Rising corn futures. Hurricane Laura. Networking at trade shows. At this year’s Farm Journal Field Days, Gabe and Rodney take farmer questions.
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Rodney: Gabe, how are you man?
Gabe: Doing good. Doing good. Feeling light.
Rodney: Big week, big week this week.
Gabe: Are you as excited as I am that I got to turn my air conditioning off today?
Rodney: Well, we're not turning our air conditioning off in the Midwest. I can tell you that. We actually canceled all softball today for heat. It was too hot. Yeah. It's hot here.
Gabe: That is disappointing.
Rodney: It is. It's a short season this year so I'm a little disappointed about that but I wrote off to get off work a little early and I didn't give you that time back. I'll be leaving a little early to play hooky I think today.
Gabe: Find a way to spend some time.
Rodney: Yeah. Exactly. Hey, heat wave actually segues into why I think it's a big week is market has been up pretty significantly. Corn has been up like 30 cents here in the last ... Since the beginning of August so last 20 days. Have you been following that?
Gabe: I have been following that. It's nice to see the market give something back here. Yeah. I mean, it's been a little difficult, I should say, to distill exactly what's happening to drive it up. It looks like a combination of things. I know the big storm was ... I think it maybe was a prompt or a catalyst but it feels like we've seen a couple of things since then that really drove it. I think you've been following it too.
Rodney: Yeah, man. We went months without any good news at all, right? Like no good news. I, like I assume most of the people watching this right now, have been very annoyed with the price action for just about every commodity in every part of the United States. Just this last string of events, we had derecho, which obviously negatively impacted a lot of people. I'm sure some people on this podcast right now.
Rodney: We've got the hurricane approaching. Hopefully, I don't want to say hopefully hits anywhere but for a corn farmer, it hopefully doesn't hit hard in New Orleans there. I think that would have a negative effect. And then some heat. Lots of stuff going on.
Rodney: Then on the positive ... Those are all negative things that have driven the price up but on the positive side, really, exports are looking really good, right? We've made a ton of sales to China. We talked a little bit about the currencies doing a little work for the farmers. All of that I think has resulted in 30 cents at corn and more like 60 on beans here in the last little bit.
Gabe: Yeah. It's been a good pop. It's been a good pop. It's exciting to see. I know we're probably back on the cusp of some profitability levels for some folks.
Rodney: Yeah. We're getting close. I think if the crop ... This has been interesting. Atlas Yield Data tracks this crop a lot, right? Every day we have the ability to log in and see how big we think the crop is. It's a weekly pace I think for most of the country for anybody that's logging into that kernel and being able to see that.
Rodney: It's interesting. We're seeing at the same time that crop conditions are coming down, we're seeing our Atlas Yield Data improving the crop just slightly so that's been interesting to watch.
Gabe: Well, that data is going to be ... Our Atlas view is going to be a little bit ahead of those surveys. It looks like things are making a little bit of a turnaround. I think in some places we've seen a pretty static gain, a steady gain I should say, in the last couple of weeks. I know we were looking at I think it was Ohio yesterday with a little more depth and we've really seen that move back to normal levels as opposed to what was highly stress about three weeks ago.
Rodney: Yeah. I think that's right. I think we've seen that a number of states where the last few weeks have been pretty good. Most importantly, I think during pollination in a lot of places. That brief pollination period I think went pretty well. Obviously, the derecho coming through hurt a lot of that. I don't know if you've been following our numbers on that. Atlas, again, they have those at about 3.3 million acres that went down or were heavily damaged in [inaudible 00:04:35]. That's way less than the first reports we heard so that's good news for most people.
Gabe: Yeah. I think the market understood that, if you look at the price action. While three million acres isn't nothing, it's also ... When we're standing at a three billion bushel corn carryout or something like that.
Rodney: Yeah. Exactly.
Gabe: On a macro level, it has less impact.
Rodney: Yeah. I'm always afraid to say that when I know actual farmers are listening and I don't know who they are because somebody has been negatively affected by that.
Gabe: Well, there's 3.3 million acres.
Gabe: An incredibly tough time. Yeah. It doesn't trivialize the problem for those individuals but the rest of the acres need to not over-index to that damage, right?
Rodney: Yeah. Speaking of over-indexing, I can't help but be bullish corn based on all of those things that I talked to you about, right?
Gabe: Wait. Sorry.
Rodney: Yeah. Go ahead.
Gabe: No, no, no. Tell me more. I think you said you were bullish, though, which I don't know that I've ever, like literally ever, heard out of your mouth.
Rodney: Yeah. I got to be a little optimistic here, right? The wind is in our sails. I agree. I'm one of those guys. I'm normally saying sell everyday, sell everyday, right? I sit here and look at December futures and it's something like 3.60. I'm sorry. 3.53 and three-quarters and I think, I don't know, maybe we can make a run to 3.70, right? I'm looking for 16 cents. I know that's irresponsible of me. What should I do about that?
