1
00:00:02,720 --> 00:00:15,840
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:18,120 --> 00:00:20,919
Speaker 2: Hello and welcome to another episode of the Odd Thoughts podcast.

3
00:00:21,000 --> 00:00:22,279
Speaker 2: I'm Tracy Alloway.

4
00:00:22,040 --> 00:00:23,200
Speaker 3: And I'm Joe Wisenthal.

5
00:00:23,520 --> 00:00:25,759
Speaker 2: Joe, there's a running joke on this podcast. There's a

6
00:00:25,800 --> 00:00:27,920
Speaker 2: few of them, but one of the running jokes is

7
00:00:28,240 --> 00:00:30,240
Speaker 2: farmers are always complaining about something.

8
00:00:30,880 --> 00:00:33,280
Speaker 3: They are they are always complaining about something, But you

9
00:00:33,320 --> 00:00:35,920
Speaker 3: know what, it's okay. We need to eat to live.

10
00:00:36,560 --> 00:00:40,400
Speaker 3: Food is pretty important for sort of human civilization, flourishing,

11
00:00:40,440 --> 00:00:43,159
Speaker 3: et cetera. So if the worst is that they complain

12
00:00:43,240 --> 00:00:46,640
Speaker 3: a little bit about how Musiah they're getting for their

13
00:00:46,680 --> 00:00:48,159
Speaker 3: corn or whatever, I'm okay with that.

14
00:00:48,200 --> 00:00:50,440
Speaker 2: Well, to be fair, we also know that one of

15
00:00:50,479 --> 00:00:54,319
Speaker 2: the defining news stories of the past few decades has

16
00:00:54,360 --> 00:00:59,080
Speaker 2: been the hollowing out of America's small scale agricultural industry

17
00:00:59,160 --> 00:01:02,600
Speaker 2: and farmers. So if you are an independent farmer, there

18
00:01:02,640 --> 00:01:03,920
Speaker 2: is a lot to complain about.

19
00:01:04,160 --> 00:01:08,039
Speaker 3: To be fair, totally, and again with the caveat that

20
00:01:08,080 --> 00:01:11,000
Speaker 3: it's always tough. Very recently, a couple of weeks ago,

21
00:01:11,080 --> 00:01:16,040
Speaker 3: we did the episode about surging fertilizer prices. In that conversation,

22
00:01:16,160 --> 00:01:19,000
Speaker 3: you know, we talked about the fertilizer to corn chart,

23
00:01:19,080 --> 00:01:22,000
Speaker 3: and it is not a good ratio. Now, you know,

24
00:01:22,040 --> 00:01:24,880
Speaker 3: there are many ways to represent an industry, but if

25
00:01:24,880 --> 00:01:27,759
Speaker 3: you just wanted one, that's a very clean way. Fertilizer

26
00:01:27,800 --> 00:01:32,080
Speaker 3: prices way up. Obviously, given the situation in Iran, corn

27
00:01:32,120 --> 00:01:34,720
Speaker 3: price is not nearly anywhere close to their all time

28
00:01:34,800 --> 00:01:37,240
Speaker 3: highs or anything like that. So just by at least

29
00:01:37,240 --> 00:01:39,440
Speaker 3: one measure, that is a clear squeeze. Right.

30
00:01:39,520 --> 00:01:42,319
Speaker 2: So we recorded our fertilizer episode, I guess a week

31
00:01:42,400 --> 00:01:44,120
Speaker 2: or two ago at this point. I think at the

32
00:01:44,120 --> 00:01:47,360
Speaker 2: time when we were discussing it, the possibility that the

33
00:01:47,360 --> 00:01:49,720
Speaker 2: closure of the Strait of Hormuz could actually push up

34
00:01:49,760 --> 00:01:53,520
Speaker 2: fertilizer prices, a lot of people weren't necessarily that aware

35
00:01:53,560 --> 00:01:57,080
Speaker 2: of this dynamic. Since then, it has gone very mainstream,

36
00:01:57,120 --> 00:01:59,920
Speaker 2: and you have officials in the US government talking about

37
00:02:00,160 --> 00:02:04,840
Speaker 2: sourcing alternative fertilizer from Morocco or Venezuela to try to

38
00:02:04,880 --> 00:02:08,040
Speaker 2: offset some of the pain. There is some slightly good

39
00:02:08,120 --> 00:02:10,720
Speaker 2: news if you are a farmer, which is that we

40
00:02:10,800 --> 00:02:13,920
Speaker 2: are seeing grain prices start to go up. But to

41
00:02:13,960 --> 00:02:17,240
Speaker 2: your point, again, it is not at all clear that

42
00:02:17,280 --> 00:02:20,560
Speaker 2: it's going to be enough to offset higher input costs

43
00:02:20,840 --> 00:02:23,840
Speaker 2: like fertilizer or oil totally.

44
00:02:24,040 --> 00:02:26,600
Speaker 3: Well, anyway, you know, we did that episode several weeks

45
00:02:26,639 --> 00:02:30,800
Speaker 3: ago about what it was like to do agribusiness in

46
00:02:31,040 --> 00:02:35,080
Speaker 3: tough markets like particularly Venezuela, Ukraine and so forth. And

47
00:02:35,120 --> 00:02:38,320
Speaker 3: I recall at the very end of that conversation, and

48
00:02:38,440 --> 00:02:41,720
Speaker 3: this was obviously before the fertilizer spike. Yeap, our guests

49
00:02:41,720 --> 00:02:44,000
Speaker 3: who we were talking to said we got a good

50
00:02:44,040 --> 00:02:47,160
Speaker 3: history lesson about Venezuela and Ukraine, but they also said,

51
00:02:47,360 --> 00:02:49,760
Speaker 3: at some point we should talk about the pain that

52
00:02:49,800 --> 00:02:53,520
Speaker 3: American farmers are in right now and so then, so

53
00:02:53,600 --> 00:02:56,000
Speaker 3: that was already the condition. There was sort of this tease.

54
00:02:56,120 --> 00:02:58,840
Speaker 3: Things weren't great. Then you get the fertilizer spike. So

55
00:02:58,840 --> 00:03:00,680
Speaker 3: it's like, it seems like a good time to have

56
00:03:00,680 --> 00:03:01,200
Speaker 3: that conversay.

57
00:03:01,280 --> 00:03:03,080
Speaker 2: Yeah, we were going to wait a little bit to

58
00:03:03,120 --> 00:03:05,280
Speaker 2: do that episode, but it turns out that now is

59
00:03:05,320 --> 00:03:08,320
Speaker 2: actually the perfect time for the perfect guests. Once again,

60
00:03:08,360 --> 00:03:10,480
Speaker 2: we are going to be speaking with Jeff Kazen and

61
00:03:10,520 --> 00:03:14,240
Speaker 2: Mike Rolfson. They are the founders of Agris Academy. So

62
00:03:14,400 --> 00:03:16,560
Speaker 2: Jeff and Mike, thank you so much for coming back

63
00:03:16,600 --> 00:03:20,120
Speaker 2: on Odd Blots. Really appreciate it. First question. You know,

64
00:03:20,160 --> 00:03:21,720
Speaker 2: when we spoke to you last time, we were very

65
00:03:21,760 --> 00:03:25,320
Speaker 2: focused on Venezuela and Ukraine and your experience working at

66
00:03:25,320 --> 00:03:28,280
Speaker 2: Cargil earlier. But can you just tell us what Agress

67
00:03:28,320 --> 00:03:31,360
Speaker 2: Academy actually does. Jeff, why don't we start with you?

68
00:03:32,760 --> 00:03:35,840
Speaker 4: Yeah, thanks for having us on again. So, Agress Academy

69
00:03:35,880 --> 00:03:38,640
Speaker 4: is not a broker and advisory business. Mike and I

70
00:03:38,680 --> 00:03:41,520
Speaker 4: each have thirty years of in depth either commodity or

71
00:03:41,920 --> 00:03:45,400
Speaker 4: involvement in the egg industry, and we decided we wanted

72
00:03:45,440 --> 00:03:48,680
Speaker 4: to start an education and consulting business, so we educate.

73
00:03:48,760 --> 00:03:53,680
Speaker 4: We have a producer practice where we educate producers on

74
00:03:53,680 --> 00:03:56,080
Speaker 4: one level how to manage risk and understand the future

75
00:03:56,120 --> 00:03:59,400
Speaker 4: side of risk, and on another level how to merchandise

76
00:03:59,680 --> 00:04:02,320
Speaker 4: like professional grain operation. Because a lot of farms have

77
00:04:02,440 --> 00:04:06,160
Speaker 4: become effectively elevator managers, there was a gap and still

78
00:04:06,200 --> 00:04:09,520
Speaker 4: is a tremendous knowledge gap en farmers around the world.

79
00:04:09,560 --> 00:04:13,720
Speaker 4: We generally have North American students and clients. And then

80
00:04:13,720 --> 00:04:16,040
Speaker 4: we also have a commercial business where we work with

81
00:04:16,120 --> 00:04:19,320
Speaker 4: businesses that work with various all kinds of commodities, where

82
00:04:19,320 --> 00:04:22,479
Speaker 4: we help them understand the risk walk through how they're

83
00:04:22,680 --> 00:04:26,080
Speaker 4: consolidating that risk, how they're managing that risk in best

84
00:04:26,120 --> 00:04:29,359
Speaker 4: practice form in a boutique consulting type of arrangement. So

85
00:04:29,400 --> 00:04:33,000
Speaker 4: we have both practices and a super rewarding business. Kind

86
00:04:33,000 --> 00:04:34,680
Speaker 4: of a second career for both of us as we

87
00:04:34,760 --> 00:04:36,919
Speaker 4: kicked it off and we wanted to be in a

88
00:04:37,040 --> 00:04:41,039
Speaker 4: very differentiated part of the market that wasn't well well covered,

89
00:04:41,120 --> 00:04:43,360
Speaker 4: and that's been a fantastic We've been in business now

90
00:04:43,400 --> 00:04:46,120
Speaker 4: for four years and grow very very steadily each year.

91
00:04:47,400 --> 00:04:51,000
Speaker 3: Mike, just in case anyone hadn't listened to the episode

92
00:04:51,000 --> 00:04:52,960
Speaker 3: with the two of you before, and just to sort

93
00:04:52,960 --> 00:04:54,960
Speaker 3: of add on to it, Jeffer saying, just give us,

94
00:04:55,000 --> 00:04:58,159
Speaker 3: like the quick your background, your bio, and the long

95
00:04:58,279 --> 00:05:00,599
Speaker 3: experience that you have had in that a space.

96
00:05:01,600 --> 00:05:03,960
Speaker 5: Yeah, about two thirds of my career was spent in

97
00:05:04,000 --> 00:05:09,480
Speaker 5: Cargill doing an array of commercial things, mostly in risk management, trading,

98
00:05:09,680 --> 00:05:13,120
Speaker 5: global supply chain type of things. I got at the

99
00:05:13,240 --> 00:05:16,159
Speaker 5: end there after a stint that Jeff and I both

100
00:05:16,200 --> 00:05:20,159
Speaker 5: did through their emerger and acquisition and corporate strategy group.

101
00:05:20,320 --> 00:05:24,320
Speaker 5: I pivoted to ventures, got hooked on that, and I

102
00:05:24,400 --> 00:05:27,000
Speaker 5: left Cargole in two thousand and nine, But since then

103
00:05:27,000 --> 00:05:29,440
Speaker 5: I've been in some sort of an ag tech oriented,

104
00:05:29,520 --> 00:05:32,240
Speaker 5: venture capital oriented type thing and nag across the array

105
00:05:32,279 --> 00:05:35,280
Speaker 5: of topics sub segments with an egg. Jeff and I

106
00:05:35,279 --> 00:05:36,840
Speaker 5: have kicked this off what about three and a half

107
00:05:36,880 --> 00:05:39,760
Speaker 5: four years ago now, And one thing I think that

108
00:05:39,839 --> 00:05:44,400
Speaker 5: helps this conversation today is sure we've probably touched through

109
00:05:44,440 --> 00:05:48,480
Speaker 5: students or through more direct relationships, almost four hundred farms

110
00:05:48,480 --> 00:05:51,640
Speaker 5: now in the US and Canada, so we definitely know

111
00:05:52,200 --> 00:05:55,880
Speaker 5: the vagaries of where this input situation falls in, who's

112
00:05:55,920 --> 00:05:59,840
Speaker 5: positioned and well or otherwise, and what's really going on

113
00:06:00,120 --> 00:06:01,280
Speaker 5: when it hits the farm gate.

