What The 'Lentil King of Saskatchewan' Knows About World Trade

Summary

Odd Lots Podcast - What The 'Lentil King of Saskatchewan' Knows About World Trade

Release Date: May 2, 2025

In this insightful episode of Bloomberg's Odd Lots podcast, hosts Joe Weisenthal and Tracy Alloway engage in a comprehensive discussion with Murad Al Khatib, the President and CEO of AGT Food & Ingredients, affectionately known as the "Lentil King of Saskatchewan." The conversation delves into the complexities of the global lentil and pulse trade, sustainable agricultural practices, supply chain logistics, and the impact of international trade policies.

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1. Introduction to the Episode

The episode begins with a brief mention of the recent Canadian elections, highlighting the unexpected victory of Mark Carney and the Liberal party. Tracy Alloway contrasts Carney's globalization-friendly approach with the more protectionist sentiments influenced by former U.S. President Donald Trump.

Notable Quote:

[01:30] Tracy Alloway: "Mark Carney is sort of the antithesis of Trump, right? He's the sort of globalization, Davos, former central banker guy."

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2. Murad Al Khatib and the Rise of AGT Food & Ingredients

Joe Weisenthal introduces Murad Al Khatib, emphasizing his pivotal role in transforming Saskatchewan into a major player in the lentil market. Murad shares his journey from a government position to founding AGT Food & Ingredients, focusing on sustainable agriculture and global trade.

Notable Quote:

[04:22] Murad Al Khatib: "It's been quite exciting to build a multibillion dollar company based right out of Regina, Saskatchewan, to reach the world, drive the Canadian trade, and participate in growing and consolidating a global supply chain in this business."

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3. Canada's Dominance in the Global Lentil Market

The discussion highlights Canada's substantial role in the global lentil and pulse trade. Murad provides insights into Canada's market share, estimating that the country accounts for approximately 50% of the world's lentil exports. He underscores the importance of lentils as high-protein crops essential for addressing global protein deficits.

Notable Quote:

[05:51] Tracy Alloway: "How big a player is Canada nowadays in pulses and grains and lentils and those things?"

[06:14] Murad Al Khatib: "Somewhere around 50% or more of the world trade."

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4. Sustainable Agricultural Practices and Yield Enhancements

Murad elaborates on the sustainable farming practices employed in Western Canada, including crop rotation and the use of nitrogen-fixing legumes like lentils. He discusses the technological advancements that have significantly increased crop yields and improved soil health.

Notable Quote:

[19:48] Murad Al Khatib: "Farmers in Western Canada are now practicing a sustainable three crop rotation... we're returning biomass into the soil."

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5. Supply Chain Logistics: From Farm to Global Markets

The conversation delves into the intricate supply chain that transports lentils from Saskatchewan farms to consumers worldwide. Murad details AGT's vertically integrated operations, including ownership of processing facilities and transportation infrastructure across multiple continents.

Notable Quote:

[10:13] Murad Al Khatib: "We take it right from the farmer right through to the distribution directly onto the consumer shelf."

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6. Impact of U.S. Trade Policies and Global Tariffs

Joe and Tracy explore how shifting U.S. trade policies, particularly under protectionist leadership, affect AGT's operations. Murad discusses strategies for mitigating the impact of tariffs, such as diversifying markets and establishing alternative supply chains to ensure resilience.

Notable Quote:

[26:10] Murad Al Khatib: "We need to pivot... we have to be part of global value chains as they settle in this new geopolitical and trade regime in the world."

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7. Infrastructure Investment and Capital Challenges

Murad emphasizes the critical need for substantial investment in trade infrastructure to support the growing agricultural output. He advocates for a strategic investment of $100 billion to enhance railways, port facilities, and other essential infrastructure components.

Notable Quote:

[31:43] Murad Al Khatib: "If I was prime minister for one day, I would invest $100 billion in trade infrastructure because that ultimately would pay dividends for generations to come."

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8. Technological Advancements and Future Outlook

The episode concludes with a discussion on the role of technology in modern agriculture. Murad highlights innovations such as precision agriculture, soil sampling, GPS-guided planting, and decision support systems that have revolutionized farming practices, leading to significant productivity gains.

Notable Quote:

[16:22] Murad Al Khatib: "Zero minimum tillage where GPS systems are giving the farmer the exact placement of seed fertilizer in a single pass without breaking the soil."

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9. Consolidation in Agriculture and the Role of SMEs

Tracy raises concerns about the consolidation trend in agriculture, where smaller farms struggle to compete against larger entities. Murad acknowledges the importance of scale for survival but emphasizes that small and medium enterprises (SMEs) still play a crucial role through innovation, partnerships, and integration into global value chains.

Notable Quote:

[45:13] Murad Al Khatib: "Scale today is essential to surviving, but that doesn't mean that small and medium enterprises don't have a role to play in scale."

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10. Navigating Trade Diversification and Future Strategies

Murad discusses the necessity of trade diversification beyond the traditional reliance on the U.S. market. He outlines AGT's strategies to establish bilateral trade agreements, expand into new markets, and enhance global partnerships to ensure sustainable growth amidst evolving geopolitical landscapes.

Notable Quote:

[29:31] Tracy Alloway: "Have you noticed any shifts in the pattern?"

[35:00] Murad Al Khatib: "We need bilateral trade agreements. We need to resolve India and China as powerhouses that balance our reliance on the US."

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11. Final Thoughts and Conclusion

The episode wraps up with the hosts reflecting on the multifaceted aspects of global trade, agricultural sustainability, and the strategic imperatives for companies like AGT. Murad's insights provide a nuanced understanding of how the agricultural sector can navigate complex global dynamics to achieve growth and sustainability.