Gabe: Well, I mean, the reason I think you and I would generally tell folks to sell everyday is because trying to pick the right timing to sell is virtually impossible and trying to hit a high even over a couple days is incredibly difficult. You know, people that do that well, I doubt there's more than 10 of them, and that's what they spend literally all their time doing.
Gabe: Selling everyday, especially when you're coming into a rally, selling into a rally everyday that feels good. I would say the other thing you can do, though, there are many ways to engage with the market to lock in some floors here and make sure that if we go to 3.70 you're still getting some of it. Right?
Gabe: I know you can do averages of floors or one of my favorites is just buying a put option, a minimum price put. It takes away the need to make a decision today, you know what you're paying for that risk management, and you've got the unlimited upside. If it's 3.70, great. If it's $4, great. If it goes to $8, boy, if I was betting on that I'd probably lose a lot of money but whatever it is ... If it goes down, you know where you're at. That is the super boring reason minimum price was called what it was. If I have unpriced grain and I buy a put, say, struck at 3.50 and pay ... I don't know what those are running right now. Probably 15 cents.
Rodney: Pretty cheap. Yeah.
Gabe: I know my minimum price on the future side of my price is going to be around 3.35. But the other big advantage I got there is I took an action and if it goes up, I'm running right with it.
Rodney: Yeah. That's right. Yeah. We have seen bases improve specifically in Iowa, which I was surprised by. I was worried about the grain being taken down in Iowa. Really having a more negative effect on bases. Our real time data is telling us there's probably not as much damage as what this latent USDA data is telling us right now. You know how these crop conditions reports are generated? Do you know this?
Gabe: You're talking about the good, excellent?
Rodney: Yeah. Exactly. Do you know how they're generated?
Gabe: Why don't you remind me?
Rodney: I have a few buddies that work at these extension offices. They're like the extension managers. They report I think it's every Sunday night, they have to report a number back to the USDA so they say, "Okay, I think the crop is in my area 50% good to excellent" or 90% good to excellent and then they aggregate those together. You want to guess what the reports were like for a guy that lived through that storm on Thursday night in Iowa, Illinois and Indiana was?
Gabe: Everything was at zeroes?
Rodney: Probably not good, right? There's so much bias that plays into those things.
Gabe: Yeah. I mean, it's hard to, like you said, sit through that and if it's anywhere near you to think that the world isn't ending. It's super tough. But on the flip side, that's why they have many extension offices and they should be aggregating it but those individual samples, yeah, were probably over-weighted to a higher amount of damage than happened.
Rodney: Yeah. I think when you look at that trend line of what that's been doing, I feel like I see a little bit of panic embedded in those numbers. I don't know. I don't know if that's a reasonable thing to say or not.
Gabe: Well, look, at the end of the day, the total yield we took three million acres out, right? Give or take. Some of those will still have useful crop on them but, I mean, it is going to hit the total production this year but the degree is probably single digit percents.
Rodney: Yeah. You ever harvested down corn?
Rodney: Man, it is way better to mow it. I would much rather ... At some point, you're better off just getting that full insurance payment and mowing that down. It doesn't look like that's going to be the case for a lot, for a good portion of that ... I think it was 14 million acres we thought were originally affected by that. Something like that. Significantly lower than those initial reports.
Gabe: Kind of good news for a lot of folks, bad news for some but, overall, I guess the other side of the story at the end of the day for the crop that is there is markets walking its way up.
Rodney: That's right.
Gabe: Okay. What else is going on?
Rodney: I'm a little concerned about volatility. What's volatility doing? Have you been tracking it? You watch it closer than I do.
Gabe: You know, it's fairly steady. It's creeped up a little bit but nothing too out of line. I think what's important to keep in mind ids volatility isn't about market direction. It's how much do we expect there to be movement, not necessarily whether it's up or down. While I think yesterday was a bigger day, about nine cents, most of the moves we've seen have actually been well within the expected volatility. It's just that it's been all one direction.
Rodney: Yeah. That's right. Yeah. Even today, a penny on corn, two cents on beans, which is essentially nothing.
Gabe: Yeah. I mean, I remember back in, oh, boy, what was it? 2007? When the ... I think it was '07. Maybe it was '08. When the grain companies stopped buying grain for contracts.
Rodney: Remember like it was yesterday.
Gabe: One of the last ones of the fall was Cargill and I remember on that day the market was unchanged but volatility had spiked like 20% or something. It wasn't that the actual value of the crop was different but there was a ton of uncertainty added in. I don't think we're seeing a bunch of that uncertainty added in. What we're seeing is a really deliberate move up. You talked about currency at the top of this. The coming down, that boosted the value of US crops.
Gabe: It's not just the, right? The dollar has fallen against its basket, the dollar ... If you go look at the dollar index since March it's fallen quite a bit. We're nowhere near low levels for dollar index but it's on the softer side. A lot of that is actually based against the Euro and then spread throughout a number of other countries. But a weaker dollar, great for exports, right? Takes more dollars to buy the same corn. In the US, I don't know if you knew this, we spend dollars on things so if we get more dollars that's great.
