Joe Weisenthal (2:33)

They are. They are always complaining about something. But you know what? It's okay. We need to eat to live. Food is pretty important for sort of human civilization, flourishing, et cetera. So if the worst is that they complain a little bit about how much they're getting for their corn or whatever, I'm okay with that.

Tracy Alloway (2:50)

Well, to be fair, we also know that one of the defining news stories of the past few decades has been the hollowing out of America's small scale agricultural industry and farmers. So if you are an independent farmer, there is a lot to complain about, to be fair.

Joe Weisenthal (3:07)

Totally. And again with the caveat that it's always tough. Very recently, a couple weeks ago, we did the episode about surging fertilizer prices. In that conversation, you know, we talked about the fertilizer to corn chart and it is not a good ratio.

Tracy Alloway (3:23)

No.

Joe Weisenthal (3:24)

You know, there are many ways to represent an industry, but if you just wanted one, that's a very clean way. Fertilizer prices way up. Obviously, given the situation in Iran, corn prices not nearly anywhere close to their all time highs or anything like that. So just by at least one measure, that is a clear squeeze.

Tracy Alloway (3:41)

Right. So we recorded our fertilizer episode, I guess a week or two ago at this point. I think at the time when we were discussing it, the possibility that the closure of the Strait of Hormuz could actually push up fertilizer prices. A lot of people weren't necessarily that aware of this dynamic. Since then it has gone very mainstream and you have officials in the US government talking about sourcing alternative fertilizer from Morocco or Venezuela to try to offset some of the pain. There is some slightly good news if you are a farmer, which is that we are seeing grain prices start to go up. But to your point, again, it is not at all clear that it's going to be enough to offset the higher input costs like fertilizer or oil.

Joe Weisenthal (4:25)

Totally. Well, anyway, you know, we did that episode several weeks ago about what it was like to do agribusiness in tough markets like particularly Venezuela, Ukraine and so forth. And I recall at the very end of that conversation, and this was obviously before the fertilizer spike. Yeah, our guests who we were talking to said we got a good history lesson about Venezuela and Ukraine, but they also said at some point we should talk about the pain that American farmers are in right now. And so then. So that was already the condition. There was sort of this tease. Things weren't great. Then you get the fertilizer spike. So it's like, it seems like a good time to have that conversation.

Tracy Alloway (5:03)

Yeah, we were going to wait a little bit to do that episode. But it turns out that now is actually the perfect time for the perfect guests. Once again, we are going to be speaking with Jeff Kazen and Mike Rolfson. They are the founders of Agris Academy. So, Jeff and Mike, thank you so much for coming back on Odd Lots. Really appreciate it. First question, you know, when we spoke to you last time, we were very focused on Venezuela and Ukraine and your experience working at Cargill earlier. But can you just tell us what Agris Academy actually does? Jeff, why don't we start with you?

Jeff Kazen (5:35)

Yeah. Thanks for having us on again. So Agris Academy is not a broker and advisory business. Mike and I each have 30 years of in depth either commodity or involvement in the ag industry. And we decided we wanted to start an education and consulting business. So we educate. We have a producer practice where we educate producers on one level how to manage risk and understand the future side of risk and on another level how to merchandise like a professional grain operation. Because a lot of farms have become effectively elevator managers. There was a gap and still is a tremendous knowledge gap in farmers around the world. We generally have North American students and clients. And then we also have a commercial business where we work with businesses that work with various all kinds of commodities, where we help them understand the risk, walk through how they're consolidating that risk, how they're managing that risk in best practice form in a boutique consulting type of arrangement. So we have both practices in a super rewarding business. Kind of a second career for both of us as we kicked it off and we wanted to be in a very differentiated part of the market that wasn't well, well covered. And that's been a fantastic. We've been in business now for four years and grow very, very steadily each year.

Joe Weisenthal (6:49)

Mike, just in case anyone hadn't listened to the episode with the two of you before, and just to sort of add on to what Jeff was saying, just give us like the quick your background, your bio and the long experience that you have had in the ag space.

Mike Rolfson (7:03)

Yeah. About two thirds of my career was spent in Cargill doing an array of commercial things, mostly in risk management, trading, global supply chain type of things. I got at the end there after a stint, actually, that Jeff and I both did through their merger and acquisition and corporate strategy group. I pivoted to ventures, got hooked on that, and I left Cargill in 2009. But since then I've been in some sort of a ag tech oriented, venture capital oriented type thing in ag across an array of topics, sub segments within ag Jeff and I have kicked this off, what, about three and a half, four years ago now. And one thing I think that helps this conversation today is we've probably touched through students or through more direct relationships, almost 400 farms now in the US and Canada. So we definitely know the vagaries of where this input situation falls and who's positioned well or otherwise and what's really going on when it hits the farm gate.

Tracy Alloway (8:03)

Yeah. So on that note, why don't you tell us where we are in the sort of agricultural calendar at the moment? Because one of the things we learned from our previous fertilizer episode is that fertilizer prices are going up kind of right when people need it most, which is the spring planting season. But my understanding is some people would be buying spot fertilizer right now. Some people have already got their supplies secured. And I'm also very curious about where we stand in terms of planting decisions, whether people are still making those right now or whether or not people have already decided what they're going to plant for the year.

