Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Are you guys doing anything interesting for fourth of July?
Speaker 3: Nope?
Speaker 2: Well it was nice talking to you.
Speaker 4: You know.
Speaker 5: Uh out in Easthampton, they don't do fireworks.
Speaker 1: It's a good thing we're not having a conversational podcast
Speaker 1: or anything. Tom says, you've got to watch the puck
Speaker 1: when you're on the bench, Tom Keene, and I'm not.
Speaker 2: Is that an insult? What does that mean? I don't
Speaker 2: understand hockey. When you're not playing, you have to watch
Speaker 2: the game?
Speaker 5: Is this about your face? I don't know why I
Speaker 5: use on the bench, but yeah, why am I on?
Speaker 6: Yeah?
Speaker 5: Well maybe if you're on the oh yeah, the ice,
Speaker 5: you would have been paying closer attention. Yeah, you can't
Speaker 5: in hockey. When you're on the bench, you're exposed. So
Speaker 5: if you're not paying attention, you could get hit in
Speaker 5: the face.
Speaker 4: Of the puck.
Speaker 1: Why don't they just build like a little protection thing
Speaker 1: like in baseballs, like a dugout.
Speaker 5: They get on and off the ice by jump over
Speaker 5: the wall.
Speaker 2: And I hate sports.
Speaker 5: I did a deadlift one two, okay?
Speaker 3: Many?
Speaker 2: Uh barges.
Speaker 5: This isn't after school special, except.
Speaker 1: I've decided I'm going to base my entire personality going
Speaker 1: forward on campaigning for a strategic pork reserve in the US.
Speaker 5: Where's the best with imposta?
Speaker 2: These are the important question. Is it robots taking over
Speaker 2: the world?
Speaker 3: No.
Speaker 5: I think that like in a couple of years, the
Speaker 5: AI will do a really good job of making the
Speaker 5: Odd Lots podcast, And people say, I don't really need
Speaker 5: to listen to Joe and Tracy anymore. We do have
Speaker 5: the perfect welcome to lots More when we catch up
Speaker 5: with friends about what's going on right now.
Speaker 1: Because even when Odd Lots is over, there's always lots
Speaker 1: more and.
Speaker 5: We really do have the perfect guest. So for those
Speaker 5: who don't follow Tracy on Twitter, which you should all be,
Speaker 5: she posted this freaky photo that two in the morning
Speaker 5: that looked everyone thought was like Halloween or like costume
Speaker 5: makeup because you have this big gash in your face.
Speaker 5: What's the story there?
Speaker 3: Uh?
Speaker 1: Someone said the Dow was a better index than the
Speaker 1: S and P five hundred, so I had to fight that.
Speaker 3: That's me.
Speaker 2: Yeah, that's right.
Speaker 1: You should see the other guy.
Speaker 2: Everyone look at Joe.
Speaker 4: No.
Speaker 1: Uh, you know, someone threw a large platinum coin at
Speaker 1: my head and then ran off and I heard them
Speaker 1: say something about a trillion dollars. I'm not sure what
Speaker 1: that was.
Speaker 5: About, because that's interesting because I thought it sort of
Speaker 5: looked like you got hit by a two by four.
Speaker 5: I thought you got hit by like someone like slammed
Speaker 5: a big piece of lumber.
Speaker 3: In your face.
Speaker 1: Actually, you know, I think that that's what it was.
Speaker 1: So unfortunately, I wish I had a dramatic story to
Speaker 1: tell about how I ended up with this like four
Speaker 1: inch gash on my forehead. But basically, I was trying
Speaker 1: to hang a frame while standing on my bed and
Speaker 1: I fell off the bed and I'm pretty sure my
Speaker 1: face hit the frame, so like kind of a two
Speaker 1: by four.
Speaker 5: Yeah, sure, photo. I think you should make it your
Speaker 5: Twitter profile.
Speaker 3: Yeah.
Speaker 5: Might actually actually pretty.
Speaker 2: Bad, thank you.
Speaker 1: The stitches themselves aren't quite as glamorous, but I'm willing
Speaker 1: to live with them. But anyway, I'm glad you mentioned
Speaker 1: to you by fours because there are some interesting things
Speaker 1: going on in the lumber market at the moment, and
Speaker 1: we really do have the perfect person to talk to
Speaker 1: Stinson Dean, president and owner of Deacon Lumber Company, who've
Speaker 1: spoken to him many times before about what happens in lumber.