Gabe: If you were looking to take a trip to Europe or something, maybe not as attractive today. I also hear there's something about some sort of virus running around so maybe that might have an effect.
Rodney: That's probably going to slow down travel.
Gabe: Maybe you weren't planning on that anyway. Yeah. There's a couple nice things putting in work to drive the price up. Then I know we've talked about the ... Not just that the value of US corn being worth more dollars but also exports going up themselves. You know, at the end of the day for that to really turn into something somebody's got to buy it at those prices. What are you seeing there?
Rodney: Yeah. No. I think any time we see future sales going on to China, which is happening right now, that, to me, is the biggest story, right? We've been talking about the story forever, "Hey, Trump got China to buy a bunch of stuff from us in the future" but there was 18 months where they didn't do anything. They were like, "Yeah. We're going to do that. We're going to do that."
Rodney: But we've seen those purchases and I think when ... My initial reaction to those purchases is yeah but remember they can cancel those, right? They have a longstanding history of canceling those. Really, they're only going to cancel them if they can source it cheaper somewhere else and right now we are probably the cheapest for them so that gives me a little more confidence and I think the market a little more confidence in the fact that these sales are actually going to be made.
Rodney: That carryout is going to tighten down, although, I mean, what is it? We're 2.7 right now billion bushels on corn. They still haven't hit those marks that they intended to hit. Say we lose 400 million bushels out of this storm last week, we're still talking 2.3 billion bushel carryout, which is, unfortunately, a huge number.
Gabe: It's a huge number.
Rodney: Yeah. I do wonder when we think about volatility ... You talked about volatility being fear, right?
Rodney: I don't know if I'm saying that right.
Gabe: Not to say fear but uncertainty, right?
Rodney: Uncertainty. Yeah. You know, markets up right now without seeing much of a spike in volatility. Should I think about that as more of a fundamental shift than an uncertainty shift?
Gabe: Yeah. I think so. I think what we're seeing is the market very deliberately incorporate all these different pieces. We had a little bit of a bump early on with the storm blowing through. But the work since then has been more about crop conditions. Some of those have come off ... While we've seen stuff recover, I think the stuff that hasn't it kind of is what it is. Right? There's not a lot of opportunity for that crop to suddenly recover in its quality.
Gabe: We're seeing some of that come out. You know, there's some talk about as harvest starts to kick off here in the southern states, what did moisture look like? Things like that. There's a number of stories playing into driving this up.
Gabe: You know, when I think about a real market shift I look to see a limit move in corn or any crop really for that matter. I don't think we're seeing that, right? It seems to be all things considered a fairly stately progression up. You know, a classic bull market tends to be pretty violent, right? It's big moves, big headlines, and just it feels like you can't get your arms around it.
Gabe: Obviously, we're moving up here but overall, on a macro level, if we take a step back and look at where does 3.50 fit in the last five, 10 years, that's still a pretty low price. I think the market still very much in a bear kind of status and so that's the behavior we're seeing.
Rodney: Yeah. One of the most annoying things about this last crop here is the fact that we inverted and low priced. I haven't seen that too often in my career, right? Where the price was the best today and it was a low price, right? Normally, when you see that it's like drought conditions.
Gabe: When you say inverted what do you mean by that? [crosstalk 00:17:18].
Rodney: Yeah. Great. Normally, the cash market, specifically, would pay the farmer to carry his grain and the way they pay him to carry their grain is they say, "Hey, corn in August is worth 3.50 and corn in September is worth 3.52", right? Or 3.53 and there's some normal amount of carry.
Rodney: I mean, I got sick of hearing my own voice talk this year about, "Hey, the best price is today." What should I do? The best price is today. That has just been obnoxious to me because normally I'm a bright and shiny guy, Gabe. I'm a silver lining guy. If the price is bad I'm the kind of guy that says, "Yeah, the price is bad but, man, July there's a carryout there and maybe we can get a reasonable price." Excuse me while I look up real quick on futures here.
Rodney: I just said I'm not really excited about [inaudible 00:18:13] at 3.53. July is at 3.76, right? I should do some math to figure out what it's going to cost me to get there and if that's ... I love comparing 3.76 July to 3.53 December. We should maybe talk about that.
Rodney: You know, for the last year I haven't been able to say, "Yeah, but there's a silver lining that is this carry in the market."
Rodney: Finally, we're getting to a point so low crop aside, new crop coming down the pike it looks like decent, if not significant carries for corn and soybeans into new crop so I'd encourage people to look at that and take advantage of it when they can.
Gabe: I know when we were looking before there's a really decent carry in one particular, I think it was Dayton, from harvest through December but after that it kind of fell off. Don't just assume that further out is better. Make sure you're looking at ... Some of those key cut-offs would be I think kind of post-thaws, post-plantings. It's going to very specifically buy your area but end of year is obviously a pretty standard one for most folks, right? There's a lot coming in in January in most places. As you look at that carry, just make sure you're not just assuming that higher is better and you're optimizing.
Rodney: Yeah. One of my favorite and most annoying things to say to people is like 3.50 corn is not better than 3.40 corn.