Jeff Kazen (8:42)

Yeah, I guess this is Jeff and I'll take this one on to start. So when we're really talking about a North American farmer here. Right. We're towards the end of the South American or South Southern hemisphere harvest, whether that's generally Australia, Argentina, Brazil. You know, we've already started planting corn in places like Texas, even into Mississippi. We have clients that have already started and it was 8 below in Minneapolis and we're not even close here in the upper Midwest. So a lot of the certain amounts of nitrogen actually is put down actually in the fall in the northern tier, where ground freezes and things kind of go into a stasis for the winter a fair amount. And we're really, really talking about nitrogen. Fertilizer here is probably maybe the one that's giving the world the most heartache at the moment. Some of it's pre bought, pre positioned. I would say the vast majority of what it needs to be used in the US Crop is already either here in warehouses or on its way because you have to remember it's a long supply chain. And if we're going to plant in earnest starting in early April into what we would call the Corn belt, that product already has to be here. So you can see that in pricing, the full, call it replacement price of some, something like urea coming out of the Arab peninsula area is not reflected in US values. So it's one of these. You generally as a trader would price replacement, but full replacement is actually not coming through at the moment, I want to thank, I don't know the name. Some Stonex people have been putting that out on X, kind of keeping people appraised of what that is. So you're not actually getting the full brunt because a lot of that in the Northern hemisphere is already here.

Mike Rolfson (10:23)

I was prepping for this and the University of Illinois puts out a really good series of reports, I believe under Farm Docs Daily, I believe it's called. And the figure they threw out, at least the one I saw, I believe was around 75% of fertilizer has already been purchased.

Joe Weisenthal (10:38)

Okay.

Mike Rolfson (10:39)

You know, plus one.

Jeff Kazen (10:40)

So.

Joe Weisenthal (10:40)

Okay, well that's, I guess that that is relatively good news that a lot of it's already been purchased, perhaps before the spike. But we're going to talk obviously about what conditions are like we're recording this March 17, 2026. But let's what conditions were like February 17, 2026. Because at the end of our last conversation several weeks ago, you're like, you know, we should really talk about this squeeze that's already sort of facing American farmers. So why don't you take us back to February 2026 or January 2026 and just talk about the sort of general macro conditions that the people you're working with were already facing prior to the fertilizer spike.

Jeff Kazen (11:21)

So let's just take you back. So I want to take your listeners to how farming works in the US A little bit of an insight that is a little bit maybe they haven't seen. So what has been happening and why you continue to hear from the farm community about the squeeze. If you look at prices right, we sent you some price charts. I'm sure you'll be able to put those in. We Basically since 2016, the futures prices have not changed. So imagine a business since 2016 where your output as prices have not changed. Then on the flip side, when you look at, let's call it inflation, land prices, I don't have these exacts have probably doubled. Equipment prices are probably up 40%. The cost of living. Think about things like health insurance, all these things. You would look at that massive increase in prices and look at that and say these businesses have to be insolvent. So the first piece of the puzzle I want to take your listener down is land. So when you produce in the big markets, let's call it corn, soybeans, cotton, soft wheat, and I'll apologize because I'm not going to cover every crop here, kind of that Midwest market, we'll just use Midwest corn It is a tremendous driver of land value. If you take a cost to grow an acre of corn, and let's use an example, it's $1,000 an acre to grow the corn. And you're in central Illinois and you're on an ideal parcel called a square section. Nice, flat, black and square. The land rent is probably going to be half your costs. And so obviously you can see that tremendous inflation in land rent or the value of the land. And a lot of land is rented. Right. Just if you look at the capital constraints and the challenge we're having as farmers with land and land rental values is it's not trading basis, it's economic value creation anymore. It's trading like gold. Hmm. Okay. So the investor community has maybe pulled back a little bit and land prices are actually stable at a very high value today. But it represents, if you think about, yeah, fertilizer is going up. It's actually in the last 10 years, isn't the one that's gone up as a percentage the most right land by far. And when you get the promise that cap rates are going to be 2% net and you're going to get 6% a year, which has actually has happened up until maybe the last 24 months, it's attractive. A lot of outside investors, it's not correlated very well to other investments. So it provides a nice portfolio effect to the thing. But it's gotten to such levels that on a cash flow basis, it makes very little sense. On the investment in land, you're banking that at 2%, you're really banking that you're going to continue to get appreciation at 6% forever. And that is actually running, in my opinion, the law of big numbers. So the other thing that you need to understand that has driven land rent, and I think you alluded to it around small farms, is federal crop insurance. You may have heard about this, right? But it's highly subsidized. And if you think about when you look go out, you spend $1,000 an acre to grow a crop, right. It would be seem to be quite risky. But if you can now, particularly with some additional subsidies, you can insure most of the loss away through federal crop insurance, which is highly subsidized. One thing I do farm at scale in my post Cargill life, so very involved in this, and think of it as a call option where all of a sudden you've been able to hedge off the downside, but you continue to run the upside for yourself. And so what that's done is it's really Stabilized land values. And it's also made rents bid up to basically no margin because they'll go, the farmers will try to get bigger, right? We're looking for economies of scale and efficiency. And it runs like a call option. If you graft it out, right, you lose the downside and you have this hockey stick effect to the upside. So that has driven land rents extremely high in a lot of places. So you're really getting a lot of pressure from your number one cost, which is land price. Number two would generally be fertilizer. But remember, as a percentage, if you've bid the ground up, and this is probably why you're getting a lot, if you've bid the ground up to a zero margin and then all of a sudden you have a shock to the fertilizer system. Now your theorem medical margin, that was basically you bid to zero to gain scale and now you're $100 an acre negative, right? And then you push that through. When you farm 1,000 acres, you've lost $100,000, you farm 200,000, 200 acres and it just keeps moving. It gets to be big, the farms have gotten big. And so that's where you really, when you get a shock, like fertilizer shock when you're late in the system, right, You've already agreed on land rents, you've agreed on basically most of your input costs are locked down at this point. And all of a sudden you don't have everything covered. It puts you into negative pretty quick. And so margins are very, very tight. And in fact you've seen some of these various government payments that have been pushed through. A lot of those are going straight through the system. So if you think about the farmer, right, he's using that money, he or she actually, I should say, to pay off various, pay the land rent or make the payment on equipment or things like that, that money is getting passed through. That's why sometimes you hear the farmers, you say they complain all the time, like I don't even get the benefit of this, you know, bridge payment or whatever the latest name is, because it's passing straight through the system, which, that's why they grumble that, you know, it all goes to the various Agco and John Deere and Nutrien and some of these companies that people are looking at as investment.

