WEBVTT - A Farmer's Take on the Economy 0:00:13.760 --> 0:00:17.360 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.440 --> 0:00:19.880 My name is Mike Reagan. I'm a senior editor at 0:00:19.880 --> 0:00:22.880 Bloomberg and on the Data High Across Acid Reporter with 0:00:22.880 --> 0:00:27.600 Bloomberg and this week, well, as the name implies, on 0:00:27.680 --> 0:00:30.680 this show, we like to discuss what's going up in markets. 0:00:31.360 --> 0:00:33.640 And while the stock and bond markets haven't given us 0:00:33.680 --> 0:00:37.480 much to talk about, here's one thing that has lean hogs. 0:00:38.120 --> 0:00:40.080 If you want to buy a futures contract on the 0:00:40.159 --> 0:00:44.280 Chicago Mercantile Exchange that represents forty thou pounds of cork, 0:00:44.760 --> 0:00:47.959 it'll set you back about thirty six thousand dollars seven 0:00:48.159 --> 0:00:51.120 and forty dollars at the moment. That's up about twelve 0:00:51.640 --> 0:00:54.680 this year, and it's hardly the only farm product that's 0:00:54.800 --> 0:00:58.440 rallying this year. Futures on corn and soybeans are up 0:00:58.480 --> 0:01:01.680 about the same and well, it's a fascinating market story. 0:01:01.840 --> 0:01:05.360 It also speaks to how those lingering supply chain problems 0:01:05.400 --> 0:01:08.119 and the were in Ukraine are coming home to roost 0:01:08.200 --> 0:01:11.679 on the farm and posing risks to the global food supply. 0:01:12.319 --> 0:01:14.560 We'll get into it with someone who is an expert 0:01:14.640 --> 0:01:17.479 on how these markets work. After all, he is a 0:01:17.520 --> 0:01:20.920 farmer vill Donna. He is. Indeed, he grows all these 0:01:21.000 --> 0:01:25.640 things I believe, hogs, corn and Swimming's very excited I'm 0:01:25.640 --> 0:01:28.440 on the show, But Philpana, I'm also very excited to 0:01:28.480 --> 0:01:33.080 hear about yet another glamorous vacation of yours coming up. 0:01:34.160 --> 0:01:36.440 You love to call me out. I don't know how 0:01:36.480 --> 0:01:38.760 you do it. How where are you jetting off to 0:01:38.840 --> 0:01:41.880 this time? I'm going to Spain? So so next week 0:01:41.920 --> 0:01:45.039 I believe you're flying solo. I won't be around next week. 0:01:45.920 --> 0:01:49.160 Uh to help you with the podcasts. How you'll survive? 0:01:49.280 --> 0:01:52.360 But who is going to roast me mercilessly? I'll have 0:01:52.440 --> 0:01:54.240 to find somebody who can do it as well as 0:01:54.760 --> 0:01:57.240 as well as I do it. Called in. But I'm 0:01:57.240 --> 0:02:01.040 also excited for your trip because this guest this week 0:02:01.240 --> 0:02:03.680 has really got me in the mood for some puork. 0:02:03.720 --> 0:02:06.800 I'm very hungry for some some quork products. You can 0:02:06.840 --> 0:02:09.760 have that in Spain. Well, I know, believe me, I know, 0:02:09.880 --> 0:02:13.560 I know you're gonna be eating nothing but coliflower. Don't 0:02:13.560 --> 0:02:18.639 tell I guess I'm vegetarian and complete colliflower flower diet. 0:02:18.840 --> 0:02:21.120 I think I just heard him tell him, Yes, let 0:02:21.120 --> 0:02:22.760 me let me introduce him. I want to bring him in. 0:02:22.840 --> 0:02:25.000 It's it's Brian Duncan. He's the vice president of the 0:02:25.040 --> 0:02:28.800 Illinois Farm Bureau. He's a farmer in northwest Illinois, and 0:02:28.840 --> 0:02:31.560 he also actually is a podcast host. So Brian, thank 0:02:31.560 --> 0:02:33.960 you so much for joining us on the show this week. 0:02:34.480 --> 0:02:36.760 Thanks for having me here Villdonna. And also, I am 0:02:36.800 --> 0:02:40.760 not a vegetarian. I figured I just didn't want you 0:02:40.800 --> 0:02:43.560 to know that. I am all I want fill Donna. 0:02:43.720 --> 0:02:47.120 It's it's called Iberico ham. They sell it like a 0:02:47.160 --> 0:02:50.840 full hogs leg at a time. It's it's cured, it's delicious. 