Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg and on the Data High Across Acid Reporter with Bloomberg and this week, well, as the name implies, on this show, we like to discuss what's going up in markets. And while the stock and bond markets haven't given us much to talk about, here's one thing that has lean hogs.
If you want to buy a futures contract on the Chicago Mercantile Exchange that represents forty thou pounds of cork, it'll set you back about thirty six thousand dollars seven and forty dollars at the moment. That's up about twelve this year, and it's hardly the only farm product that's rallying this year. Futures on corn and soybeans are up about the same and well, it's a fascinating market story.
It also speaks to how those lingering supply chain problems and the were in Ukraine are coming home to roost on the farm and posing risks to the global food supply. We'll get into it with someone who is an expert on how these markets work. After all, he is a farmer vill Donna. He is. Indeed, he grows all these things I believe, hogs, corn and Swimming's very excited I'm on the show, But Philpana, I'm also very excited to hear about yet another glamorous vacation of yours coming up.
You love to call me out. I don't know how you do it. How where are you jetting off to this time? I'm going to Spain? So so next week I believe you're flying solo. I won't be around next week. Uh to help you with the podcasts. How you'll survive? But who is going to roast me mercilessly? I'll have to find somebody who can do it as well as as well as I do it. Called in. But I'm also excited for your trip because this guest this week has really got me in the mood for some puork.
I'm very hungry for some some quork products. You can have that in Spain. Well, I know, believe me, I know, I know you're gonna be eating nothing but coliflower. Don't tell I guess I'm vegetarian and complete colliflower flower diet. I think I just heard him tell him, Yes, let me let me introduce him. I want to bring him in. It's it's Brian Duncan. He's the vice president of the Illinois Farm Bureau. He's a farmer in northwest Illinois, and
he also actually is a podcast host. So Brian, thank you so much for joining us on the show this week. Thanks for having me here Villdonna. And also, I am not a vegetarian. I figured I just didn't want you to know that. I am all I want fill Donna. It's it's called Iberico ham. They sell it like a full hogs leg at a time. It's it's cured, it's delicious. I'm not asking for a full forty pound futures contract of hand, just pounds, just one leg. You could fit
it into your carry on on the plane trying. Uh no, I'm sorry, but we are not allowing pork products in from other countries because of the risk of of a foot and mouth disease and so an African swine fever. So I'm sorry, Mike. You would have to travel to Europe to enjoy that that premium product, even the cured, cured, cured and cooked either one. You will not get past the Beagle brigade at the airport. That's good to know.
That's what it's called. That's what it's called. What that that the dogs that sniff customs, that's that's what's keeping. That's what's keeping our domestic pork production healthy and African swine fever free. Well, Dottie, you're gonna have you're gonna have to smuggle my hamleg. Then it's gonna be dangerous. Are you all smuggle? I'll smuggle, are you yes? But so so, Brian, speaking of all of this, I want
to ask you about exactly this. So you and your wife you raise corn, soybeans, sweet pigs, and cattle on your farm near Polo, Illinois. So maybe we just start out with you telling us about yourself and how things are going on the farm today. Sure. Well, again, glad to be here and thank you for this opportunity. Yeah. I grew up on our family farm. I was fortunate enough to marry my high school sweetheart. So we were celebrating actually forty years together in thirty three years of
marriage this year. And uh, we have four children, and three of which are also actively involved on our family farm. And so it's uh, it's a great lifestyle. It's a it's a you know, the hate to sound cliche like the movie, but it is a wonderful life and uh it's a pretty high calling. I think growing food and fuel and fiber for America and for the world, and so we take a lot of pride in what we do, like all farmers. Uh, yet at the end of the day,
we're a family business. That's fantastic. I gotta say I often had day dreamed about being a farmer. I grew up in Pennsylvania, not on our farm, but near farms. I'd often day dreamed about being a farmer. But I don't know if I can, if I have the fortitude of the getting up in the I think I'm meant
to be an office guy. My features in school would a test that I spent an awful lot of time daydreaming about being a farmer as well when I was living the dream, Mike living the dream Bright, I wanted to you know, the listeners of this podcast are very much of a financial orientation, investors and traders and that sort of thing, so I wanted to tap in a little bit into your expertise on the futures market. You know, as I said that the futures prices uh on lean, hoggs, corn,
soybeans all all up tremendously this year. That tremendously, but up up a decent amount tremendously when compared to all other assets. I'm just kind of curious how a farmer like yourself approaches the futures market. You know, we always hear that it's a way to sort of hedge what your crops are going to do in the coming year, But sort of what is your relation ship with the futures market? Um? You know, do you deal with a broker that sort of thing, and and how does it
work in your favor or not? Well, I'd say you can describe my relationship as solidly love hate and it depends on which way the market's going. So yeah, like a lot of our most farmers, I employ a bunch of different risk management strategies on our farm, and they involve hedging with a broker, They involve cash based futures contracts with a a packer or a grain merchant. Um. We also use some of the government risk management tools, the crop insurance or livestock insurance tools that are also
based off futures markets. So I'm usually using the futures markets to manage the risk on my on my crop production and on my hogs. Uh as far as I so, I do forward selling, forward contracting, and and what I'm looking at, Mike is is uh the ability to cover costs and allow ourselves a reasonable return. And when we see those opportunities, we we certainly do a portion of them using using a combination of those risk management tools.