Mike Rolfson (17:01)

It almost becomes sort of a hyper channeled monetary inflation. This last mechanism that Jeff described, because that money basically passes through the, of the producer and then ping pongs in the system on the input side.

Joe Weisenthal (17:29)

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Tracy Alloway (19:37)

a little bit more about land rents. And the reason I ask is because I read I found a random book in a used bookstore called Trees. Why do you wait? And it was like an anthropological study of two towns, two farming towns. I think they were actually in North Dakota, both of them in the late 1980s. And so a lot of it is about how farmers make individual decisions and so One thing I'm very curious about is the factors going into whether a farmer can outright own the land versus rent the land. Because certainly in the 1980s in these two small North Dakota towns, there was a lot of grumbling about the landowners themselves. And I think a lot of people in the towns were upset that they would rent land from, you know, usually older people who would then leave the town and go to Florida in the winter and just charge an extraordinarily high amount for the right to farm that particular piece of acreage. So I'm very curious. What are the factors that go into whether a farmer ends up owning or renting?

Jeff Kazen (20:37)

So at today's values, right, farmers generally that are in the business own a mixture of. They have some own land and some rented land and they basically will leverage the owned land or look at the average kind of land cost and they'll buy strategic pieces in today's market. The piece across the fence, the one that they've watched for years and years. And so you see a lot of that. And of course we also have an investor community and we also have a 1031 exchange community. All these solar farms and data centers are bringing massive amounts of capital back into land. And it's really. I mean, we have personal friends that are being bought out for development. We, we've watched farms trade for solar. And so, you know, and they trade at tremendous values. And the farmers like to rotate that back, that capital back in. But when you look at the returns for very prime farmland, and I'll be light on this, and you're going to pay $15,000 an acre, Iowa or Illinois, and I'll probably be a little bit late basis today's values, but for easy figuring. So if you want 10% cap rate, you have to have a land round of fifteen hundred dollars. And that's never going to work. That's going to be more than the gross revenue. So you end up with land rents that have been pushed as high as they can stand to this kind of. I'm using this example of this prime real estate at $500, this very square, very efficient piece. Not every piece of land would even garner that kind of rent. So it's very hard. You can't make the thing cash flow on its own in today's values. I said it has divorced itself from its economic. So then you're back to renting, right? And then you're in that game of securing land based. It secures across efficient equipment scale. And so you back to, you know, renting that and Quite frankly, we do see this all the time where rents have gotten so high, if grandma had 100 acres that, you know, all of a sudden she can rent out for $500 an acre. Right. It's $50,000.

Tracy Alloway (22:35)

Yeah. Not bad.

Jeff Kazen (22:36)

It's 200 acres. Right. Not bad. Right. Head to a low tax state.

Joe Weisenthal (22:39)

Yeah, yeah.

Jeff Kazen (22:39)

And enjoy some life. So you get a lot. It's very hard to justify as a farm buying land. But we still do buy some. Right. Strategic pieces, I think is what generally in today's environment where you get. But there are all kinds of actors. Mike, I think might want to comment here, but we often hear they say you're not going to make any more land.

Joe Weisenthal (22:59)

Right.