114
00:06:01,560 --> 00:06:01,880
Speaker 4: Yeah.

115
00:06:01,880 --> 00:06:04,520
Speaker 2: So on that note, why don't you tell us where

116
00:06:04,560 --> 00:06:08,239
Speaker 2: we are in the sort of agricultural calendar at the moment,

117
00:06:08,320 --> 00:06:10,839
Speaker 2: Because one of the things we learned from our previous

118
00:06:10,880 --> 00:06:15,520
Speaker 2: fertilizer episode is that fertilizer prices are going up kind

119
00:06:15,520 --> 00:06:18,560
Speaker 2: of right when people need it most, which is the

120
00:06:18,600 --> 00:06:22,520
Speaker 2: spring planting season. But my understanding is some people would

121
00:06:22,520 --> 00:06:25,520
Speaker 2: be buying spot fertilizer right now, some people have already

122
00:06:25,960 --> 00:06:29,560
Speaker 2: got their supplies secured. And I'm also very curious about

123
00:06:29,600 --> 00:06:32,840
Speaker 2: where we stand in terms of planting decisions, whether people

124
00:06:32,920 --> 00:06:35,599
Speaker 2: are still making those right now, or whether or not

125
00:06:35,680 --> 00:06:38,479
Speaker 2: people have already decided what they're going to plant for

126
00:06:38,520 --> 00:06:38,800
Speaker 2: the year.

127
00:06:40,720 --> 00:06:42,520
Speaker 4: Yeah, I guess I'll this Jeff, and I'll take this

128
00:06:42,560 --> 00:06:44,960
Speaker 4: one on to start. So, when we're really talking about

129
00:06:44,960 --> 00:06:47,640
Speaker 4: a North American farmer here right towards the end of

130
00:06:47,680 --> 00:06:50,760
Speaker 4: the South American or South Southern hemisphere harvest, whether that's

131
00:06:50,960 --> 00:06:55,760
Speaker 4: generally Australia, Argentina, Brazil, you know, we've already started planting

132
00:06:55,880 --> 00:06:59,400
Speaker 4: corn in places like Texas, even into Mississippi. We have

133
00:06:59,400 --> 00:07:02,520
Speaker 4: clients that have already started and it was eight below

134
00:07:02,520 --> 00:07:05,320
Speaker 4: in Minneapolis and we're not even close here in the

135
00:07:05,440 --> 00:07:08,640
Speaker 4: Upper Midwest. So a lot of the certain amounts of

136
00:07:08,720 --> 00:07:11,600
Speaker 4: nitrogen actually is put down actually in the fall in

137
00:07:11,640 --> 00:07:14,480
Speaker 4: the northern tier where the ground freezes and things kind

138
00:07:14,480 --> 00:07:17,120
Speaker 4: of go into a stasis. For the winner. A fair amount,

139
00:07:17,200 --> 00:07:20,560
Speaker 4: and we're really really talking about nitrogen fertilizer here is

140
00:07:20,600 --> 00:07:23,320
Speaker 4: probably maybe the one that's giving the world the most

141
00:07:23,360 --> 00:07:26,600
Speaker 4: heartache at the moment. Some of it's pre bought, prepositioned.

142
00:07:27,160 --> 00:07:30,080
Speaker 4: I would say the vast majority of what it needs

143
00:07:30,120 --> 00:07:33,880
Speaker 4: to be used in the US crop is already either

144
00:07:34,080 --> 00:07:38,280
Speaker 4: here in warehouses or on its way because you have

145
00:07:38,320 --> 00:07:40,640
Speaker 4: to remember it's a long supply chain, and if we're

146
00:07:40,680 --> 00:07:44,160
Speaker 4: going to plant in earnest starting in early April into

147
00:07:44,400 --> 00:07:46,720
Speaker 4: what we would call the corn belt, that product already

148
00:07:46,760 --> 00:07:49,600
Speaker 4: has to be here. So you can see that in pricing,

149
00:07:50,120 --> 00:07:53,720
Speaker 4: the full call it replacement price of something like your

150
00:07:53,800 --> 00:07:58,040
Speaker 4: rea coming out of the air peninsular area is not

151
00:07:58,440 --> 00:08:01,440
Speaker 4: reflected in US values. So it's one of these you

152
00:08:01,520 --> 00:08:05,440
Speaker 4: generally as a trader with price replacement, but full replacement

153
00:08:05,520 --> 00:08:08,320
Speaker 4: is actually not coming through at the moment. I want

154
00:08:08,360 --> 00:08:10,360
Speaker 4: to think, I don't know the name. Some stone Cks

155
00:08:10,360 --> 00:08:12,440
Speaker 4: people have been putting that out on X kind of

156
00:08:12,480 --> 00:08:15,280
Speaker 4: keeping people upraised of what that is. So you're not

157
00:08:15,320 --> 00:08:18,120
Speaker 4: actually getting the full brunt because a lot of that

158
00:08:18,200 --> 00:08:20,120
Speaker 4: in the northern hemisphere is already here.

159
00:08:21,000 --> 00:08:24,760
Speaker 5: I was prepping for this and the University of Illinois

160
00:08:24,800 --> 00:08:27,080
Speaker 5: puts out a really good series of reports, I believe

161
00:08:27,160 --> 00:08:29,600
Speaker 5: under Farm Docs Daily I believe it's called. And the

162
00:08:29,640 --> 00:08:31,880
Speaker 5: figure they threw out, at least the one I saw,

163
00:08:32,360 --> 00:08:34,920
Speaker 5: what I believe was around seventy five percent of fertilizer

164
00:08:34,960 --> 00:08:38,040
Speaker 5: has already been purchased, okay plus so.

165
00:08:38,480 --> 00:08:41,720
Speaker 3: Okay, well that's I guess that that is relatively good

166
00:08:41,840 --> 00:08:44,280
Speaker 3: news that a lot of it's already been purchased, perhaps

167
00:08:44,360 --> 00:08:47,040
Speaker 3: before the spike. But we're going to talk obviously about

168
00:08:47,080 --> 00:08:50,200
Speaker 3: what conditions are like. We're recording this March seventeenth, twenty

169
00:08:50,240 --> 00:08:53,440
Speaker 3: twenty six. Well, let's talk about what conditions were like

170
00:08:53,640 --> 00:08:56,400
Speaker 3: February seventeenth, twenty twenty six, because at the end of

171
00:08:56,400 --> 00:08:59,800
Speaker 3: our last conversation several weeks ago, you're like, you know,

172
00:08:59,880 --> 00:09:02,920
Speaker 3: we should really talk about this squeeze that's already sort

173
00:09:02,960 --> 00:09:05,199
Speaker 3: of facing American farmers. So why don't you take us

174
00:09:05,240 --> 00:09:08,920
Speaker 3: back to February twenty twenty six or January twenty twenty

175
00:09:08,960 --> 00:09:12,320
Speaker 3: six and just talk about the sort of general macro

176
00:09:12,480 --> 00:09:16,200
Speaker 3: conditions that the people you're working with we're already facing

177
00:09:16,280 --> 00:09:18,000
Speaker 3: prior to the fertilizer spike.

178
00:09:18,920 --> 00:09:21,160
Speaker 4: So let's just take you back. So I want to

179
00:09:21,200 --> 00:09:24,200
Speaker 4: take your listeners to how farming works in the US.

180
00:09:24,280 --> 00:09:25,880
Speaker 4: We have a little bit of an insight that is

181
00:09:25,920 --> 00:09:28,560
Speaker 4: a little bit maybe they haven't seen. So what has

182
00:09:28,600 --> 00:09:31,680
Speaker 4: been happening and why you continue to hear from the

183
00:09:31,720 --> 00:09:34,880
Speaker 4: farm community about the squeeze. If you look at prices, right,

184
00:09:35,000 --> 00:09:36,520
Speaker 4: we sent you some price charts, I'm sure you'll be

185
00:09:36,559 --> 00:09:39,760
Speaker 4: able to put those in. We basically since twenty sixteen,

186
00:09:39,880 --> 00:09:43,120
Speaker 4: the futures prices have not changed. So imagine a business

187
00:09:43,160 --> 00:09:47,839
Speaker 4: since twenty sixteen where your output as prices have not changed. Then,

188
00:09:47,880 --> 00:09:49,800
Speaker 4: on the flip side, when you look at let's call

189
00:09:49,840 --> 00:09:53,439
Speaker 4: it inflation, land prices, I don't have. These exacts have

190
00:09:53,559 --> 00:09:57,439
Speaker 4: probably doubled, okay, right, Equipment prices are probably up forty percent,

191
00:09:57,960 --> 00:10:00,840
Speaker 4: the cost of living, think about things like health insurance,

192
00:10:01,679 --> 00:10:05,040
Speaker 4: all these things. Right, you would look at that massive

193
00:10:05,080 --> 00:10:07,920
Speaker 4: increase in prices and look at that and say, these

194
00:10:07,920 --> 00:10:11,280
Speaker 4: businesses have to be insolvent. So the first piece of

195
00:10:11,280 --> 00:10:13,600
Speaker 4: the puzzle I want to take your listener down is land.

196
00:10:13,679 --> 00:10:16,559
Speaker 4: So when you produce in the big markets, let's call

197
00:10:16,600 --> 00:10:21,160
Speaker 4: it corn, soybeans, cotton, softweet. And I'll apologize because I'm

198
00:10:21,160 --> 00:10:23,120
Speaker 4: not going to cover every crop here the kind of

199
00:10:23,120 --> 00:10:26,200
Speaker 4: that Midwest market. We'll just use Midwest corn. It is

200
00:10:26,240 --> 00:10:29,560
Speaker 4: a tremendous driver of land value. If you take a

201
00:10:29,720 --> 00:10:31,600
Speaker 4: cost to grow an acre of corn, and let's use

202
00:10:31,600 --> 00:10:34,040
Speaker 4: an example, it's one thousand dollars an acre to grow

203
00:10:34,080 --> 00:10:37,760
Speaker 4: the corn, and you're in central Illinois and you're on

204
00:10:37,800 --> 00:10:42,520
Speaker 4: an ideal parcel called a square section, nice flat, black

205
00:10:42,559 --> 00:10:45,560
Speaker 4: and square. The land rents probably going to be half

206
00:10:45,559 --> 00:10:49,480
Speaker 4: your costs, okay, And so obviously you can see that

207
00:10:49,760 --> 00:10:53,760
Speaker 4: tremendous inflation in land rent or the value of the land.