You know, when you mentioned that that prices are up, and they are for agricultural commodities, but that just doesn't necessarily mean the profits are up because our costs are up as well. You know when you say corn and soybeans are are higher, Well, that makes the cost of production on the hogs higher. And so we're looking at margin and and we're looking at how we can best manage that margin and then and then protect that margin
um out into the future. Yeah right, So I'm I'm trying to wrap my head around if I see a futures market like this where there are you know, pretty
good gains in agricultural commodities, who's benefiting from that? Is it some farmers, if if they made the right trade, or is it mostly speculators hedge funds in the middle you know, who are sort of the players in the market, uh that that you know, we're are winning are losing in an environment like well, the funds have certainly become a big driver in these markets, and you certainly want to keep an eye on what they're doing if they are net long or net short of commodity, and when
they exit or enter, they can have a pretty dramatic impact on the markets because there's not a lot, there's not enough money to take the opposite position oftentimes, so you'll see them run the market up or down. Hence the love or hate relationship that I have with the marketplace. Um so yes, it's really Mike, It's it's a combination. It could be end users. So when prices go up, end users who have locked in their supply benefit because
they've hedged their risk. Um speculators who have looked at geopolitical uh things like weather or war and decided commodities were a good investment in the market goes up, and certainly producers if they if they've got to handle and if they can grow a crop. You know, if you've got a drought, it doesn't matter how high the prices go if you don't have anything to sell. So in generally now, prices going up is a benefit to rural America and to farmers. You know, it's just also got
to be it's more about margin, you know. It's it's it's the difference between our cost of production per unit and then what that unit is priced at and so and so good margins are better than high prices. High prices don't necessarily mean good margins, but a lot of times they surely do. Does that make any sense to you, Yeah,
absolutely absolutely. I mean I think that's the same conundrum that corporate America is facing, right, you know, uh, sure they're selling prices are higher, but their costs are higher too. And you know, do you have the pricing power to to raise your prices more than your costs? And uh, you know not everyone does. So it's it's a that's an important point, Mike. Farmers are price takers. We do not have pricing power. We are subject to the whims of the Board of Trade. The Board of Trade does
not care what our cost of production is. The futures the Mercantel Exchange does not care how much it costs me to produce a pound of pork. We are at the mercy of the market place, and that's what puts farmers in a uniquely disadvantaged position as far as inflation goes. We are price takers on both sides. We are subject to global fertilizer prices. We do not, as individuals have
enough market clout to drive a price. So we pay what the market offers us on inputs and we take what the market gives us on outputs, and so that puts us in a very challenging position at times. Yeah, So how do you think the average hog farmers doing this year? They are they able to protect those margins or is it a is it a tough you know? I think I think for the most part the hogs, hogs have made enough money this year to pay the feed bill, which when you look at the price of
corn and swabians, Um, that's that's really saying something. Now myself, I'm in a in a different position than a lot of hog producers in which I grow all my corn h that I need to feed my hog operation. So I'm in essence buying it from myself. Um, and so so that there's a benefit to that, that's kind of
heading a risk. But I would say in general, um, a lot of hog producers, I know, implement risk management strategies, and when they can see a margin that allows them to buy corn and soybean meal and hedgehogs at a price that allows them margins, they will take all three positions. And so the market has offered those opportunities this year, and I think in general, it has been a pretty good year, uh for the hog for the hog side
of the of the business. So, Brian, just to go back to the point you were just making about passing on prices, because I wanted to ask you about this, that it is much more difficult for farmers to do this. So can you just for me to better better understand the dynamics, can you just talk a little bit more about how rising prices, what the how it directly translates to you, what the what the relationship actually looks like. Surevill Nana. That's and and it's impossible for farmers to