Gabe: That is annoying to say. I agree.
Rodney: What I'm saying there is like 3.50 December is not better than 3.40 October for most people, right? There's some other costs that's associated with getting out there.
Gabe: Right. You've got to put it in, take it out, deal with it while it's in there. Whatever it might be. Yeah.
Rodney: Even if you leave it in the field and don't harvest it, there's field loss that's going to get into that. Man, I love throwing that out at parties. That's why I'm very popular at parties, Gabe. Stuff like that.
Gabe: When you say leave in the field, I think you just meant to say unfarmed storage, right?
Rodney: I'm talking leave in the field. That happens occasionally.
Gabe: I had to explain to folks that that is the original unfarmed storage. That is a way to do it. It's not recommended.
Gabe: Yeah. Like you said, it's kind of been a while since we've had some positives, since at least June, to talk about in market. It's been a fun couple weeks to see that come back up.
Rodney: That's right. I see Ryan hopping on. Ryan, you have something to add?
Ryan: I don't want to disrupt the conversation but we do have a question that came in asking can we get specific for how Hurricane Laura will change bases?
Rodney: Yeah. Hopefully, it won't. I'll start with that. Hopefully, it will not change basis. There is a risk if it hits New Orleans and causes any damage down there, that would tend to widen out bases. That would tend to have logistical problems down at the Gulf. I think probably the first day I was able to talk to farmers on the phone in my grain career, so it was like a couple weeks in, was when Hurricane Katrina hit New Orleans.
Rodney: I was out in the river where we were ... For fall, we were used to seeing 25 or 30 cents under for corn bases and we were ... Man, I remember being a $1.20 under. Gabe, do you remember those numbers?
Gabe: Well, we eventually just went to zero, right? They said our base was zero but there was no bid.
Rodney: Yeah. Not zero. No bid.
Gabe: Yeah. You could dump it on the driveway if you want.
Rodney: That's right.
Gabe: And we're not going to pay you for it. Yeah.
Rodney: Yeah. I remember that. Also, that was a direct hit from Hurricane Katrina. What was Hurricane Katrina? Cat seven or eight? I don't know how high that can go.
Gabe: 23? Yeah.
Gabe: Yeah. I mean, it took out the port for weeks, right? It wasn't just a disruption. There was real repairs that had to be done. Significant work.
Rodney: That's right. It is fairly safe to say if there's a logistical problem it's probably going to be bad for bases for the farmer. Right?
Gabe: Yeah. Yeah. Yes. Then it would slow down but it should also be a temporary problem, right? I think the other thing you see there is a big backup and then a big release. I do know ... I think rice just recently started getting taken out of Houston, if I remember correctly. They reopened that for exports so that might take a hit if you were looking at that because that's where Laura is aimed right now.
Rodney: That's right.
Gabe: I don't know if it's Houston but I know Texas there.
Rodney: Yeah. I know we do some I think corn and soybean exports out of there as well, just not to the extent of New Orleans. It's going to be ... Yeah. Anything that slows down those logistics are going to be bad. Hopefully, it's not bad enough that we can recover by October, right? Or into actual heavy duty harvest down there.
Ryan: Right. Thinking about any farmers in that path but understanding what's going to happen there. Another question coming in here, do you see any federal aid for disaster relief for farmers coming because of COVID or just weather?
Rodney: Man, I think ... That's a good question. Gabe, any thoughts on that?
Gabe: Well, I think the current administration has already shown a comfort with distributing cash to make up for some of this stuff. The difference here being I think there was some level of accountability by the government taken for the impact of the lack of trade to China for a period of time.
Gabe: I don't know that that same accountability is in place, like specifically, around farms. I would believe they think the more general programs around small businesses and personal tax rebates probably fulfill what the government feels like is its obligation. That would be my guess there.
Rodney: Yeah. I think you're right. I know some people, some farmers that qualified for the small business relief that they offered people. I think it would be hard for the administration to call out anything directly to the farmer that wasn't already tied to crop insurance or direct payments.
Gabe: Then as far as the disaster, if something does happen there I think it's certainly on the table. That's a very different scenario than the COVID one, which is broad based in its impact.
Rodney: It's been a while since we talked about that. How about how quickly that story went away, right? The COVID farm story, right? COVID, specifically, I'm talking processing plant story. That was a big story for a while but it all but went away as far as I know.
Gabe: Well, I mean, we talked about that a little bit. We got media inquiries around that stuff. The reality of it was most farmers, farms, food supply chain uninterrupted from the COVID stuff. We joke about farming being kind of socially distant to start with and so it wasn't hard for most of those changes. Then, like you said, the meat plants ... The other thing going on there was market prices were super low for boxed beef prices and pork prices.
Gabe: It's tough to know how much production would have gotten cut back anyway just because of the reduced prices and then COVID kind of made it an easier economic choice I think for some of those places. I think they've materially all reopened, anyone that was shut down at this point.
