

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Advisor

Re: Brazil Acreage Not Fazed By Prices

That being the case, it is probably a good thing to go ahead and load up on long term debt now while most still can so as to have a big liquidity buffer.

 

Carrying grain inventory like an elevator in a separate enterprise from marketing and buying inputs that will self liquidate within a year would likely at least return the cost of the money.

 

If one were to proceed that way I'd suggest  making sure that the accounting system is up to tracking sources and uses of funds so that the liquidity doesn't cloud analysis of financial performance.

 

 

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Veteran Advisor

Re: Brazil Acreage Not Fazed By Prices

Here are additional thoughts as to why Brazil will not reduce soybean acreage in 2014-15. This is part of a full article that appeared on noticiasagricolas.com.br.:

 

I thought you folks might find this part of the article interesting. It's been translated. So, bear with me.

 

Written by Carla Mendes

 

Planting Area in Brazil

To Marketplace Vlamir Brandalizze, the Brandalizze ConsultingBrandalizze, even with a more depressed and facing a significant increase in production costs market - which is the home of 5% per year - Brazil will not record a reduction in acreage, as had been expected by some private consultancies international.

Demand gives significant indications of growth and many countries besides China, is improving your diet, increasing consumption of animal protein and, consequently, a higher feed consumption. Only in China, the demand for animal feed must submit to grow to 25 million tons.

"The producer, the last four years, is well capitalized and has degraded pastures to plant more. Moreover, we have a portion of producers is under growing area of productive potential, and a slice of younger producers who also want to grow, or are in a time of growth, "says Vlamir Brandalizze.

The consultant also explains that many areas were prepared for this new crop in states like Mato Grosso, Piauí, Tocantins, and the producer will not fail to plant them and still believes he did not bet on a market only bassist. "The world will need soy next year and it is important that Brazil will continue producing increasingly to consolidate itself as the world's largest exporter." So Brandalizze believes may be grown 1 million hectares more, this increase can reach up to 2 million.

Currently, the soybean market has more than 200 buyers and there are basically only four countries - Brazil, United States, Argentina and Paraguay - to provide soy to the world. "We have a demand of over 300 million tonnes, the growth potential for the next 10 years is over 100 million and who can produce this volume the most is Brazil," he explains.

 

Mike

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Veteran Advisor

Re: Brazil Acreage Not Fazed By Prices

pretty bullish - long term

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