set their price, at least in a commodity type market. Now, if you're a specialty grower or have uh you know, a direct to consumer market, then you've got some options. But most of us grow bolt commodities and and we, uh, we are at the whim of the marketplace, and that marketplace has two aspects to it. So it's got the futures price that Mike you talked about. You can look on the board of Trade and see the prices that
that the board is offering on different commodities. But then the next part of that is the local price, which involves basis, and basis is the discount or plus the futures price that the local market is willing to pay. And usually it's a discount because usually there's transportation involved, but in times of shortage, some local markets will actually pay over the board of trade. So so farmers usually marketing is a two step process. I will do a hedge on the board and then I will look for
opportunities to capture a good basis as well. And so it's all a matter of timing, knowing market dynamics, and UH looking for those opportunities. So selling for a farmer is generally a two step process. On the grain side, at least hoggs, there is a basis element to it. Um and hogs get really complicated. Hogs, UH do not have a way to deliver. If I sold a contract on the Mercantile Exchange, there's no way I can deliver
that contract of Hoggs anywhere. So it does what's called cash settled, and it means it has to settle out with the cash market and Bildana. This is getting incredibly complicated, but the basis is still very real in that aspect as well. Now we like we like complicated. It's it's fascinating to untackle it, you know, Brad, I was looking at the futures curve for hog prices and for listeners who don't know what I mean by that. You know, there's futures going all the way out to what at
the end of next year. I think maybe even further. I'm gonna pulled up right now. Three is what I show, but there might be some there might be further than that. And it's a very unusual shape of the curve. In other words, it's it's lower. You know, it goes lower in the first month, I believe, and then it goes really high into like the spring and summer of next month,
then it comes back down. Um is that simple? Something as simple as just a seasonality people you know, doing more barbecuing in the summer, that that sort of thing, and that you are very observant and that's an excellent question, and you have part of the answer correct. But it also has to do with the genetic UH and the biological reality of pork production. And and I'll put it bluntly, salves breed easier, and you have more successful breeding in
the spring and in the fall. All that's the seasonality for a hog. We breed hogs and raise them all year. The hogs that you breed in the summer, in the heat, your conception isn't as good. And so when you're farrowing those pigs in November and December that we'll go to market in May, June, and July, your numbers are down. And so there are fewer numbers available for the marketplace over the summer months due to the seasonality, the biological
realities of pork production. And we and and Mike, we we have these these hogs and in wonderful facilities UH air conditioned in in in a certain aspect we use engraperative cooling. A lot of fans move a lot of air. But that biological reality that there's just gonna be fewer market hogs available in the summer is something that we have not figured out a way to a work around.
Yet that is fascinating. So you know, you've got the hog honeymoon suite there with the air cushing and the mood lighting, I guess, and that ow candle you can't. And it's but it's just something in their DNA that that regulates that pite very much so and and uh, you know the heat. Yeah, it's it's just a seasonal issue.
And so the numbers will always if you would go back and look at a bell curve mike of of of hog harvest week by week, the highest, the largest harvests are always in October, November, December, and and so that results in the lower prices that you're looking at now. Now, if you we'd have had this discussion in May, and you'd have been looking at at June, July, and August hog futures as the leaden months, you'd have seen them
the highest because there's there's just fewer hogs. And then we also experience a bump with grilling season certainly, and and and that all helps, but the pure seasonality of pork production is very much at play when you look at that futures curve. And Brad, we've mentioned a couple of differ issues so far So you have inflation, you have supply chain issues, you have droughts, and all kinds of other other problems that you're dealing with. I'm hoping maybe you can just break down one or two of
them for us and how it directly impacts you. And I'm wondering what the most difficult issue or problem has been to deal with. Well, I think inflation on inputs on the crop side and some of the hog side would be would be number one. And I think supply chain issues are number two. And on any given day, I would trade those back and forth. And uh and and I think I think they are, you know, certainly connected. I think, uh, inflation. We you guys, you're the experts.