0:02:51.160 --> 0:02:54.919 I'm not asking for a full forty pound futures contract 0:02:54.919 --> 0:02:58.120 of hand, just pounds, just one leg. You could fit 0:02:58.200 --> 0:03:02.120 it into your carry on on the plane trying. Uh no, 0:03:02.400 --> 0:03:05.040 I'm sorry, but we are not allowing pork products in 0:03:05.080 --> 0:03:09.080 from other countries because of the risk of of a 0:03:09.080 --> 0:03:12.600 foot and mouth disease and so an African swine fever. 0:03:12.720 --> 0:03:15.800 So I'm sorry, Mike. You would have to travel to 0:03:16.040 --> 0:03:20.799 Europe to enjoy that that premium product, even the cured, cured, 0:03:21.160 --> 0:03:24.120 cured and cooked either one. You will not get past 0:03:24.160 --> 0:03:28.000 the Beagle brigade at the airport. That's good to know. 0:03:28.800 --> 0:03:31.679 That's what it's called. That's what it's called. What that 0:03:31.880 --> 0:03:35.840 that the dogs that sniff customs, that's that's what's keeping. 0:03:35.920 --> 0:03:39.960 That's what's keeping our domestic pork production healthy and African 0:03:40.000 --> 0:03:43.920 swine fever free. Well, Dottie, you're gonna have you're gonna 0:03:43.920 --> 0:03:46.920 have to smuggle my hamleg. Then it's gonna be dangerous. 0:03:46.960 --> 0:03:50.680 Are you all smuggle? I'll smuggle, are you yes? But 0:03:50.760 --> 0:03:53.480 so so, Brian, speaking of all of this, I want 0:03:53.480 --> 0:03:56.240 to ask you about exactly this. So you and your 0:03:56.240 --> 0:04:00.200 wife you raise corn, soybeans, sweet pigs, and cattle on 0:04:00.240 --> 0:04:03.880 your farm near Polo, Illinois. So maybe we just start 0:04:03.960 --> 0:04:06.240 out with you telling us about yourself and how things 0:04:06.280 --> 0:04:09.880 are going on the farm today. Sure. Well, again, glad 0:04:09.920 --> 0:04:12.280 to be here and thank you for this opportunity. Yeah. 0:04:12.280 --> 0:04:16.159 I grew up on our family farm. I was fortunate 0:04:16.279 --> 0:04:18.680 enough to marry my high school sweetheart. So we were 0:04:18.680 --> 0:04:21.680 celebrating actually forty years together in thirty three years of 0:04:21.720 --> 0:04:25.200 marriage this year. And uh, we have four children, and 0:04:25.279 --> 0:04:28.800 three of which are also actively involved on our family farm. 0:04:28.880 --> 0:04:32.280 And so it's uh, it's a great lifestyle. It's a 0:04:32.560 --> 0:04:34.919 it's a you know, the hate to sound cliche like 0:04:34.920 --> 0:04:37.919 the movie, but it is a wonderful life and uh 0:04:37.960 --> 0:04:41.240 it's a pretty high calling. I think growing food and 0:04:41.480 --> 0:04:45.040 fuel and fiber for America and for the world, and 0:04:45.080 --> 0:04:47.120 so we take a lot of pride in what we do, 0:04:47.200 --> 0:04:49.680 like all farmers. Uh, yet at the end of the day, 0:04:49.680 --> 0:04:53.599 we're a family business. That's fantastic. I gotta say I 0:04:53.640 --> 0:04:56.360 often had day dreamed about being a farmer. I grew 0:04:56.440 --> 0:04:59.040 up in Pennsylvania, not on our farm, but near farms. 0:04:59.440 --> 0:05:01.800 I'd often day dreamed about being a farmer. But I 0:05:01.839 --> 0:05:04.640 don't know if I can, if I have the fortitude 0:05:04.680 --> 0:05:08.120 of the getting up in the I think I'm meant 0:05:08.120 --> 0:05:10.440 to be an office guy. My features in school would 0:05:10.440 --> 0:05:11.960 a test that I spent an awful lot of time 0:05:12.040 --> 0:05:14.320 daydreaming about being a farmer as well when I was 0:05:16.000 --> 0:05:20.159 living the dream, Mike living the dream Bright, I wanted 0:05:20.200 --> 0:05:23.720 to you know, the listeners of this podcast are very 0:05:23.800 --> 0:05:28.159 much of a financial orientation, investors and traders and that 0:05:28.240 --> 0:05:30.600 sort of thing, so I wanted to tap in a 0:05:30.600 --> 0:05:34.280 little bit into your expertise on the futures market. You know, 0:05:34.320 --> 0:05:38.600 as I said that the futures prices uh on lean, hoggs, corn, 0:05:38.680 --> 0:05:42.359 soybeans all all up tremendously this year. That tremendously, but 0:05:42.400 --> 0:05:45.000 up up a decent amount tremendously when compared to all 0:05:45.040 --> 0:05:49.320 other assets. I'm