1 00:00:05,800 --> 00:00:10,240 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:10,280 --> 00:00:14,080 Speaker 1: I'm Joey Isn't and I'm Tracy Alloway. Tracy, I feel 3 00:00:14,160 --> 00:00:16,480 Speaker 1: like one of the things that we do is just 4 00:00:17,079 --> 00:00:21,600 Speaker 1: keep revisiting old themes and sort of on this permanent rotation. 5 00:00:21,920 --> 00:00:25,239 Speaker 1: And I literally think it was like, basically a year ago. 6 00:00:25,600 --> 00:00:27,560 Speaker 1: I think it was exactly a year ago, we did 7 00:00:27,600 --> 00:00:32,320 Speaker 1: an episode on the rising price of grains, particularly corn, 8 00:00:32,520 --> 00:00:36,839 Speaker 1: wheat and soy, and since then, let's just say, we 9 00:00:36,880 --> 00:00:39,559 Speaker 1: have to revisit that now. Yeah, well we were just 10 00:00:39,600 --> 00:00:41,600 Speaker 1: talking about this, but I think a year ago, you know, 11 00:00:41,800 --> 00:00:45,280 Speaker 1: the theme was the weather hasn't been that good, crops 12 00:00:45,320 --> 00:00:48,680 Speaker 1: haven't been that good. Food prices are rising, China is 13 00:00:48,720 --> 00:00:52,040 Speaker 1: buying a lot, and that's adding additional pressure on supply, 14 00:00:52,720 --> 00:00:55,680 Speaker 1: and now we have to throw Russia Ukraine into the mix, 15 00:00:55,960 --> 00:00:59,279 Speaker 1: and it just seems like a pretty bad situation has 16 00:00:59,320 --> 00:01:02,520 Speaker 1: possibly gone a whole lot worse, right, And so when 17 00:01:02,600 --> 00:01:06,959 Speaker 1: people think about the commodity effects of that of the war, 18 00:01:07,160 --> 00:01:12,319 Speaker 1: of that conflict, I think predominantly people think about oil 19 00:01:12,360 --> 00:01:14,959 Speaker 1: and gas, and of course we have seen upward pressure 20 00:01:15,040 --> 00:01:20,520 Speaker 1: on both, but Ukraine is also a massive export of wheat. Belarus, 21 00:01:20,600 --> 00:01:23,760 Speaker 1: which has also come under sanctions, is a big exporter 22 00:01:24,080 --> 00:01:28,000 Speaker 1: of fertilizer. And so we have had this already tight 23 00:01:28,120 --> 00:01:32,160 Speaker 1: market for commodities for grains for some of the conditions mentioned, 24 00:01:32,440 --> 00:01:34,839 Speaker 1: and they've just gotten a lot tighter. Yeah. And of course, 25 00:01:34,959 --> 00:01:37,200 Speaker 1: the one thing that I'm sure all lots listeners know 26 00:01:37,319 --> 00:01:40,199 Speaker 1: about the commodities market by now is that everything tends 27 00:01:40,240 --> 00:01:43,720 Speaker 1: to be interconnected. So if you get a rise in 28 00:01:43,760 --> 00:01:46,880 Speaker 1: the price of natural gas, for instance, that can end 29 00:01:46,920 --> 00:01:49,640 Speaker 1: up feeding through into the price of fertilizers. I saw 30 00:01:49,720 --> 00:01:52,400 Speaker 1: one news story right before we came on saying that 31 00:01:52,520 --> 00:01:55,840 Speaker 1: um Yarra, which is one of the big fertilizer producers 32 00:01:55,840 --> 00:02:01,640 Speaker 1: in Norway, is curtailing its production of fertilizer because of 33 00:02:01,680 --> 00:02:04,800 Speaker 1: the nat gas price surge. And then you have things 34 00:02:04,840 --> 00:02:08,000 Speaker 1: that happen in the commodities market that feed through into 35 00:02:08,120 --> 00:02:12,040 Speaker 1: other commodities. So again another example here, the price of 36 00:02:12,040 --> 00:02:16,160 Speaker 1: wheat is expected to increase production of pork because of 37 00:02:16,200 --> 00:02:19,640 Speaker 1: course a lot of pigs in Europe in particular eat 38 00:02:19,639 --> 00:02:23,640 Speaker 1: wheat as their food grains. So everything is interconnected and 39 00:02:23,680 --> 00:02:26,600 Speaker 1: it becomes really difficult to predict and track A lot 40 00:02:26,680 --> 00:02:29,800 Speaker 1: of these movements and impacts exactly right. Well, you know, 41 00:02:29,840 --> 00:02:32,320 Speaker 1: we mentioned that we talked about this year ago, and 42 00:02:32,320 --> 00:02:35,280 Speaker 1: so we're going to bring back the guests we spoke 43 00:02:35,360 --> 00:02:38,880 Speaker 1: to before and try to wrap our heads around what 44 00:02:39,080 --> 00:02:42,280 Speaker 1: is going around now, because the one other difference is 45 00:02:42,320 --> 00:02:46,240 Speaker 1: that anxiety about inflation overall much higher today than it 46 00:02:46,320 --> 00:02:49,240 Speaker 1: wasn't early one, even as we started to see these 47 00:02:49,280 --> 00:02:53,960 Speaker 1: prices rise. So complicated time, complicated situation. I'm very excited 48 00:02:54,040 --> 00:02:57,520 Speaker 1: to bring back Scott Irwin. He's an agriculture economist at 49 00:02:57,520 --> 00:03:01,040 Speaker 1: the University of Illinois. So Scott, thank you so much 50 00:03:01,080 --> 00:03:04,399 Speaker 1: for coming back on odd Lots. My pleasure, really look 51 00:03:04,520 --> 00:03:07,200 Speaker 1: forward to it. Absolutely great to have you back. Let's 52 00:03:07,240 --> 00:03:12,200 Speaker 1: start with actually right before the invasion, just talk a 53 00:03:12,200 --> 00:03:15,720 Speaker 1: little bit about how tight or how would you characterize 54 00:03:15,720 --> 00:03:18,720 Speaker 1: the conditions in the grain markets. You know, sort of 55 00:03:18,840 --> 00:03:27,639 Speaker 1: early February, we were kind of scraping along. Prices were 56 00:03:27,639 --> 00:03:33,760 Speaker 1: certainly elevated relative to historical averages. UH. The latest thing 57 00:03:33,800 --> 00:03:36,920 Speaker 1: that the markets that are preserved was a less than 58 00:03:37,360 --> 00:03:41,600 Speaker 1: stellar growing season for South American soybeans. But we were 59 00:03:42,280 --> 00:03:49,000 Speaker 1: getting along anticipating a pretty good spring and big plantings 60 00:03:49,160 --> 00:03:54,240 Speaker 1: of UH corn and soybeans here in the United States. 61 00:03:54,280 --> 00:03:57,120 Speaker 1: That would probably help smooth that out. We're going to 62 00:03:57,280 --> 00:04:01,080 Speaker 1: have some volatility, may be related to summer weather here 63 00:04:01,120 --> 00:04:04,120 Speaker 1: in the US, but I wouldn't say that, you know, 64 00:04:04,760 --> 00:04:08,200 Speaker 1: we thought that anything was way out of bounds historically. 65 00:04:08,960 --> 00:04:12,760 Speaker 1: So how big a deal is Russia invading Ukraine from 66 00:04:13,000 --> 00:04:17,640 Speaker 1: a grains or agricultural perspective, because on the one hand, 67 00:04:18,240 --> 00:04:21,240 Speaker 1: you hear a lot that the Ukraine in particular is 68 00:04:21,279 --> 00:04:23,560 Speaker 1: you know, known as the bread basket of Europe. There's 69 00:04:23,600 --> 00:04:26,119 Speaker 1: a lot of production there. But on the other hand, 70 00:04:26,720 --> 00:04:32,040 Speaker 1: farming is an industry that is familiar with supply shocks. 71 00:04:32,120 --> 00:04:35,040 Speaker 1: You know, things happen, there's, um, I guess, bad weather 72 00:04:35,160 --> 00:04:39,520 Speaker 1: and pestilence as well. So how big a deal is this? Um? 73 00:04:39,600 --> 00:04:43,120 Speaker 1: Couch it in historical terms? Sure, This is the way 74 00:04:43,120 --> 00:04:46,919 Speaker 1: that I try to communicate just how big of a 75 00:04:47,040 --> 00:04:52,960 Speaker 1: whole this war is blowing in the global grain markets. 76 00:04:53,560 --> 00:04:58,800 Speaker 1: The Ukraine in recent years has planted about fifty nine 77 00:04:58,920 --> 00:05:04,520 Speaker 1: million acres of their top six crops wheat, sunflowers, soybeans, corn, barley, 78 00:05:04,600 --> 00:05:08,480 Speaker 1: and what they call rape scene. Um, So how big 79 00:05:08,560 --> 00:05:12,080 Speaker 1: is that? And that's what's under threat of potentially not 80 00:05:12,120 --> 00:05:15,440 Speaker 1: being planted at all, uh this spring due to the war. 81 00:05:16,240 --> 00:05:21,240 Speaker 1: That's almost exactly equal to the total planted area of 82 00:05:21,360 --> 00:05:27,640 Speaker 1: crops in Illinois and Iowa. So you're just blowing that right, 83 00:05:27,800 --> 00:05:32,080 Speaker 1: potentially out of the global markets. Imagine that now they're 84 00:05:32,160 --> 00:05:35,200 Speaker 1: they're not as productive if those acres don't grow as 85 00:05:35,320 --> 00:05:39,560 Speaker 1: much as Iowa and Illinois do. But you know that 86 00:05:39,839 --> 00:05:43,520 Speaker 1: right there is about four billion bushels of production that 87 00:05:43,880 --> 00:05:47,800 Speaker 1: potentially if it doesn't get planted, or the vast majority 88 00:05:47,880 --> 00:05:51,919 Speaker 1: doesn't get planted. Uh, you're just taking that off. Uh 89 00:05:51,960 --> 00:05:56,240 Speaker 1: you know. So that's just the immediate war impact then 90 00:05:56,279 --> 00:05:59,360 Speaker 1: they have. On the other side, Russia, they're not going 91 00:05:59,400 --> 00:06:03,680 Speaker 1: to but have you know, any problems growing their crops 92 00:06:03,760 --> 00:06:07,760 Speaker 1: this year? The question is how much of it will 93 00:06:07,800 --> 00:06:12,200 Speaker 1: be available to the world markets. Russia is the world's 94 00:06:12,480 --> 00:06:16,880 Speaker 1: largest exporter of wheat. And again, the way I try 95 00:06:16,880 --> 00:06:21,080 Speaker 1: to put that into perspective, well, you know, with US production, 96 00:06:21,680 --> 00:06:26,839 Speaker 1: what um would it take for US wheat production to 97 00:06:27,080 --> 00:06:32,240 Speaker 1: replace what's lost potentially for Russia. Well, Kansas is our 98 00:06:32,279 --> 00:06:36,279 Speaker 1: biggest uh winter wheat producer here in the United States, 99 00:06:36,440 --> 00:06:40,960 Speaker 1: and it would take four million Kansas is to replace 100 00:06:41,080 --> 00:06:45,320 Speaker 1: what was lost Wow, that's a that's quite a striking 101 00:06:45,520 --> 00:06:47,840 Speaker 1: way to put it. You know, we're recording this in 102 00:06:47,880 --> 00:06:50,960 Speaker 1: the middle of March. Actually recording data is out March fourteen. 