Notable Quote:

[51:21] Joseph Weisenthal: "Murad Al Khatib, the lentil king of Saskatchewan with his pulse on the pulses."

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Key Takeaways:

• Canada's Strategic Advantage: Leveraging vast arable land and technological innovation positions Canada as a dominant player in the global lentil and pulse markets.

• Sustainable Practices: Implementing crop rotations and nitrogen-fixing legumes enhances soil health and boosts productivity.

• Supply Chain Integration: AGT's vertically integrated supply chain ensures efficient distribution from Saskatchewan to global markets.

• Navigating Trade Policies: Diversifying markets and establishing robust trade agreements mitigate the impact of protectionist policies.

• Infrastructure Investment: Significant capital investment in trade infrastructure is essential for sustaining and expanding agricultural exports.

• Role of Technology: Advanced farming technologies drive substantial increases in yield and operational efficiency.

• SMEs in Agriculture: Small and medium enterprises remain pivotal through innovation and strategic partnerships, despite consolidation trends.

This episode offers a comprehensive exploration of the global lentil trade, underscored by the expertise of Murad Al Khatib. Listeners gain valuable insights into the intersection of agriculture, trade policy, and sustainable business practices that are shaping the future of global food security.

Transcript

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[Bloomberg Audio]

Bloomberg Audio Studios podcasts Radio News.

[Joe Weisenthal]

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

[Tracy Alloway]

And I'm Tracy Alloway.

[Joe Weisenthal]

And Tracy, Canadian elections last night.

[Tracy Alloway]

Yes, Big event. I think a lot of people are talking about it in the context of US Politics, right? So we just saw Mark Carney and the Liberals win. And in a lot of ways I think people would agree that Mark Carney is sort of the antithesis of Trump, right? He's the sort of globalization, Davos, former central banker guy. And, and the funny thing is, or the slightly ironic thing is it seems like Trump might have swung the election in the direction of the Liberals.

[Joe Weisenthal]

Well, yeah, you go back like three months ago or four months ago or something, and it just seemed guaranteed that the Conservatives, Pierre Poilievre was going to win. And then Trump started talking about making Canada the 51st state and suddenly fortunes turned very quickly. But that was just a news hook. We are not really doing a Canadian politics episode today, per se.

[Tracy Alloway]

We're doing something better.

[Joe Weisenthal]

We're doing something better. The reason that we're doing this episode, this just happened to be good timing for the hook. The real reason we're doing this episode is that several weeks ago I was reading an article and I saw a title about a man named the Lentil King of Saskatchewan, or not named, but titled as such. And I thought to myself, the Lentil King of Saskatchewan sounds Like a great odd lots character. Someone that we should talk to to learn about a very specific business and how it works.

[Tracy Alloway]

The lentil king of Saskatchewan. Saskatchewan. The sultan of split peas. The grand poopa of pulses. The baron of beans. Monarch of multigrains. I can keep going.

[Joe Weisenthal]

You did your prep. That's really good. Anyway, we have the lentil king of Saskatchewan on the podcast today, and we are gonna really learn about how the international pulses and grains trade actually work. What does it mean? How does trading work with the US how does it work with the rest of the world? How do you build that supply chain?

[Tracy Alloway]

I'm also just incredibly surprised that is such a big player in this market. I think it exports like a third of the world's lentil crop, something like that. It's kind of crazy.

[Joe Weisenthal]

That is a lot of lentils, but they have a lot of land in Canada for this type of thing. Not a ton of people, a lot of land. Anyway, let's learn all about the lentil trade, the pulse trade, the grain trade, and so forth.

[Tracy Alloway]

Are we gonna take the pulse of the pulse trade?

[Joe Weisenthal]

We are gonna take the pulse of the pulse trade. We are speaking with Murad Al Khatib. He is The President and CEO of AGT Food & Ingr, credited with turning Saskatchewan into such a powerhouse of trade from lentils. So, Murad, thank you so much for coming on Odd lot.

[Murad Al Khatib]

Well, thanks for having me.

[Joe Weisenthal]

Why don't you start with what does the lentil king of Saskatchewan do? Tell us about the business of AGT food and ingredients.

[Tracy Alloway]

Is it good to be the lentil king?

[Murad Al Khatib]

It's definitely been an interesting career for me to kind of contribute to the transformation of agriculture out in western Canada. So, you know, coming up on 25 years since I made a decision to quit my job in government at the government of Saskatchewan and move to the basement of my house and drive the transformation of a cropping system that, you know, when I was a kid growing up in a little town called Davidson, Saskatchewan, we grew wheat and we grew canola. And then the farmers had to leave their soil to summer fallow because the nitrogen fertilizer that they used in canola and the oilseed was so heavy that the soil needed to replenish naturally. The alternative to that was to plant a nitrogen fixing legume. So lentils, chickpeas, peas, beans, these crops actually fix nitrogen. They don't require nitrogen fertilizer. And so that was my bet. I mean, I was a 27 year old young entrepreneur who kind of looked at this situation and said, look, agronomically, if we can grow these things, the world demands them. They're protein crops. If we could intersect taking our summer follow into protein and reaching global markets, I could create a business. And that was kind of the premise. So it's been quite exciting to build a multibillion dollar company based right out of Regina, Saskatchewan, to kind of reach the world, drive the Canadian trade, and participate in growing and consolidating a global supply chain in this business.

[Tracy Alloway]

So how big a player is Canada nowadays in pulses and grains and lentils and those things? I mentioned earlier that I think it produces like a third of the world's lentil crop. I did see an estimate that said 60% of the world's lentil crop. So I went with the third. Trying to be conservative here, but like, give us some context around where Canada sits in this space.