Jeff Kazen (22:59)

And I really don't. We get into this thing. I don't. That's not really true. Right. The Brazilians are adding 2 million acres a year, maybe more. The Indonesians can add palm plantations at a tremendous rate. There obviously is lots of potential in Africa still to be unlocked. And then the technology and efficiency per acre has just exploded. And that's actually. If you look at that chart and say, Jeff, you started saying the prices aren't any higher. You have this huge inflationary fact. How are farmers surviving? And the answer is we've had tremendous productivity gains in farming, particularly North American farming. The country quietly should be very proud of its ag sector. It's done just. It quickly adopts things. It drives technology adoption at a tremendous rate. That's lowering its unit cost. And that's how we've been surviving for the last 10 years. If we have lower, you know, ever squeezed by inflation. You've got to survive in productivity, Mike.

Mike Rolfson (23:59)

No, Jeff nailed it. You know, you look at the charts, the blips aside, say around the 21 drought in South America and then the 22 issue with the Ukrainian war. If you look at it averaged out or Even snapshot from 10 years ago to today, we are almost dead on the same numbers. So it's being made up via efficiency gains in a significant manner. But the fact of the matter though is, and I'm sure in your world you've heard this many times, the real rate of the inflation adjusted, real rate of commodities over time will fall. They just do. If you chart, I think the best way to do this is to chart gold against anything. And you can even pick some things that have maybe been hotter in the moment, like cocoa last year or cattle recently. And if you do a long term chart of any basically price taking, very elastic supply response commodity, they will fall over time. If you Plot it against gold. It's a stunning chart.

Joe Weisenthal (24:59)

Yeah. To be fair, anything these days looks pretty bad relative to gold. But I certainly take the point and to some extent that is the definition of progress, right, that all of, you know, grains and proteins and stuff get cheaper over time as we become a wealthier society. But I certainly take that point. Talk to us about trade in the last year because I could think of like a few different dimensions. First of all, you always have the President talking about we're going to get a good deal for our soybean farmers. So I'd never quite sure where that is. Second of all, though, I imagine that, you know, especially certain just you mentioned equipment costs and tariffs on certain goods, I imagine has created a squeeze. Talk to us about the last year and how changing trade patterns have affected the farmers that you work with.

Jeff Kazen (25:50)

Yeah. So the first thing that hit us, right, obviously was the trade challenge with China, largest buyer of soybeans in the world. And that obviously pushes supply back into the US and the Brazilians actually get a different signal, economic signal, because prices actually rise in Brazil up underneath the tariff barrier, up right just below where the US value is. And so you get a signal into the Brazilian market to expand, actually. And the other thing I have a very concern about in that is as we've worked through it, we have sold the Chinese have bought just enough US Beans to keep the Brazilian honest. That's it. And that's it.

Joe Weisenthal (26:31)

Can you explain, Sorry, can you clarify what that means?

Jeff Kazen (26:34)

So what they do is because the Brazilians say, hey, you're not going to buy any US Beans, period. Right. Their prices just keep going higher and higher and higher. Well, all of a sudden, I think the day that they did finally buy a few Brazilian cargoes, I think the Brazilian beans probably lost a dollar a bushel.

Mike Rolfson (26:49)

That U.S. cargoes you mentioned.

Jeff Kazen (26:51)

Yeah, U.S. u.S. Cargoes. And it sends a signal so that the U.S. the Brazilian beans just can't get away too far away. The Chinese sacrifactly have used us as

Joe Weisenthal (27:01)

a, I see what you're saying as

Jeff Kazen (27:02)

a lever to keep that going. But so you got expansion. Brazil and of course Argentina under the new regime doing much better as far as. And you can see they had an all time record wheat crop there. And so you've got two competitors that are doing relatively well. The other concern I have with this is, and trying not to be political is back when we embargoed the Russians, it sent a signal to the world community that we were not a stable supplier.

Mike Rolfson (27:32)

The Soviets in the, in the. Yeah.

Joe Weisenthal (27:36)

Oh, you're not talking about.

Tracy Alloway (27:37)

Yeah, I was confused for a second.

Jeff Kazen (27:39)

We're going. But we're going to go way back.

Joe Weisenthal (27:40)

Good, good.

Jeff Kazen (27:41)

Let's.

Joe Weisenthal (27:41)

Good. We love, we love history on the podcast. So wait, talk to us more about

Mike Rolfson (27:45)

not the recent addition.

Joe Weisenthal (27:47)

All right. Yeah, tell us.

Jeff Kazen (27:49)

Yeah, so when that happened, right, that caused a flood of capital to pour in to Brazil and Argentina, particularly the Japanese, which were the large buyer, global buyer, and the global trade back then. But others poured money into infrastructure to get an alternative. And you would do the same thing, right, if you had one grocery store that was supplying you and all of a sudden they said you either do what I want or you'd go find a secondary supplier. And that is absolutely happening. Foreign capital is pouring into alternative markets. So it's a long term challenge in what this trade dispute has done. That's my concern.