Why I'm not sure why I you should be telling me about this, but but you know, we still see some some disruption due to COVID so manufacturing that wasn't done. A lot of our inputs come from China, and we still see a zero COVID tolerance policy and China that impacts that impacts their ability to export some of the base materials we need, whether for livestock feed or crop production products. UM, we see geopolitical unrest, a lot of
disruption caused by the war in Ukraine. Russia was a large exporter of fertilizer and as you know, a large exporter of natural gas to Europe, and and now on the nord Stream with the disruption in the Nord Stream pipeline, Europe comes shopping here for natural gas, and natural gas is a base ingredient for fertilizer, for nitrogen fertilizer, So that has definitely been a disruption supply chain, whatever whatever
you want to call it. And then I think another closely related issue with inflation and supply chain is availability of labor. And and we see that anywhere from the farms to the suppliers to the manufacturers that uh, labor is is a very limiting factor. And even in the harvest facilities of live stock harvest facilities, the availability of labor to to maximize outputs and to maximize the availability about inputs is very real for American agriculture right now.
Is there, Brian, any sense that any of these issues are are improving, Is there any sort of white at the end of the tunnel for all these problems. I I would have said yes, prior to the invasion of Ukraine, um that I think I've been saying, And I was on a on a farm bureau trip in Europe eight days after the invasion happened, been meeting with farmers and farm suppliers over there, and I came away saying, this
has changed American agriculture for a generation. That the redirection of raw materials and then of commodity flows I think is very real and something we are going to be dealing with for a long time. I mean, as Russia was a major exporter of fertilizer and natural gas, and you also see some tensions with China. They're holding their fertilizer within their own country, and yet you see a growing demand for fertilizer, be it in Brazil, Africa here. Uh,
it's just led to it was. It's just a huge disruption. So you don't you don't flip a switch and start a major fertilizer production plant overnight. It takes years to cite, one years to put one in place, and a huge investment that that any investor would want to know that the returns are not just short term, that there's going to be long term demand here. And so I think the fertilizer disruption is very real and is uh, something we're going to be dealing with going forward for a while.
The labor issue. Again, you are the experts. I'm a I'm a hog farmer from Polo, Illinois. But my sense on labor is there needs to be a collective political will amongst the leadership in this country to find a solution and come forward with some legal immigration reform. When we have people willing to work in some of these key supply chain jobs, we need to find a way
to allow them into this country and to fill those tasks. Now, the H two A program certainly helps in agriculture, and there's some different visa programs that help, but I think that is probably more doable than than solving this global redirection of fertilizer and energy. I mean, and that's the other thing. Agriculture is very fossil fuel dependent. We are it's a base product and in making some of the some of the chemicals that we use, the plant protection products.
But our machinery runs on diesel, and when diesel goes up, our life gets a lot more expensive. And everything we have on the farm or sell on the farm comes on a semi or leaves on a semi on a big truck and uh, the cost of transportation has gone through the roof as well, and so uh, I think we need to aggressively continue to to look for solutions in the hostile fuel space and uh that would also help, Brian.
Do you see, just to go back to the point about Russia and Ukraine and the fertilizer shortages, do you see American farmers stepping into help fill the void, even if it's not a quick turnaround. You mean as far as like our co ops investing in fertilizer production and
things like that. Is that what you're talking about, Panana, Yeah, exactly, Yeah, maybe so some of our co ops used to own fertilizer production facilities, um, and they weren't profitable, and so they invested of them and and so we've seen you can Yeah, I would call it an old agopoly. A very small number of fertilizer companies that control a large amount of the supply and farmer and co ops used
to be in that space, but they're not now. I don't know if there is the will or the capital to make a long term commitment to re enter that space. My sense would be once burnt twice shy, Yeah, you know, Brian. The other issue that comes up in pretty much every discussion like this, uh, you know about macro issues around the world, is is China and the sort of state of the economy in China the state of trade relations with the US. UM. China from everything I've read, is
is a major consumer of of US pork products. Um. How do you see this decoupling of the US and China playing out sort of in the in the longer term? Is that a Is that sort of a risk that maybe they'll start turning elsewhere for hogs? Uh? Is that a danger to to your business at all? Do you think? Yeah?