Rodney: I believe so. Yeah. We haven't talked much about COVID in the Midwest, specifically, Gabe. You and I. For anybody that doesn't know, me and Gabe talk about once a week on the podcast essentially. You know, I'm watching ... Gabe's out in the east coast, I'm in the Midwest and for months I have been watching the east coast really struggle with COVID and have all the time felt pretty insulated in the Midwest. It's a serious thing and we've taken it seriously.
Rodney: I would say it's changing a little bit here where I think if I was going to bet on if COVID was going to play a role in the ag industry, there's more risk on the table right now than there was four months ago for that happening. We're starting to see a lot more flare-ups in the Midwest just as you guys ... This is outsider talking about your situation. You guys feel on the backside of it.
Gabe: Well, there was literally an article that came out the other day. There was a biotech conference here, I think it was BioGen was the company, and that was ... The article was written that that was the epicenter for COVID getting spread across the country.
Rodney: Oh, nice. Thanks for that.
Gabe: We were ground zero. You're welcome.
Gabe: My family is still in Illinois so I talk to my parents regularly. My mom, in particular, out there is involved in some government stuff and she talks about trying to figure out ... It went so long where it didn't feel particularly threatening. They knew the right thing to do was to do the restrictions that they've done.
Gabe: Now that hangover of ... I shouldn't say hangover but kind of the backend piece of COVID now coming through the Midwest makes it all the harder, right? You feel like you've worked so hard at trying to slow things down and didn't really see anything and now as you see more stories about things starting to open back up, you're under the pressure.
Rodney: That's exactly right. Although, I would say, again, my dad ... I was talking to my mom. We were out at the farm this weekend. Dad was saying he has the safest job in the world for COVID and I'm always interested in any time he says something like that. Anyway, long story short, all the grain elevators out here went to the cards, like the RFD cards. For safety reasons, they won't even let him get out of the truck anymore at the facility. At the farm, he's kind of interacting with the farmer but he never even rolls down his window to get the heat anymore. He's in an AC cab and he throws his RFD card.
Gabe: RFID? Yeah.
Rodney: RFID and tells the splits and all that. Pretty insulated here I think, especially in ag. Any other questions there, Ryan, coming in yet?
Ryan: Yeah. We have one more that's a bit more general: how closely should I work with my co-op for grain marketing specifically? I like purchasing inputs and equipment with them but feel hesitant about the selling.
Rodney: Yeah. I should say, first off, you're talking to a co-op boy here so I'm a little biased probably. I'll defer to Gabe, any thoughts on that first?
Gabe: I'll say, I don't really think it's about the co-op itself. I think it's more general thinking about ... If the co-op has got the right price when you're ready to sell, great, sell it to a co-op.
Gabe: In terms of making your plan and coming up with how you're going to approach your grain marketing for the year, I think it really is by individual. You have to find somebody who you feel like you can work with. I don't think that's something that co-ops are particularly advantaged or disadvantaged for. We've seen great people at all kinds of places, even Rodney used to be part of it.
Rodney: That's right. Yeah. You know what it mostly comes down to is that price isn't everything, right? Price is a huge part of what farmers do and the decisions they make but price is not everything. We talk a lot about time is money, right? In that delivered price we don't talk about how long you wait in line when you go there, right? Around me, a lot of these co-ops have done a really good job of investing in their facilities to get you turned really quickly, right?
Rodney: They sometimes offer storage at maybe a competitive rate and if that's what you need, that's a great thing. Any time anybody is going to ask me about that it's going to be about define the value of the place you're working with and value isn't just price. Yeah, I think a lot of these co-ops do right by that.
Rodney: I think more important to that is find an originator or merchandiser or a kind of grain marketing advisor that you trust. That is the key to this whole thing, right? Even at a co-op, and I know you want to say something here, Gabe, if I'm working with the worst co-op in the world but they're paying the highest price, right? And I think I'm getting a great deal on that, I could be missing millions of opportunities around pricing or carrying in the market or discounts that I don't know I'm getting. There's just a lot to that. It's more about working with someone you trust I think.
Gabe: You want Santa Clause from Miracle on 43rd Street.
Rodney: That's who I want, yeah, grain marketing Santa Clause. Yeah.
Gabe: The guy that tells you sometimes you need to go to the competition that's going to have the better price. I think the best people that you work with do that because they know ... Well, for me, personally, people that save me time I've got all kinds of time for because I know this is a thing that saves me time. Somebody that I know I can trust when they're giving me that suggestion that saves me time, right? That also means when they tell me that their facility is the best facility, I'm also way more likely to just go with it.
Rodney: Yeah. That's right. Yeah. The other thing I'd say to that is if ... We both talk a lot, Gabe, about how we don't predict the future. We don't think for one second that ... I would not tell anybody that I think the market is going to go up tomorrow with any kind of confidence.
Gabe: I'm pretty sure you told everybody that, 3.70.
Rodney: I said I'm bullish.
Gabe: I heard 3.70.
Rodney: No, I know. That's the fine line we walk, right? Everybody wants to say what do you think? What do you think? We are very clear all the time that we don't know anything. We may think stuff. We don't know anything.
