WEBVTT - This Is the Perfect Storm That Caused Grain Prices To Soar 0:00:10.720 --> 0:00:15.000 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.040 --> 0:00:19.840 I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, obviously, 0:00:20.000 --> 0:00:23.159 we've been talking about inflation a lot lately, but I 0:00:23.160 --> 0:00:28.080 think there's like one category of inflation, or one category 0:00:28.280 --> 0:00:32.080 of goods inflation that really sort of like hits people, 0:00:32.280 --> 0:00:38.800 resonates with people emotionally more than others. It's mayonnaise obviously. Yeah, 0:00:38.840 --> 0:00:41.600 so I wrote that article about mayonnaise specifically, but it 0:00:41.640 --> 0:00:44.400 has to be food inflation, Like this is the one 0:00:44.440 --> 0:00:47.400 thing that sort of strikes fear into everyone's hearts. And 0:00:47.440 --> 0:00:51.080 it's probably where people are where you start thinking about 0:00:51.120 --> 0:00:54.520 inflation expectations the most. It's people who are actually going 0:00:54.560 --> 0:00:56.840 to the grocery store, who are looking at the price 0:00:56.880 --> 0:01:00.320 of coffee or a banana or something like that, and 0:01:00.560 --> 0:01:02.920 they can see on a day to day basis whether 0:01:03.040 --> 0:01:06.679 or not it's going up. Yeah, exactly. So it's like 0:01:06.720 --> 0:01:09.600 we could talk about like CPI and aggregant and oh 0:01:09.720 --> 0:01:12.520 big portion of that is say like used cars, but 0:01:12.600 --> 0:01:15.679 how often do you buy a used car? For most people, 0:01:15.920 --> 0:01:18.200 that's like a pretty rare purchase, so you don't like 0:01:18.480 --> 0:01:20.880 see it in your face you see it in the 0:01:20.920 --> 0:01:24.880 grocery store. Everyone sees it who goes shopping, whether it's 0:01:24.920 --> 0:01:27.600 the price of milk, whether it's the price of vegetables, 0:01:27.640 --> 0:01:29.920 the price of meat. For the most part, it's got 0:01:30.000 --> 0:01:32.160 many of these items have gone up significantly in the 0:01:32.240 --> 0:01:34.880 last year. And of course the thought of like, okay, 0:01:35.080 --> 0:01:38.360 the rise it costs like literally feed your family is 0:01:38.480 --> 0:01:41.119 a pretty big deal. Like it's about is sort of 0:01:41.480 --> 0:01:43.319 you know, if you're thinking about, like, well, what forms 0:01:43.360 --> 0:01:47.280 your view of inflation, that that is probably gasoline prices 0:01:47.600 --> 0:01:49.680 for people who don't live in a big city are 0:01:49.720 --> 0:01:52.680 probably like they're the two big ones, food and gas. 0:01:52.680 --> 0:01:55.960 But food, I mean, there's something about it. It's almost 0:01:55.960 --> 0:01:59.480 like it's tied to modern civilization as well, right, because 0:01:59.480 --> 0:02:02.280 you're not supposed to think about how the supermarket works. 0:02:02.400 --> 0:02:05.639 You're not supposed to think about how, you know, the food, 0:02:05.680 --> 0:02:08.200 the vegetables, the meat or whatever get from the farm 0:02:08.240 --> 0:02:11.160 to your table. You're not supposed to think about supply chains. 0:02:11.440 --> 0:02:14.120 But when you start thinking about them, it's usually in 0:02:14.120 --> 0:02:17.519 a really negative and worrying way, and that's when things 0:02:17.639 --> 0:02:20.519 kind of start to fall apart. So I don't know, 0:02:20.560 --> 0:02:22.400 I feel like the modern supermarket is sort of at 0:02:22.400 --> 0:02:25.640 the heart of the way we live nowadays, so when 0:02:25.680 --> 0:02:29.200 things go badly there, people start to freak out. It 0:02:29.320 --> 0:02:30.920 kind of feels like a big theme of a lot 0:02:30.960 --> 0:02:33.760 of our episodes lately is like we wish we didn't 0:02:33.760 --> 0:02:35.560 have to talk about these things, and it's a bad 0:02:35.600 --> 0:02:40.280 sign that we are. But anyway, so food inflation not great, 0:02:40.440 --> 0:02:44.000 and food prices have gone up considerably over the last year, 0:02:44.760 --> 0:02:47.840 and there are very reasons for this. But one thing 0:02:47.880 --> 