I'm I'm very worried about what what I would call the relationship that I've read and understood as bricks b R I c S Brazil, Russia, Indian China, and how they could become a galvanized interdependent force that would have that would have tremendous geopolitical consequences and it would definitely impact American agriculture. I mean, we see Brazil, so Brazil was a main grower of soybeans, okay, and so we know they're a lead export competitor on soybeans, but they've
also advanced in the technologies to grow to crops. And when you're in Brazil, they grow corn. It's called the safarina crop after they grow soybeans and now the sapharina crop. Their average yield is half or less than half of what American crops yield, but still that many acres, that's a lot of bushels. And and China has made moves to accept corn imports from Brazil, which as as we look at the redirection of trade, if if there's an alliance there, um, that could be very problematic for American
agriculture and our ability to export. And but I think there's other opportunities as well. We don't want to just export based commodities. We like to export value added commodities like ethanol and and I think there's room there but to do exports around the world. But China is is uh challenging. How's that for a trading partner. They just delisted a pork plant in uh Indiana, um and and and I won't accept it for exports. And I'm not sure why. I'm not sure anybody knows why. And and
so these nine tariff trade barriers that we see. China's is pretty expert at deploying at times, which makes which makes a long term relationship with them very challenging. But at the end, when you look at those consumers there, American business isn't American farmers time after time have decided the juice is worth the squeeze, and so we put up with it and and continue to try and move
into that market. I imagine none of that actually helps with rising meat prices, right, And I'm wondering if you have seen dwindling consumer demand at all with the right with the rise and meat prices that we've seen, I have not heard of any The consumer demand remained strong and I and and some of the rise and meat prices that you're seeing is a fall out of COVID.
So those of us in production agriculture when COVID hit, especially in the livestock business, and I'm sure you you covered this, uh back in when we had harvest facilities going closed and we had animals with no place to sell them. It was a very bleak time in livestock production, and there were some decisions made then, and remember the
biology of the animal. There were some decisions made at that time to cull breeding herds, to to exit businesses and and in production agriculture, we just can't flip a switch and turn a light back on. If I want to raise more pigs, I need to and have those pigs ready for market. It is an eighteen month process till I have marketable livestock. By the time I select the breeding animals, raised them, breed them, raise their offspring,
it's eighteen months. And so you're you're seeing the result with higher prices here of very real struggles and very challenging times that farmers had during COVID and the reduction in the herds. And then you're also seeing a result of adonna of lack of available labor on some of these farms to rant production back up. But I it's consumers and and the rising middle class around the world will continue to have a demand for protein. That's just
a fact. When consumers raise their standard of living, they want to eat better. And we've seen that time after time, And so I think there is solid underpinning of demands for protein. And I sure hope that consumers understand that farmers were doing all we can to supply the protein to them. Uh, there's just an awful lot of mitigating factors these days. Yeah, Brian I. As I said earlier, I grew up in Pennsylvania, in the suburbs of Philadelphia,
and there were family farms all around me. But you know, one by one, the value of that real estate started to become so valuable. Uh. You know, as the suburban sprawl sort of spread out throughout the suburbs of Philadelphia, You're I think, what about two hours outside of Chicago. So I'm just curious. We've had this hot real estate market at least, you know, until a few months ago.
The interest rates are kind of cooling it off. And you know that my senses, there's this very much a migration out of the cities into the suburbs and the exerbs. Is there any pressure market pressure on any your your fellow farmers, or at least the temptation to say, look, this is a hot time to sell this land, uh and and just retire and cash in on the value of that real state. Imagine that's always kind of attention
for a farmer. Is you know, is this has my real estate, my farmland appreciated enough that you know makes sense to to to bail on it, on this farm and sell a developer. Is that an issue now? Or am I just imagining that? Like, is that is that getting to be a bigger issue for farmers that temptations to to offload their real estates. Again, very good question, Mike. And so first of all, you need to realize remember what state I live in? Yeah, Illinois, Illinois. Not a
lot of people looking to move to Illinois. So well, it's it's it's reality. You know, if we were talking to a farmer in Texas or in Florida or some of the other hot growth states, that could be a bigger tension. So what we have seen, yes, there is some there is some development pressure around certain cities, but we have seen an overall rise in real estate values uh, tied to the value of commodities and low interest rates and the interest of people to invest in solid assets.