208
00:10:54,120 --> 00:10:56,320
Speaker 4: And a lot of land is rented, right and just

209
00:10:56,400 --> 00:10:59,720
Speaker 4: if you look at the capital constraints and the challenge

210
00:10:59,720 --> 00:11:02,520
Speaker 4: we're i mean as farmers with land and land rental

211
00:11:02,600 --> 00:11:06,520
Speaker 4: values is it's not trading basis. It's economic create value

212
00:11:06,559 --> 00:11:12,720
Speaker 4: creation anymore. It's trading like gold. Okay. So the investor

213
00:11:12,720 --> 00:11:15,960
Speaker 4: community has maybe pulled back a little bit. Land prices

214
00:11:16,000 --> 00:11:20,120
Speaker 4: are actually stable at a very high value today, but

215
00:11:20,280 --> 00:11:23,080
Speaker 4: it represents if you think about, yeah, fertilizer is going up,

216
00:11:24,000 --> 00:11:25,800
Speaker 4: it's actually in the last ten years, isn't the one

217
00:11:25,840 --> 00:11:28,880
Speaker 4: that's gone up as a percentage the most right? Land

218
00:11:28,920 --> 00:11:31,760
Speaker 4: by far. And when you get the promise that cap

219
00:11:31,840 --> 00:11:34,920
Speaker 4: rates are going to be two percent net and you're

220
00:11:34,920 --> 00:11:37,439
Speaker 4: going to get six percent a year, which has actually

221
00:11:37,520 --> 00:11:40,240
Speaker 4: has happened up until maybe the last twenty four months,

222
00:11:40,640 --> 00:11:44,440
Speaker 4: it's attracted a lot outside investors. It's not correlated very

223
00:11:44,480 --> 00:11:46,880
Speaker 4: well to you know, other out investments. So it provides

224
00:11:46,920 --> 00:11:49,839
Speaker 4: a nice portfolio effect to the thing. But it's gotten

225
00:11:49,840 --> 00:11:52,600
Speaker 4: to such levels right that on a cash flow basis,

226
00:11:52,600 --> 00:11:55,600
Speaker 4: it makes very little sense on the investment and land

227
00:11:55,640 --> 00:11:58,360
Speaker 4: you're banking that you know at two percent, you're really

228
00:11:58,440 --> 00:12:01,400
Speaker 4: banking that you're going to continue to get appreciation at

229
00:12:01,440 --> 00:12:04,960
Speaker 4: six percent forever. And that is actually running it, in

230
00:12:05,000 --> 00:12:08,040
Speaker 4: my opinion, the law of big numbers. So the other

231
00:12:08,080 --> 00:12:10,760
Speaker 4: thing that you need to understand that has driven land rent,

232
00:12:11,160 --> 00:12:13,640
Speaker 4: and I think you alluded to it around small farms,

233
00:12:14,320 --> 00:12:17,839
Speaker 4: is federal crop insurance. You may have heard about this, right,

234
00:12:17,840 --> 00:12:21,319
Speaker 4: but it's highly subsidized. And if you think about when

235
00:12:21,360 --> 00:12:23,200
Speaker 4: you look go out, you spend one thousand dollars an

236
00:12:23,200 --> 00:12:24,880
Speaker 4: acre to grow a crop, right, it would be seemed

237
00:12:24,920 --> 00:12:27,880
Speaker 4: to be quite risky. But if you can now, particularly

238
00:12:27,960 --> 00:12:31,840
Speaker 4: with some additional subsidies, you can ensure most of the

239
00:12:31,920 --> 00:12:36,439
Speaker 4: loss away through Federal crop insurance, which is highly subsidized.

240
00:12:36,880 --> 00:12:39,480
Speaker 4: One thing you're like, I do farm at scale in

241
00:12:39,559 --> 00:12:43,600
Speaker 4: my post cardio life, so very involved in this, and

242
00:12:43,960 --> 00:12:45,480
Speaker 4: think of it as a call option where all of

243
00:12:45,520 --> 00:12:47,559
Speaker 4: a sudden you've been able to hedge off the downside,

244
00:12:47,559 --> 00:12:51,080
Speaker 4: but you continue to run the upside for yourself. And

245
00:12:51,120 --> 00:12:55,120
Speaker 4: so what that's done is it's really stabilized land values.

246
00:12:56,000 --> 00:13:00,520
Speaker 4: And it's also made rents bid up to basically no

247
00:13:00,640 --> 00:13:04,079
Speaker 4: margin because they'll go the farmers will try to get bigger. Right,

248
00:13:04,120 --> 00:13:07,199
Speaker 4: we're looking for economies of scale and efficiency, and it

249
00:13:07,280 --> 00:13:09,840
Speaker 4: runs like a call option. If you graft it out right,

250
00:13:09,880 --> 00:13:12,760
Speaker 4: you lose the downside and you have this hockey stick

251
00:13:12,920 --> 00:13:16,200
Speaker 4: effect to the upside. So that has driven land rends

252
00:13:16,240 --> 00:13:20,200
Speaker 4: extremely high and a lot of places, so you're really

253
00:13:20,200 --> 00:13:23,000
Speaker 4: getting a lot of pressure from your number one cost,

254
00:13:23,040 --> 00:13:27,360
Speaker 4: which is land price. Number two generally be fertilizer. But remember,

255
00:13:27,440 --> 00:13:30,160
Speaker 4: as a percentage, if you've bid the ground up, and

256
00:13:30,160 --> 00:13:31,839
Speaker 4: this is probably why you're getting a lot. If you've

257
00:13:31,840 --> 00:13:34,559
Speaker 4: bid the ground up to a zero margin, and then

258
00:13:34,559 --> 00:13:37,320
Speaker 4: all of a sudden you have a shock to the

259
00:13:37,320 --> 00:13:41,560
Speaker 4: fertilizer system. Now your theorem medical margin that was basically

260
00:13:41,559 --> 00:13:44,839
Speaker 4: you bid to zero to gain scale, and now you're

261
00:13:44,840 --> 00:13:49,720
Speaker 4: one hundred dollars an acre negative, right, And then you

262
00:13:49,720 --> 00:13:52,800
Speaker 4: push that through. When you farm a thousand acres, you've

263
00:13:52,800 --> 00:13:55,040
Speaker 4: lost one hundred thousand dollars. You farm two hundred thousand,

264
00:13:55,080 --> 00:13:56,959
Speaker 4: two hundred acres, and it just keeps them well. It

265
00:13:56,960 --> 00:13:59,640
Speaker 4: gets to be big numbers because the farms have gotten big,

266
00:14:00,440 --> 00:14:02,400
Speaker 4: and so that's where you really when you get a

267
00:14:02,480 --> 00:14:06,240
Speaker 4: shock like fertilizer shock, when you're late in the system. Right,

268
00:14:06,280 --> 00:14:10,040
Speaker 4: you've already agreed on land rents, you've agreed on basically

269
00:14:10,080 --> 00:14:12,920
Speaker 4: most of your input costs are locked down at this point,

270
00:14:13,160 --> 00:14:15,199
Speaker 4: and all of a sudden you don't have everything covered.

271
00:14:15,679 --> 00:14:19,080
Speaker 4: It puts you into negative pretty quick, and so margins

272
00:14:19,120 --> 00:14:22,360
Speaker 4: are very very tight. And in fact, you've seen some

273
00:14:22,400 --> 00:14:25,160
Speaker 4: of these various government payments that have been pushed through.

274
00:14:25,760 --> 00:14:28,000
Speaker 4: A lot of those are going straight through the system.

275
00:14:28,120 --> 00:14:30,160
Speaker 4: So you think about the farmer, right, he's using that

276
00:14:30,280 --> 00:14:33,520
Speaker 4: money he or she actually, I should say, to pay

277
00:14:33,560 --> 00:14:36,880
Speaker 4: off various pay the land rent, or make the payment

278
00:14:36,920 --> 00:14:39,000
Speaker 4: on equipment or things like that. That money is getting

279
00:14:39,000 --> 00:14:41,160
Speaker 4: passed through. That's why sometimes you hear the farmers, you say,

280
00:14:41,160 --> 00:14:43,360
Speaker 4: they complain all the time, like I don't even get

281
00:14:43,360 --> 00:14:46,360
Speaker 4: the benefit of this, you know, bridge payment or whatever

282
00:14:46,400 --> 00:14:49,680
Speaker 4: the latest name is. It's because it's passing straight through

283
00:14:49,720 --> 00:14:52,360
Speaker 4: the system. Which that's why they grumble that. You know,

284
00:14:52,400 --> 00:14:54,920
Speaker 4: it all goes to the various egg co and John

285
00:14:55,000 --> 00:14:57,720
Speaker 4: Deere and Nutrient and some of these companies that people

286
00:14:57,800 --> 00:15:01,000
Speaker 4: are looking at as investment becomes.

287
00:15:00,800 --> 00:15:04,120
Speaker 5: Sort of a hyper channel the monetary inflation. This last

288
00:15:04,120 --> 00:15:08,440
Speaker 5: mechanism that Jeff described, because that money basically passes through

289
00:15:08,680 --> 00:15:10,960
Speaker 5: the all of the producer and then ping pongs in

290
00:15:11,000 --> 00:15:12,160
Speaker 5: the system on the inputs on it.

291
00:15:28,000 --> 00:15:30,480
Speaker 2: Say a little bit more about land rents, And the

292
00:15:30,520 --> 00:15:33,320
Speaker 2: reason I ask is because I read I found a

293
00:15:33,400 --> 00:15:36,240
Speaker 2: random book in a used bookstore called Trees, Why Do

294
00:15:36,240 --> 00:15:39,160
Speaker 2: You Wait? And it was like an anthropological study of

295
00:15:39,320 --> 00:15:42,080
Speaker 2: two towns, two farming towns. I think they were actually

296
00:15:42,120 --> 00:15:45,120
Speaker 2: in North Dakota, both of them in the late nineteen eighties,

297
00:15:45,680 --> 00:15:48,360
Speaker 2: and so a lot of it is about how farmers

298
00:15:48,360 --> 00:15:51,800
Speaker 2: make individual decisions. And so one thing I'm very curious

299
00:15:51,800 --> 00:15:55,320
Speaker 2: about is the factors going into whether a farmer can

300
00:15:55,360 --> 00:15:59,880
Speaker 2: outright own the land versus rent the land, because certainly

301
00:16:00,040 --> 00:16:02,920
Speaker 2: in the nineteen eighties, in these two small North Dakota towns,

302
00:16:03,160 --> 00:16:06,160
Speaker 2: there's a lot of grumbling about the landowners themselves, and

303
00:16:06,200 --> 00:16:07,800
Speaker 2: I think a lot of people in the towns were

304
00:16:07,880 --> 00:16:11,400
Speaker 2: upset that they would rent land from usually older people

305
00:16:11,440 --> 00:16:14,400
Speaker 2: who would then leave the town and go to Florida

306
00:16:14,520 --> 00:16:18,560
Speaker 2: in the winter and just charge an extraordinarily high amount

307
00:16:18,640 --> 00:16:22,480
Speaker 2: for the right to farm. That particular piece of acreage.

308
00:16:22,560 --> 00:16:24,640
Speaker 2: So I'm very curious what are the factors that go

309
00:16:24,720 --> 00:16:27,880
Speaker 2: into whether a farmer ends up owning or renting.

310
00:16:28,400 --> 00:16:31,920
Speaker 4: So in today's values, right, farmers generally that are in

311
00:16:31,960 --> 00:16:34,320
Speaker 4: the business own a mixture of They have some own

312
00:16:34,400 --> 00:16:38,080
Speaker 4: land and some rented land, and they basically will leverage

313
00:16:38,400 --> 00:16:41,520
Speaker 4: the own land or look at the average kind of

314
00:16:41,640 --> 00:16:45,880
Speaker 4: land cost and they'll buy strategic pieces. In today's market,

315
00:16:45,920 --> 00:16:48,240
Speaker 4: the piece across the fence, right, the one that they've

316
00:16:48,240 --> 00:16:50,040
Speaker 4: watched for years and years, and so you see a

317
00:16:50,040 --> 00:16:51,760
Speaker 4: lot of that. And of course we also have an

318
00:16:51,800 --> 00:16:55,160
Speaker 4: investor community, and we also have a ten to thirty

319
00:16:55,160 --> 00:16:59,360
Speaker 4: one exchange community. All these solar farms and data centers

320
00:16:59,400 --> 00:17:03,600
Speaker 4: are bringing massive amounts of capital back into land, and

321
00:17:03,680 --> 00:17:06,360
Speaker 4: it's really I mean, we have personal friends that are

322
00:17:06,760 --> 00:17:10,120
Speaker 4: being bought out for development. We watched farms trade for

323
00:17:10,480 --> 00:17:13,040
Speaker 4: solar and so you know when they've traded tremendous values

324
00:17:13,080 --> 00:17:15,560
Speaker 4: and the farmers like to rotate that back, that capital

325
00:17:15,680 --> 00:17:18,399
Speaker 4: back in. But when you look at the returns for

326
00:17:18,600 --> 00:17:21,359
Speaker 4: very prime farmland, and I'll be light on this, and

327
00:17:21,800 --> 00:17:25,800
Speaker 4: you're going to pay fifteen thousand dollars an acre Iowa Illinois,

328
00:17:25,840 --> 00:17:28,800
Speaker 4: and I'll probably be a little bit light basis today's values,

329
00:17:28,840 --> 00:17:32,200
Speaker 4: but for easy figuring. So if you want ten percent

330
00:17:32,760 --> 00:17:34,320
Speaker 4: cap rate, you have to have a land round of

331
00:17:34,359 --> 00:17:37,959
Speaker 4: fifteen hundred dollars, right, And that's never going to work, right,

332
00:17:38,000 --> 00:17:40,879
Speaker 4: That's going to be more than the gross revenue. So

333
00:17:41,000 --> 00:17:43,200
Speaker 4: you end up with land rents that have been pushed

334
00:17:43,440 --> 00:17:45,840
Speaker 4: as high as they can stand to this kind of

335
00:17:45,880 --> 00:17:48,360
Speaker 4: I'm using this example of this prime real estate at

336
00:17:48,400 --> 00:17:51,280
Speaker 4: five hundred dollars, this very square, very efficient piece. Not

337
00:17:51,440 --> 00:17:54,400
Speaker 4: every piece of land would garner even garner that kind

338
00:17:54,440 --> 00:17:57,320
Speaker 4: of rent. So it's very hard. You can't make the

339
00:17:57,359 --> 00:18:00,280
Speaker 4: thing cash flow on its own and today's values, I said,

340
00:18:00,280 --> 00:18:03,600
Speaker 4: it has divorced itself from its economic So then you're

341
00:18:03,640 --> 00:18:06,960
Speaker 4: back to renting, right, and then you're in that game

342
00:18:07,040 --> 00:18:11,480
Speaker 4: of securing land based it secures across efficient equipment scale,

343
00:18:12,040 --> 00:18:14,080
Speaker 4: and so you're back to you know, renting at and

344
00:18:14,160 --> 00:18:16,520
Speaker 4: quite frankly, we do see this all the time where

345
00:18:16,960 --> 00:18:20,040
Speaker 4: rents have gotten so high. If grandma had one hundred

346
00:18:20,040 --> 00:18:22,120
Speaker 4: acres that you know, all of a sudden she can

347
00:18:22,119 --> 00:18:24,680
Speaker 4: rent out for five hundred dollars an acre, right, it's

348
00:18:24,720 --> 00:18:25,800
Speaker 4: fifty thousand dollars.