Joe Weisenthal (28:25)

So you're saying that history is repeating in the sense that the proximate, okay, there's a bunch of trade barriers, et cetera going on. And so the move is internationally just invest more in non American farms to expand that supply. And so you see more say Chinese investment in Brazil and Chinese investment elsewhere so that they just have alternate, various buyers of alternate sources outside of the

Jeff Kazen (28:55)

U.S. yeah, that is absolutely.

Joe Weisenthal (28:57)

Got it. Got it.

Tracy Alloway (28:58)

I know you said you didn't want to get too political, but I do feel like I have to ask. We know that farmers in America overwhelmingly supported Trump 2.0, even though they had already had the experience of Trump 1.0, which also involved trade restrictions, which from what I remember were harmful to things like soybean prices. What's the rationale for farmers seemingly being hurt by trade restrictions and tariffs, but still overwhelmingly supporting a president who loves tariffs in his own words?

Jeff Kazen (29:35)

Again, I can't speak for every farmer, and there's a very wide. But I do think that in the previous administration there were call them bridge payments.

Tracy Alloway (29:43)

Okay.

Jeff Kazen (29:44)

That generally made up a lot of that gap, a lot of that Other pieces of the puzzle on taxes, we've had tremendous challenges with regulation in farming that was promised. Right. And there are, you know, whether that's particularly things around emissions, water regulation, some things that became very burdensome. And so there were a lot of reasons that not every farm, we have farms on both sides here, but a lot of farms did support the platform that Trump ran on in the previous election. There are a number of other things besides just the tariffs. They also the sense of fair trade, access to markets, we import a lot of things From Canada, but we can't export a number of things to Canada. Milk is one of the dairy products. I think we're focused on grain, but there are significant capital investments in this country and everything on the livestock and protein side out there also that we haven't even broached.

Mike Rolfson (30:42)

And another example, the eu. Obviously, the EU has a protected grain market like no place on earth. So one thing I can say, if given the opportunity, 99 plus percent of row crop producers in the United States would love nothing more than to just remove all trade regulation or trade barriers, shall we say tariffs or otherwise to global grain production. Because they would do extremely well in an environment like that.

Jeff Kazen (31:09)

Yeah, American farmers are playing to the rules. They didn't get to say at the rules. They'll play to the rules that they're given. But if you let them loose, they are tremendously productive. We have also the gifts that this country has with waterways, transportation. Rule of law is very important. Private property ownership rules, things that make the US a little less. The Canadian producer. Extremely competitive in the world evermore. We continue to get more and more government intervention and we've been through it before and we'll deal with it as it comes.

Joe Weisenthal (31:44)

What about, are labor costs a factor or is it mostly the type of crops that you deal with? Is it so mechanized that labor is just not a particularly important dial or factor of the cost?

Jeff Kazen (32:00)

In that example, thousand dollar an acre cost, labor is a tiny amount of that. In grain farming, it's become extremely efficient. But in all the crops that you think around, vegetable farming. Right. Things that are very labor intense, it's absolutely an issue. Right. In immigration robotics, although you see more and more. Right. As labor costs rise.

Mike Rolfson (32:22)

Yeah.

Jeff Kazen (32:22)

It's a huge issue in certain crops and quite frankly crops that consumers are more familiar with day to day. Right. A consumer doesn't eat a soybean or crunch on a hard piece of corn. Right. But when it becomes strawberries, lettuce, carrots. Right. It's still a very labor intensive operation.

Mike Rolfson (32:39)

And the livestock side is another good example, I think, where labor costs are squeezing and certainly harder. The immigration issue too.

Joe Weisenthal (32:48)

My son likes raw corn, by the way. I guess he doesn't.

Tracy Alloway (32:51)

Raw corn.

Joe Weisenthal (32:52)

Yeah. Well, he does.

Tracy Alloway (32:52)

Directly off the cob.

Joe Weisenthal (32:54)

Yeah, yeah, he does. Just fresh corn pre cooked. I mean it's not the. Not dried corn, not dry corn.

Jeff Kazen (32:59)

Sweet corn.

Joe Weisenthal (33:00)

Yeah, sweet corn.

Tracy Alloway (33:00)

Oh, sweet corn. Okay.

Joe Weisenthal (33:01)

Yeah, I know it's.

Tracy Alloway (33:03)

That's very confusing.

Mike Rolfson (33:04)

He wouldn't want to bite into a.

Joe Weisenthal (33:05)

No.

Mike Rolfson (33:06)

Fully cured 15 moisture.

Tracy Alloway (33:08)

Absolutely.

Joe Weisenthal (33:09)

He would not be today. But Tracy, have I, I, I've probably told this story. Did I ever tell you about the time I talked to the palm oil magnate at the top, at the nightclub

Tracy Alloway (33:17)

at the top of the Petronas Towers?