Speaker 4: Yeah. The one piece of advice I've gotten in lumber
Speaker 4: trading is don't try to catch it falling.
Speaker 5: To by four classic classic.
Speaker 6: Yes, yeah, we're in that now.
Speaker 4: And Tracy's living proof was that. Now.
Speaker 1: You know how I know lumber prices are falling. It's
Speaker 1: because I just bought like all the lumber that we
Speaker 1: need for that giant shed. It's because I've finished my
Speaker 1: acquisition and so inevitably prices start coming down.
Speaker 5: You bought the top, Yeah.
Speaker 2: It's always the case.
Speaker 1: Wait, okay, so prices are falling.
Speaker 2: What's going on?
Speaker 1: Because you know, would lumber it's not exactly a monolith.
Speaker 1: There's different types of it, as we've learned a number
Speaker 1: of times at this point. But like, how bad has
Speaker 1: the price action been?
Speaker 4: It's been pretty bad, Like lower than I thought we
Speaker 4: would go. There's this kind of age old philosophy in
Speaker 4: lumber trading that we won't trade below the break even,
Speaker 4: specifically the break even of British Columbia two by four
Speaker 4: producers and coming out of COVID, there's so much issues
Speaker 4: getting product that folks switched species. The cheaper, more available
Speaker 4: spech species from the US South and I started to
Speaker 4: think maybe British Columbia lost what I call it's peg,
Speaker 4: like everyone would peg like to the BC break even.
Speaker 4: While we've been well below that. It's kind of a
Speaker 4: mystery what it actually is. Maybe it's a little bit
Speaker 4: lower than we all thought, and we've been trading well
Speaker 4: below it. Now we're trading below even the Southern yellow pine,
Speaker 4: the cheap species break even. So we're just way cheaper
Speaker 4: than anyone thought we could go because hey, you can't
Speaker 4: trade below the break even for too long. But here
Speaker 4: we are, I don't know, six plus months probably trading
Speaker 4: below that number.
Speaker 5: So just to be clear, when we talk about the
Speaker 5: break even price, this is the cost basically of the
Speaker 5: various mills to acquire raw timber and then process it
Speaker 5: into usable wood.
Speaker 6: Exactly cost of the log, the labor.
Speaker 4: Yeah, inflation plays a big part of that. So you know,
Speaker 4: break evens have leg taken a step up since pre COVID.
Speaker 5: And I assume, okay, so no one wants to lose money.
Speaker 5: Have we seen the supply response yet? Have any of
Speaker 5: the mills been idled or anything like that in response
Speaker 5: to lower prices?
Speaker 6: Yeah?
Speaker 4: So slow, but surely we call them curtailments. Those curtailments
Speaker 4: have started started to add up. I think we're over a.
Speaker 6: Billion board feet in British Columbia.
Speaker 4: Again, everyone's looking towards them as that peg, but now
Speaker 4: we're looking at like do we need to to curtail,
Speaker 4: which is different than closing, And I think personally we
Speaker 4: need to close a lot of like permanently shut mills
Speaker 4: and burst Columbia. And then now there's talk of like
Speaker 4: what do we need to do to reduce supply coming
Speaker 4: out of the Southeast United States with Sonyella pines. So
Speaker 4: there is an accumulative effect happening, but it's not all
Speaker 4: at once, so it's not really headline grabbing. It's kind
Speaker 4: of onesie twosies. This is happening, And then people don't
Speaker 4: believe it, And is it a curtailment meaning they're going
Speaker 4: to turn it back on later if prices respond? Is
Speaker 4: it a closure? We close these mills and you're not
Speaker 4: opening them back up. But there's a fear when you curtail,
Speaker 4: whether that's reducing from three shifts the two shifts, something
Speaker 4: like that, you're going to lose your workforce in the
Speaker 4: US South, that's the biggest fear if you cut shifts,
Speaker 4: like they're going to go work for Amazons, And there's
Speaker 4: a lot of investment in the US South, So there's
Speaker 4: a very tough decision to be made. Do we retail
Speaker 4: and risk losing our workforce that we work so hard
Speaker 4: to get over the last several years. It's kind of
Speaker 4: a race to the bottom at the moment.
Speaker 2: That's really interesting.