349
00:18:26,080 --> 00:18:26,640
Speaker 2: Yeah, not bad.

350
00:18:26,720 --> 00:18:28,800
Speaker 4: Say it's two hundred acres, right, not bad. Right, head

351
00:18:28,800 --> 00:18:32,280
Speaker 4: to a low tax stadium, yeah, and enjoy some life.

352
00:18:32,320 --> 00:18:34,919
Speaker 4: So you get a lot. It's very hard to justify

353
00:18:34,960 --> 00:18:37,360
Speaker 4: as a farm buying land, but we still do buy

354
00:18:37,359 --> 00:18:41,000
Speaker 4: some right strategic pieces I think is what generally in

355
00:18:41,040 --> 00:18:44,160
Speaker 4: today's environment where you get. But there are all kinds

356
00:18:44,200 --> 00:18:46,919
Speaker 4: of actors I think might want to comment here, but

357
00:18:47,119 --> 00:18:48,679
Speaker 4: we often hear they say you're not going to make

358
00:18:48,720 --> 00:18:52,400
Speaker 4: any more land, right, and I really don't we get

359
00:18:52,400 --> 00:18:54,760
Speaker 4: into this thing. I don't. That's not really true.

360
00:18:54,840 --> 00:18:55,080
Speaker 1: Right.

361
00:18:55,680 --> 00:18:59,199
Speaker 4: The Brazilians are adding two million acres a year, maybe

362
00:18:59,200 --> 00:19:03,639
Speaker 4: more the Indonesians and can add palm plantations at a

363
00:19:03,640 --> 00:19:08,000
Speaker 4: tremendous rate there. Obviously there's lots of potential in Africa

364
00:19:08,080 --> 00:19:11,919
Speaker 4: still to be unlocked. And then the technology and efficiency

365
00:19:11,960 --> 00:19:16,080
Speaker 4: per acre has just exploded. And that's actually if you

366
00:19:16,119 --> 00:19:18,040
Speaker 4: look at that chart and say, Jeff, you started saying

367
00:19:18,040 --> 00:19:21,240
Speaker 4: the prices aren't any higher, you have this huge inflationary fact.

368
00:19:21,320 --> 00:19:24,040
Speaker 4: How are farmers surviving? And the answer is we've had

369
00:19:24,080 --> 00:19:29,000
Speaker 4: tremendous productivity gains in farming, particularly North American farming. The

370
00:19:29,080 --> 00:19:32,159
Speaker 4: country quietly should be very proud of its aag sector.

371
00:19:32,640 --> 00:19:36,800
Speaker 4: It's done just it quickly adopts things. It drives technology

372
00:19:37,440 --> 00:19:41,200
Speaker 4: adoption at a tremendous rate. That's lowering its unit costs.

373
00:19:41,200 --> 00:19:43,400
Speaker 4: And that's how we've been surviving for the last ten years.

374
00:19:43,520 --> 00:19:47,040
Speaker 4: If we have lower ever squeeze by inflation, you've got

375
00:19:47,080 --> 00:19:48,400
Speaker 4: to survive in productivity.

376
00:19:49,000 --> 00:19:51,760
Speaker 5: Mike, No, Jeff nailed it.

377
00:19:51,920 --> 00:19:52,119
Speaker 4: You know.

378
00:19:52,160 --> 00:19:55,679
Speaker 5: If you look at the charts, the blips aside, say

379
00:19:56,200 --> 00:19:59,399
Speaker 5: around the twenty one drought in South America and then

380
00:19:59,440 --> 00:20:02,720
Speaker 5: the twenty two issue with the Ukrainian war, if you

381
00:20:02,760 --> 00:20:05,439
Speaker 5: look at it averaged out or even snapshot from ten

382
00:20:05,520 --> 00:20:08,440
Speaker 5: years ago to today, we're almost dead on the same numbers.

383
00:20:08,680 --> 00:20:12,280
Speaker 5: So it's being made up via efficiency gains in a

384
00:20:12,320 --> 00:20:15,720
Speaker 5: significant manner. But the fact of the matter, though is,

385
00:20:16,080 --> 00:20:19,880
Speaker 5: and I'm sure in your world you've heard this many times,

386
00:20:20,160 --> 00:20:24,120
Speaker 5: the real rate of the inflation adjusted real rate of

387
00:20:24,680 --> 00:20:28,359
Speaker 5: commodities over time will fall. They do if you chart.

388
00:20:28,440 --> 00:20:30,360
Speaker 5: I think the best way to do this is chart

389
00:20:30,400 --> 00:20:33,720
Speaker 5: gold against anything. And you can even pick some things

390
00:20:33,760 --> 00:20:35,879
Speaker 5: that have maybe been hotter in the moment, like cocoa

391
00:20:36,000 --> 00:20:39,159
Speaker 5: last year or cattle recently. And if you do a

392
00:20:39,200 --> 00:20:43,960
Speaker 5: long term chart of any basically priced taking very elastic

393
00:20:44,640 --> 00:20:47,880
Speaker 5: supply response commodity, they will all over time, and then

394
00:20:47,920 --> 00:20:50,120
Speaker 5: if you plot it against gold, it's a stunning chart.

395
00:20:50,280 --> 00:20:51,000
Speaker 1: Yeah.

396
00:20:51,080 --> 00:20:54,400
Speaker 3: To be fair, anything these days looks pretty bad relative

397
00:20:54,440 --> 00:20:56,760
Speaker 3: to gold. But I certainly take the point, and to

398
00:20:56,800 --> 00:21:01,000
Speaker 3: some extent that is the definition of grass, right, that

399
00:21:01,240 --> 00:21:04,480
Speaker 3: all of you know, grains and proteins and stuff get

400
00:21:04,560 --> 00:21:08,960
Speaker 3: cheaper over time as we become a wealthier society. But

401
00:21:09,320 --> 00:21:12,199
Speaker 3: I certainly take that point. Talk to us about trade

402
00:21:12,560 --> 00:21:14,919
Speaker 3: and the last year, because I could think of like

403
00:21:15,000 --> 00:21:17,639
Speaker 3: a few different dimensions. First of all, you always have

404
00:21:17,680 --> 00:21:19,200
Speaker 3: the President talk about it, We're going to get a

405
00:21:19,200 --> 00:21:22,160
Speaker 3: good deal for our soybean farmers, so I'd never quite

406
00:21:22,200 --> 00:21:25,719
Speaker 3: sure where that is. Second of all, though I imagine

407
00:21:25,880 --> 00:21:30,200
Speaker 3: that you know, especially certain just you mentioned equipment costs

408
00:21:30,240 --> 00:21:33,919
Speaker 3: and tariffs on certain goods, I imagine has created a squeeze.

409
00:21:33,960 --> 00:21:36,800
Speaker 3: Talk to us about the last year and how changing

410
00:21:36,880 --> 00:21:39,399
Speaker 3: trade patterns have affected the farmers that you work with.

411
00:21:41,520 --> 00:21:43,760
Speaker 4: Yeah, So the first thing that hit us, right obviously

412
00:21:43,920 --> 00:21:47,240
Speaker 4: was the trade challenge with China, right, largest buyer of

413
00:21:47,280 --> 00:21:53,040
Speaker 4: soybeans in the world, and that obviously pushes supply back

414
00:21:53,080 --> 00:21:56,399
Speaker 4: into the US, and the Brazilians actually get a different signal,

415
00:21:56,440 --> 00:21:59,600
Speaker 4: economic signal, because prices actually rise in Brazil right up

416
00:21:59,720 --> 00:22:02,880
Speaker 4: under neath the tariff barrier, up right just below where

417
00:22:02,880 --> 00:22:05,800
Speaker 4: the US value is, and so you get a signal

418
00:22:05,840 --> 00:22:10,120
Speaker 4: into the Brazilian market to expand. Actually, and the other

419
00:22:10,160 --> 00:22:12,919
Speaker 4: thing I have a very concern about in that is,

420
00:22:13,240 --> 00:22:15,560
Speaker 4: as we've worked through it, we have sold they the

421
00:22:15,640 --> 00:22:18,560
Speaker 4: Chinese have bought just enough US beans to keep the

422
00:22:18,560 --> 00:22:21,480
Speaker 4: Brazilian the honest that's it, and that's it.

423
00:22:21,720 --> 00:22:24,160
Speaker 3: Can you explain, sorry, can you clarify what that means?

424
00:22:25,119 --> 00:22:27,320
Speaker 4: So what they do is because the Brazilians say, hey,

425
00:22:27,359 --> 00:22:30,000
Speaker 4: you're not going to buy any US beans period, right,

426
00:22:30,040 --> 00:22:32,280
Speaker 4: their prices just keep going higher and higher and higher,

427
00:22:32,280 --> 00:22:34,280
Speaker 4: wall all of a sudden. I think the day that

428
00:22:34,359 --> 00:22:37,560
Speaker 4: they did finally buy a few Brazilian cargoes, I think

429
00:22:37,680 --> 00:22:41,080
Speaker 4: the Brazilian beans probably lost a dollar bushel that US

430
00:22:41,119 --> 00:22:45,639
Speaker 4: cargos bought the US cargoes, and it sends a signal

431
00:22:45,720 --> 00:22:48,520
Speaker 4: so that the US, the brazil Brazilian beans just can't

432
00:22:48,560 --> 00:22:51,720
Speaker 4: get away too far away. The Chinese expectively have used

433
00:22:51,760 --> 00:22:53,880
Speaker 4: US as I see what you're saying as a lever

434
00:22:54,160 --> 00:22:57,240
Speaker 4: to keep that going. But so you got expansion. Brazil

435
00:22:57,280 --> 00:23:00,280
Speaker 4: and of course Argentina under the new regime doing much

436
00:23:00,320 --> 00:23:02,720
Speaker 4: better as far as and you can see they had

437
00:23:02,720 --> 00:23:05,880
Speaker 4: an all time record wheat crop there, and so you've

438
00:23:05,880 --> 00:23:08,760
Speaker 4: got two competitors that are doing relatively well. The other

439
00:23:08,800 --> 00:23:12,000
Speaker 4: concern I have with this is trying not to be political,

440
00:23:12,160 --> 00:23:16,719
Speaker 4: is back when we embargoed the Russians, it sent a

441
00:23:16,760 --> 00:23:19,320
Speaker 4: signal to the world's the world community that we were

442
00:23:19,359 --> 00:23:20,640
Speaker 4: not a stable supplier.

443
00:23:21,960 --> 00:23:24,359
Speaker 5: And the Soviets in the.

444
00:23:27,160 --> 00:23:31,000
Speaker 4: Talking we're gonna go way back.