103 00:06:51,440 --> 00:06:54,480 Speaker 1: Where are we in the cycle? And so you talked 104 00:06:54,480 --> 00:06:58,880 Speaker 1: about plantings in Ukraine right now? What needs to happen, like, 105 00:06:58,920 --> 00:07:01,400 Speaker 1: are we talking about in the couple of weeks where 106 00:07:01,440 --> 00:07:05,200 Speaker 1: exactly as the timing of this. In the Ukraine and Russia, 107 00:07:05,279 --> 00:07:09,680 Speaker 1: their biggest wheat crop is winter wheat, which was planted 108 00:07:09,760 --> 00:07:13,800 Speaker 1: last fall. It basically goes into hibernation in the winter 109 00:07:14,200 --> 00:07:17,239 Speaker 1: and then it's plant and it's harvested in the early summer. 110 00:07:17,400 --> 00:07:20,760 Speaker 1: That that's already growing in both countries. Uh, then the 111 00:07:20,840 --> 00:07:24,200 Speaker 1: question is how much of it will be available to 112 00:07:24,240 --> 00:07:28,360 Speaker 1: be harvested and moved into international markets in the Ukraine. 113 00:07:28,680 --> 00:07:33,400 Speaker 1: But the really big danger is the number one crop 114 00:07:33,520 --> 00:07:36,080 Speaker 1: in terms of volume in the Ukraine is actually corn, 115 00:07:36,320 --> 00:07:40,800 Speaker 1: which the vast majority of it is exported uh internationally. 116 00:07:41,560 --> 00:07:45,640 Speaker 1: Ukraine exports now over a billion bushels of corn every year. 117 00:07:46,320 --> 00:07:51,400 Speaker 1: And the planting window in Ukraine for their spring crops 118 00:07:51,520 --> 00:07:53,880 Speaker 1: it's almost the same as the United States. It's not 119 00:07:54,000 --> 00:07:57,320 Speaker 1: really very much different. They will be planting in April 120 00:07:57,320 --> 00:08:02,440 Speaker 1: and early May, so they're really literally just a couple 121 00:08:02,440 --> 00:08:06,400 Speaker 1: of weeks from going back, or they would intend normally 122 00:08:06,480 --> 00:08:10,400 Speaker 1: to go back to the fields UH in a couple 123 00:08:10,400 --> 00:08:13,880 Speaker 1: of weeks. So we've seen the price of wheat shoot 124 00:08:14,000 --> 00:08:16,840 Speaker 1: up really dramatically, and the price of corn has gone 125 00:08:16,880 --> 00:08:20,240 Speaker 1: up to but not as much as wheat. What exactly 126 00:08:20,240 --> 00:08:27,760 Speaker 1: accounts for the discrepancy there? Well, because combined the Ukraine 127 00:08:27,960 --> 00:08:35,200 Speaker 1: and Russia is a significant component of the total exports 128 00:08:35,320 --> 00:08:40,280 Speaker 1: of wheat in the world. UH number one, Russia's number one, 129 00:08:41,040 --> 00:08:44,040 Speaker 1: and Ukraine. Off the top of my head, I think 130 00:08:44,120 --> 00:08:47,200 Speaker 1: their second. When we think about we where does it go? 131 00:08:47,640 --> 00:08:50,400 Speaker 1: What is the end destination of wheat look like? And 132 00:08:50,480 --> 00:08:54,319 Speaker 1: Tracy mentioned something that in Europe the pigsy wheat and 133 00:08:54,480 --> 00:08:57,480 Speaker 1: how much is bread, how much is pasta, how much 134 00:08:57,600 --> 00:09:00,839 Speaker 1: is feed? What is the ultimate distribute and what kind 135 00:09:00,880 --> 00:09:05,400 Speaker 1: of substitute ability is there between grains such that if 136 00:09:05,400 --> 00:09:07,920 Speaker 1: the price of wheat sores, then the end bire can 137 00:09:07,920 --> 00:09:13,160 Speaker 1: maybe switched to a cheaper commodity for feeding animals, for 138 00:09:13,280 --> 00:09:17,120 Speaker 1: livestock feeding, there's a great deal of substitution. Basically, there's 139 00:09:17,160 --> 00:09:20,439 Speaker 1: the potential for a substitution if you have those supplies. 140 00:09:20,960 --> 00:09:25,080 Speaker 1: Where there's real concerns is you know, the vast bulk 141 00:09:25,600 --> 00:09:33,079 Speaker 1: of wheat is actually used for human consumption, bread, pasta, crackers, 142 00:09:33,720 --> 00:09:38,760 Speaker 1: things like that. This is potentially huge problems for lower 143 00:09:38,800 --> 00:09:42,679 Speaker 1: to middle income countries in North Africa and throughout the 144 00:09:42,760 --> 00:09:47,400 Speaker 1: Middle East that have relied very heavily on the imports 145 00:09:47,440 --> 00:09:50,200 Speaker 1: of wheat from this area and that's almost all for 146 00:09:50,280 --> 00:09:55,320 Speaker 1: human consumption. Egypt is kind of the prime example. You know, 147 00:09:55,640 --> 00:10:01,400 Speaker 1: Joe mentioned the substitution effect, the idea of people, you know, 148 00:10:01,960 --> 00:10:04,880 Speaker 1: maybe instead of we you use something else to feed 149 00:10:04,920 --> 00:10:08,600 Speaker 1: your pigs. But could you walk us through exactly what 150 00:10:08,800 --> 00:10:13,080 Speaker 1: happens when you get a price shock like this, Like 151 00:10:13,280 --> 00:10:17,320 Speaker 1: how does it filter through the broader market? So prices increase, 152 00:10:18,040 --> 00:10:24,000 Speaker 1: and then do pig farmers immediately start deciding to feed 153 00:10:24,120 --> 00:10:28,240 Speaker 1: their herds something else? Do farmers respond to the price 154 00:10:28,320 --> 00:10:32,360 Speaker 1: increase immediately by altering their planned crops? Like what exactly 155 00:10:32,440 --> 00:10:36,120 Speaker 1: is the sequence of events that happens. Well, all of 156 00:10:36,160 --> 00:10:39,560 Speaker 1: this is really going on at the same time, and 157 00:10:40,080 --> 00:10:42,640 Speaker 1: this is one of the reasons why in this kind 158 00:10:42,640 --> 00:10:48,000 Speaker 1: of circumstance you see just such incredible volatility or spiking 159 00:10:48,200 --> 00:10:54,319 Speaker 1: of prices in week because of the nature what I 160 00:10:54,360 --> 00:10:59,920 Speaker 1: would say is the natural inflexibility built into the consumptions 161 00:11:00,040 --> 00:11:03,040 Speaker 1: side of commodities like wheat, corn, and soybeans in a 162 00:11:03,280 --> 00:11:08,000 Speaker 1: very very short run. On the animal side, yes, there's 163 00:11:08,080 --> 00:11:12,440 Speaker 1: some short run a substitution in terms of feeding, but 164 00:11:12,679 --> 00:11:17,240 Speaker 1: that takes some time and you know, the animals that 165 00:11:17,280 --> 00:11:21,040 Speaker 1: are there have to be fed something. So this is 166 00:11:21,080 --> 00:11:24,400 Speaker 1: the heart and soul of the source of what economists 167 00:11:24,400 --> 00:11:30,840 Speaker 1: called the short run in elasticity of demand for agricultural commodities. 