[Murad Al Khatib]

Yeah, we would be more depend on the crop year, but somewhere around 50% or more of the world trade. So, you know, you have to recognize that the traditional growth of these crops were in areas where they consume them. Right? Turkey, Middle East, India. India is the biggest giant in this business with all of the vegetarians. You look at 1.3 billion people, 450 million vegetarians. Vegetable protein is essential for the diet of countries in the emerging markets. So they grow them and they consume them. Well, what was missing was global supply in nations that could grow them but not consume them, but export them. And so that's where Canada came into the play. Australia, the United States. Now we have emerging origins like Kazakhstan, Russia, Ukraine. The global consumption of these crops are over 100 million tons. Now, because you're talking about the traditional crops that we consume, let's talk about the traditional diet of the world.

[Joe Weisenthal]

Let's do it.

[Murad Al Khatib]

Rice, you know, rice is 6% protein. Corn, 8% protein. Lentils, 22% protein. Fava beans, 34% protein. Chickpeas, 26% protein. I mean, these crops are not in the same class when it comes to protein availability. And the world is in a global protein deficit. So, you know, we always forget one thing. We talk a lot about energy and energy security. We talk about, you know, oil and gas. But we have to recognize that protein and diets are human energy. And so when we look at that, there's a protein deficit in the world, it's causing major socioeconomic problems. Let's look at a country like India. 18% of children in India are stunted due to protein deficiency. The world has 800 million people who are malnourished on a daily basis. Over 2 billion people who are food insecure on a daily basis. So this has become one of society's global challenges. 10 billion people by 2050 quantifies into a statistic where in the next 40 years, we have to produce the same amount of food that the world produced in the last 10,000 years of civilization. Just wrap your head around that. Go back 10,000 years. Go ahead 40 years. You got to equal food production. And that's only if we curb food waste and we actually can store the crops that we harvest. So, you know, when you look at it, it's a global challenge. And land and water are not being created, so those are the scarcest resources in the world. And Canada is blessed with a northern hemisphere, you know, that ultimately is more resilient on climate change. We have arable land and water and we have the best farmers in the world with technology and innovation driving our sector. Those are all recipes for what I would call a generational economic driver for this country.

[Tracy Alloway]

Joe, could you say that Canada has been blessed in growing grains? Do you get it, Bean? Okay, I need to stop.

[Joe Weisenthal]

I get it.

[Murad Al Khatib]

I'm going to have a few of those over the course of the year.

[Joe Weisenthal]

I'm sure you've heard them all maurad over the years. I'm glad you brought that up actually, though, about the calorie as the original unit of energy. That was important. You know, we've never had him on the podcast, but Vaclav Smil talks about that when he talks about the history of energy and just these calculations in the beginning. Okay, how many calories did a farmer have to expend to produce this much land and then so forth and how many calories were produced and so forth. So just even thinking about it from that equation is a very like, sort of important, I think, lens. Why don't you just describe the actual role of AGT foods? Where do you sit in the supply chain and distribution? Do you have farms yourself? Do you work with farmers? Do you contract with them? Like, talk about where you sit and how a lentil grown in Saskatchewan gets to a consumer in, say, India.

[Murad Al Khatib]

Well, the entire business plan was set up modern, state of the art processing infrastructure in the areas where we grow these crops. We contract directly with farmers. We are the ones who transform their products into saleable, you know, human consumption products. So we own factories in Canada, the U.S. australia, South Africa, Turkey. So I started with one small little factory in Regina. We now have 46 manufacturing and processing facilities in five continents around the world. I started in the basement of my house, there's now 3,600 employees.

[Joe Weisenthal]

Wow.

[Murad Al Khatib]

So, you know, what we do is we take those crops, we clean them, we size them, we peel them, we split them, we can them, we package them, we put them out, and we fraction them into protein, starch, fiber, flours. I mean, we put them into food products. We do the full range of value adding. And in the scale of our business now, with, let's say around 3.2 billion in revenue this year, we've become a major global supply chain in this particular segment of the business. In fact, if I look at containerized agricultural shipments, AGT would be among the two or three largest containerized shippers of agri products in the entire world. So, you know, we ship to 110 countries actively.

[Joe Weisenthal]

And how does it get there? Like, what is the. Okay, so from a farmer in Saskatchewan, how many links are there on that chain?

[Murad Al Khatib]

So we'll take it into, let's say a farmer in Eston, Saskatchewan, will deliver to our location at eston.

[Joe Weisenthal]

Okay.

[Murad Al Khatib]

We will then take that grain. We'll put it into a rail car that we own. So those owned rail cars then go into the CN rail system. They get transported to a port facility. Let's say I just did one as an example. On May 6, we're going to ship a vessel of lentils to Turkey. So those Esten farmers would have filled the rail cars. We're shipping it to Thunder Bay. At Thunder Bay, we have an ocean terminal where we'll load a vessel. That vessel will transport 21,000 tons of lentils that will go to Turkey. They will be offloaded in the port of Mersin, Turkey, which is in the southern Mediterranean. We have factory 7 km from the port. We'll peel them, split them, polish them, package them, and then they'll be shipped to Iraq. They'll be shipped into the Gaza. Refugees, they'll be shipped into the middle east region, and they'll be consumed locally in that entire region. On the food side.

[Joe Weisenthal]

Wow.

[Murad Al Khatib]

So, you know, where we play is in the entire supply chain, taking it right from the farmer right through to the distribution directly onto the consumer shelf. And, you know, that was the strategy that we wanted to build out. It gives us resiliency.