445
00:23:31,280 --> 00:23:33,639
Speaker 3: Good, good, that's good. We love we love history. On

446
00:23:33,680 --> 00:23:38,800
Speaker 3: the podcast Talk to Us the edition, Yeah, tell.

447
00:23:38,760 --> 00:23:41,680
Speaker 4: Us about that. Yeah. So when that happened, right, that

448
00:23:41,800 --> 00:23:47,280
Speaker 4: caused a flood of capital to pour in to Brazil Argentina, right,

449
00:23:47,440 --> 00:23:50,400
Speaker 4: particularly the Japanese which were the large buyer, global buyer

450
00:23:50,400 --> 00:23:53,040
Speaker 4: and the global trade back then. But others poured money

451
00:23:53,080 --> 00:23:55,960
Speaker 4: into infrastructure to get an alternative. And you would do

452
00:23:56,000 --> 00:23:58,240
Speaker 4: the same thing, right if you were you had one

453
00:23:58,240 --> 00:23:59,760
Speaker 4: grocery store that was supplied and you and all of

454
00:23:59,760 --> 00:24:01,359
Speaker 4: a sudd and they said either do what I want

455
00:24:01,520 --> 00:24:05,159
Speaker 4: or you'd go find a secondary fire. And that is

456
00:24:05,200 --> 00:24:09,879
Speaker 4: absolutely happening. Boring capital is pouring into an alternative Marcus.

457
00:24:09,960 --> 00:24:14,480
Speaker 4: So it's a long term challenge in what this trade

458
00:24:14,480 --> 00:24:15,200
Speaker 4: dispute has done.

459
00:24:15,359 --> 00:24:19,240
Speaker 3: That's my conser So you're saying that history is repeating

460
00:24:19,840 --> 00:24:24,200
Speaker 3: in the sense that the proximate Okay, there's a bunch

461
00:24:24,280 --> 00:24:27,720
Speaker 3: of trade barriers, etc. Going on, and so the move

462
00:24:28,040 --> 00:24:33,000
Speaker 3: is internationally just invest more in non American farms to

463
00:24:33,320 --> 00:24:36,920
Speaker 3: expand that supply, and so you see more, say Chinese

464
00:24:37,000 --> 00:24:41,560
Speaker 3: investment in Brazil and Chinese investment elsewhere, so that they

465
00:24:41,680 --> 00:24:45,919
Speaker 3: just have alternate various buyers of alternate sources outside.

466
00:24:45,560 --> 00:24:46,480
Speaker 2: Of the US.

467
00:24:47,040 --> 00:24:49,040
Speaker 4: Yeah, that is absolutely got it.

468
00:24:49,560 --> 00:24:52,080
Speaker 2: I know you said you didn't want to get too political,

469
00:24:52,400 --> 00:24:54,280
Speaker 2: but I do feel like I have to ask. We

470
00:24:54,359 --> 00:24:59,080
Speaker 2: know that farmers in America overwhelmingly supported Trump two point zero,

471
00:24:59,240 --> 00:25:02,159
Speaker 2: even though they had already had the experience of Trump

472
00:25:02,200 --> 00:25:05,880
Speaker 2: one point oh, which also involved trade restrictions which from

473
00:25:05,920 --> 00:25:09,920
Speaker 2: what I remember, were harmful to things like soybean prices.

474
00:25:10,400 --> 00:25:16,800
Speaker 2: What's the rationale for farmers seemingly being hurt by trade

475
00:25:16,840 --> 00:25:22,200
Speaker 2: restrictions and tariffs but still overwhelmingly supporting a president who

476
00:25:22,440 --> 00:25:24,440
Speaker 2: loves tariffs in his own words?

477
00:25:25,760 --> 00:25:27,840
Speaker 4: Again, I can't speak for every farmer, and there's a

478
00:25:28,040 --> 00:25:31,080
Speaker 4: very wide but I do think that in the previous administration,

479
00:25:31,200 --> 00:25:35,680
Speaker 4: there were i'll call them bridge payments. Okay, the generally

480
00:25:35,760 --> 00:25:38,240
Speaker 4: made up a lot of that gap, a lot of

481
00:25:38,240 --> 00:25:42,920
Speaker 4: that other pieces of a puzzle on taxes. We've had

482
00:25:43,000 --> 00:25:48,200
Speaker 4: tremendous challenges with regulation in farming that was promised right

483
00:25:48,240 --> 00:25:51,960
Speaker 4: and there are you know, whether that's particularly things around emissions,

484
00:25:53,040 --> 00:25:57,199
Speaker 4: water regulation, some things that became very burdensome. And so

485
00:25:57,240 --> 00:26:00,720
Speaker 4: there were a lot of reasons that not every farm.

486
00:26:00,760 --> 00:26:02,760
Speaker 4: We have farms on both sides here, but a lot

487
00:26:02,760 --> 00:26:06,080
Speaker 4: of farms did support the platform that Trump ran on

488
00:26:06,280 --> 00:26:09,120
Speaker 4: in the previous election. There are a number of other

489
00:26:09,240 --> 00:26:12,159
Speaker 4: things besides just the tariffs. They also the sense of

490
00:26:12,280 --> 00:26:16,320
Speaker 4: fair trade, access to markets. We import a lot of

491
00:26:16,320 --> 00:26:18,600
Speaker 4: things from Canada, but we can't export a limber of

492
00:26:18,640 --> 00:26:21,520
Speaker 4: things to Canada. Milk is one of the dairy products.

493
00:26:21,560 --> 00:26:24,640
Speaker 4: I think we're focused on grain, but there are significant

494
00:26:24,760 --> 00:26:27,760
Speaker 4: capital investments in this country and everything on the livestock

495
00:26:28,040 --> 00:26:32,320
Speaker 4: and protein side out there also that we haven't even broached.

496
00:26:33,280 --> 00:26:37,240
Speaker 5: And another example the EU. Obviously, the EU has a

497
00:26:37,280 --> 00:26:40,800
Speaker 5: protected grain market like no place on Earth. So one

498
00:26:40,800 --> 00:26:44,399
Speaker 5: thing I can say, if given the opportunity, ninety nine

499
00:26:44,840 --> 00:26:47,840
Speaker 5: plus percent of row crop producers in the United States

500
00:26:47,840 --> 00:26:51,040
Speaker 5: would love nothing more than to just remove all trade

501
00:26:51,040 --> 00:26:54,800
Speaker 5: regulation or trade barriers shall we say tariffs or otherwise

502
00:26:55,240 --> 00:26:58,000
Speaker 5: to global grain production, because they would do extremely well

503
00:26:58,000 --> 00:26:58,920
Speaker 5: in an environment like that.

504
00:26:59,720 --> 00:27:03,200
Speaker 4: Yeah, American farmers are playing to the rules. They didn't

505
00:27:03,200 --> 00:27:05,000
Speaker 4: get to say it the rules. They'll play to the

506
00:27:05,040 --> 00:27:07,560
Speaker 4: rules that they're given. But if you let them loose,

507
00:27:08,119 --> 00:27:12,320
Speaker 4: they are tremendously productive. We have also the gifts that

508
00:27:12,400 --> 00:27:17,040
Speaker 4: this country has with waterways, transportation, rule of law is

509
00:27:17,200 --> 00:27:21,040
Speaker 4: very important, private property ownership rules, things that make the

510
00:27:21,200 --> 00:27:26,000
Speaker 4: US a little less the Canadian producer extremely competitive in

511
00:27:26,040 --> 00:27:28,600
Speaker 4: the world. Ever more, we continue to get more and

512
00:27:28,600 --> 00:27:32,520
Speaker 4: more government intervention, and we've been through it before and

513
00:27:32,600 --> 00:27:33,920
Speaker 4: we'll deal with it as it comes.

514
00:27:34,680 --> 00:27:37,879
Speaker 3: What about are labor costs a factor or is it

515
00:27:38,000 --> 00:27:41,520
Speaker 3: mostly the type of crops that you deal with? Is

516
00:27:41,560 --> 00:27:46,159
Speaker 3: it's so mechanized that labor is just not a particularly

517
00:27:46,359 --> 00:27:49,679
Speaker 3: important dial or factor of the cost.

518
00:27:51,040 --> 00:27:54,520
Speaker 4: In that example, thousand dollars an acre cost, Labor is

519
00:27:54,520 --> 00:27:58,360
Speaker 4: a tiny amount of that. Ingrain farming has become extremely efficient,

520
00:27:58,800 --> 00:28:02,800
Speaker 4: but in all the crops that you think around vegetable farming, right,

521
00:28:02,920 --> 00:28:06,600
Speaker 4: things that are very labor intense. It's absolutely an issue, right,

522
00:28:06,680 --> 00:28:10,879
Speaker 4: and immigration robotics, although you see more and more right,

523
00:28:11,000 --> 00:28:14,120
Speaker 4: is labor costs rise? Yeah, it's a huge issue in

524
00:28:14,200 --> 00:28:17,359
Speaker 4: certain crops and quite frankly, crops that consumers are more

525
00:28:17,560 --> 00:28:20,000
Speaker 4: familiar with day to day. Right. A consumer doesn't eat

526
00:28:20,000 --> 00:28:23,040
Speaker 4: a soybean or crunch on a hard piece of corn, right,

527
00:28:23,119 --> 00:28:27,880
Speaker 4: But when it becomes strawberries, lettuce, carrots, right, it's still

528
00:28:27,920 --> 00:28:29,879
Speaker 4: a very labor intensive operation.

529
00:28:30,280 --> 00:28:33,160
Speaker 5: And the livestock side is another good example I think

530
00:28:33,200 --> 00:28:36,320
Speaker 5: where labor costs are squeezing and certainly part of the

531
00:28:36,760 --> 00:28:38,040
Speaker 5: immigration issue too.

532
00:28:39,080 --> 00:28:41,640
Speaker 3: My son likes raw corn, by the way, I guess

533
00:28:41,640 --> 00:28:44,040
Speaker 3: he doesn't raw corn. Yeah, well he does directly off

534
00:28:44,040 --> 00:28:47,240
Speaker 3: the cop Yeah, yeah, he does. Just fresh corn, pre cooked.

535
00:28:47,280 --> 00:28:50,720
Speaker 3: I mean it's not the fried corn corn sweet corn, yeah,

536
00:28:50,800 --> 00:28:51,760
Speaker 3: sweet o sweet corn.

537
00:28:51,760 --> 00:28:54,719
Speaker 2: Okay, Yeah, it's very confused.

538
00:28:54,720 --> 00:28:58,200
Speaker 5: You wouldn't want to bite into a fully cured fifteen

539
00:28:58,240 --> 00:28:59,520
Speaker 5: percent moisture.

540
00:28:59,160 --> 00:29:01,520
Speaker 3: Absolutely, he would not being today, But Tracy, have I

541
00:29:02,000 --> 00:29:03,600
Speaker 3: I've probably told this story. Did I ever tell you

542
00:29:03,600 --> 00:29:06,720
Speaker 3: about the time I talked to the palm oil magnate

543
00:29:06,840 --> 00:29:10,920
Speaker 3: at the top at the night club tower. There's really

544
00:29:11,000 --> 00:29:14,320
Speaker 3: noisy nightclub at the top of the Petronas towers in Kualampoor,

545
00:29:14,960 --> 00:29:17,920
Speaker 3: and I met there, Oh you have, and there's this

546
00:29:17,960 --> 00:29:21,360
Speaker 3: palm oil magnate. It was super loud in there, and

547
00:29:21,360 --> 00:29:23,080
Speaker 3: he was like, Joe, let me tell you why palm

548
00:29:23,120 --> 00:29:25,160
Speaker 3: oil is just the best business in the world. It

549
00:29:25,200 --> 00:29:27,720
Speaker 3: goes into everything. It goes into women's lipstick, it goes

550
00:29:27,760 --> 00:29:30,240
Speaker 3: into this, it goes into that, and then this is

551
00:29:30,320 --> 00:29:33,080
Speaker 3: like the key thing relevant. He's like, because of like

552
00:29:33,120 --> 00:29:36,040
Speaker 3: the nature of the trees. At least as of the time,

553
00:29:36,240 --> 00:29:39,520
Speaker 3: it was very difficult to mechanize and so unlike say

554
00:29:41,040 --> 00:29:43,800
Speaker 3: there was always going to because labor is going it

555
00:29:43,920 --> 00:29:46,120
Speaker 3: was such an important part of picking palm oils, like

556
00:29:46,320 --> 00:29:51,200
Speaker 3: Malaysia will always have this cost advantage over richer countries.