just kind of curious how a farmer 0:05:49.960 --> 0:05:53.400 like yourself approaches the futures market. You know, we always 0:05:53.400 --> 0:05:55.880 hear that it's a way to sort of hedge what 0:05:56.000 --> 0:05:58.160 your crops are going to do in the coming year, 0:05:58.200 --> 0:06:00.440 But sort of what is your relation ship with the 0:06:00.480 --> 0:06:02.880 futures market? Um? You know, do you deal with a 0:06:02.960 --> 0:06:05.720 broker that sort of thing, and and how does it 0:06:05.760 --> 0:06:08.359 work in your favor or not? Well, I'd say you 0:06:08.360 --> 0:06:12.719 can describe my relationship as solidly love hate and it 0:06:12.760 --> 0:06:16.000 depends on which way the market's going. So yeah, like 0:06:16.160 --> 0:06:18.400 a lot of our most farmers, I employ a bunch 0:06:18.440 --> 0:06:21.680 of different risk management strategies on our farm, and they 0:06:21.720 --> 0:06:25.280 involve hedging with a broker, They involve cash based futures 0:06:25.320 --> 0:06:30.320 contracts with a a packer or a grain merchant. Um. 0:06:30.560 --> 0:06:33.920 We also use some of the government risk management tools, 0:06:34.040 --> 0:06:37.760 the crop insurance or livestock insurance tools that are also 0:06:37.839 --> 0:06:42.360 based off futures markets. So I'm usually using the futures 0:06:42.400 --> 0:06:46.520 markets to manage the risk on my on my crop 0:06:46.520 --> 0:06:49.800 production and on my hogs. Uh as far as I so, 0:06:49.960 --> 0:06:54.320 I do forward selling, forward contracting, and and what I'm 0:06:54.360 --> 0:06:57.480 looking at, Mike is is uh the ability to cover 0:06:57.560 --> 0:07:00.960 costs and allow ourselves a reasonable return. And when we 0:07:01.000 --> 0:07:03.800 see those opportunities, we we certainly do a portion of 0:07:03.839 --> 0:07:08.080 them using using a combination of those risk management tools. 0:07:08.600 --> 0:07:11.280 You know, when you mentioned that that prices are up, 0:07:11.400 --> 0:07:14.360 and they are for agricultural commodities, but that just doesn't 0:07:14.400 --> 0:07:17.120 necessarily mean the profits are up because our costs are 0:07:17.200 --> 0:07:18.680 up as well. You know when you say corn and 0:07:18.680 --> 0:07:21.720 soybeans are are higher, Well, that makes the cost of 0:07:21.760 --> 0:07:25.160 production on the hogs higher. And so we're looking at 0:07:25.200 --> 0:07:27.760 margin and and we're looking at how we can best 0:07:27.800 --> 0:07:31.120 manage that margin and then and then protect that margin 0:07:31.440 --> 0:07:35.280 um out into the future. Yeah right, So I'm I'm 0:07:35.320 --> 0:07:37.360 trying to wrap my head around if I see a 0:07:37.440 --> 0:07:39.960 futures market like this where there are you know, pretty 0:07:39.960 --> 0:07:44.720 good gains in agricultural commodities, who's benefiting from that? Is 0:07:44.720 --> 0:07:47.800 it some farmers, if if they made the right trade, 0:07:47.880 --> 0:07:50.840 or is it mostly speculators hedge funds in the middle 0:07:50.920 --> 0:07:53.240 you know, who are sort of the players in the market, 0:07:53.800 --> 0:07:57.000 uh that that you know, we're are winning are losing 0:07:57.000 --> 0:07:59.720 in an environment like well, the funds have certainly become 0:08:00.200 --> 0:08:03.160 a big driver in these markets, and you certainly want 0:08:03.200 --> 0:08:05.160 to keep an eye on what they're doing if they 0:08:05.160 --> 0:08:07.640 are net long or net short of commodity, and when 0:08:07.640 --> 0:08:11.400 they exit or enter, they can have a pretty dramatic 0:08:11.720 --> 0:08:14.920 impact on the markets because there's not a lot, there's 0:08:14.920 --> 0:08:18.840 not enough money to take the opposite position oftentimes, so 0:08:18.920 --> 0:08:21.880 you'll see them run the market up or down. Hence 0:08:21.920 --> 0:08:24.640 the love or hate relationship that I have with the marketplace. 0:08:25.280 --> 0:08:28.880 Um so yes, it's really Mike, It's it's a combination. 