New Regulations for Soybean Producers in Mato Grosso - Friday, 06 January 2017

The market has received a bit of a new-year boost as the Funds prepare for next week’s USDA Annual Crop Production Summary and Quarterly Stocks reports.  Kevin Van Trump had an interesting write-up this week that I decided to share, in part, with you regarding his thoughts as we move into the New Year. “I believe there is still risk on the horizon.  I’m also thinking U.S. corn acres in 2017 might be less than many inside the trade are currently forecasting.  Obviously a lot will depend on the weather and to the extent it provides the farmer with a cooperative window of opportunity this spring.  But for many producers, tightening “lines-of-credit” and a much more burdensome “basis” makes soybeans a more clear and obvious choice.” “…the current “environment” is definitely ripe for the U.S. farmer to dramatically cut corn acres in 2017.”  Of course we were all told many of these same things a year ago and 2016 turned out to be a record breaking year for corn production so it’s really too far ahead for anything more than speculation.  Van Trump concluded his thoughts with, “Remember, it’s not necessarily what the market “knows” but rather what the market ”does not yet know” that provides the opportunity.”

The two graphs below show us the comparison over the past 10 years for crop production, harvested acres and yield for both corn and soybeans. Based on the final USDA numbers for 2016 production estimates will producers plant less corn acres in 2017?

 

 

A new state regulation for the 2016/17 crop in Mato Grosso, Brazil sets new deadlines for producers.  The new rules include a deadline that requires all soybeans be planted by December 31st and must be harvested no later than May 5th which is the beginning of the soybean-free period.  In addition producers are no longer allowed to plant a second crop of soybeans.  These new rules were designed in an attempt to minimize the spread of soybean rust from one growing season to another.  While Moto Grosso is currently the only state with these new regulations in place, other states in Brazil are expected to begin similar rules over the next few years.

We often hear of delays at the ports in Brazil and South America due in large part to the poor transportation system in place.  This has prompted several companies to invest nearly $4 billion for the development of a 580 mile railway system.   While this is a good solution it is expected the project will take 12 years to complete and new northern ports will still have to deal with unpaved roads and heavy shipping delays when rains move through. Below is a picture taken recently north of Sinop along an unpaved section of BR-163.  This is the situation many producers deal with in getting their grain hauled to the ports.

 

 

The Weather Company is now predicting that January, 2017 to be much colder than normal from the Pacific Northwest into the upper Midwest.  The Gulf Coast is the only portion of the country that they predict will see temperatures above normal.  One of the biggest influences driving these temps is La Niña which typically brings colder than normal temps to the northern and western sections of the country and warmer than normal temps to the southern and eastern U.S.

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