Joe Weisenthal (33:19)

I was at this really noisy nightclub at the top of the Petronas Towers in Kuala Lumpur and I met. Oh, you have. And there was this palm oil magnate and it was super loud in there. And he was like, joe, let me tell you why palm oil is just the best business in the world. It goes into everything. It goes into women's lipstick, it goes into this, it goes into that. And this is the key thing. Relevant. He's like, because of like the nature of the trees, at least as of the time, it was very difficult to mechanize. And so unlike, say, there was always going to be, because labor is such an important part of picking palm oil, Malaysia will always have this cost advantage over richer countries. And so, yes, he was very, he was.

Tracy Alloway (34:03)

But now they're talking about mechanized ways.

Joe Weisenthal (34:04)

Yeah, I think, I think they are making it more mechanized and robots will eventually come for it. But at least at the time, he was really giving me the hard sell on palm oil is the future.

Tracy Alloway (34:14)

And yet you came back from your trip without having bought.

Joe Weisenthal (34:17)

Yet I did not buy. Yeah.

Tracy Alloway (34:19)

Okay. So one of the things I wanted to ask is how farmers actually make the decision on what they're going to plant each year. I'm sure some of it is just based on their own experience and the type of land they have. But it also seems like there are all these other factors that they would be considering future prices that they could get for things or input costs. Maybe certain crops, for instance, consume or need more nitrogen, which is now going up in price. So what are all the individual factors that go into making those decisions every year?

Jeff Kazen (34:51)

As the farmer of the group? I guess I'll have to take this one. So I'd say, obviously, economics, we do look economics, although I think farmers tend to look a little bit more backward than forward, because you really don't know until you have yield. Right. And so fundamentally, you can only take forward looking economics. So far, crop rotation is very important. Disease breaking, equipment utilization, storage utilization. And it also depends in the, you know, what are your choices. Certain parts of the country have a lot more choices. We've kind of left out. Cotton has been severely depressed. Cotton is a very flexible crop in a sense that you could replace that with a soybean, potentially a little bit of corn. Peanuts is a big crop in the Southeast Highly government regulated. So what you switch to crop insurance is a huge piece of the puzzle. What can, what levels can you ensure? You may grow a crop that doesn't look profitable, but because of the levels you can guarantee revenue, those things go. But you don't, you don't get tremendous switches in most places because you just. If you go all corn, we saw a lot more corn last year actually you can suddenly find yourself in a severe storage problem because you trade a 50, 50 bushel an acre soybean for a 200 bushel an acre corn. And you actually have that in the far West. Even as we speak, there is grain piled across Minnesota, North Dakota, South Dakota, Nebraska, because we had a lot more corn on corn acres rotation and we outran our storage and we had a great crop.

Tracy Alloway (36:23)

So this is something else I wanted to ask about which is like the decision to put something in storage and then when you actually decide to sell it because the stuff. This is again one thing I hadn't really realized was such a thing in the US until I read that book. But also it seems to be relevant again today because we are seeing grain prices start to go up a little bit given the Iran situation. And so I'm reading stories on Ag Week and places like that saying that farmers are all rushing to sell all the corn that they had in storage from last year.

Mike Rolfson (36:57)

Corn really moves for, or grain really moves for two main reasons in terms of having to move. As Jeff already alluded to, storage is one and cash needs is the other. And the real value of storage space in North America is that first sort of 90 days into harvest, into harvest and afterwards after that it becomes again more of a personal decision, a personal marketing decision. There's an approach we teach that forces producers to think more an actual grain merchandising and risk management group like the the group we worked for in the past would think so their actual drivers for that economic drivers might change than the way they did it before. But yes, flat prices that are better are just that and it will bring grain to market. Especially when we were seeing prices we haven't seen for quite some time. And as Jeff said, we had a really good crop and a lot still sitting around. So yeah, in the last month a tremendous amount of physical grain has moved to hit these higher prices.

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Joe Weisenthal (39:16)

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Jeff Kazen (39:52)

Yeah, that's a great question. Farmers ask us that all the time. So yes, space gets more valuable right up to a point. And then that point, you know, keeps the value of space keeps rising until it it grabs an incremental space and the next thing you know the easy space gets filled first and then space value gets higher and then the next thing you know you're filling a salt mine somewhere and then you get out to the far west where you have cold or drier, they actually pile the grain and cover it. Millions and millions and millions of bushels which kind of caps out the value of space. So that really starts to set that value of space. But yes, it does flex over time. And now farmers have invested in a lot of space and one of the things we teach is how to utilize that space like a grain elevator and how to earn like a merchandiser. That's a piece, a big piece of what we do in our farmer producer business.

Joe Weisenthal (40:40)

Interesting. So I'm zooming out for a second. I am looking at a chart from the American Farm Bureau Federation. 2025 was a very high year for farm bankruptcies overall. And we're, you know, it's not at the levels of like when they were doing the Farm Aid concerts in the 1980s or so forth. But it's clearly ticked up the highest, it looks like certainly since the pandemic. When a farmer declares bankruptcy, how did they wind up in that situation? I mean we, everyone's facing the same stresses. But what had to have happened to kick off that sequence of events such that a Farmer Files Chapter 12.