0:08:29.120 --> 0:08:31.920 It could be end users. So when prices go up, 0:08:32.000 --> 0:08:35.240 end users who have locked in their supply benefit because 0:08:35.280 --> 0:08:39.439 they've hedged their risk. Um speculators who have looked at 0:08:40.040 --> 0:08:46.400 geopolitical uh things like weather or war and decided commodities 0:08:46.400 --> 0:08:48.360 were a good investment in the market goes up, and 0:08:48.400 --> 0:08:53.280 certainly producers if they if they've got to handle and 0:08:53.320 --> 0:08:54.920 if they can grow a crop. You know, if you've 0:08:54.920 --> 0:08:57.240 got a drought, it doesn't matter how high the prices 0:08:57.280 --> 0:09:00.520 go if you don't have anything to sell. So in 0:09:00.559 --> 0:09:04.439 generally now, prices going up is a benefit to rural 0:09:04.480 --> 0:09:08.280 America and to farmers. You know, it's just also got 0:09:08.320 --> 0:09:11.240 to be it's more about margin, you know. It's it's 0:09:11.280 --> 0:09:15.240 it's the difference between our cost of production per unit 0:09:15.280 --> 0:09:17.120 and then what that unit is priced at and so 0:09:17.400 --> 0:09:21.360 and so good margins are better than high prices. High 0:09:21.360 --> 0:09:23.880 prices don't necessarily mean good margins, but a lot of 0:09:23.920 --> 0:09:27.120 times they surely do. Does that make any sense to you, Yeah, 0:09:27.440 --> 0:09:30.199 absolutely absolutely. I mean I think that's the same conundrum 0:09:30.240 --> 0:09:32.960 that corporate America is facing, right, you know, uh, sure 0:09:32.960 --> 0:09:35.640 they're selling prices are higher, but their costs are higher too. 0:09:35.840 --> 0:09:39.000 And you know, do you have the pricing power to 0:09:39.000 --> 0:09:41.559 to raise your prices more than your costs? And uh, 0:09:41.600 --> 0:09:43.959 you know not everyone does. So it's it's a that's 0:09:43.960 --> 0:09:47.400 an important point, Mike. Farmers are price takers. We do 0:09:47.480 --> 0:09:50.880 not have pricing power. We are subject to the whims 0:09:50.920 --> 0:09:52.679 of the Board of Trade. The Board of Trade does 0:09:52.720 --> 0:09:55.480 not care what our cost of production is. The futures 0:09:55.600 --> 0:09:58.000 the Mercantel Exchange does not care how much it costs 0:09:58.040 --> 0:10:00.480 me to produce a pound of pork. We are at 0:10:00.480 --> 0:10:02.440 the mercy of the market place, and that's what puts 0:10:02.440 --> 0:10:06.439 farmers in a uniquely disadvantaged position as far as inflation goes. 0:10:07.120 --> 0:10:11.040 We are price takers on both sides. We are subject 0:10:11.120 --> 0:10:14.040 to global fertilizer prices. We do not, as individuals have 0:10:14.200 --> 0:10:17.400 enough market clout to drive a price. So we pay 0:10:17.520 --> 0:10:21.120 what the market offers us on inputs and we take 0:10:21.160 --> 0:10:23.200 what the market gives us on outputs, and so that 0:10:23.240 --> 0:10:26.920 puts us in a very challenging position at times. Yeah, 0:10:27.000 --> 0:10:29.720 So how do you think the average hog farmers doing 0:10:29.720 --> 0:10:33.400 this year? They are they able to protect those margins 0:10:33.440 --> 0:10:34.720 or is it a is it a tough you know? 0:10:34.840 --> 0:10:36.560 I think I think for the most part the hogs, 0:10:36.720 --> 0:10:38.320 hogs have made enough money this year to pay the 0:10:38.320 --> 0:10:40.439 feed bill, which when you look at the price of 0:10:40.480 --> 0:10:44.400 corn and swabians, Um, that's that's really saying something. Now myself, 0:10:44.920 --> 0:10:47.319 I'm in a in a different position than a lot 0:10:47.320 --> 0:10:49.960 of hog producers in which I grow all my corn 0:10:50.760 --> 0:10:53.360 h that I need to feed my hog operation. So 0:10:53.559 --> 0:10:57.599 I'm in essence buying it from myself. Um, and so 0:10:57.600 --> 0:10:59.760 so that there's a benefit to that, that's kind of 0:10:59.800 --> 0:11:03.800 heading a risk. But I would say in general, um, 0:11:03.840 --> 0:11:07.640 a lot of hog producers, I know, implement risk management strategies, 0:11:07.679 --> 0:11:11.040 and when they can see a margin that allows them 0:11:11.080 --> 0:11:13.960 to buy corn and soybean meal and hedgehogs at a 0:11:14.000 --> 0:11:17.600 price that allows them margins, they will take all three positions. 