0:02:50.040 that we've really seen over the last year, and we 0:02:50.080 --> 0:02:54.079 did one episode on it in the early Scott ran 0:02:54.160 --> 0:02:57.520 over the University of Illinois is grains. And of course 0:02:57.560 --> 0:03:01.200 grains are consumed by humans, but they're also by animals, 0:03:01.240 --> 0:03:03.919 so the higher grain prices feeds into higher meat and 0:03:04.000 --> 0:03:07.200 dairy prices and so forth. And one of the interesting 0:03:07.240 --> 0:03:10.960 things about grains, I think historically, or soft commodities in general, 0:03:11.040 --> 0:03:14.760 agricultural commodities, is that they often seem like of the 0:03:14.800 --> 0:03:20.120 commodity complex, more disconnected sometimes from the macros. So you 0:03:20.160 --> 0:03:24.640 can like grains maybe affected by drought or other conditions, 0:03:25.000 --> 0:03:27.440 whereas something like you know, copper might just be like 0:03:27.480 --> 0:03:30.040 a reflection or oil might be reflection of the macro 0:03:30.120 --> 0:03:33.920 economy boom or bust. Grains and other soft commodities, they 0:03:33.960 --> 0:03:36.760 might have more idiosyncratic factors like what was the weather 0:03:36.800 --> 0:03:39.400 in Brazil like? Or what was the weather in Iowa like? 0:03:39.920 --> 0:03:42.280 And so it's kind of like a it's a niche 0:03:42.400 --> 0:03:44.520 that sort of. I think a lot of people don't 0:03:44.600 --> 0:03:46.640 spend a lot if you're not in it, don't a 0:03:46.680 --> 0:03:50.560 lot spend a lot of time like think about specifically. Yeah, 0:03:50.600 --> 0:03:53.040 I think that's right. I mean I think rarely does 0:03:53.080 --> 0:03:55.280 the price wheat go up because g d P is 0:03:55.320 --> 0:03:59.160 at like four or five or something like that. Yeah, exactly, 0:03:59.160 --> 0:04:02.200 So a recovery could obviously increase the price of gasoline 0:04:02.360 --> 0:04:05.720 or copper, but usually we don't really associate the price 0:04:05.760 --> 0:04:08.600 of like, yeah, wheat or corn with the cycle. That 0:04:08.720 --> 0:04:12.640 being said, right now, we are seeing this boom in grains, 0:04:12.680 --> 0:04:17.040 particularly wheat, so we corn, and soy or as they 0:04:17.080 --> 0:04:19.599 call them in the industry, beans. They're all up a 0:04:19.600 --> 0:04:22.640 lot from the last year. Corn and beans have actually 0:04:22.640 --> 0:04:24.560 come off their highs a little bit. They're not up, 0:04:24.600 --> 0:04:27.160 but wheat is very high. So there's a lot of 0:04:27.520 --> 0:04:29.320 to get into it. There's a lot of stuff going 0:04:29.360 --> 0:04:31.520 on at this space. I'm very excited we're going to 0:04:31.520 --> 0:04:34.719 be talking about wheat, corn and beans. That sounds great. 0:04:34.760 --> 0:04:37.479 I mean, this kind of falls into our category of 0:04:37.520 --> 0:04:40.800 getting really really micro and niche this year. But also 0:04:41.160 --> 0:04:43.800 it's kind of a weird one because on the one hand, 0:04:43.839 --> 0:04:46.320 these are all individual markets, but on the other hand, 0:04:46.560 --> 0:04:49.480 they do have one or two things in common. You know. 0:04:49.720 --> 0:04:51.880 One thing is the weather, which you already mentioned, and 0:04:51.920 --> 0:04:54.040 that's played into a lot of the issues that we've 0:04:54.080 --> 0:04:58.480 seen recently. And the other is fertilizer. And I know, yeah, 0:04:58.839 --> 0:05:01.680 I don't know much about fertilizer, but the one thing 0:05:01.720 --> 0:05:03.880 I do know about it um only because I lived 0:05:03.880 --> 0:05:06.839 in Abu Dhabi for a while. But most people think 0:05:06.839 --> 0:05:10.320 of it as like cow poop, you know, just the 0:05:10.400 --> 0:05:13.359 stuff that you get from somewhere, organic material that you 0:05:13.400 --> 0:05:17.279 put on your farmland and things grow. But it's actually 0:05:17.279 --> 0:05:21.400 the product of a really intense chemical process. And it 0:05:21.440 --> 0:05:23.960 feels to me like the weird thing about fertilizer is 0:05:24.560 --> 0:05:27.520 it's this big chemical