168 00:11:31,200 --> 00:11:34,520 Speaker 1: So on the animal side, the animals have to be fed, 169 00:11:34,960 --> 00:11:39,559 Speaker 1: and there's limited substantutability. You know, you have to get 170 00:11:39,880 --> 00:11:43,920 Speaker 1: different suppliers, commodities have to be moved around in terms 171 00:11:43,920 --> 00:11:48,480 Speaker 1: of this substitution. It will happen, but it just takes time. 172 00:11:49,000 --> 00:11:54,200 Speaker 1: And then that's even harder on the human side, when 173 00:11:54,679 --> 00:11:58,960 Speaker 1: as we know, diets are relatively fixed, and you know, 174 00:11:59,000 --> 00:12:02,560 Speaker 1: countries like Egypt will do everything they can to probably 175 00:12:02,600 --> 00:12:06,560 Speaker 1: try to increase subsidies and insulate their population from these 176 00:12:06,559 --> 00:12:10,640 Speaker 1: price increases. But if wheat is simply not available in 177 00:12:10,640 --> 00:12:13,800 Speaker 1: a place like that, that's a huge problem. There's there's 178 00:12:14,320 --> 00:12:20,439 Speaker 1: really besides aid from other countries Uh, it's very difficult 179 00:12:20,440 --> 00:12:25,160 Speaker 1: to change that diet in a matter of a few weeks. Okay, 180 00:12:25,160 --> 00:12:27,160 Speaker 1: so you walk through, we get this price surge, what 181 00:12:27,280 --> 00:12:32,160 Speaker 1: happens on the consumption side, what happens on the supply side? 182 00:12:32,760 --> 00:12:36,760 Speaker 1: What are a is there's still time for farmers in 183 00:12:36,800 --> 00:12:39,880 Speaker 1: the US or anywhere else to change their choice of 184 00:12:39,960 --> 00:12:43,959 Speaker 1: crops or to reallocate acreage. And is there anything anyone, 185 00:12:44,080 --> 00:12:47,640 Speaker 1: whether in the US or elsewhere, can do to increase 186 00:12:47,679 --> 00:12:51,600 Speaker 1: supply overall in a short to medium period of time. 187 00:12:52,040 --> 00:12:55,199 Speaker 1: What is the opportunity to replace the lost the lost? 188 00:12:55,200 --> 00:13:01,880 Speaker 1: Weeat A great question. Uh. In wheat unfortunately kind of 189 00:13:01,920 --> 00:13:08,280 Speaker 1: in a devilishly tight situation here because the biggest wheat 190 00:13:08,280 --> 00:13:11,480 Speaker 1: crop in the world, as I mentioned before, is winter wheat, 191 00:13:12,000 --> 00:13:15,760 Speaker 1: and for the Northern hemisphere that was already planted and 192 00:13:15,800 --> 00:13:18,840 Speaker 1: there's just nothing you can do now in terms of 193 00:13:19,200 --> 00:13:23,400 Speaker 1: increasing the winter wheats supply in the northern hemisphere of 194 00:13:23,480 --> 00:13:27,720 Speaker 1: the world because that planting window was last fall. Now, 195 00:13:27,760 --> 00:13:32,120 Speaker 1: the southern hemisphere can uh, you know, begin planting winter 196 00:13:32,120 --> 00:13:35,960 Speaker 1: wheat right now. Uh. And there are some large producers 197 00:13:35,960 --> 00:13:39,800 Speaker 1: like Australia, but the Southern hemisphere doesn't tend to be 198 00:13:40,280 --> 00:13:42,480 Speaker 1: you know, that large of a wheat producer, so maybe 199 00:13:42,520 --> 00:13:44,640 Speaker 1: we'll get some more out of that, but you know 200 00:13:44,760 --> 00:13:48,520 Speaker 1: that's you know, six eight months down the line. So 201 00:13:48,600 --> 00:13:51,520 Speaker 1: the short run on the wheat supply is all going 202 00:13:51,600 --> 00:13:55,079 Speaker 1: to be with spring wheat um and there is some 203 00:13:55,200 --> 00:13:59,080 Speaker 1: scope for the ability to expand production of spring wheat, 204 00:13:59,400 --> 00:14:03,600 Speaker 1: but springwheat tends to be grown in far northern areas 205 00:14:03,840 --> 00:14:06,840 Speaker 1: of the Great Plains of the US and into Canada, 206 00:14:07,120 --> 00:14:10,720 Speaker 1: and uh so there'll be probably some increased production there, 207 00:14:10,720 --> 00:14:15,160 Speaker 1: but it can't show up until at the earliest September. 208 00:14:15,559 --> 00:14:20,400 Speaker 1: So you know, that's the vice that the wheat market 209 00:14:20,480 --> 00:14:22,800 Speaker 1: is in in the world, is that our ability to 210 00:14:22,880 --> 00:14:29,000 Speaker 1: basically really alter availability is through the channel of spring wheat, 211 00:14:29,320 --> 00:14:35,240 Speaker 1: which is a relatively minor crop compared to the major crop, 212 00:14:35,320 --> 00:14:39,120 Speaker 1: of which are wheat, So that makes it hard. You 213 00:14:39,160 --> 00:14:42,960 Speaker 1: mentioned Russian winter wheat at the beginning, and of course 214 00:14:43,040 --> 00:14:46,680 Speaker 1: you know that's expected to still grow and probably be 215 00:14:47,040 --> 00:14:52,200 Speaker 1: largely unimpacted by the events in Ukraine, but no one 216 00:14:52,280 --> 00:14:54,240 Speaker 1: can get to it, or fewer people can get to 217 00:14:54,240 --> 00:14:56,680 Speaker 1: it because of the sanctions in place. What are the 218 00:14:56,760 --> 00:15:00,360 Speaker 1: chances that some of that is able to leak into 219 00:15:00,400 --> 00:15:04,680 Speaker 1: the market. Well, that's going to be the great question 220 00:15:05,400 --> 00:15:10,520 Speaker 1: because we know, first off, there's what economists called trade 221 00:15:10,560 --> 00:15:14,960 Speaker 1: diversion in these kinds of situations. Um, you know, not 222 00:15:15,080 --> 00:15:18,760 Speaker 1: everyone is going to follow the sanctions. For example, we 223 00:15:18,880 --> 00:15:24,040 Speaker 1: expect that um, some of Russia's wheat exports will now 224 00:15:24,080 --> 00:15:26,520 Speaker 1: go to China so that they can use that to 225 00:15:26,920 --> 00:15:31,960 Speaker 1: feed their feed their animals and contribute to their diets. 226 00:15:32,000 --> 00:15:35,520 Speaker 1: So that's trade diversion will happen. The big question in 227 00:15:35,600 --> 00:15:41,520 Speaker 1: my mind is always leakage that you know, um, not 228 00:15:41,560 --> 00:15:44,360 Speaker 1: speaking to the morality of the situation, but we know 229 00:15:44,920 --> 00:15:52,280 Speaker 1: that historically that large international commodity trading firms are experts 230 00:15:52,960 --> 00:15:57,480 Speaker 1: at figuring ways uh semi legally is the way I 231 00:15:57,480 --> 00:16:00,880 Speaker 1: would put it around the sanctions and to move these 232 00:16:00,920 --> 00:16:05,520 Speaker 1: commodities around the world. Yet there's a cost of that. 233 00:16:05,840 --> 00:16:08,800 Speaker 1: You know that they'll only buy the wheat from Russia 234 00:16:09,000 --> 00:16:12,760 Speaker 1: deep discounts. It takes time for these alternative channels and 235 00:16:13,480 --> 00:16:18,400 Speaker 1: legalities to be worked out, and so inevitably, you know, 236 00:16:19,240 --> 00:16:25,280 Speaker 1: trade diversion and leakage can't offset the full effect of 237 00:16:25,360 --> 00:16:28,560 Speaker 1: the sanctions. And what you know, we're all trying to 238 00:16:28,560 --> 00:16:31,280 Speaker 1: figure out, and that's what the market has to assess 239 00:16:31,280 --> 00:16:33,880 Speaker 1: in real times. You know, well, what's that leakage and 240 00:16:34,320 --> 00:16:38,320 Speaker 1: a trade diversion going to look like. So we mentioned 241 00:16:38,320 --> 00:16:40,800 Speaker 1: it at the very beginning in the intro. But when 242 00:16:40,800 --> 00:16:42,720 Speaker 1: we had you on a year ago, I think it 243 00:16:42,760 --> 00:16:45,080 Speaker 1: was about a year ago, the story at the time 244 00:16:45,400 --> 00:16:51,120 Speaker 1: seemed to be about very aggressive Chinese buying and building 245 00:16:51,200 --> 00:16:53,680 Speaker 1: up stocks, building a buffer stocks, and I think I 246 00:16:53,720 --> 00:16:57,680 Speaker 1: saw ustand recently I forget the number. I'm not sure 247 00:16:57,680 --> 00:17:00,360 Speaker 1: how many years worth of week trying to current he has. 248 00:17:00,680 --> 00:17:03,400 Speaker 1: Wait since you mentioned that China is likely to be 249 00:17:03,480 --> 00:17:07,159 Speaker 1: a destination for whatever wheat gets out of that market, 250 00:17:07,400 --> 00:17:10,159 Speaker 1: out of the Russian market, what is the state of 251 00:17:10,320 --> 00:17:14,000 Speaker 1: Chinese buying? Is it still in accumulation mode? Has it 252 00:17:14,080 --> 00:17:17,119 Speaker 1: balanced out the stocks? What kind of deficit or position 253 00:17:17,200 --> 00:17:20,280 Speaker 1: is China in right now? I have to admit that 254 00:17:20,320 --> 00:17:23,320 Speaker 1: we're all looking through the glass darkly in terms of 255 00:17:23,440 --> 00:17:29,040 Speaker 1: China's grain reserves, and that's an official state secret, and 256 00:17:29,080 --> 00:17:34,440 Speaker 1: so everybody just guesses at it. Uh So, my perception 257 00:17:34,880 --> 00:17:40,600 Speaker 1: is that they have done quite a bit of reserve rebuilding, 258 00:17:41,000 --> 00:17:43,800 Speaker 1: but at the same time they're in the phase of 259 00:17:43,960 --> 00:17:48,600 Speaker 1: rapidly rebuilding their animal herds and so in that race 260 00:17:48,720 --> 00:17:54,640 Speaker 1: between increasing consumption from their animal herds versus their rebuilding. Uh, 261 00:17:54,760 --> 00:17:57,960 Speaker 1: nobody really knows, but I do know that they've been 262 00:17:58,119 --> 00:18:03,560 Speaker 1: back in the grain market for US supplies in a 263 00:18:03,640 --> 00:18:08,119 Speaker 1: big way in the last couple of weeks, which everybody's expecting. 