0:11:17.679 --> 0:11:21.000 And so the market has offered those opportunities this year, 0:11:21.000 --> 0:11:24.560 and I think in general, it has been a pretty 0:11:24.559 --> 0:11:27.440 good year, uh for the hog for the hog side 0:11:27.440 --> 0:11:30.520 of the of the business. So, Brian, just to go 0:11:30.559 --> 0:11:33.160 back to the point you were just making about passing 0:11:33.200 --> 0:11:35.360 on prices, because I wanted to ask you about this, 0:11:35.480 --> 0:11:37.760 that it is much more difficult for farmers to do this. 0:11:37.840 --> 0:11:40.679 So can you just for me to better better understand 0:11:40.840 --> 0:11:43.000 the dynamics, can you just talk a little bit more 0:11:43.040 --> 0:11:47.840 about how rising prices, what the how it directly translates 0:11:48.040 --> 0:11:51.000 to you, what the what the relationship actually looks like. 0:11:51.240 --> 0:11:54.240 Surevill Nana. That's and and it's impossible for farmers to 0:11:54.320 --> 0:11:57.200 set their price, at least in a commodity type market. Now, 0:11:57.240 --> 0:12:01.360 if you're a specialty grower or have uh you know, 0:12:01.640 --> 0:12:04.800 a direct to consumer market, then you've got some options. 0:12:04.800 --> 0:12:10.040 But most of us grow bolt commodities and and we, uh, 0:12:10.080 --> 0:12:12.160 we are at the whim of the marketplace, and that 0:12:12.240 --> 0:12:15.680 marketplace has two aspects to it. So it's got the 0:12:15.720 --> 0:12:18.160 futures price that Mike you talked about. You can look 0:12:18.160 --> 0:12:20.600 on the board of Trade and see the prices that 0:12:20.600 --> 0:12:24.040 that the board is offering on different commodities. But then 0:12:24.320 --> 0:12:27.480 the next part of that is the local price, which 0:12:27.520 --> 0:12:34.760 involves basis, and basis is the discount or plus the 0:12:34.800 --> 0:12:37.080 futures price that the local market is willing to pay. 0:12:37.600 --> 0:12:42.239 And usually it's a discount because usually there's transportation involved, 0:12:42.840 --> 0:12:46.880 but in times of shortage, some local markets will actually 0:12:46.920 --> 0:12:51.120 pay over the board of trade. So so farmers usually 0:12:51.160 --> 0:12:54.480 marketing is a two step process. I will do a 0:12:54.559 --> 0:12:57.640 hedge on the board and then I will look for 0:12:57.679 --> 0:13:01.439 opportunities to capture a good basis as well. And so 0:13:01.559 --> 0:13:05.000 it's all a matter of timing, knowing market dynamics, and 0:13:05.160 --> 0:13:08.240 UH looking for those opportunities. So selling for a farmer 0:13:08.320 --> 0:13:10.959 is generally a two step process. On the grain side, 0:13:10.960 --> 0:13:14.800 at least hoggs, there is a basis element to it. 0:13:15.440 --> 0:13:21.080 Um and hogs get really complicated. Hogs, UH do not 0:13:21.200 --> 0:13:24.000 have a way to deliver. If I sold a contract 0:13:24.000 --> 0:13:26.319 on the Mercantile Exchange, there's no way I can deliver 0:13:26.400 --> 0:13:29.640 that contract of Hoggs anywhere. So it does what's called 0:13:29.679 --> 0:13:32.040 cash settled, and it means it has to settle out 0:13:32.040 --> 0:13:35.040 with the cash market and Bildana. This is getting incredibly complicated, 0:13:35.480 --> 0:13:38.520 but the basis is still very real in that aspect 0:13:38.880 --> 0:13:43.199 as well. Now we like we like complicated. It's it's 0:13:43.240 --> 0:13:52.959 fascinating to untackle it, you know, Brad, I was looking 0:13:53.080 --> 0:13:57.640 at the futures curve for hog prices and for listeners 0:13:57.679 --> 0:13:59.240 who don't know what I mean by that. You know, 0:13:59.280 --> 0:14:02.160 there's futures going all the way out to what at 0:14:02.200 --> 0:14:04.079 the end of next year. I think maybe even further. 