557
00:29:51,760 --> 00:29:53,480
Speaker 3: And so yes, he was very he was.

558
00:29:53,720 --> 00:29:55,240
Speaker 2: But now they're talking about mechanized ways.

559
00:29:55,400 --> 00:29:57,760
Speaker 3: Yeah, I think I think they are making it more

560
00:29:57,800 --> 00:30:00,080
Speaker 3: mechanized and robots will eventually come for it. But at

561
00:30:00,120 --> 00:30:01,960
Speaker 3: least at the time he was really giving me the

562
00:30:01,960 --> 00:30:05,080
Speaker 3: hard sell on palm oil is the future.

563
00:30:05,200 --> 00:30:07,520
Speaker 2: And yet you came back from your trip without having,

564
00:30:07,920 --> 00:30:10,200
Speaker 2: but yeah, I did not buy all the Yeah.

565
00:30:10,240 --> 00:30:10,640
Speaker 4: Okay.

566
00:30:10,840 --> 00:30:12,800
Speaker 2: So one of the things I wanted to ask is

567
00:30:12,880 --> 00:30:15,640
Speaker 2: how farmers actually make the decision on what they're going

568
00:30:15,680 --> 00:30:17,840
Speaker 2: to plant each year. I'm sure some of it is

569
00:30:17,920 --> 00:30:20,720
Speaker 2: just based on their own experience and the type of

570
00:30:20,800 --> 00:30:23,280
Speaker 2: land they have, but it also seems like there are

571
00:30:23,280 --> 00:30:26,200
Speaker 2: all these other factors that they would be considering future

572
00:30:26,240 --> 00:30:28,880
Speaker 2: prices that they could get for things, or input costs.

573
00:30:28,920 --> 00:30:33,520
Speaker 2: Maybe certain crops, for instance, consume or need more nitrogen,

574
00:30:33,600 --> 00:30:36,520
Speaker 2: which is now going up in price. So what are

575
00:30:36,600 --> 00:30:40,080
Speaker 2: all the individual factors that go into making those decisions

576
00:30:40,120 --> 00:30:40,560
Speaker 2: every year?

577
00:30:41,760 --> 00:30:43,400
Speaker 4: Well as the farmer of the group. I guess I'll

578
00:30:43,440 --> 00:30:46,959
Speaker 4: have to take this one, so I'd say, obviously economics.

579
00:30:47,080 --> 00:30:49,600
Speaker 4: We do look economics, although I think farmers tend to

580
00:30:49,640 --> 00:30:53,040
Speaker 4: look a little bit more backward than forward because you

581
00:30:53,080 --> 00:30:55,400
Speaker 4: really don't know until you have yield right, and so

582
00:30:55,520 --> 00:30:58,400
Speaker 4: fundamentally you can only take forward looking economics. So far,

583
00:30:58,880 --> 00:31:05,680
Speaker 4: crop rotation is very important, disease breaking, equipment utilization, storage utilization,

584
00:31:05,840 --> 00:31:08,400
Speaker 4: and it also depends in the you know, what are

585
00:31:08,440 --> 00:31:11,120
Speaker 4: your choices. Certain parts of the country have a lot

586
00:31:11,160 --> 00:31:14,600
Speaker 4: more choices. We've kind of left out cotton has been

587
00:31:14,640 --> 00:31:17,480
Speaker 4: severely depressed. Cotton is a very flexible crop in a

588
00:31:17,560 --> 00:31:20,800
Speaker 4: sense that you could replace that with a soybean potentially

589
00:31:20,800 --> 00:31:23,080
Speaker 4: a little bit of corn. Peanuts is a big crop

590
00:31:23,120 --> 00:31:27,920
Speaker 4: in the Southeast, highly government regulated. So what you switch

591
00:31:28,000 --> 00:31:30,360
Speaker 4: to crop insurance is a huge piece of the puzzle.

592
00:31:30,520 --> 00:31:32,720
Speaker 4: What can what levels can you ensure? You may grow

593
00:31:32,720 --> 00:31:35,440
Speaker 4: a crop that doesn't look profitable, but because of the

594
00:31:35,520 --> 00:31:39,600
Speaker 4: levels you can guarantee revenue. Those things got but you don't.

595
00:31:39,720 --> 00:31:43,320
Speaker 4: You don't get tremendous switches in most places because you

596
00:31:43,440 --> 00:31:45,640
Speaker 4: just if you go all corn. We saw a lot

597
00:31:45,680 --> 00:31:49,520
Speaker 4: more corn last year. Actually, you can suddenly find yourself

598
00:31:49,520 --> 00:31:53,040
Speaker 4: in a severe storage problem because you trade a fifty

599
00:31:53,080 --> 00:31:55,360
Speaker 4: bushel and acre soybean for a two hundred bushel and

600
00:31:55,320 --> 00:31:58,480
Speaker 4: an acre corn, and you actually have that in the

601
00:31:58,480 --> 00:32:01,320
Speaker 4: far West. Even as we speak, there is grain piled

602
00:32:01,800 --> 00:32:06,760
Speaker 4: across Minnesota, North Dakota, South Dakota, Nebraska because we had

603
00:32:06,760 --> 00:32:10,280
Speaker 4: a lot more corn on corn acres rotation and we

604
00:32:10,320 --> 00:32:13,360
Speaker 4: outran our storage and we had a great crop.

605
00:32:14,040 --> 00:32:16,240
Speaker 2: So this is something else I wanted to ask about,

606
00:32:16,640 --> 00:32:20,520
Speaker 2: which is like the decision to put something in storage

607
00:32:20,760 --> 00:32:23,600
Speaker 2: and then when you actually decide to sell it, because

608
00:32:23,640 --> 00:32:25,920
Speaker 2: this is again one thing I hadn't really realized was

609
00:32:25,960 --> 00:32:28,880
Speaker 2: such a thing in the US until I read that book.

610
00:32:29,160 --> 00:32:33,080
Speaker 2: But also it seems to be relevant again today because

611
00:32:33,120 --> 00:32:35,520
Speaker 2: we are seeing grain prices start to go up a

612
00:32:35,520 --> 00:32:39,320
Speaker 2: little bit given the Iran situation, and so I'm reading

613
00:32:39,360 --> 00:32:43,160
Speaker 2: stories on Agweek in places like that saying that farmers

614
00:32:43,160 --> 00:32:45,480
Speaker 2: are all rushing to sell all the corn that they

615
00:32:45,520 --> 00:32:47,080
Speaker 2: had in storage from last year.

616
00:32:48,040 --> 00:32:50,360
Speaker 5: Corn really moves for our grain really moves for two

617
00:32:50,440 --> 00:32:53,840
Speaker 5: main reasons in terms of having to move. As Jeff

618
00:32:53,880 --> 00:32:57,840
Speaker 5: already alluded to, storage is one and cash needs is

619
00:32:57,840 --> 00:33:01,080
Speaker 5: the other. And the real value of storage space in

620
00:33:01,120 --> 00:33:04,560
Speaker 5: North America is that first sort of ninety days into

621
00:33:04,560 --> 00:33:09,520
Speaker 5: harvest into harvest, and afterwards after that it becomes again

622
00:33:09,920 --> 00:33:12,520
Speaker 5: more of a personal decision, a personal marketing decision. There's

623
00:33:12,560 --> 00:33:16,000
Speaker 5: an approach we teach that forces producers to think more

624
00:33:16,120 --> 00:33:19,800
Speaker 5: an actual grain merchandising and risk management group like the

625
00:33:19,840 --> 00:33:22,280
Speaker 5: group we work for in the past, would think. So

626
00:33:22,360 --> 00:33:26,360
Speaker 5: they're actual drivers for that. Economic drivers might change than

627
00:33:26,400 --> 00:33:29,400
Speaker 5: the way they did it before. But yes, flat prices

628
00:33:29,440 --> 00:33:31,680
Speaker 5: that are better are just that, and it will bring

629
00:33:31,840 --> 00:33:34,040
Speaker 5: grain to market, especially when we were seeing prices we

630
00:33:34,080 --> 00:33:37,200
Speaker 5: haven't seen for quite some time, and as Jeff said,

631
00:33:37,200 --> 00:33:39,880
Speaker 5: we had a really good crop and a lot still

632
00:33:39,880 --> 00:33:42,400
Speaker 5: sitting around. So yeah, in the last month, a tremendous

633
00:33:42,400 --> 00:33:57,840
Speaker 5: amount of physical grain is moved to hit these higher prices.

634
00:34:01,000 --> 00:34:03,120
Speaker 3: Who makes a lot of money when there's a ton

635
00:34:03,200 --> 00:34:07,479
Speaker 3: of supply and everyone wants storage, do those storage rents

636
00:34:07,520 --> 00:34:08,680
Speaker 3: go way up at that time?

637
00:34:10,440 --> 00:34:12,879
Speaker 4: Yeah, that's a great question. Farmers ask us that all

638
00:34:12,880 --> 00:34:15,520
Speaker 4: the time. So, yes, space gets more valuable right up

639
00:34:15,560 --> 00:34:18,440
Speaker 4: to a point, and then that point, you know, it keeps.

640
00:34:18,840 --> 00:34:21,480
Speaker 4: The value of space keeps rising until it grabs an

641
00:34:21,480 --> 00:34:24,240
Speaker 4: incremental space and the next thing, you know, the easy

642
00:34:24,239 --> 00:34:27,200
Speaker 4: space gets filled first, and then space value gets higher,

643
00:34:27,239 --> 00:34:28,880
Speaker 4: and then the next thing, you know, you're filling a

644
00:34:28,960 --> 00:34:31,080
Speaker 4: salt mine somewhere, and then you get out to the

645
00:34:31,120 --> 00:34:33,600
Speaker 4: far west where you have cold or dryer they actually

646
00:34:33,640 --> 00:34:36,360
Speaker 4: pile the grain and cover it millions and millions and

647
00:34:36,400 --> 00:34:39,320
Speaker 4: millions of bushels, which kind of caps out the value

648
00:34:39,360 --> 00:34:42,760
Speaker 4: of space. So that really starts to set that value

649
00:34:42,719 --> 00:34:45,360
Speaker 4: of space. But yes, it does flex over time. And

650
00:34:45,400 --> 00:34:48,080
Speaker 4: now farmers have invested in a lot of space, and

651
00:34:48,120 --> 00:34:50,320
Speaker 4: one of the things we teach is how to utilize

652
00:34:50,320 --> 00:34:53,320
Speaker 4: that space like a grain elevator, and how to earn

653
00:34:53,400 --> 00:34:55,920
Speaker 4: like a merchandiser. That's a piece, a big piece of

654
00:34:55,960 --> 00:34:58,960
Speaker 4: what we do in our farmer producer business.

655
00:34:58,960 --> 00:35:02,240
Speaker 3: Interesting, So zooming out for a second, I am looking

656
00:35:02,320 --> 00:35:06,040
Speaker 3: at a chart from the American Farm Bureau Federation. Twenty

657
00:35:06,120 --> 00:35:10,040
Speaker 3: twenty five was very higher for farm bankruptcies overall, and

658
00:35:10,080 --> 00:35:12,480
Speaker 3: we're you know, it's not at the levels of like

659
00:35:12,880 --> 00:35:15,480
Speaker 3: when they were doing the Farm Made concerts in the

660
00:35:15,560 --> 00:35:18,000
Speaker 3: nineteen eighties or so forth, but it's clearly ticked up

661
00:35:18,200 --> 00:35:21,200
Speaker 3: the highest that looks like certainly since the pandemic. When

662
00:35:21,200 --> 00:35:24,640
Speaker 3: a farmer declares bankruptcy, how did they wind up in

663
00:35:24,680 --> 00:35:28,200
Speaker 3: that situation? I mean, we everyone's facing the same stresses.

664
00:35:28,239 --> 00:35:30,520
Speaker 3: But what had to have happened to kick off that

665
00:35:30,600 --> 00:35:34,720
Speaker 3: sequence of events such that a farmer files Chapter twelve.