Speaker 1: It also just seems bad to curtail a bunch of
Speaker 1: mills and lumber supply at a time when we're still
Speaker 1: talking about structural undersupply in the housing market.
Speaker 5: No, this is really interesting because we've talked about labor
Speaker 5: hoarding in the past, and all these companies they're anxious
Speaker 5: about losing workers. And maybe it's the first time for
Speaker 5: many of these managers and CEOs where they had a
Speaker 5: hard time working or they had a hard time hiring.
Speaker 5: But it's interesting dynamic to say, well, maybe there are
Speaker 5: aspects of that are disinflationary or deflationary for certain prices,
Speaker 5: because it implicitly means continuing to run the operation at
Speaker 5: a loss, contributing to oversupply of the key commodity. Because
Speaker 5: the alternative is that libor loss I hadn't really thought
Speaker 5: about that aspect.
Speaker 1: No, wait, Stintson, is the market is it?
Speaker 4: So?
Speaker 1: Normally lumber futures are in contango, so the spot prices
Speaker 1: are lower than prices further out. Is that still the case.
Speaker 1: I'm starting to wonder whether or not I should be
Speaker 1: stockpiling umber and you know, just wait a year or two.
Speaker 6: Yes, yeah, it is.
Speaker 4: I don't know what the definition of a super contango is,
Speaker 4: but I think we're we're in it or approaching it,
Speaker 4: meaning the futures market is paying you above and beyond
Speaker 4: what it actually costs the store for sixty days or
Speaker 4: sixty days in between each of our contracts, and we
Speaker 4: have a deep carry. I always like to say the
Speaker 4: futures they don't have to be right until you get
Speaker 4: into expiration.
Speaker 6: Which is where we're in July. Second.
Speaker 4: Our July contract expiresly fifteenth. Typically all the speculators and
Speaker 4: outside money is long gone before the spot month comes
Speaker 4: into the calendar month, and we're seeing the spread the
Speaker 4: July losing a tremendous amount of value relative to the
Speaker 4: next month in September.
Speaker 6: So yeah, huge carries in the market.
Speaker 4: The market is begging participants to store lumber, don't put
Speaker 4: it on the market. Don't put it up for sale.
Speaker 4: The market will pay you above and beyond your interest,
Speaker 4: insurance and storage costs to keep it till September fifteenth,
Speaker 4: and at this pace, January will probably pay you to
Speaker 4: not sell it until January fifteenth, and we'll kind of
Speaker 4: go from there.
Speaker 5: You have storage, right, so you're you're a lumber trader,
Speaker 5: but you're not just like one of these guys who
Speaker 5: looks at his computer screen all day. You actually have capacity, right, Yeah.
Speaker 4: Yeah, that's one of the things we invested in coming
Speaker 4: out of kind of the windfall of COVID volatility is storage,
Speaker 4: indoor Storageecifically, you have to be able to keep lumber
Speaker 4: out of the weather and dry, and so we invested
Speaker 4: in a lot of storage options for us so we
Speaker 4: can take advantage of these carries in the market. And yeah,
Speaker 4: my day job is buying physical railcars a lumber, shipping
Speaker 4: it right now, shipping it into the storage facilities, and
Speaker 4: putting a hedge on it, and then going fishing waiting
Speaker 4: for the market to come back.
Speaker 5: To Ustinton Lumber. The Stintson Lumber Reserve is what basically.
Speaker 2: Is a strategic extense.
Speaker 5: The strategic Extenson Lumber Reserve. I like that SSLR.
Speaker 1: So you touched on the unemployment aspect just then. But
Speaker 1: of course when people think about lumber prices, I think
Speaker 1: the first thing they think is that this is a
Speaker 1: traditional arbiter of economic activities. So if lumber prices are
Speaker 1: going down, it's probably because people aren't building that much,
Speaker 1: and that suggests that something bad is happening to economic growth,
Speaker 1: or at the very least it's starting to slow. Is
Speaker 1: that the basic read through here.
Speaker 6: I think.
Speaker 4: So, I think you look at lumber was kind of
Speaker 4: the first thing to hit headlines and set new all
Speaker 4: time highs back in twenty twenty and then and really
Speaker 4: became a popular thing to talk about in twenty twenty one.
