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Letter from Brazil

The Big Lie

Apparently there's a trust issue about soybean production information coming from Brazil.

Hello my friends, I've been watching a lot of comments on social media - Twitter - and receiving many questions so I felt I needed to write for my readers and try to uncover the truth.

As you know, last year South American suffered a lot with the drought (and you're probably tired of hearing about this), but a lot of people in the United States took time to believe this fact, but didn't believe other information coming out of Brazil about the rebound.

Well, this year, Brazil is running to produce a record 85 million metric ton crop of soybeans, and will become the No. 1 soybean producer in the world. But I suppose it's not that question that made a lot of people try to corner the market and offer up lies about the Brazilian and South American situation.

First, a lot of people won't want to believe in that record crop because we are just planting. You need to raise a crop to get one. Note that all climate models and current situations that we have in Brazil showed back in September and October that we will have a huge crop.

Second, with that news came the talk about our logistics problems and it's true that we have a lot of deficits in our transportation infrastructure, but we are boosting our export capacity. And the government has launched a program to keep enhancing that capacity.

These two rumors are not enough after prices fell from $17 to below $15 and people are still saying that weather conditions in Brazil will hurt. But USDA, CONAB (a Brazilian national company) me and other's have not stopped raising our soybean crop estimate for Brazil. And Argentina has remained almost unchanged. And the market did respond by dropping prices below $14.

Prices were falling with enormous pressure in the first week of 2013, with macro-economies, new tax regulation in the United States, and of course perfect growing conditions in South America.

The second week of January comes and all markets are waiting for that USDA report. The numbers come in on the bullish side, with huge demand and tight world stocks, especially in the U.S. And the Chinese dragon continues to be hungry, buying soybeans in the U.S. because Brazil will start to export large volumes the second week of February, and in this report USDA increased the Brazilian crop, and cut the Argentina crop a bit.

Now comes another rumor. Recently, talk on Twitter suggested that Brazil was OVERSOLD on February soybeans; and I will tell you we are not oversold! The last beans farmers sell in Brazil is the early seeds, because the be risk is concentrated here. It's a difficult crop to estimate, like U.S. double-crop acres.

A lot of people will say Brazil is oversold because they have a lot of vessels waiting in Brazil and they're empty. Well they are here, but that doesn't mean we're oversold, it's because the U.S. has few soybeans left to export, the Mississippi River has problems and it's cheaper waiting here trying to buy and load early than to stay somewhere else.

With this we hear yet another rumor, that it's raining too much in Mato Grosso and I'm telling you it's raining but it won't delay the harvest pace, create a big issue or big losses.

We don't need lies about the crop because in truth most people don't believe the information they get from Brazil and Brazilians don't believe the information that comes from the United States. The world has the tightest stocks situation, and we need to create a solid and trusted network to advise our farmers in the best way possible.

I just want to say this article represents my own view, and you have two choices. Believe me or not. And if you don't believe me, I would like to advise you to control your risk management and keep your profit margins safe.

I just want to bring you my point of view and offer my perspective to your analysis so you can make the best choice.

Thanks very much,

João Carlos Kopp.

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