666
00:35:35,960 --> 00:35:39,040
Speaker 4: Yeah, in our farm management practice, which is a part

667
00:35:39,040 --> 00:35:40,880
Speaker 4: of this business, we see a lot. So let's be

668
00:35:41,160 --> 00:35:43,279
Speaker 4: first off, you got dig deeper in those numbers. I'll

669
00:35:43,760 --> 00:35:47,640
Speaker 4: venture to guess that the dairy numbers are in there,

670
00:35:47,920 --> 00:35:51,439
Speaker 4: and we have a structural change in dairy to these

671
00:35:51,560 --> 00:35:56,279
Speaker 4: mega dairy efficiencies that have that business model has taken over,

672
00:35:56,719 --> 00:35:59,919
Speaker 4: and so it's put intense pressure on even the mid

673
00:36:00,120 --> 00:36:03,719
Speaker 4: size dairy farm. So you've got a lot of that

674
00:36:03,760 --> 00:36:07,600
Speaker 4: and that's that's a very emotional type of farming, I

675
00:36:07,600 --> 00:36:10,480
Speaker 4: want to say, because you're there every day with those lot,

676
00:36:10,560 --> 00:36:13,480
Speaker 4: with that livestock. It's hard to explain to somebody who

677
00:36:13,560 --> 00:36:16,600
Speaker 4: hasn't been with an animal since it was born and

678
00:36:17,120 --> 00:36:19,200
Speaker 4: is with it for seven or eight years to get

679
00:36:19,200 --> 00:36:22,600
Speaker 4: forced out that way, it's really challenging. We don't see

680
00:36:22,640 --> 00:36:24,520
Speaker 4: it in the grain side. A lot of it has

681
00:36:24,560 --> 00:36:28,000
Speaker 4: to do with the payments, right, It's been tight, and

682
00:36:28,040 --> 00:36:31,520
Speaker 4: you're watching working capital and farms are different, but we

683
00:36:31,560 --> 00:36:34,520
Speaker 4: don't see a lot of Chapter twelve. You don't see it,

684
00:36:34,560 --> 00:36:36,719
Speaker 4: and we're not seeing farms being forced to sale. We're

685
00:36:36,760 --> 00:36:40,560
Speaker 4: not seeing wholesale equipment sales that are bankruptcy driven in

686
00:36:40,600 --> 00:36:44,120
Speaker 4: the grain side in most markets, I think rice has

687
00:36:44,120 --> 00:36:47,880
Speaker 4: been particularly difficult. We're not huge into that kind of

688
00:36:48,000 --> 00:36:51,880
Speaker 4: Arkansas area. I think cotton has been very, very challenging.

689
00:36:52,160 --> 00:36:55,080
Speaker 4: We really haven't seen a credit contraction, right, which is

690
00:36:55,080 --> 00:36:58,040
Speaker 4: what you would think would happen from working capital. A

691
00:36:58,040 --> 00:37:01,239
Speaker 4: lot of working capital is provided through the farm credit system. Right,

692
00:37:01,320 --> 00:37:07,439
Speaker 4: the quasi backed agencies, and we have very rarely even

693
00:37:07,480 --> 00:37:11,160
Speaker 4: in the last cycle because they're renewing their operating loans.

694
00:37:11,200 --> 00:37:13,759
Speaker 4: Here in the last couple of months there has been

695
00:37:13,800 --> 00:37:16,919
Speaker 4: a very few pullbacks, and then quite frankly, it's still

696
00:37:17,040 --> 00:37:20,279
Speaker 4: very competitive where you can borrow money. It call it

697
00:37:20,400 --> 00:37:22,280
Speaker 4: six and a half to seven and a half percent

698
00:37:22,480 --> 00:37:25,360
Speaker 4: for short term versus a government treasury at three and

699
00:37:25,400 --> 00:37:28,440
Speaker 4: a half three point six. So as investors, right, that's

700
00:37:28,440 --> 00:37:30,920
Speaker 4: a good spread. And there still is a lot of

701
00:37:31,000 --> 00:37:34,000
Speaker 4: equity in farms. It's in the land, so you can

702
00:37:34,040 --> 00:37:37,279
Speaker 4: get farms that get tripped up through expansion and you

703
00:37:37,360 --> 00:37:40,480
Speaker 4: have equity, but it's locked through into the land values,

704
00:37:40,600 --> 00:37:42,440
Speaker 4: and that can be where you get into trouble. You

705
00:37:42,480 --> 00:37:45,720
Speaker 4: just get short term operating capital squeeze. But the banks

706
00:37:45,760 --> 00:37:48,600
Speaker 4: are not, to the best of what we see, are

707
00:37:48,600 --> 00:37:52,399
Speaker 4: not really heavily pulling back on operating notes at this point.

708
00:37:52,520 --> 00:37:54,120
Speaker 5: Yeah, it goes back to the land point that we

709
00:37:54,160 --> 00:37:57,400
Speaker 5: made earlier in equity. And when you compare now to

710
00:37:57,520 --> 00:38:00,479
Speaker 5: the farm aid stuff in the late eighties, much better

711
00:38:00,480 --> 00:38:04,239
Speaker 5: balance sheets at the producer level now versus then. And

712
00:38:04,440 --> 00:38:08,640
Speaker 5: also remember you had interest rates in the upper teams, right,

713
00:38:08,719 --> 00:38:11,600
Speaker 5: So it's just very different now because obviously there's a squeeze,

714
00:38:11,640 --> 00:38:12,919
Speaker 5: but it's not remotely like that.

715
00:38:13,719 --> 00:38:16,680
Speaker 2: So I realized we're already running out of time and

716
00:38:16,719 --> 00:38:19,759
Speaker 2: we could kind of keep going for ages. But just

717
00:38:19,800 --> 00:38:23,120
Speaker 2: to get back to the current situation, what are you

718
00:38:23,239 --> 00:38:27,240
Speaker 2: hearing from your network of farming contacts right now about

719
00:38:27,239 --> 00:38:30,040
Speaker 2: how they're feeling about the around situation, Because as we

720
00:38:30,080 --> 00:38:33,000
Speaker 2: mentioned in the intro, there are these push pull factors

721
00:38:33,040 --> 00:38:34,319
Speaker 2: that are going on right now.

722
00:38:35,080 --> 00:38:37,719
Speaker 4: Yeah, we as you know, as we connect with the

723
00:38:37,719 --> 00:38:39,480
Speaker 4: farmers and I have my own farm. First off, we've

724
00:38:39,480 --> 00:38:41,839
Speaker 4: had some opportunities to hedge off some grain for new

725
00:38:41,880 --> 00:38:44,839
Speaker 4: crop have some relatively interesting levels, and lots of our

726
00:38:44,840 --> 00:38:47,279
Speaker 4: clients have taken a time to at least get some

727
00:38:47,520 --> 00:38:48,120
Speaker 4: grain sold.

728
00:38:48,520 --> 00:38:50,880
Speaker 2: You forward sold the upcoming.

729
00:38:50,480 --> 00:38:53,799
Speaker 4: We can we can forward sell the upcoming crop we've

730
00:38:53,840 --> 00:38:56,480
Speaker 4: taken advantage of on the old crop right, which we

731
00:38:56,520 --> 00:38:59,960
Speaker 4: talked about a little bit earlier. We obviously are very

732
00:39:00,040 --> 00:39:02,880
Speaker 4: very concerned about the fertilizer prices on the pieces we

733
00:39:02,920 --> 00:39:06,120
Speaker 4: don't have locked up, and you know, and that constant

734
00:39:06,160 --> 00:39:08,920
Speaker 4: squeeze across all inflationary I think the inflation is the

735
00:39:08,920 --> 00:39:12,319
Speaker 4: piece that drives us. I'm going to call us being

736
00:39:12,320 --> 00:39:15,120
Speaker 4: the proverbial us because we don't feel like we're in control.

737
00:39:15,560 --> 00:39:18,440
Speaker 4: A number of suppliers and the A sector operate in

738
00:39:18,560 --> 00:39:26,080
Speaker 4: olig olig oligopoly, right, and so you'll hear a lot

739
00:39:26,080 --> 00:39:31,799
Speaker 4: about whether that seed fertilizer, particularly in cattle processing, and

740
00:39:31,920 --> 00:39:34,920
Speaker 4: you know that's a big issue. We're very aware of it.

741
00:39:35,080 --> 00:39:38,480
Speaker 4: When you put in trade barriers, you actually isolate other

742
00:39:38,520 --> 00:39:43,000
Speaker 4: competitors out right. They are probably critical to keeping costs

743
00:39:43,040 --> 00:39:46,840
Speaker 4: down at the farm. So farmers feel very threatened about

744
00:39:47,239 --> 00:39:50,960
Speaker 4: the supplier environment that they're in, and probably with good reason.

745
00:39:51,400 --> 00:39:54,799
Speaker 4: I've never seen anything personally illegal go on, but I

746
00:39:54,800 --> 00:39:57,600
Speaker 4: see lots of behavior that is legal to operate in

747
00:39:57,640 --> 00:40:02,440
Speaker 4: that oligopoly environment. And so it's it's really disconcerting if

748
00:40:02,440 --> 00:40:05,560
Speaker 4: you think about running a business where your suppliers are two.

749
00:40:06,000 --> 00:40:09,799
Speaker 4: You know, there's what three maybe four seed companies left genetics.

750
00:40:10,360 --> 00:40:12,960
Speaker 4: You're processing the cattle, which, by the way, you know,

751
00:40:13,000 --> 00:40:15,840
Speaker 4: at least on the calf sides at all time record profits.

752
00:40:15,880 --> 00:40:19,000
Speaker 4: But they're still concerned because you only have realistically three

753
00:40:19,120 --> 00:40:24,239
Speaker 4: or four buyers. Hogs are highly consolidated, chickens very consolidated fertilizer.

754
00:40:24,680 --> 00:40:28,960
Speaker 4: So that's probably one of the angst. We have policies

755
00:40:28,960 --> 00:40:31,879
Speaker 4: another big piece of the angst because we're I think

756
00:40:31,880 --> 00:40:34,160
Speaker 4: without these payments, we don't know whether those are going

757
00:40:34,239 --> 00:40:37,080
Speaker 4: to come or not. That's floated a lot of farms

758
00:40:37,320 --> 00:40:40,359
Speaker 4: in the last year, and so that's very disconcerning because

759
00:40:40,360 --> 00:40:43,200
Speaker 4: you could change the administration to administration, you can't hedge

760
00:40:43,239 --> 00:40:45,279
Speaker 4: that or know what the numbers are going to look like.

761
00:40:45,640 --> 00:40:46,400
Speaker 4: Lots of uncertainty.

762
00:40:46,680 --> 00:40:49,040
Speaker 3: But do you have one piece of advice for your client,

763
00:40:49,080 --> 00:40:51,640
Speaker 3: like right now is right now in this environment? Like okay,

764
00:40:51,800 --> 00:40:54,680
Speaker 3: they that's what they're telling you. What are you telling

765
00:40:54,719 --> 00:40:55,799
Speaker 3: them to do right now?

766
00:40:56,400 --> 00:40:59,919
Speaker 5: Well, one thing, as we already talked about, is look

767
00:41:00,160 --> 00:41:02,320
Speaker 5: these gift horses in a good way and hedge a

768
00:41:02,360 --> 00:41:05,000
Speaker 5: little bit off for next year because we are at

769
00:41:05,080 --> 00:41:08,960
Speaker 5: new crop levels we describe new crop as next fall

770
00:41:09,480 --> 00:41:12,000
Speaker 5: in trader language, at numbers that we haven't seen for

771
00:41:12,040 --> 00:41:14,360
Speaker 5: a while. So let's go ahead and take advantage of

772
00:41:14,360 --> 00:41:18,080
Speaker 5: that and see what happens. As you folks probably very

773
00:41:18,080 --> 00:41:21,239
Speaker 5: well know, crude and corner incredibly correlated. I think they

774
00:41:21,280 --> 00:41:24,040
Speaker 5: have an R square north of ninety five with some

775
00:41:24,120 --> 00:41:27,920
Speaker 5: of our very tight relationships. We're having producers sit in

776
00:41:27,920 --> 00:41:30,000
Speaker 5: their easy chair on Sunday nights when the overnight's open

777
00:41:30,080 --> 00:41:33,520
Speaker 5: after a weekend of crazy news and everyone's doom scrolling

778
00:41:33,560 --> 00:41:37,839
Speaker 5: and crud's up twenty and corn's up twenty cents following it.