0:14:04.240 --> 0:14:07.400 I'm gonna pulled up right now. Three is what I show, 0:14:07.440 --> 0:14:10.080 but there might be some there might be further than that. 0:14:10.920 --> 0:14:14.920 And it's a very unusual shape of the curve. In 0:14:14.960 --> 0:14:18.240 other words, it's it's lower. You know, it goes lower 0:14:18.720 --> 0:14:20.920 in the first month, I believe, and then it goes 0:14:21.040 --> 0:14:24.440 really high into like the spring and summer of next month, 0:14:24.840 --> 0:14:28.680 then it comes back down. Um is that simple? Something 0:14:28.720 --> 0:14:33.160 as simple as just a seasonality people you know, doing 0:14:33.160 --> 0:14:35.280 more barbecuing in the summer, that that sort of thing, 0:14:35.600 --> 0:14:38.680 and that you are very observant and that's an excellent question, 0:14:39.200 --> 0:14:42.480 and you have part of the answer correct. But it 0:14:42.560 --> 0:14:48.000 also has to do with the genetic UH and the 0:14:48.040 --> 0:14:52.600 biological reality of pork production. And and I'll put it bluntly, 0:14:53.280 --> 0:14:57.880 salves breed easier, and you have more successful breeding in 0:14:57.920 --> 0:15:01.760 the spring and in the fall. All that's the seasonality 0:15:01.840 --> 0:15:05.080 for a hog. We breed hogs and raise them all year. 0:15:05.800 --> 0:15:08.960 The hogs that you breed in the summer, in the heat, 0:15:09.200 --> 0:15:13.080 your conception isn't as good. And so when you're farrowing 0:15:13.320 --> 0:15:15.800 those pigs in November and December that we'll go to 0:15:15.840 --> 0:15:18.400 market in May, June, and July, your numbers are down. 0:15:19.000 --> 0:15:22.400 And so there are fewer numbers available for the marketplace 0:15:22.840 --> 0:15:26.560 over the summer months due to the seasonality, the biological 0:15:27.600 --> 0:15:31.160 realities of pork production. And we and and Mike, we 0:15:31.160 --> 0:15:35.640 we have these these hogs and in wonderful facilities UH 0:15:35.840 --> 0:15:39.640 air conditioned in in in a certain aspect we use 0:15:39.680 --> 0:15:42.680 engraperative cooling. A lot of fans move a lot of air. 0:15:42.720 --> 0:15:46.200 But that biological reality that there's just gonna be fewer 0:15:46.240 --> 0:15:49.080 market hogs available in the summer is something that we 0:15:49.120 --> 0:15:51.120 have not figured out a way to a work around. 0:15:51.200 --> 0:15:54.680 Yet that is fascinating. So you know, you've got the 0:15:55.120 --> 0:15:58.040 hog honeymoon suite there with the air cushing and the 0:15:58.120 --> 0:16:02.720 mood lighting, I guess, and that ow candle you can't. 0:16:02.520 --> 0:16:06.880 And it's but it's just something in their DNA that 0:16:06.880 --> 0:16:10.960 that regulates that pite very much so and and uh, 0:16:11.080 --> 0:16:15.040 you know the heat. Yeah, it's it's just a seasonal issue. 0:16:15.280 --> 0:16:18.040 And so the numbers will always if you would go 0:16:18.080 --> 0:16:20.800 back and look at a bell curve mike of of 0:16:20.800 --> 0:16:24.680 of hog harvest week by week, the highest, the largest 0:16:24.680 --> 0:16:29.360 harvests are always in October, November, December, and and so 0:16:29.440 --> 0:16:32.280 that results in the lower prices that you're looking at now. Now, 0:16:32.320 --> 0:16:34.920 if you we'd have had this discussion in May, and 0:16:34.960 --> 0:16:37.640 you'd have been looking at at June, July, and August 0:16:37.640 --> 0:16:39.880 hog futures as the leaden months, you'd have seen them 0:16:39.920 --> 0:16:44.440 the highest because there's there's just fewer hogs. And then 0:16:44.520 --> 0:16:48.720 we also experience a bump with grilling season certainly, and 0:16:48.720 --> 0:16:52.360 and and that all helps, but the pure seasonality of 0:16:52.680 --> 0:16:55.360 pork production is very much at play when you look 0:16:55.360 --> 0:16:59.640 at that futures curve. And Brad, we've mentioned a couple 0:16:59.680 --> 0:17:03.040 of differ issues so far So you have inflation, you 0:17:03.080 --> 0:17:06.360 have supply chain issues, you have droughts, and all kinds 0:17:06.400 --> 0:17:09.119 