Rodney: Yeah. You know, one of the things I'm thinking about with that local co-op is when there are all kinds of pricing opportunities that you can take advantage of, if you like to work with your local co-op, do yourself a favor and understand when they are the best price, right? If prices are just random and you don't know when to sell at least tell the guy to call you when he's the best price so that if everything is random at least I'm selling to the guy I want to sell to. I think that plays a big role.
Gabe: Yeah. Yeah. I got nothing else to add there. Ryan, we got any other questions coming through?
Ryan: One more just came through. It's asking about farming conferences, funny enough, that many of them have been canceled but often wonder about the money spent and time getting there and how essential that networking is to my job.
Rodney: Oh, man. I feel a Medici effect conversation coming on here, Gabe.
Gabe: Why don't you open it up?
Rodney: I love ag conferences. There are a ton of things I hate about them. All right? Let's start with that. There are a ton of things I hate about ag conferences. What I love about ag conferences is they tend to force you to be at a table with people you don't know, right? I always find myself in a lunch where I'm sitting ... It's always a big round table and a big open hotel plaza or whatever.
Rodney: I always find myself in an interesting conversation because farmers just tend to be interesting people, right? It's been a while since I've been to a heavy farm one. Lately, I've been going to more brokerage type and merchandiser type conferences but the same thing. You sit across the table from a really interesting merchandiser and what I do is I just pepper those guys with questions, right? "Hey, what do you think about this? How do you think about this?" I'm always interested in just a completely different outlook on life in general.
Gabe: That's big, Rodney.
Rodney: Are you going to add to it? I mean, I rarely ... I'll tell you this, when I go to conferences like that, they tend to be two or three days. When I come home, my wife is always upset with me because I always come home with a headache. I'm always a total wreck when I get home from those conferences. I think that's because I'm an introvert, right? I love being around people, I love talking to people, and I think a lot of people are going to be like, "You're not an introvert, Rodney" but that's because when I'm around people I like to interact with people and understand what they're up to and when I come home from a three day conference like that I'm so drained I can barely get out of bed because I just throw everything into getting to know those people.
Gabe: I'm similar to you on the introverted side, right? It does take a lot of energy but to your point, the big value there is the unintended accidental meeting, interaction, and so kind of with purpose having unpredictable interactions, right? Unexpected learnings.
Gabe: At Indigo, we talk a lot about how are we going to work once we're through COVID? I think I'll say I've learned ... I was really worried about our pricing desk and having that be all remote. We were set up for it from a disaster recovery perspective but at no point in time did I envision a world where for six months my pricing team was going to be at their homes working. They've done an amazing job. One, I should have had higher expectations of them, right? I should have known better. They've also matured quite a bit through this and so that's an example of something like, "Man, I never would have been okay with that." I'm totally okay with it now.
Gabe: The reason I bring it up is the conference has got me thinking. The other thing we talk about, though, is it's a lot harder to build relationships ... I've spent most of my career actually working virtually anyway. I think I'm more than a lot of folks am pretty comfortable with this setup. I joke with the leadership team that this is the way I prefer to interact with them.
Gabe: But where we struggle is we've obviously hired new people over the last six months and they're great people and they're doing well but you just aren't able to advance as quickly. I know there's things that I'm not learning that I would normally learn from those new people just by the accidental interactions. That's even more magnified when I think about missing out on a conference or a professional event. Like being able to meet a set of peers that approach problems a lot differently ... It's problematic when you're the only one or you're with the same handful of people thinking about the same problems, addressing them the same way. You tend to come up with the same answers.
Gabe: It gets harder and harder to try new things, right? It's difficult to challenge each other. I think that's ... You like to pepper with questions. I like to pepper with questions. I like to test ideas. Right? Tell me why this is a bad idea. I thought of it so I think it's amazing. I need you to help me understand what's wrong with it. That's what I miss is that more casual ... It not just being people that I knew to go look for but the people that I accidentally encounter.
Rodney: That's exactly right. Those accidental encounters are the most important part, right? Gabe and I have talked about the Medici effect on the podcast. I don't think it's required reading to work for you, Gabe, but it's highly encouraged, right?
Gabe: It might be required.
Rodney: It might be. I don't know. I read it. I would say I subscribe to that thinking, right? The Medici effect is all about getting people with alternative views together and ... Man, you should explain what this is.
Gabe: Yeah. The idea is the more different areas of expertise you can get into the same brain, the better. The book is full of examples. One of my favorites is there's a guy that build a hospital in I think it was western Africa that didn't need air conditioning because what he did is he also knew about ants. I forget what science that is.
Gabe: He used the same architecture that ants used in that area to keep their mound at a steady whatever it was, 76 degrees or something. They used that same architecture for the hospital and so it doesn't need air conditioning and it stays at a steady temperature. Things like that where you combine these two different disciplines or more, you come up with really great ideas
Gabe: Well, it's hard for one person to become an expert in a whole bunch of things and so if you can't do that, I'm fairly simple minded here so then grab other people that do have those wide variety of views on things and then put them in an environment where they can argue and debate and take an idea and take it apart and put it back together where it comes out way stronger on the other side.