process with an actual supply chain, 0:05:27.560 --> 0:05:29.440 but at the same time, it doesn't really have the 0:05:29.480 --> 0:05:33.640 same infrastructure as other commodities like oil and gas. And 0:05:33.680 --> 0:05:35.960 I think this is probably a year when we've really 0:05:36.000 --> 0:05:38.800 felt that. So that's the one thing I know about fertilizers, 0:05:38.839 --> 0:05:42.679 and I'm interested to talk more about it. And because 0:05:42.720 --> 0:05:46.400 fertilizer is connected to energy, and because energy is connected 0:05:46.440 --> 0:05:49.000 to everything else, this is the one way very clearly 0:05:49.040 --> 0:05:52.440 in which the macro cycle impacting grains. All right, let's 0:05:52.440 --> 0:05:55.000 get to it. I am very excited about our guest. 0:05:55.360 --> 0:05:58.480 We're gonna be speaking about all things grains with Angie Setser. 0:05:59.080 --> 0:06:01.520 She is a co found of Conscious r o I, 0:06:01.600 --> 0:06:04.520 which is a new company that consults on all kinds 0:06:04.520 --> 0:06:08.279 of things grains for farmers, investors, and so on. Previous 0:06:08.320 --> 0:06:11.320 to that, she was the vice president of grain at 0:06:11.360 --> 0:06:14.680 a Citizens Elevator in Michigan for ten years. So a 0:06:14.839 --> 0:06:19.039 true grain veteran. Uh, Angie, thank you so much for 0:06:19.360 --> 0:06:22.000 coming out odd lots, Thanks for having me. I'm excited 0:06:22.040 --> 0:06:24.520 to be here. But can I ask a really embarrassing 0:06:24.600 --> 0:06:27.680 question to start? Of course, the more embarrassing the better. 0:06:27.760 --> 0:06:30.400 Let's break that ice. So I lived in Illinois for 0:06:30.440 --> 0:06:33.640 a while, the south of Chicago. I lived in the Midwest. 0:06:33.680 --> 0:06:37.560 There were a lot of cornfields and other farms around me, 0:06:37.640 --> 0:06:42.640 and stuff you used to work for Citizens elevator. How 0:06:42.640 --> 0:06:44.880 does a grain elevator work? Again, I drove by them 0:06:44.880 --> 0:06:46.480 on the way to school all the time as a 0:06:46.560 --> 0:06:49.440 kid from like age two to twelve, and I actually 0:06:49.520 --> 0:06:52.520 don't know really like why what the how elevators work? Well? 0:06:52.560 --> 0:06:56.960 That means they're working right right idea. You never had 0:06:56.960 --> 0:06:58.440 to learn, so you never had to worry about it. 0:06:58.480 --> 0:07:01.320 But yeah, I mean a grain elevator. Really the entire 0:07:01.440 --> 0:07:04.599 beginning of the industry was we had this massive amount 0:07:04.640 --> 0:07:07.320 of harvest that came off one time of year, right like, 0:07:07.400 --> 0:07:11.280 so the farmers spent all year long producing this crop 0:07:11.440 --> 0:07:15.200 and it had to go somewhere. And traditionally, the demand 0:07:15.280 --> 0:07:18.560 sector obviously is set up to handle all of the 0:07:18.600 --> 0:07:22.080 harvest coming off. It needs to be kind of rationed 0:07:22.080 --> 0:07:24.400 out throughout the year, if you will. And so that 0:07:24.560 --> 0:07:27.080 was why a grain elevator started, as we needed to 0:07:27.120 --> 0:07:29.720 have a place locally for the farmers to be able 0:07:29.720 --> 0:07:32.280 to harvest their crops, bring them in, and then it 0:07:32.320 --> 0:07:35.000 was the elevator's job to kind of work throughout the 0:07:35.080 --> 0:07:38.000 year to kind of put the grain out into the 0:07:38.040 --> 0:07:42.120 demand structure, whether that was export, whether that was feeding 0:07:42.360 --> 0:07:45.960 uh animals or you know. Now in the last fifteen 0:07:46.040 --> 0:07:50.560 years or so, renewable fuels or by ethanol, biodiesel, whatever, 0:07:50.880 --> 0:07:53.080 and so a grain elevator's job really is just to 0:07:53.640 --> 0:07:56.680 help facilitate the harvest, take the grains in at harvest time. 0:07:56.920 --> 0:07:59.560 My job, as as the vice president of grain at 0:07:59.560 --> 0:08:02.480 the elevator or was to hedge that use the futures 0:08:02.520 --> 0:08:04.800 market to kind of offset my future's risk, and then 0:08:04.880 --> 