264 00:18:08,720 --> 00:18:13,960 Speaker 1: Of what we have seen for two before the Ukrainian 265 00:18:14,160 --> 00:18:20,639 Speaker 1: crisis was that China soybean buying was back to basically 266 00:18:20,720 --> 00:18:23,720 Speaker 1: the trend they were on before our trade war, which 267 00:18:23,880 --> 00:18:28,159 Speaker 1: means it's huge. Uh. They weren't buying as much corn 268 00:18:28,280 --> 00:18:32,240 Speaker 1: in two as they did in UM. It had backed 269 00:18:32,359 --> 00:18:37,720 Speaker 1: off some. Uh that I suspect that they'll be back 270 00:18:37,840 --> 00:18:43,480 Speaker 1: closer now in two now than they had planned because 271 00:18:43,560 --> 00:18:49,240 Speaker 1: the lack of availability of Ukrainian supplies. But that story 272 00:18:49,359 --> 00:19:00,320 Speaker 1: remains to be written. This might be a very basic shan. 273 00:19:00,600 --> 00:19:05,040 Speaker 1: But if supply is constrained, and you know, everyone in 274 00:19:05,080 --> 00:19:09,200 Speaker 1: the world presumably wants to keep wheat prices relatively low 275 00:19:09,320 --> 00:19:11,760 Speaker 1: so that the price of bread doesn't go up too much, 276 00:19:12,600 --> 00:19:17,719 Speaker 1: China is still buying um large amounts. How does existing 277 00:19:17,840 --> 00:19:22,879 Speaker 1: supply get allocated? Could we see a return or even 278 00:19:22,920 --> 00:19:27,280 Speaker 1: more sort of food supply nationalism and the idea that 279 00:19:27,320 --> 00:19:29,560 Speaker 1: people are going to be keeping more of their own 280 00:19:29,600 --> 00:19:36,080 Speaker 1: crops closer to home. This is the great danger in 281 00:19:36,760 --> 00:19:40,840 Speaker 1: global grain markets right now, Tracy. This is what I'm 282 00:19:40,960 --> 00:19:46,040 Speaker 1: most concerned about, which history shows that when you get 283 00:19:46,080 --> 00:19:51,119 Speaker 1: in these huge scary price spikes, particularly for food commodity 284 00:19:51,320 --> 00:19:55,399 Speaker 1: like wheat, that there's a tendency for a bit of 285 00:19:55,600 --> 00:20:00,720 Speaker 1: panic to set in and countries begin shutting off exports 286 00:20:01,080 --> 00:20:08,800 Speaker 1: to uh basically protect domestic supplies and protect domestic consumers, 287 00:20:09,320 --> 00:20:17,119 Speaker 1: and that really leaves importers, particularly importers in the not 288 00:20:17,359 --> 00:20:22,760 Speaker 1: rich countries, out in the cold. And we're already seeing 289 00:20:23,280 --> 00:20:27,159 Speaker 1: that kind of bing bing bing beginning to happen. And 290 00:20:27,400 --> 00:20:31,520 Speaker 1: so if you lock up supplies in some doesn't take 291 00:20:31,600 --> 00:20:36,240 Speaker 1: very many exporting countries, then that really makes prices for 292 00:20:36,320 --> 00:20:41,960 Speaker 1: everybody else explode and puts more of the burden on 293 00:20:42,280 --> 00:20:47,359 Speaker 1: generally poorer importing countries. And that's where things politically get 294 00:20:48,400 --> 00:20:52,760 Speaker 1: really explosive. And so that's that's a real concern that 295 00:20:52,840 --> 00:20:55,879 Speaker 1: I have, because the market is going to do its job. 296 00:20:56,720 --> 00:21:01,040 Speaker 1: The market's job is basically to the price of wheat 297 00:21:01,240 --> 00:21:09,880 Speaker 1: up high enough that you ration current demands enough so 298 00:21:09,920 --> 00:21:12,639 Speaker 1: that the globe has something left over at the end 299 00:21:12,640 --> 00:21:15,880 Speaker 1: of the year the problem, you know, But in order 300 00:21:15,920 --> 00:21:19,240 Speaker 1: for the market to do that job, somebody has to 301 00:21:19,280 --> 00:21:23,720 Speaker 1: get priced out of the global market. And the job 302 00:21:23,800 --> 00:21:28,399 Speaker 1: of trade is for the market to then spread around 303 00:21:28,440 --> 00:21:35,840 Speaker 1: available supplies to um to the highest bidder. And some 304 00:21:35,880 --> 00:21:38,840 Speaker 1: people that as a policy matter, that we probably don't 305 00:21:38,880 --> 00:21:41,880 Speaker 1: want priced out of the market can easily get priced 306 00:21:41,920 --> 00:21:45,160 Speaker 1: out of the market as the market does its job. 307 00:21:45,480 --> 00:21:48,080 Speaker 1: So that's what happens in the very short run. And 308 00:21:48,119 --> 00:21:51,680 Speaker 1: the other side of the market's job is to run 309 00:21:51,680 --> 00:21:54,840 Speaker 1: the price up of wheat high enough that as we 310 00:21:55,000 --> 00:21:59,800 Speaker 1: can expand acreage and production to adjust to this that 311 00:22:00,160 --> 00:22:05,320 Speaker 1: supply response, and it will happen. It always does, but 312 00:22:05,440 --> 00:22:08,680 Speaker 1: it's you know, can take a year or two for 313 00:22:08,760 --> 00:22:12,159 Speaker 1: this kind of shock to fully be absorbed and we 314 00:22:12,240 --> 00:22:16,040 Speaker 1: get the supply response in terms of expanded a creach 315 00:22:16,119 --> 00:22:19,320 Speaker 1: and production around the world. So the shocks from this 316 00:22:19,359 --> 00:22:22,639 Speaker 1: are going to reverberate for some time. Yeah, there's so 317 00:22:22,680 --> 00:22:25,440 Speaker 1: many follow up questions I have to that, you know, 318 00:22:25,680 --> 00:22:29,040 Speaker 1: But the first one when price of oil and also gas. 319 00:22:29,280 --> 00:22:32,400 Speaker 1: But when the praise of oil surges, it immediately becomes 320 00:22:32,400 --> 00:22:35,760 Speaker 1: a political question and people start turning to elected leaders, 321 00:22:36,040 --> 00:22:37,760 Speaker 1: what are you going to do about this? What can 322 00:22:37,800 --> 00:22:41,040 Speaker 1: we do to say, increase exploration or drilling in the 323 00:22:41,119 --> 00:22:44,560 Speaker 1: United States, or what can Germany do to cut off 324 00:22:44,560 --> 00:22:49,920 Speaker 1: its reliance from Russian gas, etcetera. Are there policy levers 325 00:22:50,160 --> 00:22:53,520 Speaker 1: that countries, whether rich or poor, can pull here? But 326 00:22:53,560 --> 00:22:56,000 Speaker 1: I'm thinking in the United States, for example, is there 327 00:22:56,040 --> 00:22:59,040 Speaker 1: something equivalent is this? Is there something for the U 328 00:22:59,119 --> 00:23:01,359 Speaker 1: s d A Or the House to think about doing 329 00:23:01,920 --> 00:23:05,520 Speaker 1: during such a time of high prices and tight supplies. Well, 330 00:23:05,520 --> 00:23:09,800 Speaker 1: there is one that could be considered. In the United States. 331 00:23:10,760 --> 00:23:14,600 Speaker 1: We have something that's called the Conservation Reserve program in 332 00:23:14,640 --> 00:23:19,360 Speaker 1: the United States that currently contains twenty two million acres 333 00:23:19,400 --> 00:23:22,840 Speaker 1: of previously cropped land that has been taken out of 334 00:23:22,840 --> 00:23:30,000 Speaker 1: production presumably because it's most environmentally sensitive in terms of 335 00:23:30,320 --> 00:23:36,520 Speaker 1: wind and water erosion, or it has bio diversity. Really 336 00:23:36,560 --> 00:23:41,920 Speaker 1: a lot of it's for pheasant hunting. Uh, So there's 337 00:23:42,040 --> 00:23:47,800 Speaker 1: that acreage that could be considered for maybe a special 338 00:23:47,840 --> 00:23:52,560 Speaker 1: one time exemption from the current long term contracts that 339 00:23:53,760 --> 00:23:57,040 Speaker 1: are required to place acreage into that reserve. So we 340 00:23:57,119 --> 00:24:01,399 Speaker 1: have an acreage reserved something like the search Egic Petroleum 341 00:24:01,480 --> 00:24:05,680 Speaker 1: Reserve that it's at least could be considered. UH. It's 342 00:24:05,840 --> 00:24:09,120 Speaker 1: very controversial, as I found out when I suggested it 343 00:24:09,200 --> 00:24:12,040 Speaker 1: a couple of weeks ago, But basically my argument is 344 00:24:12,280 --> 00:24:15,119 Speaker 1: pretty straightforward, and you can hear it through the conversation 345 00:24:15,119 --> 00:24:18,880 Speaker 1: with Pad today. I believe this is the largest supply 346 00:24:19,040 --> 00:24:24,280 Speaker 1: shock of my lifetime UH in global grain markets. UH 347 00:24:24,400 --> 00:24:31,440 Speaker 1: if the conflict continues and severely harms planting in the Ukraine, 348 00:24:31,920 --> 00:24:35,720 Speaker 1: and so we need to at least look at extraordinary 349 00:24:35,760 --> 00:24:39,080 Speaker 1: measures like this here in the US that you use. 350 00:24:39,119 --> 00:24:44,240 Speaker 1: Ahead of us, they're already apparently making plans to make 351 00:24:44,280 --> 00:24:49,400 Speaker 1: their what they call set aside acreage available for production 352 00:24:49,480 --> 00:24:53,120 Speaker 1: this year. And those policy means you might think, oh 353 00:24:53,160 --> 00:24:55,040 Speaker 1: my gosh, you well you can plant this spring, but 354 00:24:55,160 --> 00:24:58,120 Speaker 1: we don't get that until next fall. But the markets 355 00:24:58,119 --> 00:25:02,760 Speaker 1: will react to those move now, because the markets always 356 00:25:02,880 --> 00:25:07,679 Speaker 1: are in an anticipatory mode, and if they see that 357 00:25:07,720 --> 00:25:10,320 Speaker 1: there's going to be somewhat more supply than they would 358 00:25:10,440 --> 00:25:14,159 Speaker 1: normally think, that will have an impact now. And so 359 00:25:15,080 --> 00:25:19,520 Speaker 1: that's UH. In the EU and in here in the US, 360 00:25:19,600 --> 00:25:22,760 Speaker 1: those those are pretty much the only policy levers that 361 00:25:23,320 --> 00:25:29,440 Speaker 1: we have. No one has huge grain stocks piling up 362 00:25:29,440 --> 00:25:31,720 Speaker 1: in warehouses anymore like we used to say in the 363 00:25:31,760 --> 00:25:34,320 Speaker 1: nineteen eighties. Nobody has those, So the only thing we 364 00:25:34,359 --> 00:25:39,800 Speaker 1: really can do is try to juice up acreage this spring. Wait, 365 00:25:39,840 --> 00:25:42,760 Speaker 1: could you walk us through exactly why this is so controversial, 366 00:25:42,760 --> 00:25:45,440 Speaker 1: because I did see some people on Twitter who were 367 00:25:45,480 --> 00:25:48,160 Speaker 1: pushing back. And you know, initially, if someone says, well, 368 00:25:48,720 --> 00:25:50,680 Speaker 1: the price of wheat is going up a lot, there 369 00:25:50,720 --> 00:25:55,440 Speaker 1: might be food shortages. Let's increase acreage. It sounds like 370 00:25:56,000 --> 00:25:59,400 Speaker 1: a very like good thing to do. But I imagine 371 00:25:59,440 --> 00:26:02,560 Speaker 1: there are those environmental concerns and other issues with it. 372 00:26:02,640 --> 00:26:06,280 Speaker 1: So what are those exactly? Well, there's what I would 373 00:26:06,280 --> 00:26:10,320 Speaker 1: call a you know, they're the environmental concerns, and then 374 00:26:10,359 --> 00:26:15,119 Speaker 1: they're the practical pushback on that idea. The environmental is 375 00:26:15,359 --> 00:26:20,840 Speaker 1: these are supposed to be highly erodable acres and less 376 00:26:20,880 --> 00:26:23,879 Speaker 1: productive acres that are put into the conservation reserve. And 377 00:26:23,920 --> 00:26:28,680 Speaker 1: there's no doubt that that is true, and so you're 378 00:26:28,720 --> 00:26:33,520 Speaker 1: not getting your your prime acres motors, productive acres put in. 379 00:26:33,640 --> 00:26:36,680 Speaker 1: And so if you took them out, people say it 380 00:26:36,720 --> 00:26:39,359 Speaker 1: wouldn't be that productive. My counter that that is the U. 381 00:26:39,520 --> 00:26:42,720 Speaker 1: S d A has actually done some great work tracking 382 00:26:42,760 --> 00:26:46,520 Speaker 1: parcel by parcel. What happens to acres in the past 383 00:26:46,800 --> 00:26:49,359 Speaker 1: as they've come out of the conservation reserve, because it 384 00:26:49,400 --> 00:26:52,159 Speaker 1: turns over there's acres going in every year, there's acres 385 00:26:52,200 --> 00:26:54,800 Speaker 1: coming out. Without getting into all the details, but over 386 00:26:54,840 --> 00:26:59,879 Speaker 1: time the acres that come out over go back into 387 00:27:00,040 --> 00:27:03,480 Speaker 1: crop production or some kind of annual crops, so it 388 00:27:04,720 --> 00:27:09,959 Speaker 1: can be used. So that's the one biggest is you know, 389 00:27:10,040 --> 00:27:14,040 Speaker 1: these are supposedly our most environmentally sensitive acres, so why 390 00:27:14,119 --> 00:27:17,640 Speaker 1: would we want to um mess with them? And then 391 00:27:17,680 --> 00:27:21,600 Speaker 1: the other point is you know that those acres have 392 00:27:22,040 --> 00:27:27,720 Speaker 1: biodiversity benefits in particular, as I said, for recreation and 393 00:27:27,840 --> 00:27:33,760 Speaker 1: animal biodiversity, and so those benefits are there. And in 394 00:27:33,840 --> 00:27:37,600 Speaker 1: my mind, probably the bigger concern is the practical It's 395 00:27:37,800 --> 00:27:42,199 Speaker 1: very very late in the calendar to for farmers to 396 00:27:42,359 --> 00:27:47,040 Speaker 1: adjust their plans to try to farm those acres. Um. 397 00:27:47,080 --> 00:27:49,560 Speaker 1: You know, if even if you do try to farm 398 00:27:49,840 --> 00:27:54,560 Speaker 1: the CRP acres, you have to plow up something that 399 00:27:54,680 --> 00:27:59,920 Speaker 1: is in grass, can you get the seed and fertilizer 400 00:28:00,080 --> 00:28:03,280 Speaker 1: that you need even if you want to do this. 401 00:28:03,800 --> 00:28:07,359 Speaker 1: So so there are some very significant practical concerns to 402 00:28:07,440 --> 00:28:10,199 Speaker 1: doing this. But I'm a big believer as an economist, 403 00:28:10,600 --> 00:28:15,760 Speaker 1: I mean, if there were ever incentives in place to 404 00:28:15,880 --> 00:28:18,959 Speaker 1: do what uh. One of my old professors at Purdue, 405 00:28:19,000 --> 00:28:22,000 Speaker 1: Earl Butts, was famous for saying when he was Secretary 406 00:28:22,000 --> 00:28:25,399 Speaker 1: of egg in the seventies and the Nixon administration, he 407 00:28:25,480 --> 00:28:28,600 Speaker 1: was famous for when that price pike went so high 408 00:28:28,600 --> 00:28:31,760 Speaker 1: that farmers would plant fence road defense row. And the 409 00:28:31,800 --> 00:28:36,040 Speaker 1: incentives are in place, uh to go fence row to 410 00:28:36,119 --> 00:28:40,160 Speaker 1: fence row, and um, you know, and the other is 411 00:28:40,200 --> 00:28:43,680 Speaker 1: a policy consideration. You know, there will be differences of 412 00:28:43,720 --> 00:28:50,000 Speaker 1: opinions about this, but these are extraordinary conditions. And I think, 413 00:28:50,480 --> 00:28:54,200 Speaker 1: going towards what you said, Tracy, maybe we should consider 414 00:28:54,360 --> 00:28:57,440 Speaker 1: doing what we can, even if it's not our most 415 00:28:57,440 --> 00:29:00,440 Speaker 1: productive acres. Maybe if it won't make a huge difference, 416 00:29:00,840 --> 00:29:05,560 Speaker 1: but why not do what we can to address these 417 00:29:05,680 --> 00:29:08,920 Speaker 1: supply issues, even if they're not going to make a 418 00:29:09,000 --> 00:29:12,680 Speaker 1: huge difference. But you know, even a few hundred million 419 00:29:13,080 --> 00:29:17,840 Speaker 1: extra bushels of wheat in this country could go along ways, 420 00:29:18,480 --> 00:29:22,719 Speaker 1: uh to spanning the gap in places like Egypt potentially 421 00:29:22,760 --> 00:29:25,320 Speaker 1: as we go through the next year. So that that's 422 00:29:25,400 --> 00:29:28,880 Speaker 1: my counter argument to those that criticize that idea. That 423 00:29:29,000 --> 00:29:32,880 Speaker 1: was great and uh, that was very interesting answer. I 424 00:29:32,880 --> 00:29:36,040 Speaker 1: want to continue on the supply side aspect of the 425 00:29:36,120 --> 00:29:39,160 Speaker 1: question because you mentioned okay, is the fertilizer going to 426 00:29:39,240 --> 00:29:41,080 Speaker 1: be there? And again it is something I think about, 427 00:29:41,480 --> 00:29:44,160 Speaker 1: let's say oil, which is that even if there were 428 00:29:44,240 --> 00:29:47,640 Speaker 1: some sort of you know, impulse to explore more oil, 429 00:29:47,680 --> 00:29:50,640 Speaker 1: there's a lot of tightness in labor markets. At the 430 00:29:50,680 --> 00:29:54,320 Speaker 1: oil padge. People talk about the shortage of steel pipes, 431 00:29:54,360 --> 00:29:57,360 Speaker 1: in the shortage of fracts, and what are you know, 432 00:29:57,440 --> 00:30:01,880 Speaker 1: even prior to this crisis, how have shortages in general 433 00:30:02,120 --> 00:30:06,440 Speaker 1: and tight labor markets, how are they affecting the farmers 434 00:30:06,600 --> 00:30:10,080 Speaker 1: that you speak to in the grain area. And what 435 00:30:10,240 --> 00:30:14,120 Speaker 1: kind of scarcity of other commodities in labor make the 436 00:30:14,200 --> 00:30:17,920 Speaker 1: supply side perhaps less rapid or how much of a 437 00:30:18,000 --> 00:30:23,280 Speaker 1: challenge would that be to scaling up more production. Excellent question. 438 00:30:24,080 --> 00:30:28,920 Speaker 1: Farmers have been struggling on the labor side like everyone else, 439 00:30:29,680 --> 00:30:32,640 Speaker 1: but I haven't really heard that that would be a 440 00:30:32,720 --> 00:30:36,480 Speaker 1: significant constraint, you know, Uh, farmers being farmers, they'll just 441 00:30:36,480 --> 00:30:39,160 Speaker 1: work extra hours to get it if they have to. 442 00:30:39,240 --> 00:30:46,320 Speaker 1: The bigger concern is the availability of fertilizer and her 443 00:30:46,440 --> 00:30:50,840 Speaker 1: besides and pesticides that they need. I think farmers were 444 00:30:51,120 --> 00:30:55,560 Speaker 1: counting on all that working before the Ukraine crisis, and 445 00:30:55,640 --> 00:30:58,800 Speaker 1: I think that was a reasonable position for the US 446 00:30:58,920 --> 00:31:03,800 Speaker 1: because we don't actually import that large of a proportion 447 00:31:03,880 --> 00:31:09,200 Speaker 1: of our fertilizer probably so, so I think that what 448 00:31:09,240 --> 00:31:14,200 Speaker 1: we needed was probably in place in the United States, 449 00:31:14,640 --> 00:31:18,760 Speaker 1: but it was a little iffy. But right now, UM, 450 00:31:19,080 --> 00:31:22,040 Speaker 1: when I talk to farmers, they're very nervous about just 451 00:31:22,200 --> 00:31:28,440 Speaker 1: getting their uh, chemical chemicals and fertilizer supplies. Now no 452 00:31:28,440 --> 00:31:31,560 Speaker 1: one seems to be giving them firm answers on anything. 