[Tracy Alloway]

I was going to ask, is it normal for agricultural companies to actually own their own, like, transportation capital? You mentioned train cars just then. That seems extremely vertically integrated.

[Murad Al Khatib]

Well, yeah, actually, I was definitely not, you know, the normal thought in that in 2015, I decided to build a transportation business. And so we bought 650km of short line Railway.

[Joe Weisenthal]

Wow.

[Murad Al Khatib]

We bought the Saskatchewan Government grain car fleet. So when the Canadian Wheat Board was dismantled the Saskatchewan flagged grain cars, I bought them. We bought 13 locomotives. We set up our own transportation infrastructure, linked it in a long term agreement to CN Rail and we're able to access it through ocean port infrastructure. We actually took that business in 2025 in January and we sold it for $192 million to an infrastructure fund in the United States and then we contracted them back to provide a service for the next 20 years. So you are correct. We actually built out a transportation infrastructure that didn't exist to handle these kinds of commodities. And then we found a partner to run it for the long term and it gives us a competitive advantage to get our products to market.

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[Joe Weisenthal]

You mentioned that the only scarce resources are land and water. Can you talk about yields on an acre or yields on a given farm today versus when you got started in the industry and what you've seen in terms of technology and productivity growth at the land level.

[Murad Al Khatib]

Massive, massive transformation. So precision agriculture digital infrastructure has transformed the productivity of Canada and You know, when I was a kid growing up in that little village of Davidson, 1,200 people in the middle of Saskatchewan as an immigrant Turkish family, the farmer would go out and kick the dirt. He would put his hand into the soil. He'd have his wife with him and say, what do you think? Should we go? And she'd say, yeah, let's go. And they would go and start seeding. Today we're soil sampling. We're analyzing the soil and the nitrogen in the soil. There's precision weather stations that are measuring moisture. We have zero minimum tillage where GPS systems are giving the farmer the exact placement of seed fertilizer in a single pass without breaking the soil using air channels. We're putting the seed in a precision basis to maximize the yield to lower the amount of nitrogen fertilizer being used in all crop rotations, which ultimately saves inputs and lowers the carbon intensity of our agriculture. Our yield curves have been massively increasing to a point where if I look at the next decade ahead in Saskatchewan, I'm forecasting 7 to 10 million additional tons of grain from the same amount of acres that are being seeded. That is a massive wait.

[Joe Weisenthal]

What's the baseline? What's the 7 to 10 million? On top of how many?

[Murad Al Khatib]

We're growing about 30 million tons and we're going to have another 7 to 10 million. I mean, you're talking about 20 to 30% yield increase over the next seven years. I mean, when I chaired the national strategy table for Agriculture and Food for the government of Canada, we set a target in 2019 that the Agriculture sector in our country would grow from 45 billion to 85 billion of exports in a five year cycle. And domestic agricultural output would grow from 120 billion to 145 billion. And we reached that target in three years. I mean, what sector of our economy can deliver 65 billion of growth in three years? Agriculture did that in this country. So the tangibility of that opportunity of global food insecurity, the productivity of precision agriculture in our country, and the ability to get our products to market. This is the recipe that I believe is going to be a big part of, of the government economic agenda going forward. So, you know, we talk a lot about natural resources that are in conflict in certain mindsets, whether it be oil and gas or mining. There's very little controversy on the growth of the natural resource sector in agriculture. So from that perspective, I see that as being a key opportunity for this country and one that I'm very excited about for the next 20 years. Of my career.

[Tracy Alloway]

So I take the point about yields having been improved, but at the same time, there. There's a lot of talk about soil exhaustion. Right. And one of the reasons this is on my mind is because I was gardening over the weekend on an old farm property and the soil is just terrible. It's basically dust, like, there's no tilth. I think I found one earthworm in, like six hours of digging. How big a problem is soil depletion? And you touched on this earlier, but what role can lentils and beans play in that?

[Murad Al Khatib]

Well, that's actually the key. The key is that farmers in Western Canada are now practicing a sustainable three crop rotation. So one year they'll grow that wheat like when I was a kid. The next year they'll grow an oil seed like canola, and then the year after that, they'll plant the legume that will fix the nitrogen. By using zero minimum tillage, we're conserving soil moisture, we're managing pests and the health of the soil, and we're actually using farming practices where without tilling, we're returning biomass into the soil. So from that perspective, when I look at the sustainability of soil health, the farmers in Western Canada have got it. And, you know, this is something that bothers me is people talk about how regenerative agriculture is such a key part. Well, in western Canada, we've been doing regenerative agriculture for the last 40 years. This is something that is actually foundational to the success of the Western Canadian, and I mean the Canadian agriculture sector in general. So, you know, I think that when I look at soil depletion and soil health, it's about farmers pushing the wrong rotations, growing crops on top of crops, the same crops. You know, ultimately, if you don't rotate, you have pests that multiply, you have diseases that ultimately get resistance to any type of management. So, you know, this kind of diversity of our agricultural system is one that not only has to be celebrated, but it's actually yielding that yield gain. So, you know, not only is our soil health at a peak, but it's also something I want to be clear, we can't take for granted. We have to be continuously innovating to make sure that we maintain that. I mean, I say the canola fields of Saskatchewan are the same as the oil fields of Saudi Arabia, only every year it replenishes naturally. So we can take crops, we can produce renewable fuels, we can take crops, extract protein and feed the world, but we have to make sure foundationally that soil health is at the forefront and I think it is in our farmers minds and in the practices that they do.