0:08:08.680 trade the spreads in the market structure that carry we 0:08:08.840 --> 0:08:12.320 say carry or inversions and grain as opposed to you 0:08:12.360 --> 0:08:15.960 know those fancy fun cantango and backwardation like we're just 0:08:16.160 --> 0:08:18.880 very simple, I guess, but you know, the monitor what 0:08:18.920 --> 0:08:21.280 the spreads are doing, and trade the basis which is 0:08:21.320 --> 0:08:23.960 the difference between the cash price and futures. You know. 0:08:24.040 --> 0:08:26.800 As responsible for being in charge with trading with the 0:08:26.840 --> 0:08:29.920 elevators handling, you know, I was a basis traders what 0:08:30.040 --> 0:08:32.559 that was called. But like I said, my job was 0:08:32.640 --> 0:08:35.359 to take in the grain at harvest time, help facilitate 0:08:35.360 --> 0:08:38.000 that harvest for my customers, and then spend the rest 0:08:38.040 --> 0:08:40.440 of the year kind of putting it out into the 0:08:40.440 --> 0:08:43.520 market structure depending on you know, where the demand was 0:08:43.720 --> 0:08:46.760 most present and where the market opportunities were the best 0:08:46.840 --> 0:08:49.839 and and then hopefully get it empty or or get 0:08:49.840 --> 0:08:52.000 everything kind of put away to do it all over 0:08:52.040 --> 0:08:55.800 again the following year. So I have another really basic 0:08:56.000 --> 0:08:58.800 um question. But you know, Joe laid out the sort 0:08:58.840 --> 0:09:03.400 of trio of cash grain, so corn, soybeans, and wheat. 0:09:04.080 --> 0:09:07.600 What is it that those three have in common? Like 0:09:07.720 --> 0:09:11.600 what makes them a unified market? Um? Or like why 0:09:11.720 --> 0:09:14.120 do we talk about them as a trio? And then secondly, 0:09:14.760 --> 0:09:18.160 are most people in this space would they be involved 0:09:18.200 --> 0:09:20.360 in all three of those at any one time or 0:09:20.360 --> 0:09:25.920 would you specialize in one market in particular? It really depends, um. 0:09:25.960 --> 0:09:28.400 I think the reason that we talk about them as 0:09:28.400 --> 0:09:31.360 a trio is because they they are the most actively traded. 0:09:31.559 --> 0:09:34.600 They were the cornerstone to a certain extent of the 0:09:34.720 --> 0:09:38.520 Chicago Board of Trade, and so we see this sort 0:09:38.559 --> 0:09:42.480 of there the I don't know, the top three produced crops, 0:09:42.559 --> 0:09:44.640 I guess you could say, and the ones with the 0:09:44.679 --> 0:09:48.440 bulk of the demand and supply structure around the world, 0:09:48.559 --> 0:09:50.280 And so I feel like they just kind of all 0:09:50.280 --> 0:09:52.840 get lumped in with one another. They tend to trade 0:09:53.120 --> 0:09:57.240 um within a certain level of of a ratio, especially 0:09:57.280 --> 0:10:01.359 corn and wheat, when really it depends on where you're located. 0:10:01.679 --> 0:10:04.280 You know, for instance, an elevator in Iowa, where they 0:10:04.280 --> 0:10:06.920 do not grow hardly any wheat. They grow some, but 0:10:07.000 --> 0:10:08.840 not a lot out there. You know, they're not going 0:10:08.880 --> 0:10:11.880 to focus on wheat at all, whereas someone in in 0:10:11.960 --> 0:10:13.319 our neck of the woods, in my neck of the 0:10:13.320 --> 0:10:15.880 woods in Michigan, you know, wheat is one of the 0:10:15.920 --> 0:10:19.120 top three in the rotation, and therefore you need to 0:10:19.160 --> 0:10:21.679 have an understanding of how that wheat market works. There 0:10:21.720 --> 0:10:24.560 are people that are are specialized traders. You know. I 0:10:24.640 --> 0:10:27.800 have friends that they're one and only job is to 0:10:27.880 --> 0:10:31.280 trade wheat in the Pacific Northwest, and so they trade 0:10:31.360 --> 0:10:34.160 white wheat, soft soft white wheat. I mean, wheat is 0:10:34.480 --> 0:10:36.360 one of those things where we say wheat as though 0:10:36.400 --> 0:10:40.360 it's under this big umbrella. But there's five different classes 0:10:40.600 --> 0:10:44.240 of of wheats, and so yeah, there are some specialized traders. 