of other other problems that you're dealing with. I'm hoping 0:17:09.119 --> 0:17:11.199 maybe you can just break down one or two of 0:17:11.240 --> 0:17:14.960 them for us and how it directly impacts you. And 0:17:15.640 --> 0:17:19.600 I'm wondering what the most difficult issue or problem has 0:17:19.680 --> 0:17:25.000 been to deal with. Well, I think inflation on inputs 0:17:25.000 --> 0:17:27.080 on the crop side and some of the hog side 0:17:27.119 --> 0:17:30.360 would be would be number one. And I think supply 0:17:30.480 --> 0:17:33.000 chain issues are number two. And on any given day, 0:17:33.000 --> 0:17:37.280 I would trade those back and forth. And uh and 0:17:37.520 --> 0:17:40.280 and I think I think they are, you know, certainly connected. 0:17:40.840 --> 0:17:45.440 I think, uh, inflation. We you guys, you're the experts. 0:17:45.440 --> 0:17:46.960 Why I'm not sure why I you should be telling 0:17:47.000 --> 0:17:49.680 me about this, but but you know, we still see 0:17:49.760 --> 0:17:55.160 some some disruption due to COVID so manufacturing that wasn't done. 0:17:55.600 --> 0:17:57.359 A lot of our inputs come from China, and we 0:17:57.400 --> 0:18:00.439 still see a zero COVID tolerance policy and China that 0:18:00.480 --> 0:18:03.320 impacts that impacts their ability to export some of the 0:18:03.359 --> 0:18:06.879 base materials we need, whether for livestock feed or crop 0:18:06.880 --> 0:18:12.000 production products. UM, we see geopolitical unrest, a lot of 0:18:12.440 --> 0:18:15.879 disruption caused by the war in Ukraine. Russia was a 0:18:15.960 --> 0:18:19.440 large exporter of fertilizer and as you know, a large 0:18:19.480 --> 0:18:22.960 exporter of natural gas to Europe, and and now on 0:18:23.000 --> 0:18:25.840 the nord Stream with the disruption in the Nord Stream pipeline, 0:18:25.880 --> 0:18:29.080 Europe comes shopping here for natural gas, and natural gas 0:18:29.119 --> 0:18:32.960 is a base ingredient for fertilizer, for nitrogen fertilizer, So 0:18:33.320 --> 0:18:37.800 that has definitely been a disruption supply chain, whatever whatever 0:18:37.840 --> 0:18:40.719 you want to call it. And then I think another 0:18:40.760 --> 0:18:44.400 closely related issue with inflation and supply chain is availability 0:18:44.400 --> 0:18:48.359 of labor. And and we see that anywhere from the 0:18:48.400 --> 0:18:53.040 farms to the suppliers to the manufacturers that uh, labor 0:18:53.320 --> 0:18:56.119 is is a very limiting factor. And even in the 0:18:56.160 --> 0:18:59.399 harvest facilities of live stock harvest facilities, the availability of 0:18:59.520 --> 0:19:04.200 labor to to maximize outputs and to maximize the availability 0:19:04.200 --> 0:19:08.000 about inputs is very real for American agriculture right now. 0:19:09.840 --> 0:19:13.360 Is there, Brian, any sense that any of these issues 0:19:13.400 --> 0:19:16.919 are are improving, Is there any sort of white at 0:19:16.920 --> 0:19:20.959 the end of the tunnel for all these problems. I 0:19:20.880 --> 0:19:25.199 I would have said yes, prior to the invasion of Ukraine, 0:19:25.400 --> 0:19:28.119 um that I think I've been saying, And I was 0:19:29.160 --> 0:19:32.120 on a on a farm bureau trip in Europe eight 0:19:32.200 --> 0:19:35.760 days after the invasion happened, been meeting with farmers and 0:19:35.760 --> 0:19:38.840 farm suppliers over there, and I came away saying, this 0:19:38.880 --> 0:19:43.440 has changed American agriculture for a generation. That the redirection 0:19:43.800 --> 0:19:47.920 of raw materials and then of commodity flows I think 0:19:48.040 --> 0:19:49.679 is very real and something we are going to be 0:19:49.720 --> 0:19:51.960 dealing with for a long time. I mean, as Russia 0:19:52.000 --> 0:19:56.080 was a major exporter of fertilizer and natural gas, and 0:19:56.240 --> 0:19:59.320 you also see some tensions with China. They're holding their 0:19:59.359 --> 0:20:02.919 fertilizer within their own country, and yet you see a 0:20:02.960 --> 0:20:08.119 growing demand for fertilizer, be it in Brazil, Africa here. Uh, 0:20:08.160 --> 0:20:10.919 it's just led to it was. It's just a huge disruption. 