You know, Bill Donna, you said earlier you you you specialize in cryptocurrencies. Well, farmland is about the opposite as much of an opposite in investment as cryptocurrent and cryptocurrency as there is. Because people like to be able to drive by and see their farm land, and so we have seen arise in interest from investors and so yes, it has caused farmland values to rise, uh. The capitalization required to farm is extraordinary, and uh arising interest rates
also makes our costs higher. But but Mike your second question, the other side of that coin is when a farmer sell, If he would sell that land and cash out, then he's going to realize some pretty significant capital gains taxes. And so most farmers that I know, at least in my area, were not development pressured. We have investment pressure. Um, hold the land, try to hold it for generations, hopefully, you know they all we all hope our kids want to farm, and I'm fortunate I got three maybe four
that that want to be a part of it. And so we see this as a long term play. Uh like generations. I've got a grand that was born last August. I'm already figuring out which tractor he's gonna drive in a few years. So we we tend to look at it generationally. Might not not that short term, but I know if a farmer is nearing retirement and doesn't have any kids coming on, um, yeah, I think that's probably a very real temptation. But then they're always going to
look at the tax consequences and make the decision. Well, that's interesting that the value of it as farmland. It sounds like that that demand for the farmland is just as strong, uh, maybe stronger in your area than the value of development. Yeah, and it's not just the price
of commodities. We see. We see some very interesting um I don't know if they're anomalies or if they're real, but there's interest in carbon sequestration and value of farmland in the whole climate battle and what what that might look like, um companies that may be buying farmland to offset their E S E S G scores. There's all sorts of dynamics here at play right now that it's kind of hard to get a handle on, right right, Well,
let's unpack that a little bit. The carbon idea, that's uh, you know, for lack of a better word, of manure, right, you collect the gases coming off the manure. Well, it's it's the sequester the plants. Again, I was daydreaming about farming and high school temistry biology. That the plants capture the carbon and and and hold the carbon and then if they go into the soil and the carbon stays in the soil. That's that's that's about my third grade
level of education. And so farmers can see quester or capture carbon from the air and hold it in the soil, and there is some there is some interest in that ability that companies would pay farmers, companies who are big carbon emitters would pay farmers for sequestering carbon. But there's
a world of unknown's yet about that, Mike. We don't even know if you can accurately measure carbon in soil, and some of the techniques used to hold that carbon in the soil are really challenging, UH not conducive to growing crops, at least in more northern parts of colder climates. And so there's a lot of there's a lot of questions, but let's just say there's interest there about could that be another potential revenue stream for farmers and see farmers
as part of the solution UH climate change. Brian and I have so many questions for you, and I apologize for jumping from topic to topic, but I do want to ask you about your crop this year because I read an interview or heard an interview of yours, a recent one where you had said you felt good about your crop this year. So can you maybe give us an update on this and in particular maybe focused on corn because we had a Bloomberg story a couple of days ago that said the US is set to have
a smallest corn crop in something like three years. So, uh, maybe just give us an update in an overview of of how that's going. Yeah, sure, build, and I feel very fortunate this year we have been the benefits. Beneficiary is a very timely rainfall in northwest Illinois. We have been very dry the last two years. Yeah, but this year, Uh, we've the Good Lord smiled on us. We were horrible dry in June and I thought our crop was deteriorating
before my eyes. And then the last Saturday in June, out of nowhere, we got an inch rain and then it's just been raining pretty regularly since then. And then like three weeks ago we had two three and a half inch rains in two days, and then last week of five inch rain, which that's getting a little silly, but the point being we have had plenty of moisture
and our good soils. Part of the world that I'm from a northwest Illinois, Um, we don't irrigate, we rely, we rely on Mother Nature for rain and U we've been very blessed this year. I think we in my part of the world are going to have a phenomenal crop. Uh. Now there's other parts of the state. I don't have to drive very far that the rains have been fickle. Um, they may drop three quarters of an inch in one area, then go two miles away and they didn't get anything.
And so there are parts and then especially as you go west in Iowa, Nebraska, they've been dry plain and simple dry and that's where the reduction and yielded um is that you're seeing in the news. Well, I'm glad to hear that the years is going well. But then maybe can you talk about next year and how how you're planning for and how supply chain issues hinder or or or make planning for the next year more difficult. Yeah, again,
that's a that's a great question. Um, we need to Now we've got a decision point with our local suppliers of crop input products. We to get the best prices or to lock in so we know we have availability. We need to pay cash for them by the mid September for next year's inputs. And I was just running
the numbers today before I before I came here. Um, what that would look like with the cash flow needs would be And if I think that these prices are worth locking in now, so they're significantly higher than what we locked in at this time last year, but they're down a little. Then the fertilizer prices are down a little from the spring high UM, so I think we will go ahead and plan the same basic prop rotation. I tend to plan eighty percent corn soybeans about five
percent weeks. So I say, I'm from the land of corn. We grow a lot of corn in my area, and that's what that's still the economics look favorable for that. As I was looking at next year's prices, they're not as good as this year. But there's a lot of time yet to take advantage of maybe some marketing opportunities between now and then. But what I have been told is, uh, if we pay for it now, there's availability that if you don't want to pay for it, um, you're taking
you're taking a risk um. And so those are those are the realities we're facing right now. And how does the rising dollar affect you? Well, it makes our exploit makes our products more expensive in the world market. Right, you know that when we're looking at exporting corn or soybeans, or pork. There's all of a sudden cheaper places to get it in the world. There's, uh, if you're China, you can you can import corn from Brazil. Um. But but I believe the reality has had some strength lately too.