0:10:44.559 --> 0:10:46.400 You know, some folks you start to talk about wheat 0:10:46.400 --> 0:10:49.080 and they completely glaze over. Others you start to talk 0:10:49.080 --> 0:10:51.240 about wheat and they get all excited, like, oh, did 0:10:51.240 --> 0:10:53.840 you see what's going on with You know VSR, which 0:10:53.880 --> 0:10:56.800 is a variable storage rate that Semi introduced a few 0:10:56.840 --> 0:10:59.360 years back, and you know some of these other things, 0:10:59.400 --> 0:11:02.360 and so it really just depends on where the person 0:11:02.440 --> 0:11:06.360 is located and what their specific job is as to 0:11:06.400 --> 0:11:09.120 whether or not they're they're really kind of specialized. But 0:11:09.280 --> 0:11:13.040 I would say from an overall standpoint that why they 0:11:13.120 --> 0:11:15.640 kind of just get lumped in together is that they 0:11:15.679 --> 0:11:18.200 are the most actively traded, and I think they're the 0:11:18.200 --> 0:11:22.200 market that you see the majority of that outside interest in, 0:11:22.480 --> 0:11:25.040 and they just kind of have somehow become, you know, 0:11:25.120 --> 0:11:28.920 by proxy, their representatives of all things egg, even though 0:11:28.960 --> 0:11:32.800 there's a whole slew of other crops that that people handle, cotton, sorghum, 0:11:32.800 --> 0:11:36.160 you know, potatoes, vegetables, all of these other things, but corn, 0:11:36.200 --> 0:11:38.120 wheat and beans tend to be the the end all 0:11:38.160 --> 0:11:42.280 and be all of of agriculture. Then, honestly, how I'm 0:11:42.320 --> 0:11:44.920 not sure, but I think most of that is simply 0:11:44.960 --> 0:11:49.200 because of the cbot and where that started. So I 0:11:49.200 --> 0:11:51.160 want to get into soon like what's going on in 0:11:51.160 --> 0:11:53.360 the market. But one other sort of I don't know 0:11:53.360 --> 0:11:57.240 if the market structure question is how much fungibility is 0:11:57.280 --> 0:12:01.480 there in farmland that allows armors to say, switch up 0:12:01.559 --> 0:12:07.320 space in a given year, reallocating between one grain versus another, 0:12:07.400 --> 0:12:10.400 depending on conditions, Let's say the price of soy or 0:12:10.440 --> 0:12:13.000 in this case, these days, wheat prices are very high. 0:12:13.160 --> 0:12:17.559 To what degree can typical farm or pivot and reallocate 0:12:17.600 --> 0:12:20.080 acreage to one of the other. Much of that just 0:12:20.160 --> 0:12:22.080 depends on the crop and what's going on from a 0:12:22.080 --> 0:12:25.840 weather situation. Let's say winter wheat right now, so specifically 0:12:25.920 --> 0:12:29.199 Chicago and Kansas City wheats are are your wheats that 0:12:29.240 --> 0:12:32.760 are planted in the fall, And so right now for us, 0:12:32.800 --> 0:12:35.920 for instance, in Michigan, the weather has been less than 0:12:36.000 --> 0:12:38.640 ideal throughout much of October. You know, we had one 0:12:38.679 --> 0:12:42.240 of the top fifteen wettest October's on record, and that 0:12:42.320 --> 0:12:46.400 really doesn't necessarily facilitate getting that wheat crop planted. You 0:12:46.440 --> 0:12:49.040 can't really get a wheat crop mut it in. And 0:12:49.080 --> 0:12:52.080 now we're expecting snow this weekend, and some of those thinks. 0:12:52.120 --> 0:12:54.480 So I may have had some customers that were intending 0:12:54.520 --> 0:12:57.000 on increasing their wheat acres due to the high costs 0:12:57.080 --> 0:12:59.719 or high value of of wheat for next year. Now 0:12:59.720 --> 0:13:03.080 we're with eight dollar week on in July two for Chicago, 0:13:03.600 --> 0:13:05.839 and so they would have had this desire perhaps to 0:13:05.920 --> 0:13:09.680 increase their weet acres by ten something of that nature. 