779
00:41:38,080 --> 00:41:40,160
Speaker 5: Maybe if you only have a little bit hedge for

780
00:41:40,239 --> 00:41:42,120
Speaker 5: next year, go into your account and hedge a little more.

781
00:41:42,239 --> 00:41:45,919
Speaker 5: So we've been taking advantage of some of these wild

782
00:41:45,920 --> 00:41:48,239
Speaker 5: market swings, often a weird times for whatever reason, the

783
00:41:48,280 --> 00:41:51,239
Speaker 5: last couple Sunday nights have been absolutely wild. Yeah, So

784
00:41:52,080 --> 00:41:54,359
Speaker 5: just pay a little bit more attention and win these

785
00:41:54,360 --> 00:41:56,560
Speaker 5: little battles along the way we refer to as winning

786
00:41:56,560 --> 00:41:59,200
Speaker 5: the details. Take advantage of those things. Why you can.

787
00:42:00,160 --> 00:42:04,200
Speaker 4: I think what we teach in class right is around discipline. Right,

788
00:42:04,239 --> 00:42:07,680
Speaker 4: the discipline and hearts are really good. So understanding your

789
00:42:07,719 --> 00:42:12,200
Speaker 4: actual risk, managing that risk off, that's just your risk profile,

790
00:42:12,400 --> 00:42:15,520
Speaker 4: staying steady right, things that people who trade commodities for

791
00:42:15,560 --> 00:42:18,919
Speaker 4: a living do and understand. And then there are huge

792
00:42:18,920 --> 00:42:22,400
Speaker 4: amounts of physical details around cash management and storage and

793
00:42:22,440 --> 00:42:24,640
Speaker 4: things like that that are still out there. So that's

794
00:42:24,719 --> 00:42:28,680
Speaker 4: really where we bring out the disciplined approach around this

795
00:42:28,840 --> 00:42:31,319
Speaker 4: and becoming risk managers. We always one of the first

796
00:42:31,320 --> 00:42:33,120
Speaker 4: things we say is that if you want to make

797
00:42:33,160 --> 00:42:36,200
Speaker 4: a jump as a producer, you become a risk manager

798
00:42:36,200 --> 00:42:38,960
Speaker 4: to the farm instead of a speculator. And that's how

799
00:42:39,080 --> 00:42:42,960
Speaker 4: the biggest companies, right, they have risk managers, whether they're

800
00:42:42,960 --> 00:42:46,440
Speaker 4: commodity companies or people who use a lot of commodities, right,

801
00:42:46,520 --> 00:42:50,040
Speaker 4: they have people that risk manage and they focus on margin.

802
00:42:50,160 --> 00:42:53,239
Speaker 4: And so we've really tried to bring that discipline through

803
00:42:53,239 --> 00:42:56,560
Speaker 4: our classes and through our one on one relationships out

804
00:42:56,640 --> 00:42:59,040
Speaker 4: to the farm which never had access to this type

805
00:42:59,040 --> 00:43:02,680
Speaker 4: of education. That's where a business came in, disciplined thought

806
00:43:02,719 --> 00:43:04,319
Speaker 4: process that their buyers use.

807
00:43:04,680 --> 00:43:06,319
Speaker 5: If you look at all the companies that have been

808
00:43:06,360 --> 00:43:09,840
Speaker 5: around forever in the commodity side, they're all hyper disciplined.

809
00:43:10,320 --> 00:43:13,280
Speaker 5: They all share the same culture and approaches and their hedges,

810
00:43:13,640 --> 00:43:17,960
Speaker 5: and we try to have that mindset lead into the

811
00:43:18,040 --> 00:43:20,040
Speaker 5: practice of our students and clients.

812
00:43:20,480 --> 00:43:22,719
Speaker 2: All right, Jeff and Mike, thank you once again for

813
00:43:22,760 --> 00:43:25,920
Speaker 2: coming back on all thoughts. Truly the perfect guests at

814
00:43:25,920 --> 00:43:27,960
Speaker 2: the perfect time, So really appreciate it.

815
00:43:28,200 --> 00:43:29,880
Speaker 4: Yeah, thanks for having us appreciate it.

816
00:43:29,880 --> 00:43:31,440
Speaker 3: It's fun to hear that you know, we're in our

817
00:43:31,480 --> 00:43:35,160
Speaker 3: New York City apartments like doom scrolling Sunday night futures,

818
00:43:35,200 --> 00:43:37,600
Speaker 3: and we're all doing the same thing. The farmers out

819
00:43:37,640 --> 00:43:39,799
Speaker 3: in the middle of the country and those of us

820
00:43:39,960 --> 00:43:42,120
Speaker 3: all we're all looking at that open but thank you

821
00:43:42,200 --> 00:43:43,520
Speaker 3: so much, those are bland you beat.

822
00:43:43,960 --> 00:43:59,759
Speaker 2: Thank you so Joe. That was really really interesting, and

823
00:43:59,800 --> 00:44:02,200
Speaker 2: I feel like even though we spoke for quite a while,

824
00:44:02,280 --> 00:44:05,120
Speaker 2: we've still only scratched the surface. It's a big topic, right,

825
00:44:05,440 --> 00:44:07,640
Speaker 2: But one of the things that stood out there was

826
00:44:07,760 --> 00:44:11,840
Speaker 2: the importance of land, yes, ladin costs, and also competition

827
00:44:11,880 --> 00:44:14,440
Speaker 2: from abroad, because I hadn't really thought about that before.

828
00:44:14,680 --> 00:44:17,359
Speaker 2: We are used to hearing the phrase that buy land,

829
00:44:17,440 --> 00:44:20,120
Speaker 2: they're not making any more of it, But if you're

830
00:44:20,600 --> 00:44:24,040
Speaker 2: deforesting Brazil or Indonesia, it turns out you are making

831
00:44:24,080 --> 00:44:25,000
Speaker 2: more farm land.

832
00:44:25,200 --> 00:44:25,279
Speaker 4: No.

833
00:44:25,400 --> 00:44:27,000
Speaker 3: I thought that was a great point. There's been a

834
00:44:27,080 --> 00:44:30,480
Speaker 3: lot of interest in reporting, including from our Bloomberg colleagues,

835
00:44:31,040 --> 00:44:37,439
Speaker 3: about specifically Chinese agriculture investments in Brazil and how much

836
00:44:37,480 --> 00:44:41,360
Speaker 3: they're building up that linkages and so obviously still today

837
00:44:41,480 --> 00:44:44,359
Speaker 3: as they put it, you know, Trump tries to make

838
00:44:44,400 --> 00:44:48,120
Speaker 3: some soybean sales and the American farmer sort of has it.

839
00:44:48,280 --> 00:44:50,960
Speaker 3: They could play each other off, discipline the Brazilian farmer

840
00:44:51,000 --> 00:44:55,359
Speaker 3: by buying some American beans, et cetera. But there is

841
00:44:55,400 --> 00:44:59,280
Speaker 3: this really big farm ecosystem that continues to grow, also

842
00:44:59,360 --> 00:45:02,799
Speaker 3: continues to get very productive. They're using some of the

843
00:45:02,800 --> 00:45:04,800
Speaker 3: top of the line Chinese equipment, which we know is

844
00:45:04,880 --> 00:45:07,920
Speaker 3: very good, and yeah, that's going to continue to undercut

845
00:45:07,960 --> 00:45:09,120
Speaker 3: the American exporter.

846
00:45:09,520 --> 00:45:13,520
Speaker 2: Do you think the farming evolution and the productivity revolution

847
00:45:13,640 --> 00:45:15,440
Speaker 2: is going to be a good analogy for AI for

848
00:45:15,480 --> 00:45:17,759
Speaker 2: everyone else, for the white collar working class, you.

849
00:45:17,719 --> 00:45:20,840
Speaker 3: Know, it's I don't know, probably not, but it is interesting.

850
00:45:21,719 --> 00:45:24,360
Speaker 3: There was actually something out literally today. I think some

851
00:45:24,480 --> 00:45:27,040
Speaker 3: hdge fun put a thing like trying to push back

852
00:45:27,040 --> 00:45:29,719
Speaker 3: some of the doom scenarios, and they're like, oh, you know,

853
00:45:29,760 --> 00:45:32,880
Speaker 3: we used to be so much agriculture based, then it

854
00:45:32,960 --> 00:45:35,799
Speaker 3: went away, but we have other jobs, et cetera. But

855
00:45:35,800 --> 00:45:38,640
Speaker 3: that was like one sector, you know, Like, I'm not

856
00:45:38,960 --> 00:45:43,239
Speaker 3: very like, I'm not very comforted by any historical analogy

857
00:45:43,600 --> 00:45:46,680
Speaker 3: where the technology just applies to one sector of the like, oh,

858
00:45:46,760 --> 00:45:50,280
Speaker 3: like bank tellers didn't disappear after the ATM was introduced.

859
00:45:50,440 --> 00:45:53,320
Speaker 3: There was one, right, and we're talking about the whole knowledge,

860
00:45:53,320 --> 00:45:57,160
Speaker 3: but like the entire the human brain being replicated. So

861
00:45:57,200 --> 00:45:59,520
Speaker 3: I'm not no, I'm not that. I don't take too

862
00:45:59,600 --> 00:46:00,640
Speaker 3: much comfort from that.

863
00:46:01,239 --> 00:46:01,560
Speaker 1: All right.

864
00:46:01,600 --> 00:46:03,759
Speaker 3: It's bad and it's tough for farmers.

865
00:46:03,520 --> 00:46:06,319
Speaker 2: Yes, no, that's my point. My point is that the

866
00:46:06,360 --> 00:46:08,839
Speaker 2: experience of small scale farmers can be coming to all

867
00:46:08,880 --> 00:46:11,200
Speaker 2: of us because it's it's just going to be about

868
00:46:11,360 --> 00:46:14,839
Speaker 2: scale and capital investment. Yeah, how big your tractor is?

869
00:46:15,000 --> 00:46:15,200
Speaker 5: I know?

870
00:46:15,440 --> 00:46:15,879
Speaker 4: All right?

871
00:46:15,920 --> 00:46:17,600
Speaker 3: Shall we leave it there, Let's leave it there.

872
00:46:17,719 --> 00:46:20,399
Speaker 2: This has been another episode of the Authots podcast. I'm

873
00:46:20,440 --> 00:46:22,840
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway.

874
00:46:23,000 --> 00:46:25,680
Speaker 3: And I'm Jill Wisenthal. You can follow me at the Stalwart.

875
00:46:25,960 --> 00:46:29,160
Speaker 3: Follow Mike and Jeff they're at Agris Academy. Follow our

876
00:46:29,200 --> 00:46:32,360
Speaker 3: producers Kerman Rodriguez at Kerman armand dash Ol Bennett at

877
00:46:32,440 --> 00:46:35,359
Speaker 3: Dashbod and Keil Brooks at Kilbrooks. And for more odd

878
00:46:35,440 --> 00:46:37,960
Speaker 3: Laws content, go to Bloomberg dot com slash odd loads

879
00:46:37,960 --> 00:46:40,120
Speaker 3: where of a daily newsletter and all of our episodes,

880
00:46:40,320 --> 00:46:42,200
Speaker 3: and you can chat about all these topics twenty four

881
00:46:42,239 --> 00:46:46,680
Speaker 3: to seven in our discord Discord dot gg slash odlines.

882
00:46:46,560 --> 00:46:48,520
Speaker 2: And if you enjoy Odd Lots. If you like it

883
00:46:48,560 --> 00:46:51,359
Speaker 2: when we do these agricultural episodes, then please leave us

884
00:46:51,360 --> 00:46:54,600
Speaker 2: a positive review on your favorite podcast platform. And remember,

885
00:46:54,640 --> 00:46:56,920
Speaker 2: if you are a Bloomberg subscriber, you can listen to

886
00:46:57,040 --> 00:46:59,719
Speaker 2: all of our episodes absolutely ad free. All you need

887
00:46:59,760 --> 00:47:02,320
Speaker 2: to do is find the Bloomberg channel on Apple Podcasts

888
00:47:02,360 --> 00:47:05,000
Speaker 2: and follow the instructions there. Thanks for listening.