Speaker 4: You know, at the time, I'm like, hey, this is fundamental,
Speaker 4: and we got COVID supply chain shutdowns and they can't
Speaker 4: get their workforce back, and you know, if you get
Speaker 4: test positive, you got to sit down, is stay away
Speaker 4: from work, and we couldn't get caught up. All that's fixed,
Speaker 4: and so we're at very have very efficient supply lines
Speaker 4: now in at the same time we're looking at housing
Speaker 4: starts really showing what the lumber industry has seen since January,
Speaker 4: which is really weak demand. As a lumber trader, I
Speaker 4: would say lumber supply chain is too fixed. Like it
Speaker 4: is very smooth. Rail cars are getting from British Columbia
Speaker 4: to Atlanta and record time, record speeds, and lumbers getting
Speaker 4: produced as much as you could ever want. Everyone has it.
Speaker 4: There's no fear of a shortage. The end user lumberyard
Speaker 4: is able to run kind of a lean, just in
Speaker 4: time inventory model again, and it's so the supply chain
Speaker 4: side is very fixed. But then now we have kind
Speaker 4: of a broken housing starts world where you know, the
Speaker 4: the number one demand a lumber is repairing to model,
Speaker 4: and just behind that a single family, and then way
Speaker 4: down the list is multifamily. Multi family is less than
Speaker 4: ten percent of lumber demand.
Speaker 5: Wait, sorry, what's first again? Single family or repair? Oh okay, okay,
Speaker 5: this is interesting.
Speaker 6: Repair and renovation, yes, repair and remodel this.
Speaker 4: Yes.
Speaker 1: So on that note, is it possible that like in
Speaker 1: the post uh the immediate post twenty twenty period, we
Speaker 1: just had everyone remodeling their homes and so you know,
Speaker 1: that sort of took care of demand further out, or
Speaker 1: that maybe because lumber prices went up so much, you
Speaker 1: had this huge supply response from the mills, and so
Speaker 1: there's just over supply, Like, is it possible that this
Speaker 1: is something that's still very pandemic specific versus something that's
Speaker 1: about slowing growth.
Speaker 4: Well, Tracy, that's a good way to frame it, because
Speaker 4: I'm thinking, you know, my initial thought is like, oh,
Speaker 4: this is a very is an economic indicator slow and growth.
Speaker 4: But also I want to say we clearly now I
Speaker 4: think undisputed can say we had pulled forward demand of
Speaker 4: repair and remodel, so projects that would have been spread
Speaker 4: out over five years got crunched into twenty four months,
Speaker 4: and now we're on the back half of that five years,
Speaker 4: and there's not much business to kind of float and
Speaker 4: handle the supply that we have. So I don't know,
Speaker 4: is that the definition of slowing economic growth is pull forward?
Speaker 4: I don't know that's over my pay grade, but I
Speaker 4: think it's clearly what happened is there is a repair
Speaker 4: model boom that has really one of your housing and
Speaker 4: lumber guests, Dustin Jolbert, has tweeted about it. Repairing the
Speaker 4: models kind of flatted down and dead in the water.
Speaker 4: That's a lot of big box home depot lows monards business,
Speaker 4: and that's fifty percent of lumber that's produced goes to
Speaker 4: that that sector, and it's it's down, and then we
Speaker 4: all know, single families down just in time her supply
Speaker 4: to be as efficient as it's ever been. And lastly,
Speaker 4: I haven't been able to mention pre COVID eighteen nineteen,
Speaker 4: there's a ton of cap X to invest in the US.
Speaker 1: Sorry eighteen nineteen or nineteen eighteen nineteen, I'm sorry, sorry, was.
Speaker 5: Technically sorry.
Speaker 4: I'll restated.
Speaker 1: No, No, it's fine, it's uh did I mention? I've
Speaker 1: bumped my head, so my my numerical understanding is not
Speaker 1: as great as it might normally be.
Speaker 4: Well, in twenty eighteen and twenty nineteen, their plans announced
Speaker 4: and enacted to build new production sawmills in the US
Speaker 4: South to take advantage of the larger fiber basket forest
Speaker 4: logs down there versus the Canadian fiber basket. And it
Speaker 4: was and is the Canadians who are doing that investment.