Rodney: Yeah. That's exactly right. I subscribe to that and I subscribed to it before I came to work here. I would say when I show up to a conference and I'm sitting at this round table talking to farmers, if you tell me you're a quinoa farmer from North Dakota, I have lots of questions and I'm going to spend a lot of time talking to you.
Gabe: Is the first one what's quinoa?
Rodney: Yeah. Well, maybe. If you tell me you're a row crop farmer from Central Illinois and you love corn as much as I do, I'm going to be like, "Hey, super nice to meet you. We should catch up sometime" and I'm going to carry on my way, right?
Rodney: I think the whole point of those conferences is to gain outside perspectives, get alternative viewpoints, and to that, I would say ... I'm not related to this industry at all or to the ... I don't put on those shows or really get personally invited to those shows but I would say ... I have no skin in the game but I would say I know a lot of them have moved online and I think that's worth investing that money in. It seems weird, it seems harder to me to pay $300 to watch a bunch of Zoom meetings all day long but I still think it's valuable, although, less valuable than going in person.
Rodney: I think this whole conversation carries over too to farm operations. I've dealt with a ton of farm operations in my career, Gabe, and I've seen just about every dynamic of family operations that you could imagine. I think the most successful farms that I see are father/son operations, maybe a father/daughter operation, right? Where each side has a little skin in the game, right? I've been on farm operations where it's run by the dad or the grandpa, right? Dad or grandpa says everything and the rest of the people kind of do what they say. Successful operations for sure, right? This family farm has been going on for 100 years.
Rodney: More interesting operations happen to be where the dad is running the show or has been running the show for a long time but also likes to hear about his daughter's thoughts on how do I handle this? How do I handle that? And is open to that feedback. I think that's that Medici effect like playing in real time on farms.
Gabe: Yeah. Yeah. I don't have quite the breadth of exposure but I think when you see the work divided ... Like genuinely divided and respect between the efforts, that's when you get that. It's ultimately about healthy debate from genuinely different perspectives. Sometimes you can develop those yourselves and sometimes you've got to bring them in.
Rodney:Healthy debate in a safe environment, right? Dads listening, as you're pulling in this maybe next generation, maybe wife, maybe intern that spent some time in some other realm, man, really genuinely try to pick their brain and figure out where they see holes in your operation. That has been one of my favorite things in coming to Indigo is I am one of the guys at Indigo that has a significant career in the ag industry, right?
Rodney: We employ a lot of people that came from other realms and industries and as much as I hate being in a presentation and saying how the grain industry works and somebody raising their hand and saying, "That's really stupid", right?
Rodney: Your initial response is, "I'm going to be really defensive about this because, hey, this is the way it's done. This is the way it's been done for 100 years." But the reality is that person on the other end of that statement has some experience in a different industry that has probably already solved this problem or dealt with a problem like it. Man, those are my favorite conversations at Indigo and on the farm.
Gabe: Well, I think that last point is so ... Assume somebody else has had this problem and fixed it. Rarely are the problems we deal with genuinely unique.
Gabe: Yeah. You sometimes have to cast a pretty wide net to find the person that's dealt with it.
Rodney: That's right.
Ryan: Nice, guys. We have another question coming in here as we kind of close up our time. I'll remind all folks you can submit your questions at the Q&A at the bottom of the screen. This question coming in from David is: Folks are scared of farming. What role do you see Indigo playing in assuring folks that farmers care?
Rodney: I think and, David, correct me if I'm wrong, this is folks are scared of farmers trying to kill them through pesticides and stuff like that type tone? Or are they scared of being a first-generation farmer?
Gabe: Or did they learn...
Rodney: I got a yes. I got a yes. David agrees with me. It's killing people with pesticides.
Gabe: Okay. I thought ... Just so everybody knows, rice paddies have alligators in them. I've been on a lot of farms. I will not go into a rice field. I am scared of that.
Ryan: I think it's about where the food comes from and folks not knowing the origins for their food, which is very, very common.
Rodney: I'll give you my take on it. I think farmers are humble folks, right? Every farmer I talk to is just humble. Over and over. I think the farm bureau has done a pretty good job ... Illinois Farm Bureau so this is Illinois Farm Bureau has done a pretty good job of trying to encourage farmers to tell their story and get to know you type thing and I think one of the things that's interesting about Indigo, the question was how does Indigo help with this?
Rodney: One of the things that's interesting about Indigo is we think about everything from the farmer point of view, right? I don't want to be wrong about ... We think about everything from the individual point of view, whether that's a buyer or whether that's a farmer or whether that's a truck driver, we view the world from that specific point of view because we have this geolocation piece to our business.
Rodney: I think we're in a unique situation to be able to really tell those stories, right? Dive into that farmer's operation. What are you dealing with? What do prices look like for you? How can you benefit from different farm practices? I think we get to some point for that and I think the farmer needs to continue to tell his story to just a wider audience on that.