So rising dollar makes any puts, any export or not just agriculture at a disadvantage, you know, Brian. So I'm trying to think, you know, if if I had a uh, create a a version of the consumer Price Index the CPI and call the farmer's price index for all the input costs and all your and and you're selling costs, it strikes is it? Uh, it doesn't sound like you would expect that to be coming down anytime soon. Um. You know you're talking about locking in prices for delivery
for goods next year, presumably fertilizer being the biggest. Uh. Sort of thrown in your side at the moment. But is that is that safe to say that? It doesn't quite seem like inflation is cracking or cooling off from from your perspective, given all the inputs that you have to acquire. Yeah, that's that's correct. I do not see I do not see our prices coming down anytime soon. And I know farmers are concerned that again being priced takers,
that we do worry. We know that commodities tend to cycle, and and uh, we have see a good crop worldwide. The commodities that we sell, the corn, the soybeans, the pork, the beef, the milk could could go down because of of global supply, whereas I don't see an immediate allusion to some of the Remember how base fossil fuel dependent agriculture is both on the on the fuel side and on the fertilizer side. I don't see a solution. So let's just say natural gas. I do not see Europe
not coming here and buying a lot of natural gas. Now, you tell me you watch the global markets more than I do. I don't see anything short of regime regime change in Russia changing the realities of the gas supply for Europe. And if Europe needs to shop for gas here, that is going to drive the cost of fertilizer up period and and I don't see that changing anytime soon. Yeah, I think that's a very student analysis of the situation. I don't either, you know, uh, some major change of
of heart of Vladimir Putin. I think you're absolutely yeah, I don't. I just I just see that continuing to be difficult. We've got tariffs on right now with I mean, so Russia could be a big supplier fertilizer too, But who's doing business with Russia. Maybe the Brazilians will, maybe the Chinese will, but I don't think we will. And we've got three on one and two thirty two tariffs on with China as well on some of the base petrochemical UH products that we need on our on our
plant protection products. I don't see those going away. I don't see trade with China. I mean, I think it's always gonna be tenuous, but I sure don't see a big breakthrough on trade there either. So that would lead
to my pessimism on input costs for American agriculture. And like I said, Mike, if we're gonna we need more fertilizer production in this country, if you wanted to, if you could get the investors and you could find a site that would allow you to do it, and you wanted to build a plant your three or four years before you've got product to sell, that's just the realities
of construction today. And so that's why I'm I'm I'm I just think we're in a higher cost baseline for agriculture, for productive especially for crop agriculture as we go forward. Fascinating stuff, Brian. I gotta say, if someone can come up with an Illinois version of that Iberico pork, leg i'm a I'm a buyer. Well, you've got to let him graze under the nut trees in Spain, I think, is why get that taste and then mike those pigs. Remember I told you eighteen months on a on a
commercial production facility in the United States. I think you already stretched that out to about three years in Spain. So their production, Yeah, it may be delicious, but it's it's limited. Um, that's that's that's the real. Fair enough, I will say, I I ate enough of the domestically ground pork as well that I'm doing my my part for the for the market. Here, bacon makes everything better,
even salad Bilda excellent stuff, right, I think. Um, we've got just a few minutes left, so hopefully they warned you about our little gimmick. Here. The craziest thing we saw in markets this week. I'm dying to hear what yours is. But let's get started with yours, what's the craziest thing you've seen this week? So I know you love to make fun of me for living in New York. So my craziest thing actually is about living in New York.