Speaker 4: They own over fifty percent of the US South production
Speaker 4: and a lot of those projects got delayed and for
Speaker 4: COVID reasons, they couldn't get their saw mills built. They
Speaker 4: couldn't get them staffed, but now they can't. So a
Speaker 4: lot of those projects are now online and they are
Speaker 4: not going to get shut down. There's debt to service,
Speaker 4: there's cash flow motivations to just run. Who cares what
Speaker 4: the break even is. So we have that, we have
Speaker 4: repaired supply chains, and we have the hangover of the
Speaker 4: pull forward demand of repairing the model, and then you
Speaker 4: know the single family stories at this point.
Speaker 5: So when Stinson first mentioned, when you said repair and
Speaker 5: remodel is actually the biggest category, Like at first, I
Speaker 5: was kind of surprised by that, but you know, I
Speaker 5: would have thought single family was a bigger source of demand.
Speaker 5: But it occurred to me that there is a connection
Speaker 5: here between what we've talked about in some our recent
Speaker 5: conversation with Brad Jacobs, where he made the point that
Speaker 5: like the US housing stock is really old right now,
Speaker 5: and there is just and houses have to be repaired.
Speaker 5: They're like any other asset, especially the moment you buy
Speaker 5: a house that starts to fall apart. And so if
Speaker 5: we have this historically old housing market, that is just
Speaker 5: a big source of ongoing structural demand right just to
Speaker 5: keep those homes in existence for all kinds of materials
Speaker 5: they might need, So that actually sort of makes sense
Speaker 5: to me.
Speaker 1: I feel like this is something you internalize as soon
Speaker 1: as you actually buy.
Speaker 5: Oh no, no, no, for real, I bought my apartment
Speaker 5: in Manhattan and it never had any issues and then
Speaker 5: literally like a window started leaking. They like literally that week.
Speaker 3: It was so perfect.
Speaker 1: Wait, so Stintent, you mentioned something interesting, which is this
Speaker 1: idea of the mills kind of hoarding workers first of all,
Speaker 1: but then also just trying to withstand the lower prices
Speaker 1: and maybe operating at a loss for as long as
Speaker 1: they can and just sort of waiting to see if
Speaker 1: they can beat out others who are forced to shut down.
Speaker 1: What's the sort of differentiating factor in survival for some
Speaker 1: of these mills. Is it just whoever has access to
Speaker 1: like extra cash laying around for a rainy day, or
Speaker 1: is it mills that maybe have supply agreements with like
Speaker 1: big builders and big box companies and that sort of thing.
Speaker 4: You know, I would say, and I'm not honestly the
Speaker 4: best to speak to this, but I would guess it's
Speaker 4: these newer steady dart mills have the advantage they're going
Speaker 4: to have been located strategically closer to a fiber supply
Speaker 4: for trees and logs, they are going to have a
Speaker 4: lot of investment. They're largely public companies that have built these,
Speaker 4: so they have access to the cash to kind of
Speaker 4: see to get to the other side. In the South,
Speaker 4: it's still it's much more fragmented as far as they're smaller,
Speaker 4: single location, mom and pop type locations. Those folks are
Speaker 4: going to struggle. But then those folks have probably more
Speaker 4: discipline and have saved some cash over the last several years.
Speaker 4: And there's no way to know, but you would think
Speaker 4: they've made it this far. They knew twenty one to
Speaker 4: twenty two wasn't going to be around forever, so they
Speaker 4: save some cash. Where the publics, you know, have to
Speaker 4: disperse their cash. They pay down debt and then pay dividends, YadA, YadA, YadA.
Speaker 4: So you know, I think the advantage is just the
Speaker 4: newness of the mill because of the state of the art,
Speaker 4: state of the art, less manpower, higher yields out of logs,
Speaker 4: and then its strategic location where the old mills are
Speaker 4: naturally going to be further away. They're going to have
Speaker 4: logged everything within their radius and they're having to go
Speaker 4: further and further away to get their logs. That's the
Speaker 4: only thing I can think of. And this the structural
Speaker 4: housing shortage that we all know by evidence by home
Speaker 4: prices have not crashed in the phase of eight percent morgages.
Speaker 4: We know that, the mills know that, and it's just like, well,
Speaker 4: it's just going to turn and rate cuts. We got
Speaker 4: to wait for rate cuts. And here we are and
Speaker 4: I don't know, and I haven't heard, like how long
Speaker 4: is this runway? Like how long can they bleed? And
Speaker 4: I don't I don't know, but it's clearly been longer
Speaker 4: than most traders had anticipated.