0:13:10.120 --> 0:13:12.240 But if they weren't able to get it planted prior 0:13:12.320 --> 0:13:14.480 to the start of October when the weather really went 0:13:14.559 --> 0:13:17.160 sideways on us, they're not going to you know, the 0:13:17.240 --> 0:13:19.560 same could be said for corn in the spring. If 0:13:19.600 --> 0:13:22.240 if we miss that window of opportunity for planting or 0:13:22.280 --> 0:13:24.240 something of that nature, then they may be forced into 0:13:24.240 --> 0:13:27.160 planning soybeans. You know. For now, I would say though, 0:13:27.160 --> 0:13:29.600 that it's it's kind of a toss up for most 0:13:29.640 --> 0:13:32.720 growers going into the new crop year, going into next spring, 0:13:33.040 --> 0:13:35.040 you know, whereas if they are able to get the 0:13:35.080 --> 0:13:38.400 crop off, they're looking at different opportunities when it comes 0:13:38.440 --> 0:13:40.920 to you know, returns on investment and some of these 0:13:40.920 --> 0:13:43.960 other things. They may be able to switch up their rotation. 0:13:44.160 --> 0:13:47.200 But for most farmers, what they will tell you is 0:13:47.280 --> 0:13:50.960 that it's very rotationally driven. It's best for the soil 0:13:51.000 --> 0:13:53.679 to kind of keep in mind soil weed control, pest control, 0:13:53.720 --> 0:13:55.960 all of these things, to kind of say, okay, well, 0:13:56.200 --> 0:13:58.400 we grew corn last year, we're probably gonna switch to 0:13:58.480 --> 0:14:01.320 beans this year. Michigan here, like I said, we have 0:14:01.640 --> 0:14:03.760 a three crop rotation, and so a lot of times 0:14:03.800 --> 0:14:06.600 you'll see corn the following year beans and then wheat 0:14:06.640 --> 0:14:09.240 planted in the fall after that bean crop, and then 0:14:09.280 --> 0:14:11.440 corn again the following year, and so for a lot 0:14:11.520 --> 0:14:14.680 of those folks out there, they'll stick to that rotation. 0:14:14.840 --> 0:14:17.880 But if mother nature says something different, like what we 0:14:17.920 --> 0:14:20.720 saw in two thousand nineteen where we just literally could 0:14:20.720 --> 0:14:23.600 not get the crop planted until the middle of June, 0:14:24.000 --> 0:14:25.600 for a lot of folks at that point they may 0:14:25.640 --> 0:14:28.440 have switched over into soybeans or or something different. And 0:14:28.520 --> 0:14:31.480 so for the most part, there there are a lot 0:14:31.560 --> 0:14:33.720 of ways that farmers can kind of change their mind 0:14:33.840 --> 0:14:38.160 or maybe reevaluate what they intend to plant, but for 0:14:38.200 --> 0:14:40.640 the most part, they tend to keep it in line 0:14:40.680 --> 0:14:43.320 with with what their local market structure asks for, with 0:14:43.360 --> 0:14:46.280 what their soil is asking for. And you know what 0:14:46.320 --> 0:14:49.280 they've done from a traditional standpoint, maybe for the last 0:14:49.320 --> 0:15:08.600 several years. So why don't we go ahead and talk 0:15:08.640 --> 0:15:12.400 about what's going on in prices? So a big run 0:15:12.480 --> 0:15:16.720 up in wheat, soybeans have dropped from um, a pretty 0:15:16.880 --> 0:15:19.640 big spike over the past year or so, and corn 0:15:20.000 --> 0:15:24.440 doing relatively better than soy but not that great. What 0:15:24.560 --> 0:15:28.920 exactly is going on? A ton of things? It's amazing, Um, 0:15:28.960 --> 0:15:32.080 you know what's taken place here and thinking back over 0:15:32.120 --> 0:15:35.760 the last fourteen fifteen months, and so that's one of 0:15:35.760 --> 0:15:37.560 the biggest things I'd say is you almost have to 0:15:37.600 --> 0:15:40.840 start from the beginning, right, Uh, this September two thousand 0:15:40.840 --> 0:15:44.240 and twenty, So a year ago September, we saw these 0:15:44.400 --> 0:15:47.480 massive ending stock estimates from the U. S d A. 0:15:47.760 --> 0:15:49.520 We we thought we were going to be flirting with 0:15:49.560 --> 0:15:51.480 a three billion bush will carry out. And so to 0:15:51.520 --> 0:15:55.120 put that the perspective for corn, you know, a tight 0:15:55.320 --> 0:15:58.240 or a pipeline minimum where we say that we're we're 0:15:58.280 --> 0:16:00.680 at the low end of supplies is around it alien bushel. 