Jeff Kazen (41:17)

Yeah. In our farm management practice which is a part of this business, we see a lot. So let's be first off, you got to dig deeper in those numbers. I venture to guess that the dairy numbers are in there and we have a structural change in dairy to these mega dairy efficiencies that have. That business model has taken over and so it's put intense pressure on even the mid size dairy farm. So you've got a lot of that and that's, that's a very emotional type of farming I want to say because you're there every day with those, with that livestock. It's hard to explain to somebody who hasn't been with an animal since it was born and is with it for seven or eight years to get forced out that way is really challenging. We don't see it in the grain side. A lot of it has to do with, with the payments. Right. It's been tight and you're watching working capital and farms are different. But we don't see a lot of chapter 12. You don't see it. We're not seeing farms being forced to sell, we're not seeing wholesale equipment sales that are bankruptcy driven in the grain side in most markets. I think rice has been particularly difficult. We're not huge into that kind of Arkansas area. I think cotton has been very, very challenging. We really haven't seen a credit contraction. Right. Which is what you would think would happen from working capital. A lot of working capital is provided through the farm credit system. Right. The quasi backed agencies. And we have very rarely even in the last cycle because they're renewing their operating loans here. In the last couple of months there has been a very few pullbacks and then quite frankly it's still very competitive where you can borrow money at call it 6 and a half to 7 and a half percent for short term versus a government treasury at 3 and a half, 3.6. So as investors. Right. That's a good spread and there still is a lot of equity in farms. It's in the land. So you can get farms that get tripped up through expansion and you have equity but it's locked through into the land values. And that can be where you get into trouble. You just get short term operating capital squeezed. But the banks are not, to the best of what we see, are not really heavily pulling back on operating notes at this point.

Mike Rolfson (43:34)

Yeah, it goes back to the land point that we made earlier in equity. And when you compare now to the farm aid stuff in the late 80s, we have much better balance sheets at the producer level now versus then. And also remember you had interest rates in the upper teens.

Jeff Kazen (43:50)

Right.

Mike Rolfson (43:50)

So it's just very different now. It's obviously there's a squeeze, but it's not remotely like that.

Tracy Alloway (43:55)

So I realized we're already running out of time and we could kind of keep going for ages. But just to get back to the current situation, what are you hearing from your network of farming contacts right now about how they're feeling about the Iran situation? Because as we mentioned in the intro, there are these push pull factors that are going on right now.

Jeff Kazen (44:16)

Yeah, we, as you know, as we connect with the farmers and my own farm, first off, we've had some opportunities to hedge off some grain for new crop at some relatively interesting levels. And lots of our clients have taken a time to at least get some grain sold.

Tracy Alloway (44:30)

So you forward sold the up upcoming crop.

Jeff Kazen (44:33)

We can forward sell the upcoming crop we've taken advantage of on the old crop, which we talked about a little bit earlier. We obviously are very concerned about the fertilizer prices on the pieces we don't have locked up and that constant squeeze across all inflationary. I think the inflation is the piece that drives us. I'm going to call us being the proverbial us because we don't feel like we're in control. A number of suppliers in the ag sector operate in oligarchy. Oligarchy.

Joe Weisenthal (45:04)

Oligopoly.

Jeff Kazen (45:05)

Oligopoly. Right. And so you'll hear a lot about whether that seed fertilizer, particularly in cattle processing and you know, that's a big issue. We're very aware of it. When you put in trade barriers, you actually isolate other competitors out. Right. That are probably critical to keeping costs down at the farm. So farmers feel very threatened about the supplier environment that they're in and probably with good reason. I've never seen anything personally illegal go on, but I see lots of behavior that is legal to operate in that oligopoly environment. And so it's really disconcerting if you think about running a business where your suppliers are two, there's what, three, maybe four seed companies left. Genetics. You're processing the cattle which by the way, at least on the calf sides at all time, record profits. But they're still concerned because you only have realistically three or four buyers. Hogs are highly consolidated. Chickens, very consolidated. Fertilizer. So that's probably one of the angst. We have policies, another big piece of the angst because we're I think without these payments we don't know whether those are going to come or not. That's floated a lot of farms in the last year and so that's very disconcerting because you could change administration to administration. You can't hedge that or know what that numbers are going to look like. Lots of uncertainty, I bet.

Joe Weisenthal (46:28)

Do you have one piece of advice for your client like right now? Right now in this environment, like okay, that's what they're telling you. What are you telling them to do right now?

Mike Rolfson (46:38)

Well, one thing as we already talked about is look at these gift horses in a good way and hedge a little bit off for next year because we are at new crops levels. We describe new crop as next fall in trader language at numbers that we haven't seen for a while. So let's go ahead and take advantage of that and see what happens. As you folks probably very well know, crude and corn are incredibly correlated. I think they have an r squared north of 95. With some of our very tight relationships we're having producers sit in their easy chair on Sunday nights when the overnights open after a weekend of crazy news and and everyone's doom scrolling and crude's up 20 and corn's up 20 cents following it. Maybe if you only have a little bit hedge for next year, go into your account and hedge a little more. So we've been taking advantage of some of these wild market swings often at weird times for whatever reason, the last couple Sunday nights have been absolutely wild.