0:20:11.400 --> 0:20:16.200 So you don't you don't flip a switch and start 0:20:16.440 --> 0:20:21.119 a major fertilizer production plant overnight. It takes years to cite, 0:20:21.160 --> 0:20:24.240 one years to put one in place, and a huge 0:20:24.280 --> 0:20:27.639 investment that that any investor would want to know that 0:20:27.680 --> 0:20:31.119 the returns are not just short term, that there's going 0:20:31.160 --> 0:20:34.480 to be long term demand here. And so I think 0:20:34.520 --> 0:20:38.840 the fertilizer disruption is very real and is uh, something 0:20:38.880 --> 0:20:41.359 we're going to be dealing with going forward for a while. 0:20:42.520 --> 0:20:45.399 The labor issue. Again, you are the experts. I'm a 0:20:45.560 --> 0:20:48.960 I'm a hog farmer from Polo, Illinois. But my sense 0:20:49.000 --> 0:20:52.280 on labor is there needs to be a collective political 0:20:52.400 --> 0:20:55.719 will amongst the leadership in this country to find a 0:20:55.760 --> 0:21:01.200 solution and come forward with some legal immigration reform. When 0:21:01.240 --> 0:21:03.360 we have people willing to work in some of these 0:21:03.440 --> 0:21:06.680 key supply chain jobs, we need to find a way 0:21:06.960 --> 0:21:10.040 to allow them into this country and to fill those tasks. Now, 0:21:10.080 --> 0:21:13.520 the H two A program certainly helps in agriculture, and 0:21:13.560 --> 0:21:17.400 there's some different visa programs that help, but I think 0:21:17.480 --> 0:21:21.720 that is probably more doable than than solving this global 0:21:21.760 --> 0:21:24.960 redirection of fertilizer and energy. I mean, and that's the 0:21:25.000 --> 0:21:28.960 other thing. Agriculture is very fossil fuel dependent. We are 0:21:29.080 --> 0:21:32.240 it's a base product and in making some of the 0:21:32.359 --> 0:21:35.040 some of the chemicals that we use, the plant protection products. 0:21:35.080 --> 0:21:39.040 But our machinery runs on diesel, and when diesel goes up, 0:21:39.200 --> 0:21:42.000 our life gets a lot more expensive. And everything we 0:21:42.119 --> 0:21:44.680 have on the farm or sell on the farm comes 0:21:44.720 --> 0:21:46.919 on a semi or leaves on a semi on a 0:21:46.920 --> 0:21:50.880 big truck and uh, the cost of transportation has gone 0:21:50.920 --> 0:21:54.520 through the roof as well, and so uh, I think 0:21:54.560 --> 0:21:59.800 we need to aggressively continue to to look for solutions 0:21:59.800 --> 0:22:05.400 in the hostile fuel space and uh that would also help, Brian. 0:22:05.480 --> 0:22:06.800 Do you see, just to go back to the point 0:22:06.800 --> 0:22:09.760 about Russia and Ukraine and the fertilizer shortages, do you 0:22:09.800 --> 0:22:13.840 see American farmers stepping into help fill the void, even 0:22:14.000 --> 0:22:17.080 if it's not a quick turnaround. You mean as far 0:22:17.160 --> 0:22:20.439 as like our co ops investing in fertilizer production and 0:22:20.520 --> 0:22:24.600 things like that. Is that what you're talking about, Panana, Yeah, exactly, Yeah, 0:22:24.880 --> 0:22:28.080 maybe so some of our co ops used to own 0:22:28.400 --> 0:22:35.240 fertilizer production facilities, um, and they weren't profitable, and so 0:22:35.320 --> 0:22:39.199 they invested of them and and so we've seen you 0:22:39.240 --> 0:22:41.760 can Yeah, I would call it an old agopoly. A 0:22:41.840 --> 0:22:45.200 very small number of fertilizer companies that control a large 0:22:45.200 --> 0:22:47.800 amount of the supply and farmer and co ops used 0:22:47.800 --> 0:22:51.080 to be in that space, but they're not now. I 0:22:51.200 --> 0:22:54.560 don't know if there is the will or the capital 0:22:54.640 --> 0:22:57.439 to make a long term commitment to re enter that space. 0:22:57.520 --> 0:23:03.720 My sense would be once burnt twice shy, Yeah, you know, Brian. 0:23:03.760 --> 0:23:06.640 The other issue that comes up in pretty much every 0:23:06.680 --> 0:23:10.359