453 00:31:31,640 --> 00:31:35,640 Speaker 1: So that's that is what I'm hearing. I think the 454 00:31:35,680 --> 00:31:39,600 Speaker 1: supplies are there, but everything is just in such turmoil 455 00:31:40,320 --> 00:31:45,680 Speaker 1: that uh. That's if there's a place for a bottleneck, 456 00:31:46,120 --> 00:31:50,160 Speaker 1: that is where it's going to show up this spring. Uh. 457 00:31:50,800 --> 00:31:55,200 Speaker 1: I believe that for the planned acreage that we had 458 00:31:55,400 --> 00:31:58,960 Speaker 1: before the Ukrainian crisis, that the vast majority of the 459 00:31:58,960 --> 00:32:02,200 Speaker 1: supplies are there and they will eventually get through. But 460 00:32:02,400 --> 00:32:07,320 Speaker 1: it makes one a little, I think, a little sketchy 461 00:32:07,480 --> 00:32:10,720 Speaker 1: how much we can expand beyond that even with these 462 00:32:10,760 --> 00:32:16,280 Speaker 1: great prices. From what I'm hearing from farmers, what is 463 00:32:16,320 --> 00:32:19,920 Speaker 1: the situation with fertilizers at the moment, because you know, 464 00:32:20,200 --> 00:32:22,360 Speaker 1: as you mentioned, it seems like it's difficult to get 465 00:32:22,680 --> 00:32:26,800 Speaker 1: information on supply potentially, But we have seen some impact 466 00:32:26,880 --> 00:32:31,720 Speaker 1: in the market already, and even before Russia actually invaded Ukraine, 467 00:32:32,000 --> 00:32:34,560 Speaker 1: there's a lot of talk of tightness in that market. 468 00:32:35,320 --> 00:32:39,600 Speaker 1: Oh clearly. I mean we saw starting last fall that 469 00:32:40,840 --> 00:32:47,520 Speaker 1: nitrogen fertilizer prices just spiked, uh to um, you know, 470 00:32:47,600 --> 00:32:54,080 Speaker 1: extraordinary price levels, you know, more than double and and 471 00:32:54,760 --> 00:32:59,400 Speaker 1: some of that is just demand side and natural gas 472 00:32:59,400 --> 00:33:04,560 Speaker 1: prices or spiking, which is the primary input for making 473 00:33:04,680 --> 00:33:08,800 Speaker 1: nitrogen fertilizer. So you know, we were already struggling with 474 00:33:09,000 --> 00:33:14,920 Speaker 1: extremely large increases in production costs, particularly for corn here 475 00:33:14,960 --> 00:33:21,280 Speaker 1: in the United States. Uh So that was already a 476 00:33:21,320 --> 00:33:25,080 Speaker 1: major topic of conversation here in the in the corn belt. 477 00:33:25,600 --> 00:33:27,920 Speaker 1: It seems like there's two, at least a couple of 478 00:33:27,920 --> 00:33:31,600 Speaker 1: factors on the fertilizer side. There is the high cost 479 00:33:31,640 --> 00:33:34,520 Speaker 1: of energy, and I think Tracy mentioned in the beginning 480 00:33:34,920 --> 00:33:38,800 Speaker 1: that we saw some fertilizer companies in Europe just say 481 00:33:38,960 --> 00:33:40,600 Speaker 1: we're not going to produce right now because it's not 482 00:33:40,720 --> 00:33:43,560 Speaker 1: economical given the high cost of natural gas and then 483 00:33:43,600 --> 00:33:48,200 Speaker 1: my understanding is that Belarus itself is a huge exporter 484 00:33:48,360 --> 00:33:52,400 Speaker 1: of either fertilizer or one of the key ingredients to fertilizer. 485 00:33:52,520 --> 00:33:54,960 Speaker 1: Maybe can you talk a little bit more about the 486 00:33:55,680 --> 00:34:01,440 Speaker 1: sources of constraints and particularly the Belarus angle. Well, right, um, 487 00:34:01,480 --> 00:34:05,480 Speaker 1: you know, Russia through Belarus is you know, they're a 488 00:34:05,680 --> 00:34:10,520 Speaker 1: huge at exporter of potash uh. You know, one of 489 00:34:10,560 --> 00:34:13,400 Speaker 1: those things that we never talked about. You know, again, 490 00:34:13,600 --> 00:34:18,720 Speaker 1: for the United States, that's probably not a huge uh issue, 491 00:34:18,880 --> 00:34:21,800 Speaker 1: even though if we would could lose ten or fifteen 492 00:34:21,840 --> 00:34:24,800 Speaker 1: percent of your supplies, you know, that has an impact. 493 00:34:25,280 --> 00:34:30,520 Speaker 1: But that's potentially next year a major issue for a 494 00:34:30,560 --> 00:34:34,719 Speaker 1: country like Brazil, which imports most of its fertilizer, and 495 00:34:34,840 --> 00:34:39,839 Speaker 1: so that's you know, the difference. I do not know 496 00:34:40,520 --> 00:34:45,879 Speaker 1: the import percentages for for Europe, but I suspect they're 497 00:34:45,920 --> 00:34:51,440 Speaker 1: also very tightly tied to the Russian and Belarusian supplies, 498 00:34:51,600 --> 00:34:54,120 Speaker 1: you know, and you know, and one of the things 499 00:34:54,160 --> 00:34:58,439 Speaker 1: that I find terribly interesting little factoid about how this 500 00:34:58,719 --> 00:35:03,080 Speaker 1: stuff filters in one of the Formula one Grand Prix 501 00:35:03,520 --> 00:35:09,120 Speaker 1: UH teams is actually or was sponsored by one of 502 00:35:09,160 --> 00:35:13,120 Speaker 1: the largest Russian fertilizer companies and his son was a 503 00:35:13,200 --> 00:35:15,719 Speaker 1: driver on a Formula One team, and last week it 504 00:35:15,760 --> 00:35:18,480 Speaker 1: was announced that Formula One kicked him out. Oh I 505 00:35:18,520 --> 00:35:20,839 Speaker 1: think I saw that headline. I didn't. I didn't make 506 00:35:20,840 --> 00:35:23,799 Speaker 1: the connection of what was going on there. Yeah, they're 507 00:35:23,840 --> 00:35:27,440 Speaker 1: they're one of those companies and they were sponsoring a 508 00:35:27,520 --> 00:35:32,000 Speaker 1: Formula One team, the host team and uh, you know 509 00:35:32,040 --> 00:35:36,640 Speaker 1: they've canceled the Russian Grand Prix uh and kick the 510 00:35:36,800 --> 00:35:40,600 Speaker 1: UH fertilizer sponsor from Russia out of out of the program. 511 00:35:40,600 --> 00:35:43,759 Speaker 1: I mean, it doesn't have much to do with this, 512 00:35:43,840 --> 00:35:48,640 Speaker 1: but it just showing how extraordinary and how fast moving 513 00:35:48,840 --> 00:35:58,919 Speaker 1: these events are. Right now, I want to go back 514 00:35:58,920 --> 00:36:03,000 Speaker 1: to things that can be done about the situation. And 515 00:36:03,280 --> 00:36:06,200 Speaker 1: another thing that I've seen floated recently is this idea 516 00:36:06,280 --> 00:36:12,040 Speaker 1: of maybe suspending incentives for renewable fuel production. So that 517 00:36:12,040 --> 00:36:14,680 Speaker 1: would mean, you know, less corn being used for stuff 518 00:36:14,719 --> 00:36:19,239 Speaker 1: like ethanol and more of it going into actual food production. 519 00:36:20,239 --> 00:36:26,320 Speaker 1: How feasible is that politically and practically? U super question 520 00:36:26,560 --> 00:36:29,520 Speaker 1: and something that you know I've been talking about in 521 00:36:29,520 --> 00:36:32,880 Speaker 1: the last week. UM, It's a little bit complicated, so 522 00:36:33,360 --> 00:36:37,640 Speaker 1: I'll try to be really condensed in my answer. Short 523 00:36:37,680 --> 00:36:43,319 Speaker 1: answer is that waving the ethanol mandates here in the 524 00:36:43,440 --> 00:36:48,080 Speaker 1: United States I don't believe would have hardly any impact 525 00:36:48,880 --> 00:36:55,200 Speaker 1: on the use of ethanol um in the United States, 526 00:36:55,200 --> 00:36:58,759 Speaker 1: which means that wouldn't have any savings in terms of 527 00:36:59,120 --> 00:37:03,560 Speaker 1: corn bushels. And the reason is that ethanol has now 528 00:37:03,640 --> 00:37:09,000 Speaker 1: become the cheapest source of octane available to gasoline blenders, 529 00:37:09,080 --> 00:37:12,120 Speaker 1: and so without intending it to be, we ran an 530 00:37:12,280 --> 00:37:15,719 Speaker 1: experiment about waiving the mandates and what would happen to 531 00:37:15,760 --> 00:37:20,280 Speaker 1: ethanol use in the Trump administration through something called small 532 00:37:20,320 --> 00:37:25,080 Speaker 1: refinery exemptions, and that was effectively waiving the mandate, and 533 00:37:25,080 --> 00:37:28,440 Speaker 1: we didn't use any less ethanol. In fact, it grew 534 00:37:28,600 --> 00:37:32,880 Speaker 1: a little bit as we waived the ethanol mandates. So 535 00:37:33,400 --> 00:37:38,440 Speaker 1: I think that that's that would have no impact on 536 00:37:38,880 --> 00:37:44,799 Speaker 1: corn usage. So the ethanol side of the equation in 537 00:37:44,920 --> 00:37:48,480 Speaker 1: terms of our bio fused policy to me as a nonstarter. 