Speaker 5: Wait, I have a total curveball question actually, and if
Speaker 5: you don't want to answer it, that's fine. But we
Speaker 5: actually this week we did publish that interview with Brad Jacobs,
Speaker 5: who is trying to do a roll up of the
Speaker 5: what he calls a highly fragmented building supply industry, and
Speaker 5: lumber is a building supply though I don't know if
Speaker 5: he's going to get into lumber, though maybe he will
Speaker 5: a from your perspective, is it really is it? Does
Speaker 5: it seem very fragmented to you? And b let's say
Speaker 5: Brad listens to odd lives and he hears this, smart
Speaker 5: Stinson fellow, and he calls you up. What kind of
Speaker 5: asset would you buy to create a platform for consolidating
Speaker 5: this industry? A few had billions of dollars four and
Speaker 5: a half billion dollars.
Speaker 4: Yeah, storage, storing, storage, Yeah, I think, I think the
Speaker 4: sawmill production business. I learned this when I start. I
Speaker 4: started out in grains. Yeah, it's just so tough and
Speaker 4: you just rather have someone else. But with that, and
Speaker 4: when they are over produced, you become a You've become
Speaker 4: their liquidity provider. You give them cash, they give you lumber,
Speaker 4: and you store it and wait for the supply response.
Speaker 4: The crap and oil traders taught me this, I think.
Speaker 4: And when I started in commodities in fourteen fifteen, there's
Speaker 4: a big contango and the boats, the oil bart is
Speaker 4: the just float around with no destination because they were
Speaker 4: getting paid to store it. And if you have the
Speaker 4: balance sheet to store your material when no one else
Speaker 4: needs it, then you're the only one who has it
Speaker 4: when when things change, and there's inevitably going to be
Speaker 4: a supply response, and the lower we go, the more
Speaker 4: violent it'll be. But for me, it's in my niche.
Speaker 4: It's it's all about storage. I wouldn't be interested in
Speaker 4: owning a producer. This is just a very, very tough business.
Speaker 4: But if you if you can store, and the balance
Speaker 4: sheet has a lot to do with that because your
Speaker 4: liquidity is tied up in inventory.
Speaker 6: You know that that's what I would be doing. But
Speaker 6: I'm a and I we are doing it.
Speaker 4: But the public the pressures that public companies have with
Speaker 4: their lean balance sheets and their lean inventory models and
Speaker 4: turning inventory terms with that, it's hard to execute. So
Speaker 4: that's why folks like me exist where they can't execute.
Speaker 4: I can, So I'll take on that risk. I'll warehouse it,
Speaker 4: I'll hedge it and wait for things to shake out.
Speaker 4: And it's not uncommon for me to sell the lumber
Speaker 4: right back to the same people I bought it from.
Speaker 4: And I'm just able to navigate slower inventory terms than anyone.
Speaker 2: Else, huh.
Speaker 1: I remember one of the first times we talked to
Speaker 1: you ever, you spoke about how the industry was slow
Speaker 1: to build out inventory because of the reasons that you
Speaker 1: just explained. You know, the tendency towards efficiency and the
Speaker 1: desire to be as streamlined as possible, and so when
Speaker 1: demand starts picking up, it really takes people a lot
Speaker 1: of time to get hold of the wood the lumber
Speaker 1: that they need to actually match it. Is there any
Speaker 1: sign that that behavior is kind of changing? So I
Speaker 1: take the point that people like you exist to bridge
Speaker 1: that gap. But do you see more and more industry
Speaker 1: participants start to build out additional inventory or additional supply
Speaker 1: just in case or is it still not really a reality.
Speaker 4: I think they tried, and that was kind of the
Speaker 4: top of the market, and it was kind of this
Speaker 4: whipsaw like, oh, we need to build inventory. Everyone builds inventory,
Speaker 4: price goes up, and then it crashes because I bought
Speaker 4: three months worth of inventory. Is almost the same concept
Speaker 4: to pull forward demand instead of spreading it out over
Speaker 4: three months, they rushed in about it all over within
Speaker 4: a few weeks. I think folks are back to just
Speaker 4: in time lean inventories. I don't think they have an
Speaker 4: interest in building inventory to cost to do so is
Speaker 4: expensive with where interest rates are and there everyone's very
Speaker 4: uncomfortable with having low inventory turns. So no, I don't
Speaker 4: think there's been a lesson learned to have more inventory
Speaker 4: just the case. I think they tried to learn it
Speaker 4: in real time and didn't didn't work out, And more
Speaker 4: than anything, the interest rates are painful to store inventory. Now,
Speaker 4: Oh yeah, if they ran a grain elevator hedging model,
Speaker 4: they would know Fature's contract is compensating you for the
Speaker 4: cost of interest, but not everyone is able to execute
Speaker 4: on that.