Joe Weisenthal (47:32)

Yeah.

Mike Rolfson (47:32)

So just pay a little bit more attention and win these little battles along the way we refer to as winning the details. Take advantage of those things while you can.

Jeff Kazen (47:41)

Yeah, I think what we teach in class, right. Is around discipline. Right. The discipline in hearts of really good. So understanding your actual risk, managing that risk off best is your risk profile staying steady. Right. Things that people who trade commodities for a living do and understand. And then there are huge amounts of physical details around cash management and storage and things like that that are still out there. So that's really where we bring out the disciplined approach around this and becoming risk managers. We always. One of the first things we say is that if you want to make a Jump as a producer, you become a risk manager to the farm instead of a speculator. And that's how the biggest companies, right, they have risk managers, whether they're commodity companies or people who use a lot of commodities. Right. They have people that risk management, they focus on margin. And so we've really tried to bring that discipline through our classes and through our one on one relationships out to the farm, which never had access to this type of education. That's where our business came in. Disciplined thought process that their buyers use.

Mike Rolfson (48:46)

If you look at all the companies that have been around forever in the commodity side, they're all hyper disciplined. They all share the same culture and approaches and they're hedgers. And we try to have that mindset bleed into the practice of our students and clients.

Tracy Alloway (49:02)

All right, Jeff and Mike, thank you once again for coming back on Odd Lots. Truly the perfect guest at the perfect time. So really appreciate it.

Jeff Kazen (49:09)

Yeah, thanks for having us. Appreciate it.

Joe Weisenthal (49:11)

It's fun to hear that, you know, we're in our New York City apartments like doom scrolling Sunday night futures and we're all doing the same thing. The farmers out in the middle of the country and those of us, we're all, we're all looking at that open. But thank you so much, that was a blast. You bet.

Tracy Alloway (49:25)

Thank you. So Joe, that was really, really interesting and I feel like even though we spoke for quite a while, we, we've still only scratched the surface. It's a big topic. Right. But one of the things that stood out there was the importance of land. Yes, land costs and also competition from abroad. Because I hadn't really thought about that before. We are used to hearing the phrase that buy land, they're not making any, any more of it. But if you're deforesting Brazil or Indonesia, it turns out you are making more farmland.

Joe Weisenthal (50:06)

No, I thought that was a great point. There's been a lot of interesting reporting, including from our Bloomberg colleagues about specifically Chinese agriculture investments in Brazil and how much they're building up that linkages. And so obviously still today, as they put it, you know, Trump tries to make some soybean sales and the American farmer sort of has a, they could play each other off, discipline the Brazilian farmer by buying some American beans, et cetera. But there is this really big farm ecosystem that continues to grow, also continues to get very productive. They're using some of the top of the line Chinese equipment, which we know is very good. And yeah, that's going to continue to undercut the American exporter.

Tracy Alloway (50:51)

Do you think the Farming evolution and the productivity revolution is going to be a good analogy for AI, for everyone else, for the white collar working class.

Joe Weisenthal (50:59)

You know, it's. I don't know, probably not, but it is interesting. There was actually something out literally today, I think some hedge fund put a thing like trying to push back some of the doom scenarios and they're like, oh, you know, we used to be so much agriculture based, then it went away, but now we have other jobs, et cetera. But that was like one sector.

Tracy Alloway (51:18)

Yeah.

Joe Weisenthal (51:18)

You know, like I'm not very, like, I'm not very comforted by any historical analogy where the technology just applies to one sector. They're like, oh, like bank tellers didn't disappear after the ATM was introduced. There was one technology. Right.

Tracy Alloway (51:33)

And we're talking about the whole knowledge,

Joe Weisenthal (51:35)

the entire, the human brain being replicated. So I'm not, no, I'm not that. I don't take too much comfort from that.

Tracy Alloway (51:42)

All right.

Joe Weisenthal (51:43)

It's bad and it's tough for farmers.

Tracy Alloway (51:45)

Yes. No, that's my, that's my point. My point is that the experience of small scale farmers could be coming to all of us because it's, it's just going to be about scale and capital investment and how big your tractor is.

Joe Weisenthal (51:56)

I know.

Tracy Alloway (51:57)

All right, shall we leave it there?

Joe Weisenthal (51:58)

Let's leave it there.

Tracy Alloway (51:59)

This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

Joe Weisenthal (52:04)

And I'm Joe Weisenthal. You can follow me at the Stalwart, follow Mike and Jeff, they're at Agris Academy. Follow our producers Kerman Rodriguez at Kerman Erman, Dashiell Bennett at dashbot. And Kale Brooks. And Kale Brooks. And for more Odd Lots content, go to bloomberg.com oddlots we have a daily newsletter and all of our episodes and you can chat about all these topics 24. 7 in our Discord Discord GG oddlots.

Tracy Alloway (52:28)

And if you enjoy Odd Lots, if you like it when we do these agricultural episodes, then please leave us a positive review on your favorite podcast platform. And remember, remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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