538 00:37:48,520 --> 00:37:52,680 Speaker 1: It doesn't get us anywhere, and and it would have 539 00:37:53,160 --> 00:37:57,480 Speaker 1: the follow on effect of likely raising the price of 540 00:37:57,520 --> 00:38:03,200 Speaker 1: gasoline a little bit at least and maybe noticeably. So 541 00:38:03,239 --> 00:38:07,600 Speaker 1: I call that a robbing Peter to pay Paul uh 542 00:38:07,840 --> 00:38:11,919 Speaker 1: policy response that doesn't really get us anywhere where. It's 543 00:38:11,960 --> 00:38:16,799 Speaker 1: more interesting those ideas, and and doesn't get discussed enough 544 00:38:17,600 --> 00:38:22,319 Speaker 1: is on the advanced or biodiesel renewable diesel side. We 545 00:38:22,400 --> 00:38:26,760 Speaker 1: are currently going through a boom in world veg oil 546 00:38:26,840 --> 00:38:31,200 Speaker 1: prices through a boom and building what are called renewable 547 00:38:31,239 --> 00:38:37,040 Speaker 1: diesel UH plants. Long story, but even there, if we 548 00:38:37,080 --> 00:38:44,320 Speaker 1: waived those parts of our RFS mandates, it's not very 549 00:38:44,360 --> 00:38:48,680 Speaker 1: clear if it would have much impact because the largest 550 00:38:49,239 --> 00:38:53,920 Speaker 1: policy subsidy for renewable diesel is not coming through the 551 00:38:54,680 --> 00:38:59,560 Speaker 1: UM the RFS, our national policy. It's coming through the 552 00:38:59,600 --> 00:39:04,920 Speaker 1: local Urban Fuel standard in California. So to have really 553 00:39:04,960 --> 00:39:07,719 Speaker 1: any guarantees you want to take pressure off of world 554 00:39:07,840 --> 00:39:10,839 Speaker 1: veg oil markets, you have to waive the California Low 555 00:39:10,880 --> 00:39:14,880 Speaker 1: Carbon Standard and the RFS at the same time. That 556 00:39:15,560 --> 00:39:20,200 Speaker 1: doesn't seem likely to happen, particularly the California. And can 557 00:39:20,239 --> 00:39:23,920 Speaker 1: you talk a little bit about the effect of the 558 00:39:24,000 --> 00:39:26,719 Speaker 1: end consumer and so, you know, people don't eat wheat. 559 00:39:26,760 --> 00:39:30,040 Speaker 1: Typically they eat bread or the pasta. And I'm seeing 560 00:39:30,160 --> 00:39:32,840 Speaker 1: some claims that you know, in the end like the 561 00:39:32,880 --> 00:39:36,239 Speaker 1: actual wheat hasn't got a huge source of the UH 562 00:39:36,600 --> 00:39:38,560 Speaker 1: cost of a loaf of bread or whatever it is, 563 00:39:38,760 --> 00:39:42,520 Speaker 1: how much do these huge swings feed through to the 564 00:39:42,560 --> 00:39:47,799 Speaker 1: price of finished goods that consume wet Again critical point 565 00:39:47,840 --> 00:39:53,759 Speaker 1: to understand. Um uh. Here in the United States, on average, 566 00:39:54,719 --> 00:39:58,719 Speaker 1: the cost of what a consumer bias in the grocery 567 00:39:58,719 --> 00:40:03,680 Speaker 1: store for food, only about fifteen per cent is represented 568 00:40:03,719 --> 00:40:07,160 Speaker 1: by the cost of the raw commodity. So if you 569 00:40:07,200 --> 00:40:11,359 Speaker 1: take a dollar food expenditure, fifteen cents is the raw commodity. 570 00:40:12,160 --> 00:40:15,600 Speaker 1: Even if that doubles, you know, you go from fifteen 571 00:40:15,600 --> 00:40:18,600 Speaker 1: to thirty cents, that's fifteen cents on a dollar. You know, 572 00:40:18,680 --> 00:40:23,200 Speaker 1: it's noticeable, but it's not doubling because you have that 573 00:40:23,239 --> 00:40:28,920 Speaker 1: passed through effect. Um. You know, in terms of the 574 00:40:28,960 --> 00:40:33,799 Speaker 1: retail food price inflation, the number one factors are one, 575 00:40:35,200 --> 00:40:39,360 Speaker 1: price of fuel basically crude oil because uh, it's like 576 00:40:39,800 --> 00:40:42,680 Speaker 1: we have to move all this food around from producers 577 00:40:42,719 --> 00:40:47,200 Speaker 1: to consumers. And then number two wages because of all 578 00:40:47,239 --> 00:40:50,720 Speaker 1: the processing that goes on. So those are the biggest 579 00:40:50,760 --> 00:40:55,720 Speaker 1: determinants of retail food price inflation. Although you are certainly 580 00:40:55,719 --> 00:41:00,239 Speaker 1: gonna gonna be added cost push inflation from these raw 581 00:41:00,320 --> 00:41:04,680 Speaker 1: commodity price increases as well. But here in the US, 582 00:41:04,800 --> 00:41:08,360 Speaker 1: you're not going to see you know, fifty percent food 583 00:41:08,560 --> 00:41:12,400 Speaker 1: price inflation because the price of reed's gone for that reason. 584 00:41:12,920 --> 00:41:16,880 Speaker 1: But that's not true in countries like Egypt, where those 585 00:41:17,520 --> 00:41:21,480 Speaker 1: those pass throughs are much closer to one for one. 586 00:41:22,040 --> 00:41:25,240 Speaker 1: I have one last question, just based on that. Finally, 587 00:41:25,400 --> 00:41:30,480 Speaker 1: like on this policy question, should rich countries think about 588 00:41:30,760 --> 00:41:33,600 Speaker 1: aid too poor? I mean that seems to be the 589 00:41:33,719 --> 00:41:37,200 Speaker 1: recurring theme that we keep coming back to. Is okay 590 00:41:37,560 --> 00:41:42,239 Speaker 1: US reasonably insulated. Yes, prices will rise, but obviously, as 591 00:41:42,239 --> 00:41:45,040 Speaker 1: you just mentioned, there isn't anything close to a one 592 00:41:45,080 --> 00:41:47,719 Speaker 1: to one passed through. We're probably not going to have 593 00:41:47,840 --> 00:41:52,440 Speaker 1: outright shortages in the US. But for poorer countries Egypt 594 00:41:52,520 --> 00:41:55,920 Speaker 1: and elsewhere, food rise in food price is gonna have seriously, 595 00:41:56,560 --> 00:42:01,200 Speaker 1: obviously devastating health consequences, devastating political cuntic quinces, consequences for 596 00:42:01,560 --> 00:42:06,480 Speaker 1: stability overall, From a policy perspective, should leaders in rich 597 00:42:06,560 --> 00:42:10,120 Speaker 1: countries be thinking about that, about what can be done 598 00:42:10,640 --> 00:42:13,640 Speaker 1: with our own wealth, with our own stocks, to ameliorate 599 00:42:13,719 --> 00:42:16,919 Speaker 1: some of the negative effects on the countries that can't 600 00:42:17,120 --> 00:42:24,600 Speaker 1: easily afford these price wings. Absolutely, and the number one 601 00:42:25,680 --> 00:42:28,640 Speaker 1: policy lever that should be pulled there is to the 602 00:42:28,719 --> 00:42:36,759 Speaker 1: degree possible to persuade exporting countries not to hoard their 603 00:42:36,840 --> 00:42:42,720 Speaker 1: supplies exactly when they're most needed on world grain markets. 604 00:42:42,800 --> 00:42:46,920 Speaker 1: That's number one. To try to stop that kind of 605 00:42:47,000 --> 00:42:51,799 Speaker 1: beggar thy neighbor dominoes falling, that's number one. Number two, 606 00:42:51,840 --> 00:42:55,479 Speaker 1: if there are ways to increase food aid where we can, 607 00:42:56,120 --> 00:43:00,760 Speaker 1: that's important. And number three the this is a longer 608 00:43:00,880 --> 00:43:06,680 Speaker 1: term response, but we've we know that the best way 609 00:43:07,040 --> 00:43:14,800 Speaker 1: is to continue supporting the growth of agriculture in these 610 00:43:14,960 --> 00:43:18,120 Speaker 1: poorer areas. That's the number one way for their economies 611 00:43:18,160 --> 00:43:25,880 Speaker 1: to develop and to um become more self sustaining in 612 00:43:25,920 --> 00:43:30,360 Speaker 1: some of these key commodities areas. So support for their 613 00:43:30,440 --> 00:43:34,600 Speaker 1: domestic agricultural producers it's really important. For example, you know, 614 00:43:34,680 --> 00:43:38,879 Speaker 1: you've got to be really careful. We've learned Joe that Okay, yeah, 615 00:43:38,960 --> 00:43:42,080 Speaker 1: we have this emotional response and we want to really 616 00:43:42,120 --> 00:43:45,479 Speaker 1: help poorer countries and so we kind of dump food 617 00:43:45,520 --> 00:43:48,200 Speaker 1: aid in there. In the short run, well, that just 618 00:43:48,320 --> 00:43:54,040 Speaker 1: destroys the livelihood of farmers in those countries. So it's 619 00:43:54,080 --> 00:43:56,200 Speaker 1: it's it's not as easy as just give them a 620 00:43:56,200 --> 00:44:01,319 Speaker 1: lot more aid. Well, Scott Irwin always fascinating to catch 621 00:44:01,400 --> 00:44:04,160 Speaker 1: up with you, and like I said, said in the beginning, 622 00:44:04,480 --> 00:44:07,319 Speaker 1: it seems like infinitely more complex than the first time 623 00:44:07,360 --> 00:44:09,719 Speaker 1: we chatted. But thank you so much for coming back 624 00:44:09,760 --> 00:44:14,240 Speaker 1: on Odd Lots. Yeah. I really always enjoy it and 625 00:44:14,520 --> 00:44:17,640 Speaker 1: hopefully added a little signal and not too much noise 626 00:44:17,719 --> 00:44:21,480 Speaker 1: to the conversation. Absolutely, that was very useful and I 627 00:44:21,560 --> 00:44:23,440 Speaker 1: learned a lot from it, So thank you. Yeah, that 628 00:44:23,520 --> 00:44:26,680 Speaker 1: was great, Scott. Thank