[Joe Weisenthal]

So you know, you've described this global supply chain that exists and the fact that you can get the lentil product from a farmer in Saskatchewan all the way to a consumer in India or Iraq or Turkey, et cetera. Obviously we're having this conversation at least on the US Side with this turn against globalized supply chains, globalized trade and so forth. Talk to us a little bit about how you see the state of U.S. canada, ag trade, or give us the sort of the short history of the various turns of the dial there and how some of these conversations are affecting your business.

[Murad Al Khatib]

Look, I think we got to recognize one thing. We have a president in the United States today who's just very loud and using tariffs as the mechanism to not only provoke conversation but to drive policy. Protectionist agricultural policies in the United States are not something new. I always have to remind people that country of origin labeling was a Barack Obama policy that continued through the Trump administration and into the Biden administration. So every government in the world, agriculture is the most political business in the entire globe because farmers have to be protected by governments that are elected. Yet food inflation and food security are paramount considerations in the health, wealth and security of every nation in the world. So when we look at it, let's not forget one thing. When a baby is hungry, they cry. When an 18 year old man is unemployed and hungry, they protest. So ultimately a big part of civil obedience in the world is available food. And that growing food insecurity is one that I think is going to be paramount. So when I look at even US policy, look, food security is a foundational part of US intelligence and foreign policy. And so from that perspective, I believe that agricultural trade will have to be preserved as a part of the overall policy framework. So we're going to see tariffs, we're going to see protectionist measures being more prevalent in the world. But I do think that ultimately food are going to be concessionary items. Governments are going to allow them to flow. Governments will use tariffs to protect their farmers when they need to at times where they harvest their crops. But they need food available and the COVID post supply chain disruptions and food lines and food inflation and food being a big driver of that inflationary environment in the world is something that everybody recognizes can't continue. On the US policy side, domestic agriculture in the US and Canada are very integrated. So if I look at the pasta on the shelves of the US consumer come largely from Durum wheat in western Canada, the overall integration of our livestock sectors, cropping sectors are there. And ultimately, I think we're going to see further integration. We're going to see getting over this current protectionist, conflict laden dialogue to recognizing that the Americas integration and more reliance on each other as nations in the Americas is going to be part of economic prosperity. And I think that if I look at the Trump administration kind of policy on Canada, we have to just remind everybody very clearly to have calm heads. 31 US states have Canada as their largest trading partner. The ultimate availability of food in the United States is not completely reliant, but we certainly have a big influence on food prices. And so I'm a very strong optimist that agriculture will continue its integration and that ultimately food and I believe energy are going to be the two sectors. And the third one from a Saskatchewan perspective, is potash. I mean, 80% of the potash in the United States, which is a necessary nitrogen element, comes from Canadian mines. So from that perspective, there's certain sectors that I think are mutually beneficial that are going to enjoy heightened access in some sort of resolution.

[Tracy Alloway]

Okay, so agriculture might be special in one way or another. But just to drill down a little bit into specifics, if the US Slaps tariffs on Canadian lentils, what is the first thing that happens in your supply chain? And I guess maybe we could go back in history and talk a little bit about the tariffs from India on lentils, because you have experience with this, right? Like you have gone through this process. What exactly happens?

[Murad Al Khatib]

Agriculture is no different than any other sector, except that our markets are already a lot more diversified than other sectors. So when I look at the crop sectors in particular wheat, canola and pulses, we do have shipments into the US On a regular basis, but it's still making up a relatively small percentage when you look at it compared to other sectors. Reliance on the US So one of the key things to having strength in a tariff or a trade protectionist environment is to have alternative markets. Now, for us, I worry more about the reciprocal tariffs in places like China, India and other large markets than I do only the US Market. I mean, it's one of the considerations. We want that resolution, but what we do is we pivot. When we were facing the tariffs on the March deadline than the April deadline. You know, as a company, we already prepared for this. We have a North Dakota manufacturing facility that was going to manufacture more for the US Market. We were going to switch our supply chain to reliance on North Dakota and Montana, and we were going to Take the Western Canadian product and we were going to go out to the Middle east into other markets in Asia. We're going to put a heightened focus on South America and we were going to ship into Europe. So you know, that's where you have to be. And I think that this is ultimately my dialogues with Prime Minister Carney prior to the election and my dialogues after with Prime Minister Carney are going to be. Trade diversification agenda is not something that we can blink at no matter how quickly or how comprehensively the resolution is with the US we need to finally execute trade diversification in this country. We need to recognize that our industries have become overly reliant, we've been complacent. You know what, this has to be a wake up call to my colleagues in every industry in this country. Wake up over reliance. Eggs in one basket is a dangerous remedy for long term sustainable health of your business. And you know, ultimately that's where we have to go. We need bilateral trade agreements. We need to resolve India and China as powerhouses that balance our reliance on the US and we need to monetize the European Union trade agreement that we've already signed. We need to ensure that we get relevance with these countries. And agri, food, energy and potash and uranium are four things that get us relevance with these nations. We need to parlay that into free trade agreements, bilateral exchange agreements, and we need to get ourselves market access.

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[Joe Weisenthal]

Obviously, negotiating free trade or bilateral trade agreements with different counterparts is an important element. There's also a physical element, right? The quality of rail infrastructure, the quality of export terminal and I guess on the other side, import terminal infrastructure. In the context of energy, we hear a lot about this. And are we building export terminals fast enough? And is it cheap enough? Is it economical? Talk to us about the sort of like the physical things that need to get built to, as you put it, monetize these relationships. And like, I don't know in the US I know that building everything is crazy expensive these days. What is the state of this physical trade infrastructure look like in Canada right now?