Gabe: Yeah. I mean, I think we can agree most fear comes from a lack of understanding, right? If we understand something rarely are we scared of it, right? Even if it's we think we understand it, it's because we're worried about other things that might happen as a result of it.
Gabe: Fear of the type of food, it's an unfortunate consequence of the kind of evolution of the distancing of many people from where their food comes from. Even that sentence like, "My parents are scared of farming. What do I do about that?" That's a really ambiguous thing to be scared of. Right? You had to ask for clarification. Even that, I would suspect they have some difficulty articulating actually what it is they're scared of.
Gabe: I suspect, like you said, are they worried about pesticides? Are they worried about nitrogen run-off? Are they worried about water usage rights? What is the ... That's the first thing is let's have a conversation about what that is.
Gabe:To your point, most farmers are conservationists. They don't actually want to use extra fertilizer.
Rodney: No. Right.
Gabe: For lots of reasons.
Rodney: Even if they are evil people, just the cost alone is [crosstalk 00:47:37].
Gabe: Right? Yeah. From an economics perspective, that's never a good method, excess. If I'm having that conversation my first set of questions is help me understand exactly what it is you're worried about. Associating those things specifically with farming, it's tough because, again, that's really ambiguous. It's like a big scary thing over there that they've turned it into or maybe it's not that big but whatever. Here's this ambiguous thing.
Gabe: To Rodney's point, we talk about looking at the world from every individual's perspective, right? Being able to present things. You left the consumer out of there, which is one that we look at it from.
Gabe: Fundamentally, one of the things I like talking about is Indigo is actually unabashedly capitalist. One of the reasons that we look at, say, our marketplace is because we think by creating the signals, the consumer demand signals aren't making it all the way back to the farmer.
Gabe: Another way for me to interpret that fear of the farmer is actually the supply chain doesn't let the consumer get all the way back to the farmer, "Here's what I want" and the farmer doesn't get to hear that. It gets stuck along the way. For something like Indigo Marketplace, one of the big intentions there is really to create transparency in the market so that we can use the market to solve the problem of removing the fear so that a consumer can see where those things come from. They can get as much story as they need to make themselves feel comfortable with what it is they're eating.
Gabe: I'll go back to my other point, if there's specific things that they're worried about, that's fine if they want to worry about them, that's how they want to spend their anxiety, that's great. Chances are, if you dig into whatever that is, you will find farmer groups also worried about that, right? Not actually trying to push it but also worried about it. Like any of those topics that I mentioned and just about anything else you can think of.
Gabe: There's a humility. I also think there's an accountability to the community, right? That always exists. Those things they go hand in hand with the culture.
Rodney: Yeah. The other thing I think when I've seen this question posed, and I have a lot, to a farmer I think the initial reaction is like, "Hey, I need to defend the whole ag industry", right? That feels like what they have to do but, man, that's where I get nervous is trying to defend the whole ag industry so one tactic that I've started to take is like, "Look, I don't know about this industrial farm that you're talking about. I can tell you about my farm."
Gabe: I haven't seen it.
Rodney: Yeah. Our farm, we use as little chemicals as possible and we only use enough to kill the weeds that are actually growing and we use all these alternative ways to do whatever we need to do and, again, I don't know about this evil guy you're talking about but I can tell you that all my neighbors act similar to how I act, right? I think anything you can do to bring that down to your family farm I think that's the best approach.
Rodney: The other thing when you talk about marketplace ... I know you and I have talked about this a lot, Gabe, I view marketplace as a translation tool, right? It translates consumer demand to farmer supply, right? It translates a number of things. I would love to see a world where we had traceability inside a marketplace and could take a truckload of I'm going to go with quinoa from North Dakota because I'm a corn guy and ship it to some buyer, mill, or whatever with the farmer's face on that thing, right?
Rodney: I think in some future world we have the ability to do that. Two problems with that, one, to your point, that value chain doesn't continue all the way down to the farmer. The farmer doesn't hear that signal. Also, I don't have a lot of farmers telling me they want to put their picture on the side of their bushel of corn that they hauled to whatever, right?
Gabe: Well, they don't all think they look as good as you do, Rodney.
Rodney: I don't want ... Nobody wants my picture on it. I get it. I think all of this ... It's all about the signals and translating that signal into something that's understandable for the person on the other end.
Gabe: I think it's important when one of the things that Rodney and I mean when we say signals is price, right? What somebody is willing to pay for something.
Rodney: That's a huge signal.
Gabe: That traceability comes with a cost. It is extra work. If we move that way, people need to get paid for those things. If that's what Dave's parents want they're going to need to pay for it.
Rodney: That's right.
Gabe: Most people are happy to do it.
Rodney: For payment, yeah. I would say if you told me that you wanted my picture on a bushel of corn I would probably say no. I have no interest in that.
Gabe: I thought you said you were going to pay me but okay.
Rodney: If you said, "Hey, I'm willing to pay you a couple cent premium in exchange for putting your picture on that" well, now, we're talking, right? Didn't cost me anything. Just pulling the right levers.