0:16:00.720 --> 0:16:03.480 And so last September we were expecting three times what 0:16:03.520 --> 0:16:07.240 would be a minimum pipeline amount. It was burdensome, was 0:16:07.280 --> 0:16:10.200 the words being used quite often. Then the same could 0:16:10.200 --> 0:16:13.040 be said for soybeans. We were expecting close to a 0:16:13.080 --> 0:16:16.320 billion bushel worth of carry out and insteps China, and 0:16:16.480 --> 0:16:20.080 all of a sudden we get this conversation of a 0:16:20.200 --> 0:16:24.960 China stockpiling, cheap prices, trade war phase one and all 0:16:24.960 --> 0:16:26.960 of these things, and so China steps in and just 0:16:27.000 --> 0:16:31.120 starts buying in a way that we had never seen before. Honestly, 0:16:31.160 --> 0:16:33.040 I mean, it was it was like someone had flipped 0:16:33.080 --> 0:16:35.640 a switch. It didn't matter what prices were doing, it 0:16:35.640 --> 0:16:38.040 didn't matter what it would cost to get there. They 0:16:38.040 --> 0:16:40.640 were just told to buy, and they were buying, you know. 0:16:40.680 --> 0:16:44.120 And and so that started really kind of the sudden turn, 0:16:44.520 --> 0:16:47.000 and we had what you would call a bullish response 0:16:47.000 --> 0:16:50.440 to a Barish report. And that was the first sign 0:16:50.560 --> 0:16:53.200 that things were probably going to be quite different. And 0:16:53.320 --> 0:16:55.720 you know, around about a year ago, I remember it, 0:16:55.800 --> 0:16:58.080 right around Thanksgiving time was when we started to talk 0:16:58.080 --> 0:17:01.240 about the inflation, you know, and what was gonna happen 0:17:01.320 --> 0:17:04.560 from an inflation trade standpoint, and suddenly the macro side 0:17:04.600 --> 0:17:08.159 of of everything came back into focus, um, which was 0:17:08.200 --> 0:17:10.080 the first time we had seen any sort of macro 0:17:10.240 --> 0:17:13.800 conversation I'd say two thou eighteen. We probably flirted with 0:17:13.880 --> 0:17:16.640 it for a minute, but really, you know, we're we're 0:17:16.640 --> 0:17:20.240 talking two thousand eight, two thousand nine type inflationary conversations 0:17:20.280 --> 0:17:23.760 obviously when you look at inflation data. And so we 0:17:23.840 --> 0:17:28.320 had this sort of combination of significant increases in demand 0:17:28.640 --> 0:17:31.560 via China and then suddenly the U s d A 0:17:31.840 --> 0:17:37.240 was like, oops, we we overestimated last year's crop pretty substantially, 0:17:37.520 --> 0:17:40.920 and we started to see this reduction in overall supply, 0:17:41.160 --> 0:17:43.880 and so you could say that it was a perfect 0:17:43.920 --> 0:17:46.520 storm of bullishness. I mean it just you had the 0:17:46.560 --> 0:17:49.399 inflation really putting the gas to the fire, and then 0:17:49.440 --> 0:17:51.359 you had these supply and demand so like as you 0:17:51.400 --> 0:17:52.879 were saying at the start of the show, you know, 0:17:52.920 --> 0:17:55.480 we tend to just focus on what's weather doing. You know, 0:17:55.520 --> 0:17:57.679 what are we going to use for exports? And and 0:17:57.760 --> 0:17:59.639 most of the time folks don't even care what's going 0:17:59.680 --> 0:18:02.200 on in grains because we just kind of trade back 0:18:02.200 --> 0:18:04.600 and forth, maybe get some seasonal rallies here or there, 0:18:04.680 --> 0:18:06.680 but from an overall standpoint, we never have to worry 0:18:06.680 --> 0:18:09.399 about running out or any of this. Well, China, like 0:18:09.440 --> 0:18:13.000 I said, stepped in and bought well beyond what you 0:18:13.000 --> 0:18:15.640 would traditionally see them take in from a corn standpoint, 0:18:15.720 --> 0:18:18.280 especially soybeans were a bit of a surprise, but then 0:18:18.320 --> 0:18:21.040 you saw them really come in and and buy that corn. 0:18:21.440 --> 0:18:24.119 But in addition to that, then you had these Brazilian issues. 