[Murad Al Khatib]

We have to acknowledge that we've got major challenges. I mean, we've got large geographic land base, we have mountains between production regions in Western Canada and the coast in Vancouver, and we have minus 40 degree temperatures. So these are all constraints that we have to live with. And one of the things I've become a little bit known for in this country is my adage that if I was prime minister for one day, I would invest $100 billion in trade infrastructure because that ultimately would pay dividends for generations to come. So we need to revive the gateway strategies. If I look back at the 2005-2011 period, the Asia Pacific Gateway initiative was one of the most successful in recent times in Canada where you had municipal governments, provincial governments, private sector players, class one railways, port authorities, port infrastructure, private sector players working on first mile and last mile. And we made major progress on developing the Asia Pacific Gateway. We need to acknowledge that we need to build a trade infrastructure for 30 and 40 and 50 years from now, not just for 30 and 40 and 50 weeks from now. We need to relocate rail lines out of the center of communities across our nation, to plan for development of industrial and residential developments and allow for the trade infrastructure to have room to scale as we continue to build out. I mean, Saskatchewan is a perfect example, As I said, 7 to 10 million more tons of agri. With the BHP investment of $12 billion in potash, K plus S mine expansion and the expansions that are on for Nutrien and Mosaic, you have roughly about 12 million additional tons of potash that will come online over the next decade. And if we get oil and pipelines and we get the dry bulk commodities on rail, we have some capacity. But we got to think about what we're going to be 30 years from now if we continue on these yield trends. We're going to reach 100 million tons of production one day. Today our average is 55 million tons in this country in agri. So from that perspective, the economic benefit is there as well, which ultimately funds the Canadian way of life, social programs like healthcare, education, the things that we as Canadians value in terms of being Canadian versus living in another nation around the world. So that's the opportunity in trade infrastructure. I have a level of optimism that our newly elected Liberal government, and frankly it would have been the same if the Conservatives were elected. Trade infrastructure is recognized as an essential element of that trade diversification strategy. We focused a lot on north south infrastructure and not that we should diminish that because I think people got to recognize we're not saying trade less with the U.S. we're saying trade our growth with new countries over time. We will diversify. Trade diversification could not happen in one day, one year or even in 10 years. We have created an economy that's reliant over decades. We need to diversify over the next decades.

[Tracy Alloway]

So I know it's early days, but just on this point, farming is clearly a very capital intensive business and you want to be investing in trade, infrastructure and things like that. Have you noticed any changes in capital availability post Trump's win? So are people, maybe they feel more cautious because there's all this policy uncertainty or maybe people are directing capital away from the US and towards Canada now, I don't know. Have you noticed any shifts in the pattern?

[Murad Al Khatib]

I think that certainly short term disruptions like this cause capital to be nervous. There's no doubt about it. But if I look at my partners in AGT are Fairfax Financial is a 60% owner of my company. So Prem Watsa believed in the long term growth of an agri food champion from Canada along with Omer's pension program. Those two companies own 72% of my shares along with myself. And that kind of capital source is recognizing Canada's role to build billions of growth in this sector. In the trade infrastructure side, I think that there's a recognition that we're not building this only to talk about, oh, we got great infrastructure, there's a large economic benefit that will come along with it that can allow the tax base to be directed into the things that need to be done in this country. So when I look at that recognition again, not looking with rose colored glasses. I believe capital will flow. We need to do a better job of figuring out how to monetize trade infrastructure into projects that could be funded in more traditional project finance. So it's easy on a toll road, you have an income stream and someone will finance that. How do you finance the growth of Class 1 railway infrastructure or bridges that go to the ports or port infrastructure? You need to come up with economic models that create cash. And I remind people that extra revenue is cash and cost savings in the supply chain are also cash. So from that perspective, I think that we're going to see a capital attraction because Canada has such a fundamental competitive advantage in the natural resources sector, that capital will come here to get our products to the places that demand them.

[Tracy Alloway]

So, speaking of cost savings in the supply chain, one of the things we've seen since the tariffs announcement is a slowdown in global shipping, or a slowdown at least in shipping between China and the U.S. does that affect you at all? Because I imagine on the one hand, maybe container rates start coming down, which would be good for you. But on the other hand, my understanding is that a lot of your produce is shipped via backhaul. So the ships come over carrying, I don't know, toys or whatever, and then they're loaded with all the agricultural products and they're sent out into the world, wherever those are going to be processed or sold. So are you experiencing any changes in terms of the actual flow of ships here?

[Murad Al Khatib]

That's a great question, and you are absolutely correct. The trade flow in the world is dependent on balance. We can only fill what comes in full, we send it back full. So ultimately, it has been an Asia trade into North America and a North American trade back out to Asia. So far, the disruption time period has been small enough that we haven't felt it yet, but it's something we're watching very, very closely. Now. What I think we have to recognize is that although President Trump would like to have manufacturing at the snap of a finger in the US it's gonna take time if they do succeed in building out domestic capacity for a number of these consumer goods that they want to produce. And then we have to also be realistic that the cost of manufacturing and the cost of production in the US Is going to be a lot higher on a number of these items. So I still have a view that there will be some sort of a balanced resolution where there will be some tariffs, but there ultimately will still be production around the world coming into North America. So I think that no matter what, if it doesn't come from China, it may have to come from Korea or it might come from, you know, Indonesia, or it may come from, you know, another nation that is set up to manufacture. You know, if you look at, you know, Apple as an example, is saying now, well, we're going to stop shipping out of China, we're going to start shipping out of India. You know, there's ultimately going to be trade flows that are going to come in. So we're watching it carefully. We are definitely concerned, but we ultimately know the consumption's not going away. So that consumption has to be filled somehow. And ultimately it will ultimately be through a combination long term of more domestic manufacturing. But, you know, at the end of the day, that's not going to happen in the near term. Next five to seven years are going to be transition years. And, you know, again, our supply chains will have to also transition if we don't have container availability. What you'll see is bulk supply chains getting bigger. Like we're shipping those lentils in a vessel to Turkey and we'll have to be manufacturing elsewhere as well. So we'll have to be a part of global value chains as they settle in this new geopolitical and trade regime in the world.