Speaker 5: Yeah, this is an important point actually because just on
Speaker 5: this point specifically, so right, it's easy enough to say, Okay,
Speaker 5: you're going to buy when it's low and the future's
Speaker 5: curve there's a higher price out there that you theoretically
Speaker 5: be able to sell it at, but you do have
Speaker 5: to match that against the interest rates. So it needs
Speaker 5: to be sufficiently steep I guess that curve such that
Speaker 5: it makes sense for you to hold rather than just
Speaker 5: like buy treasuries or whatever.
Speaker 4: Yes, yes, exactly, And there's a level of sophistication, yeah,
Speaker 4: I mean is needed for that. And then you know,
Speaker 4: the futures market's small, so the bigger players kind of like,
Speaker 4: we can't really have a material impact on our risk
Speaker 4: because we can't put on a big enough position. All
Speaker 4: our little futures contract that we adjusted last year is
Speaker 4: doing much better, but we still have some room to grow.
Speaker 6: But you know, there's a reason.
Speaker 4: Well I'm wait over my skis here, but I think
Speaker 4: a Cargill, there's a reason they're they're private, you know,
Speaker 4: and I think one of them is they can execute
Speaker 4: on these fairly sophisticated storage strategies. And I really have
Speaker 4: to explain to everyone like, this is a six month
Speaker 4: plus ARB and we're going to pay a bunch of
Speaker 4: margin call and pay a bunch of interests, but we're
Speaker 4: making it up because our cost basis goes lower and
Speaker 4: lower every time we roll into the next contract. That's
Speaker 4: just a really hard thing to explain to public investors.
Speaker 6: And and you.
Speaker 4: Know, public commodity companies often tell me when I was
Speaker 4: a consultant, you know, our investors pay us to have
Speaker 4: pretty naked exposure to the underlying commodity, and that was
Speaker 4: as an uphill battle as a consultant.
Speaker 6: So I've said, I'll do it.
Speaker 4: And I know if you're not hedging, someone's going to
Speaker 4: hedge for you, and that that's me, that's your investors.
Speaker 4: And there's a level of you just realities of hedging
Speaker 4: that not everyone could take advantage of.
Speaker 2: The secret to success is storage.
Speaker 6: I love it.
Speaker 5: Wait, just real quickly thirty second question, you have some
Speaker 5: other businesses. I know, you have your hands all things
Speaker 5: in other pods. You're out in the real world and
Speaker 5: not like in Manhattan. You're like out in the real economy.
Speaker 5: Do you think you see a slow down day to day?
Speaker 6: Gosh, I'm so concentrated in the lumber, but I do.
Speaker 6: I do. Yeah, it's just like it's a front and.
Speaker 4: Center because you know, there's a reason on the show today.
Speaker 4: But yeah, there's some other service businesses that are unrelated
Speaker 4: and uncrrelated that I was in the middle of the
Speaker 4: hiring when it was so tough to hire quality people
Speaker 4: and we're just having to raise the wage. Yeah, to
Speaker 4: find a clearing wage that has significantly cooled. We're able
Speaker 4: to hire whenever we want and frankly let go of
Speaker 4: folks without fear of being able to replace them.
Speaker 6: Yes, that aspect, it's like, is it too easy? I
Speaker 6: don't know.
Speaker 4: This is it kind of feels like it used to
Speaker 4: be where the employer had such an advantage over the employee,
Speaker 4: like the employee really needed the job, and that's kind
Speaker 4: of what we're getting. More professional follow ups and and
Speaker 4: there's they're like they are vuying for the job. Versus
Speaker 4: us buying for them. Like I think that dynamic has
Speaker 4: has certainly changed, but I wouldn't say there's a material
Speaker 4: drop off and activity in these businesses that would see.
Speaker 4: Outside of Number.
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