So New York City, the Sublima story continues to be the priceiest place to be a tenant and the media, and one bedroom rent is up forty percent year over year. Two bedroom apartments are up forty seven and Manhattan is the worst. Monthly rent has climbed to four thousand, two hundred and twelve dollars, up from last year. That's the average. Yes, that is tremendous. I wonder if it it uh maybe it dips during COVID and it's catching back up. I don't know, I wonder if that's I think it dipped
in the beginning, and now everything is just surging. And you hear these stories of people waiting like two or three hours just to go and see an apartment before they can even try to sign up for one. Everyone bailed out on the city and now they're getting called back to work and they have to find a place. Yeah, but that's crazy. That is nuts, and that rent component and you know, if you want to talk about CPI. That rent component is one of the one of the
biggest components. Well, Brian, how about you. Have you seen anything crazy in your world last week or so on? Price my nitrogen for next year, next year's corn crop, and it is up sixty five what I priced it at for this year's crop, so six price increase. And and Mike, if you want to pull up your Chicago Board of Trade prices and lookout into next December, corn is worth less than it is right now. But yet we're dealing with price increase for the base fertilizer we
need to grow corn. Wow, and that is Does that all sort of relate back to the natural gas per that's a that's a big world world demand, natural gas supply chain, transportation. Uh, all sorts of disruptions, Yes, yes, and yes it's all the headlines are hitting you at once. It sounds like that. Well, we wish you the best luck, Brian. Uh and fascinating conversation. Um, you really sew yourself sure, you're you're you could be teaching an economics class, not
just a finance class. So we really appreciate your time. Let me hit you with my crazy thing before we leave. Uh we do A one thing that caused inflation, uh, or one of the issues causing inflation that a lot of people were focused on was used car prices. I've got a ridiculous price for a used car. Here. It's a nineteen five ford Escort Uh. Recently went up for auction. Uh. The trick here is that it was owned by Princess Diana. That's that's a small ash tricks small So it was that.
I'm amazing to think that the Princess of England was driving around in a ford Escort back in the day, but that that's what they had her and I guess they wanted her to look like you can be incognito in it. Yeah, yeah, So in nineteen five ford Escort RS turbo. Um. And I don't know if you remember the eighties enough to remember the ford Escort not exactly a luxury car. Let's just say this, uh sold new in for eight hundred pounds, so about ten less than
ten thousand that today's exchange rate. So it's not a time to play the prices precise is what do you think Princess Diana's five ford Escort RS turbo sold for at auction? Okay? You always, I do so poorly with the with the car once, I'm gonna go with two hundred and fifty thousand pounds two d and fifty thousand pounds, okay, so that would be was a little less than three hundred thousand US something like that. All right, Brian, time time for you to claim victory over Vildanna here in
our little game show. What do you what do you think the price was at auction for Princess Diana's ford Escort? Three quarters of a million? Oh my god, this guy is good. Well what did what did a stand musual rookie card sew for the other day? Well? North of a million til the car is gonna be Yeah, the the mickey Mickey man, it was like ten million or something like that. Seven hundred and sixty four thousand dollars. Brian was basically a rounding error off in his guests.
That's very very that's really good. Well, I was I was gonna guess two millions, so I guess. I'm glad I didn't go with my first guess. Still, three quarters of a million dollars for eighty five ford escort. It's it's a crazy world out there. I don't know, but is a car still functioning? You know, I believe it is. I'd have to read the whole story. And this is
courtesy the Washington Post. And and if it was a sport, it had a four speed, you know, it had a manual transmission had to be so that makes it worth more too, just on the fun factor. That fun failure, Well, good luck finding someone who knows how to drive one of those. These days. I think you and me might be among the only ones left who uh, you can drive a stick. I haven't driven a stick, I don't think in this century. So i'd probably burn out a clutch or two on that trying to remember how to
drive drive a manual. But Brian, good stuff. If you ever give up the farming career, I think you could get a job as an appraiser of crazy collectibles because you now that. Well it's been it's been nice getting to know both of you. Thank you for this opportunity. I've certainly enjoyed it, and maybe we can do it again sometime. I would love that. Brian, thank you, thank
you for joining us. What goes up, we'll be back next week and so then you can find us on the Bloomberg terminal website and app, or wherever you get your podcasts. We love it if you took the time to rate and review the show on Apple Podcasts so more listeners can find us. And you can find us on Twitter. Follow me at reag Anonymous. Bill Donna Hirich is at Bildonna Hirach. You can also follow Bloomberg Podcasts at podcasts. What Goes Up is produced by Stacy Wong.
The head of Bloomberg podcast is francesco Leavie. Thanks for listening. To see you next time.