[Joe Weisenthal]

I just want to get back to the politics of farming for a second. And you mentioned this is one of the most politically sensitive topics because every government feels some impulse to take care of their local farmers and also every citizen in the world of every country eats and is sensitive to food inflation. And Tracy asked about India earlier and they've had an on again, off again lentil import tariff. Can you talk a little bit more about what you saw there specifically, like both, I guess, the domestic politics of lentil tariffs and then again, like how it affected your business specifically as they've toggled that on and off.

[Murad Al Khatib]

Look, you know, I've been a very vocal advocate over the last couple of years to have the Canadian industry recognize that the domestic agricultural policy of India is actually a sensible policy, that the Modi government has no choice but to do it. You know, ultimately nations in the world have to build local production to insulate themselves from food security issues. So, you know, the view that 22 million tons of production of pulses in India should become 35 million one day will still not even keep pace with their domestic consumption. So there's still going to be a net importer at that. So how can we as a nation, you know, fault another nation from trying to encourage local Production. We've shifted our dialogue with India to say, look, we are the reliable partner to fill your gaps. We're going to see in countries like India, Turkey. Turkey has been doing this for decades. From May until September of every year when they harvest their crop in June, Turkey has a lentil tariff on. So if you're bringing in lentils from Canada, they put a tariff on to protect their domestic price of lentils for their farmers. And September they take it off to protect against food inflation. So these are the ways that tariffs are used to build local prices, farm receipts, and yet not sacrifice the domestic prices for affordability. India is going to do the same thing and I think ultimately it's a sensible policy. We got to recognize that trade relationships are no longer going to be how do we drive by and sell. Nations in the world are looking for two way trade, investment and innovation and technology development and transfer. So you know, we as a company, agt, are taking that view. We're building a new processing plant near Mumbai where we're going to be, you know, taking Canadian materials. We're going to be processing them in India and we're going to be playing in the local market. And we're also going to be exporting out of India to nations in Asia where they have a competitive advantage. So, you know, that's the way that you build the long term trade relationship. You know, recognizing that we can't sit here and say we want tariff free access to all markets around the world. We have supply management in our country. We're restricting the access to our agricultural sector for nations around the world. So you know what, you want to be free traders. Let's concentrate on the things that we need to do in this country. Interprovincial trade barriers have to come down. We have to open up our domestic agricultural markets and we have to recognize that we're going to have more to gain from free trade than we are to lose from free trade. So I see this as a transitional time where ultimately deals are going to get done and trade is going to happen. It has to because economies can't transition quick enough to fill the gaps. That's what's ultimately going to drive it.

[Tracy Alloway]

So everything you've outlined sounds very sensible. Boosting production in North Dakota, setting up more bilateral trade relationships, maybe moving some processing capacity elsewhere in the world. But it also sounds very expensive and very difficult to do if you are a smaller scale farmer. And I guess one of the concerns with the rise in trade protectionism in general is that you are going to get even More consolidation in agriculture. And we know that small scale farmers have been suffering for a while. It's difficult to compete against giants in the agricultural business. Is that going to become even more of a trend in the current circumstances? Like, is scale going to be essential basically to surviving?

[Murad Al Khatib]

Scale today is essential to surviving, but that doesn't mean that small and medium enterprises don't have a role to play in scale. I always counsel entrepreneurs. There are different ways in which to achieve scale. You can build scale, you can buy scale, or you can partner scale. That's it. That's the key. And what we have not had enough of in our economy in Canada, it's a recognition. I call it the dinner diner phenomenon. Do you want to be dinner or do you want to be a diner? I want to be a diner. I want to eat other businesses and grow my scale. I don't want to build myself to be eaten by somebody else. So ultimately what we encourage is companies have to build theirselves into a link in the global value chain. They have to recognize what role they do play and they have to link themselves into a supply chain. That makes a lot of sense. You know, I was in Turkey three days ago. In fact, I was there on the earthquake day in Istanbul, so scary day that day. But you know, ultimately I was in Turkey meeting with, you know, customers from Japan. You know, we've linked with the major Japanese trading houses on the development of our pasta manufacturing business because the large Japanese trading houses have strong linkages into the Japanese retail and the Asian distribution side of things. So, you know, we've recognized even as a relatively large company that we don't have the scale. And we're partnering with companies that have $100 billion in revenue because we can't solve that distribution. Or in India, we're in discussions with the large majors like Tata or Reliance or, you know, those types. Wilmar Adani Group. I mean, these are the type of companies that dominate, you know, the distribution in those nations. So consolidation, you know, at the farm gate is already happening. I mean, can you, can you imagine when I was a kid growing up again, you know, we as A family had 4,000 acres of farmland that was a big farm in 1978. Today at 4,000 acres, a family can't farm full time. You know, they ultimately will need to have a second job. You know, you basically say today a mother, father and a daughter who are farming would have to be 12,000 acres in order to sustain a family. So from that perspective, you know, again, scale is actually part of our Advantage in our agricultural system. And we're a low cost, high quality producer. We're competing against nations that have one acre and two acre and five acre farms that are very manual and not mechanized. So ultimately we have to recognize, I don't think it's a bad word, I think it's transition. But I do think that SMEs are key. Small and medium enterprises are key because they're nimble, they can innovate, they can deliver a product that is fitting. Sometimes bigger companies aren't good at doing things like that. We're not nimble enough to do it. We need SMEs to make us competitive. We gotta build the ecosystem and the linkages. We haven't done that in this country.

