Letter from Brazil

Myth Buster

Taking on Mad Cow, logistics, drought conditions in Brazil and the huge crop in South America.

First I want to wish you a wonderful 2013 and hope Mother Nature will provide the best crop growing conditions for everyone.

In this article I would like to do something like the Myth Buster TV show and try to tackle a few topics the world has been talking about in Brazil in the last few months.

Myth: Mad Cow in Brazil

In November 2012 we had news from the Agriculture Department that in 2010 there was a cow slaughtered that was later said to have had bovine spongiform encephalopathy - or Mad Cow Disease. The government confirmed that the cow was infected but that was not the cause of the cows death and world health authorities continue to list Brazil without risk of the disease.

Brazilian cattle production has changed a little in the past three years as prices have risen in central and western Brazil. The production system is using more feedlots and reducing grass feeding due to better margins on grains and an intensification of the system. I can guarantee that our feeders aren't using animal protein to feed cattle.

Myth: Denied!

Myth: Logistics

Everyone knows Brazil has logistics issues. We don't have a decent rail infrastructure and we have a pretty bad road system too, which I talked about in my last letter.

but the big question is, are we improving export capacity? Yes! Since 2008, Brazil has improved its grain export capacity year to year. In 2000, we exported 11.75 million metric tons of soybeans, in 2005 we exported 22.55 MMT, almost double the earlier total. In 2010, the number rose to 29.07 MMT, and we closed 2012 with 32.9 MMT shipped. The increase in grain exports - soybeans/soymeal/corn - has increased 16.8%, above my last estimate of 15% in October. This is pretty good.

When the entire world is living with the worst condition for grain stocks in recent years, we need to do our part and export a lot of grains. I'm still sticking with my projections that Brazil will export 40 to 40 MMT of soybeans in 2013, and I'm willing to tell you, that it will not be a surprise to me if we top this expectation and export around 50 MMT.

Myth: Confiremed - but it isn't slowing grain exports.

Myth: Dry weather in Brazil

I like to read a lot of opinions but I'm intrigued when people talk about drying conditions in Brazil. It's true that Northeast of Brazil it was drier, especially Bahia, but I will tell you something - Bahia produced 3.18 MMT of soybeans in the last crop season, and according to major reporting services they will produce 3.8 MMT in 2013 and the entire northeast area will produce about 6.97 MMT up from 6.09 MMT in 2012 when the same drought that hit the United States hit Bahia.

 It this season, we are so far away from the bad conditions we saw last year, that we'll have more production. And central and west Brazil produced more than half the soybeans last year. Below are charts showing cumulative rainfall in Brazil, with intense red at .4 inches; intense yellow at 4.16 inches and light green at 12.5 inches. Check out the conditions in the northeast.

In September Bahia almost didn't have any rainfall, in October they had less than 1 inch and in November rains are helping a lot with almost 10 inches in the eastern area, and December had 1 to 4 inches.

Check out the conditions in the northeast in the graphics below. The top one shows dry conditions in Bahia because of little October rain, but the bottom graphic shows the changing conditions through November and December.

Myth Buster

Myth Buster

Myth: Dry Weather in Brazil: Denied!

Myth: Huge Crop in S.A.

Looking back at those rainfall charts you can see that in September we had South Brazil covered with more than four inches, in October the soybean belt had three to 12 inches. Rains in October caused some planting delays, but provided perfect soil moisture. And in November we had 1 to 2.5 inches. And in December, almost 10 inches of rain covered South Brazil.

Central and west Brazil had better conditions than the south, with a good start in September with 1 to 2 inches, October with 2 to 4 inches and November with almost 10 inches. December had 4 to 11 inches.

We had some planting delays in Argentina too, but conditions are very similar to South Brazil, and I'm still seeing 55 MMT in Argentina's soybean production. I may raise my Brazil projections from 83.37MMT in October to 85 MMT due to good conditions in Mato Grosso, and South Brazil, especiall in RGDs.

Myth: Huge Crop in S.A. Confirmed! Brazil will be the Top Soy Producer in the World

I sincerely hope that Mother Nature provides good growing conditions for North Americans, like the provides to us here south of the equator. Below are some pictures I took in Mato Grosso December 20.

Myth Buster

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