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Veteran Advisor

Brazil's soybean crop is not getting smaller

Opposite of what the market is trading, my Brazilian source, Pedro Dejneka, PHDerivatos, drove the soybean areas recently, says there are a lot of reasons why Brazil's soybean crop is not getting or going to be as small as projected. As a result, the market may be rallying artifically. Combine this misnomer with the possiblity of China's financial breakdown in soybean purchases, and you could see 50¢ come off the bean market, he says. So, in his own words:

 

"1st -  The crop is not small – it is the largest on record in Brazil and still at least 3 to 5% higher than last year’s – which was already a record.
 
2nd -  The market seems to get caught up in generalized talks – for instance – the “drought” in BR (only affected a small area relative to total area) and the same can be said for “floodings” in Mato Grosso – I drove through Mato Grosso a couple of weeks ago – the media in BR unfortunately does a poor job of reflecting what is really happening (aside from a couple of much more serious publications).  Was there flooding? Yes.  Did it affect the entire state or a majority of it? No.  However, a few pictures from producers and market participants start floating around e-mail (which gets passed around everywhere in the globe) and BAM! There you have it – Now all of the sudden Mato Grosso’s production estimates go from 28 MMTs to 23 MMTs in some people’s books…
As for the drought in Parana – yes, it hit the northern part of the state pretty hard.  However, it seems to me that many specialists, etc, are suffering from short memory… do we remember what happened in the last two years here in the US? In 2012 the final crop numbers were basically 10 MMTs higher than the USDA had estimated during the drought.  Last year, the final crop was 4 MMTs higher than the September USDA estimate called for – and much higher than what some analysts were calling for.
In other words – the market does indeed shoot first and asks questions later.  New technology of inputs, seeds, techniques, etc… have turned the soybean plant much more resilient than even some of the world’s best and most renowned specialists had ever expected.  It is very difficult anymore to judge a crop on appearance alone – we found that out the hard way (or positive way) the last two years here in the U.S.
 
3rd – Very few are talking about the sizeable seeding of SAFRINHA BEANS in Mato Grosso – I saw it firsthand.  Farmers have planted anywhere between 500k and 1 million acres – which could produce close to or upwards of 1MMT of beans that is not being account for.  I have the state harvesting upwards of 26 MMTs – still 3 MMTs above last year’s record crop…
 
Lastly – I believe this year’s BR crop will come in somewhere between 87 and 88.5 MMTs by time it is all said and done…
Of course that number could change or be diminished depending on conditions during the last 40% or so of harvesting, but all in all, I believe 85 is a good baseline number and 88.5 “ish” a good upper end estimate.

 

Mike
 

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17 Replies
Honored Advisor

Re: Brazil's soybean crop is not getting smaller

Just wondering which one of our US market advisors is your source in Brazil?........... Ha...........It sure sounds like one of our guys. 

 

BTW, even at 88.5, it is much smaller than 92-93 which is all we heard about a month ago.......so......by that account, it is getting smaller.

 

I know that there are folks in DC that are hoping the Brazilian soybean crop is not getting smaller.......they are counting on those imported beans.

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Advisor

Re: Brazil's soybean crop is not getting smaller

Sounds reasonable.

 

We had an epic short squeeze set off by a confluence of circumstances- a very oversold and complacent market, some downward adjustment of SA projections and a general commodity pop.

 

It created some nice opportunities but one should not assume that the size of the market move must mean that the fundamental news is proportionate.

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Senior Contributor

Re: Brazil's soybean crop is not getting smaller

Apparently there are mixed messages coming from Brazil regarding their drought effects. Article I read this morning indicated there are already as many drought caused insurance claims this year as there were in 2012.

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Senior Contributor

Re: Brazil's soybean crop is not getting smaller

As far as the sarfinia beans some if not a lot will not see a combine as they have already been destoyed or will be, because of diesease, incects or weather. From what I hear is Ag offficials in MG are upset farmers are planting so many acres of 2nd crop beans and are planning on new regulations to stop the practice for future years. IMO agronomically it can't be a good idea to plant a 2nd crop of the same type in a already dominated monoculture enviroment. What are they ( farmers) thinking?

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Senior Advisor

China financial breakdown in Soy ??????

Ain't going to happen. No way, no how. At all. Period. Expectations of that outcome are pure delusion.

 

Any of the other points could be debatable at least.

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Advisor

Re: China financial breakdown in Soy ??????

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Senior Contributor

Re: Brazil's soybean crop is not getting smaller

Here is the article I was refering to from a online source called agrolink. Obviously some of the higher number of claims is due to having more policies sold. However, where there is smoke, there is often a fire.

 

Banks point record claims in crop insurance


Views : 889


Banks point record claims in crop insurance

13/03/14 - 19:44


 
Requests for agricultural insurance hit record this season , with some farmers communicating losses since December 2013. Only the first 10 days of February , more than 2000 insurance claims have been made to the insurance group Mapfre and Banco do Brazil , for example.
 

The entity estimates pay $ 275 million in compensation to producers 5000 . The prolonged drought , which is hindering the main summer crops ( soybeans and corn ) , is considered the main villain .
 

" The drought is more serious than previously thought ," says Luis Carlos Guedes Pinto , director of Rural and insurance BB MAPFRE and former Minister of Agriculture . " Since the 2004/2005 harvest did not have such a large number of claims reported in a single day . That number is almost double the notices received in the same period of 2013 , and 250 % higher than in 2012 , when there was a drought that originated 5000 claims and R $ 180 million in damage , "recalls Guedes Pinto .

 
Most claims refers primarily to events in the states of Paraná , São Paulo , Rio Grande do Sul, Mato Grosso , Minas Gerais and Goias " The harvests of 2011/2012 and 2012/2013 , for BB Agricultural Insurance the total number of contracted policies varied between 25 and 27 thousand, compared to approximately 40 thousand policies in the current crop " , records the former minister.

 
 
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Advisor

Re: China financial breakdown in Soy ??????

It is a very opaque situation that has many possible explanations, including the conventional ones.

 

But the pace and sourcing of recent Chinese soy purchases doesn't make sense to me.

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Senior Advisor

Re: China financial breakdown in Soy ??????

The idea that soy is used as zerohedge implies is PURELY speculative. That's the best I could say about it.

 

I think the following is iron clad. China made a strategic decision years ago that they had to go to the world market for soy for a number of very important reasons. The underlying idea is that soy is key to China's food standard of living requirement for meat, protein and oil and that the dietary improvement in the standard of living is the bedrock of China's development.

 

China's purchases of soy center on one thing, and one thing only, in terms of importing - keeping the conveyor to it's shores constant in order to make the best use of it's very stretched infrastructure. At almost  70 Million tns  a year it's landing soy almost every day in multiple ports. Look at the yearly consumption of soy. You will find only year after year increase. That's going to continue for the forseeable future as there aren't any alternatives. Iron ore imports can vary from year to year - or copper. Soy imports do only one thing - continue to increase year after year. But government auction policies and control of reserves makes it very dicey to hoard soy. Their shipping schedule is long into the future and they can play with that line up by juggling both infrastructure reality and prices but the necessary conveyer is constant in the near term.

 

 

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