0:18:24.160 --> 0:18:27.159 You started with a low or a slow start to monsoon, 0:18:27.240 --> 0:18:29.360 no moisture in Brazil, so they were unable to really 0:18:29.400 --> 0:18:32.480 get the crop planted and tell around January when traditionally 0:18:32.480 --> 0:18:34.240 you like to see the bulk of the crop planet 0:18:34.280 --> 0:18:39.720 October November. That had major implications on the US export window. UH. 0:18:39.760 --> 0:18:42.760 And export window traditionally closes for soybeans around the first 0:18:42.760 --> 0:18:46.560 part of January, you know, into February. Last year or 0:18:46.640 --> 0:18:48.680 at the start of this year, we were exporting beans 0:18:48.720 --> 0:18:52.000 to China into March because Brazil's crop wasn't ready to 0:18:52.040 --> 0:18:55.240 make its way into the export pipeline. That slow start 0:18:55.280 --> 0:18:58.720 to their soybean crop hurt or slowed their ability to 0:18:58.720 --> 0:19:01.520 get their corn crop planted. Put that corn crop, you know, 0:19:01.640 --> 0:19:05.639 into that important window of production falling right when the 0:19:05.720 --> 0:19:08.600 dry period starts, so the mansunal moisture and Brazil tends 0:19:08.640 --> 0:19:11.360 to shut off last part of April into May, so 0:19:11.400 --> 0:19:13.520 that's when the majority of the corn crop was trying 0:19:13.600 --> 0:19:16.879 to mature. You know, we had this this amazing uh 0:19:16.920 --> 0:19:19.080 if you can call it, that drought and Brazil take 0:19:19.119 --> 0:19:22.800 place and really just take their second crop corn production 0:19:22.840 --> 0:19:25.520 expectations from around a hundred and twenty million metric ton 0:19:25.880 --> 0:19:28.560 down to eighty five. So we had these just this 0:19:29.240 --> 0:19:32.080 wild series of events that made it a feel as 0:19:32.080 --> 0:19:34.080 though we were never going to see corn and soybeans 0:19:34.400 --> 0:19:38.400 go down again, only to actually have a pretty reasonable 0:19:38.440 --> 0:19:42.800 production season. In the US. We actually are looking at 0:19:42.840 --> 0:19:45.760 probably having a record large soybean crop. We're gonna be 0:19:45.800 --> 0:19:49.520 flirting with a record yield and corn and so that's 0:19:49.520 --> 0:19:52.240 helped kind of stabilize some of that supply and taken 0:19:52.280 --> 0:19:55.239 some of that story away, but poor wheats still on 0:19:55.280 --> 0:19:57.399 that track. We didn't get the memo that we were 0:19:57.440 --> 0:20:00.879 supposed to calm down because we had auction shortages. We 0:20:00.920 --> 0:20:03.159 had this massive drought in the Canadian prairies and in 0:20:03.200 --> 0:20:06.080 the northern portion of the US where spring wheed is grown, 0:20:06.400 --> 0:20:09.520 so production there was off substantially. And then of course 0:20:09.560 --> 0:20:11.480 we have this fall weather here where we could be 0:20:11.480 --> 0:20:15.160 looking at another reduction in production, specifically in the soft 0:20:15.160 --> 0:20:17.880 red wheat area, the Chicago weeed area. And then there's 0:20:17.960 --> 0:20:20.320 questions as to what the heck is going on in Russia. 0:20:20.480 --> 0:20:24.040 The Russia is obviously continuing to limit what they're exporting. 0:20:24.080 --> 0:20:28.240 You're seeing some continued food inflation stories. The the industry 0:20:28.280 --> 0:20:30.679 itself is changing there. What you used to see was 0:20:30.720 --> 0:20:34.440 the farmer having to force supplies into the market structure 0:20:34.520 --> 0:20:36.760 as they were harvesting. Similar what we had talked about 0:20:36.760 --> 0:20:39.840 earlier with the U S Elevator. Now they're building space, 0:20:39.920 --> 0:20:43.000 they're keeping the crops closer to home. They're finding that 0:20:43.000 --> 0:20:46.000 that gives them some power, and so that's really changing 0:20:46.000 --> 0:20:50.120 what we're seeing from the overall global supply and demand situation. 0:20:50.640 --> 0:20:53.520 And there's a million different little stories that you could 0:20:53.520 --> 0:20:56.080 point to in any one day that would be either 0:20:56.160 --> 0:20:59.359 bullish or bearish price. And right now, with that inflation 0:20:59.520 --> 0:21:03.359 under that we're seeing, or that inflationary support, it's keeping 0:21:03.400 --> 0:21:07.360 prices supported even if the fundamental story, especially for like soybeans, 0:21:07.800 --> 0:21:11.120