you, Tracy. I always really like 629 00:44:27,239 --> 00:44:31,640 Speaker 1: speaking with Scott. It does feel like something like a 630 00:44:31,760 --> 00:44:35,160 Speaker 1: wheat shortage here. We might look at a screen and 631 00:44:35,280 --> 00:44:38,160 Speaker 1: see arise and prices, but and this is a theme 632 00:44:38,200 --> 00:44:40,560 Speaker 1: that comes elsewhere. There's sort of a very there's a 633 00:44:40,560 --> 00:44:43,759 Speaker 1: difference between arise and prices and then places just not 634 00:44:43,840 --> 00:44:48,200 Speaker 1: being able to get the actual commodity. Yeah. Absolutely, And 635 00:44:48,239 --> 00:44:50,200 Speaker 1: I think this is something that we actually wrote about 636 00:44:50,320 --> 00:44:53,080 Speaker 1: for the Odd Lots newsletter recently, this idea of the 637 00:44:53,120 --> 00:44:56,600 Speaker 1: difference between the financial realm and the physical realm, which 638 00:44:56,640 --> 00:44:59,319 Speaker 1: is something that it feels like the world is very 639 00:44:59,400 --> 00:45:01,880 Speaker 1: much way king up to at the moment. But I 640 00:45:01,960 --> 00:45:06,000 Speaker 1: also like Scott's nuance on the point of wheat prices 641 00:45:06,160 --> 00:45:09,279 Speaker 1: in the US and the idea that well, if the 642 00:45:09,400 --> 00:45:13,840 Speaker 1: raw material goes up a lot that shouldn't necessarily translate 643 00:45:13,880 --> 00:45:16,880 Speaker 1: into higher prices for things like bread and pasta, because 644 00:45:16,880 --> 00:45:18,319 Speaker 1: a lot of those are going to be driven by 645 00:45:18,840 --> 00:45:23,480 Speaker 1: larger input costs like labor and energy. Unfortunately, at the moment, 646 00:45:24,080 --> 00:45:28,719 Speaker 1: energy prices and perhaps labor as well are also going up, right, 647 00:45:28,840 --> 00:45:32,919 Speaker 1: So it's not exactly much constellation necessarily that the price 648 00:45:32,920 --> 00:45:36,280 Speaker 1: of bread isn't entirely determined by wheat, is just determined 649 00:45:36,280 --> 00:45:39,239 Speaker 1: by everything else in the price of all those things are. 650 00:45:39,719 --> 00:45:43,759 Speaker 1: You know, it's interesting. Another theme that continues to emerge 651 00:45:44,360 --> 00:45:48,200 Speaker 1: is how bifurcated or how fragmented a lot of these 652 00:45:48,360 --> 00:45:52,560 Speaker 1: markets are. And so, you know, a scout mentioned in 653 00:45:52,600 --> 00:45:55,360 Speaker 1: the US, we might be in decent shape from a 654 00:45:55,400 --> 00:45:58,600 Speaker 1: fertilizer perspective, It might be tight, it might be a 655 00:45:58,640 --> 00:46:03,000 Speaker 1: little bit more expensive, whereas for a country like Brazil, 656 00:46:03,080 --> 00:46:08,200 Speaker 1: which he noted is extremely reliant on imported potash UH, 657 00:46:08,440 --> 00:46:10,719 Speaker 1: that could be a totally different story. Of course, it 658 00:46:10,719 --> 00:46:13,480 Speaker 1: would all come back around and connect and then you'd 659 00:46:13,480 --> 00:46:16,160 Speaker 1: have global prices. But it is interesting to think about, 660 00:46:16,560 --> 00:46:20,719 Speaker 1: you know, the US relatively insulated on a number of 661 00:46:20,760 --> 00:46:24,120 Speaker 1: these things compared to UH, compared to lots of other countries, 662 00:46:24,320 --> 00:46:28,000 Speaker 1: whether they be producers or consumers of great well. Also 663 00:46:28,200 --> 00:46:31,200 Speaker 1: the point about certain countries that rely a lot on 664 00:46:31,360 --> 00:46:34,960 Speaker 1: food imports um now being most vulnerable to all of us. 665 00:46:35,000 --> 00:46:38,080 Speaker 1: And I know Egypt is the one that was mentioned 666 00:46:38,400 --> 00:46:40,800 Speaker 1: a number of times, but of course there are others, 667 00:46:41,440 --> 00:46:44,560 Speaker 1: and when it comes to food price inflation, this is 668 00:46:44,600 --> 00:46:47,840 Speaker 1: something we've discussed again. But that is clearly a really 669 00:46:47,920 --> 00:46:52,319 Speaker 1: sensitive topic for for consumers and people who have to eat, 670 00:46:52,840 --> 00:46:54,960 Speaker 1: and it's the kind of thing that tends to um 671 00:46:55,000 --> 00:46:58,839 Speaker 1: explode into the political sphere very quickly as well. So 672 00:46:59,160 --> 00:47:03,040 Speaker 1: I think I'm very briefly mentioned the the egypt bread riots. 673 00:47:03,480 --> 00:47:05,640 Speaker 1: I think that was back in two thousand and eight. 674 00:47:05,680 --> 00:47:07,839 Speaker 1: I mean some people talk about those as a sort 675 00:47:07,880 --> 00:47:11,440 Speaker 1: of prelude for the Arab spring entirely. So it's very 676 00:47:11,480 --> 00:47:16,240 Speaker 1: easy to see food price pressures translate into political upheaval 677 00:47:16,280 --> 00:47:19,200 Speaker 1: as well. Last point though, it'll be interesting if the 678 00:47:19,200 --> 00:47:23,640 Speaker 1: White House does anything on those uh millions of acres 679 00:47:23,680 --> 00:47:27,520 Speaker 1: that are currently held back. I didn't realize that previously 680 00:47:27,520 --> 00:47:30,800 Speaker 1: that we have this equivalent of essentially, it's not quite 681 00:47:30,800 --> 00:47:34,080 Speaker 1: a strategic patrol. It's not quite the equivalent of a 682 00:47:34,120 --> 00:47:37,239 Speaker 1: strategic patrollingm reserve because there's nothing to sell into the 683 00:47:37,280 --> 00:47:41,279 Speaker 1: market immediately, but to make them make those acres available 684 00:47:41,360 --> 00:47:44,920 Speaker 1: for planting. I don't know. It doesn't feel like wheat politics, 685 00:47:45,520 --> 00:47:48,040 Speaker 1: uh create havoc for the White House the same way 686 00:47:48,120 --> 00:47:50,759 Speaker 1: gasoline prices do. But it will be interesting to see 687 00:47:50,760 --> 00:47:54,040 Speaker 1: if that lever or something similar is pulled at some point. Well. 688 00:47:54,120 --> 00:47:57,520 Speaker 1: Also Scott's point about you know, even if you just 689 00:47:57,600 --> 00:48:01,680 Speaker 1: did something relatively small, and it's probably not feasible that 690 00:48:01,920 --> 00:48:05,360 Speaker 1: releasing those reserved acres would suddenly lead to a big 691 00:48:05,560 --> 00:48:08,480 Speaker 1: boom and supply, but even something small can send a 692 00:48:08,520 --> 00:48:12,200 Speaker 1: price signal to the market and start bringing them down, 693 00:48:12,600 --> 00:48:16,800 Speaker 1: particularly at a time when people, when countries are hoarding. 694 00:48:17,120 --> 00:48:19,920 Speaker 1: And so if there's a lot of access buying because 695 00:48:19,920 --> 00:48:23,240 Speaker 1: everyone is nervous and you're signaling to the market, okay, 696 00:48:23,480 --> 00:48:26,240 Speaker 1: supply is going to come in September or whenever that comes. 697 00:48:26,680 --> 00:48:29,880 Speaker 1: That might ease some of the current hoarding now and 698 00:48:29,960 --> 00:48:32,840 Speaker 1: be able to have have a response even before the 699 00:48:32,880 --> 00:48:36,320 Speaker 1: weed is actually or whatever grain it is is actually grown. Yeah, 700 00:48:36,440 --> 00:48:39,759 Speaker 1: it's an interesting one. Although maybe the pheasant hunters will 701 00:48:39,800 --> 00:48:42,520 Speaker 1: get upset. I don't know how how large is like 702 00:48:42,560 --> 00:48:45,759 Speaker 1: the pheasant hunting lobby. It'll be really bad if we 703 00:48:45,840 --> 00:48:47,239 Speaker 1: have to like, like we're not going to do a 704 00:48:47,280 --> 00:48:49,359 Speaker 1: pheasant huntings. I mean, what if it gets to that 705 00:48:49,400 --> 00:48:51,040 Speaker 1: point we're like, well now we have to do a 706 00:48:51,040 --> 00:48:53,920 Speaker 1: pheasant hunting story. But we all know it's really bad 707 00:48:54,080 --> 00:48:56,879 Speaker 1: if that's where we have to keep keep keep going 708 00:48:56,920 --> 00:49:00,759 Speaker 1: down that route. Yeah, so we leave it. Let's leave 709 00:49:00,760 --> 00:49:03,640 Speaker 1: it there. Okay. This has been another episode of the 710 00:49:03,680 --> 00:49:06,360 Speaker 1: All Thoughts podcast. I'm Tracy Alloway. You can follow me 711 00:49:06,480 --> 00:49:09,640 Speaker 1: on Twitter at Tracy Alloway. And I'm Joe Wisenthal. You 712 00:49:09,680 --> 00:49:12,640 Speaker 1: can follow me on Twitter at the Stalwart. Follow our 713 00:49:12,640 --> 00:49:16,320 Speaker 1: guest Scott Irwin on Twitter. He's at Scott Irwin UI. 714 00:49:16,640 --> 00:49:20,560 Speaker 1: Big thanks to our producers Magnus Hendrickson and Colin Tipton. 715 00:49:21,040 --> 00:49:24,239 Speaker 1: Follow the Bloomberg had a podcast Francesca Leaving at Francesci 716 00:49:24,360 --> 00:49:28,000 Speaker 1: Today and check out all of our podcasts Bloomberg under 717 00:49:28,040 --> 00:49:30,680 Speaker 1: the handle at Podcasts. Thanks for listening.