[Joe Weisenthal]

I just have one last question and it sort of relates to the productivity gains that you've seen over the years in farming from all kinds of like sensors and maybe there's drones involved and stuff like that, or lower cost of tractors or whatever. There's obviously a lot of anxiety about how much technological products come from China. When you look at the farming business in Canada, how much of that tech stack that drives productivity gains these days comes from Chinese tech basically, or Chinese manufacturing in the form of farm equipment.

[Murad Al Khatib]

I would say, you know, from my experience, there'd be a lot more reliance on the overall Asian manufacturing, not just China. And I think that's an advantage for us. You know, again, a lot of the sensors and things that we use are now manufactured in so many nations around the world that we can kind of dodge that. They think the key is, you know, on the manufacturing side. You know, a lot of the farm equipment is, you know, still very much dominated by US manufacturers. But a lot of the core technologies like zero minimum tillage, you know, the center of manufacturing for that technology is western Canada. We're the ones who developed it. You know, companies like, you know, Borgo Industries and you know, Flexicoil and Morris Industries, these are industries that were here for the last four decades, you know, developing out these zero minimum tillage seating systems. All we've done is add on the technology to that. GPS sensors, decision support systems, the big guys, the John Deere's, the case, ih, I mean these are again large global companies who are ultimately driving it. Data is something that is going to be a key advantage for us. I don't see vulnerability. Maybe I'm overstating. Yes, there's always vulnerability when you have a tech stack. But ultimately we are using so many different technologies and we're stacking them Together that I think that ultimately we have something that is not only unique, but it's something that you can only implement at scale. You can't digitize one acre farms. It's not cost viable. We have single farm families in west central Saskatchewan who are seeding 300,000 acres of farmland this year. 300,000 acres. You know, these farm families have, you know, two generations, they're four generations on the farm and they have full time IT departments on their farm. So these are not, you know, corporate farms in the, in the mindset. Don't forget we still have foreign ownership guidelines that prevent foreign ownership of farmland in Saskatchewan as an example. So these are still family farms. They've just scaled to be something that is very large and very competitive.

[Joe Weisenthal]

Murad Al Khatib, the lentil king of.

[Tracy Alloway]

Saskatchewan, the legumary lentil king, the legumary.

[Joe Weisenthal]

Of Saskatchewan with his pulse on the pulses. That was fantastic. I learned a lot in that conversation. Thank you so much for coming on odd lots.

[Murad Al Khatib]

Thank.

[Joe Weisenthal]

That was a lot of fun. There are a lot of very interesting strands to pull out from that conversation. I do think, like the politics of food is definitely one of them. And this idea that every government basically around the world is trying to balance the distinct demands of their local constituency food security, which can kind of only be ensured by having some sort of local production and then the fact that everyone has to eat.

[Tracy Alloway]

Are there any countries or governments out there that don't sort of idealize agriculture?

[Joe Weisenthal]

Yeah, it's a great question. I don't know, like in Singapore, did they. I don't know. There's gotta be some.

[Tracy Alloway]

Yeah, maybe Singapore, I guess, some Middle east countries. But even there I know they're doing stuff with like hydroponics. Anyway, couple things that stood out to me. So Murad's comment about trade being a balance.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

Especially in global shipping, I think is really important. So even if Canada wasn't directly affected by something like U.S. tariffs, there would still be that knock on effect from ships being rerouted around the world. And this is something that we saw in the pandemic, of course, you know, like ships coming over full and then returning empty. And that being a pretty big problem for a bunch of companies and American consumers. So that's one thing. And then the other thing is the consolidation aspect. It just seems to me like the only, I mean, we said it right. The only way to survive, especially in a world where trade restrictions are becoming more popular, really is scale. And it's going to be near impossible. I think for the smaller guys to compete.

[Joe Weisenthal]

I'm glad you asked that question about the backhaul because this is one of the things that's been worrying me. It's like, you know, people talk about the sort of tariffs from a sort of strictly fiscal standpoint, like this is going to raise the cost of X and so there's gonna be less. But as we recently saw, like there's another knock on effect and I'm glad you brought that up about the fact that the ships just might not be there in place or certain goods that are intermediate goods in some way. And so that's how you get these like ripple out disruptions beyond just oh, this is lost product for me or this is lost income for you. I also liked how Murad talked about the calorie as the original form of energy, which I just find to be really important in this idea that the productivity in the ag space is pretty extraordinary and the fact that there's still more yield expected. And then the question is, do you have the rail capacity, do you have the export terminal capacity to actually monetize these agreements and increased yield?

[Tracy Alloway]

I'm just gonna say lentils are amazing. They're great. And I am really, really hungry and I'm craving like a bunch of dal.

[Joe Weisenthal]

Yes, I know I haven't eaten today and so I've had the exact same thought during the entire conversation.

[Tracy Alloway]

So good and good for the soil.

[Joe Weisenthal]

Good for the soil.

[Tracy Alloway]

All right, shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

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

[Joe Weisenthal]

And I'm Jill Wiesenthal. You can follow me at the Stalwart. Follow our guest, he's at Murad AGT Foods. Follow our producers, Carmen Rodriguez at CarmenArman, Dash O'Bennett at Dashbot and Kale Brooks at Kalebrooks. For more Odd Lots content go to bloomberg.com oddlots we have all of our episodes and a daily newsletter and you can chat about all of these topics including supply chains 24. 7 in our Discord Discord GG oddlots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we speak to the Lentil King of Saskatchewan, then please leave us a positive review on your favorite podcast platform. And 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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