← The Edge of Risk Podcast by IRMI
The Edge of Risk Podcast by IRMI
Global Risk, Local Impact: A Conversation with "The Cow Guy"
00:13:39
Loading summary
Transcript15 lines
- [00:00]
A
Foreign. Welcome to the Edge of Risk podcast. I'm Joel Applebaum, the Chief Content Officer for ermi. And in this episode we're diving into the intersection of agriculture markets and global risk. Because in today's environment, what happens in commodities, currency or geopolitics can have a direct impact on the farm economy. And I'm happy to have with us today Scott Shelady, better known to many of us as the Cow Guy, a well known market commentator, former derivatives trader and trusted voice on global financial trends and how they influence agriculture. And most importantly for our listeners, he's going to be our keynote speaker at our 2026 IRMI Agricon. So we're excited to get perspectives on where the financial markets are headed, what ag producers and insurers should be watching closely, and how all of this connects to risks in today's uncertain environment. Scott, welcome to the podcast.
- [00:59]
B
Thanks for having me. I enjoy it. Looking forward to speaking to you all at the end of August, early September.
- [01:04]
A
All right, so Scott, you grew up on a dairy farm, right? And later traded across Europe, Asia, North America. When you look at today's ag markets, where do you see global forces most directly colliding with on the ground farm realities?
- [01:20]
B
Well, we just had a big example of it and we're kind of still living through the after effects. But I mean, global geopolitics, you know, kinetic wars that we're just experiencing with Iran, that's going to be something that affects our producers, our ranchers. It did with the Ukraine war which is still raging with Russia. And you can see what it does to a lot of the prices around the world. I mean, I think the best example is just fertilizer. What happened to fertilizer prices? They went through the roof. Now they've come back down significantly like oil has. Also, we've seen oil trade below 70 bucks a barrel today, so that's obviously very good. But I think we highlighted some choke points with the Straits of Hormuz and some issues with our energy and also our fertilizer that probably need to be revisited. And I think they will be. I don't think we're going to have this issue in five years time. I think people are going to make different supply chain routes or at least start to open some up because that kind of really held the world hostage there for a little bit and it still could until something like that gets rerouted. But you know, we're going to have things like that still happen. It's not just this year, but obviously three or four years ago. When the Russia, Ukraine thing kicked off, you know, so it happens from time to time and it roils the markets. And unfortunately, a lot of our ag producers and our ranchers here in the States, they get caught in the crossfire and it's not really anything to do with them.
- [02:36]
A
Yeah, awesome. You're famous for the cow print jacket and your straight shooting style, right? And you have your own podcast as well. When you think back to growing up on a dairy farm, what lessons from these early days still shape how you see the markets and people today?
- [02:55]
B
Well, I mean, look, we milked. Well, we started with corn and beans, and then for some reason, when we were junior high, my father thought it'd be a great idea to start milking 200 head of cattle twice a day. And I don't know why. I think he was just trying to get to heaven. But it turned out to be one of the harder things we've had to do. Now we call my dad a gentleman farmer. He traded the Chicago mortar trade and. And I followed in his footsteps down there, so he commuted back and forth a lot between our farm and the Board of Trade, and so did my brother and I and my sister. So we stayed a lot of times at the farm. But we also had a house in Chicago, too, so we kind of split our time. But it was very. It was a very grounding experience working out there, because, A, you knew the value of a dollar, but B, I think that sometimes it gets missed for a lot of folks about, you know, where the food actually comes from. You know, you've got your warriors pounding away at their keyboards in Starbucks, eating their chicken sandwich, and they have no idea how the bread was made, how the chicken was braised, you know, nothing. They're clueless as to what it really takes to put that food on the table. And so you learn hard work, you learn the value of a dollar, you learn life cycles, too. You see, animals get born. Animals are born, they serve their purpose, and then they die. And a lot of times that's sad because you can't help but get attached to them. So, man, there's just a wealth of things. You know, life lessons are, there's always something to be doing. You know, it's not worth standing around, you know, leaning on a broom. There's always a job to be done. It doesn't matter what you think. The cows don't care. You gotta be there at six in the morning, at six at night, you know, but it was a very wholesome upbringing, and I've taught my brother and my sister and I, some really, really good lessons that we still hold dear today. And you know, I think the world would probably be a better place if a lot of people had those life lessons because it's, it's bigger than you. The animals need, you know, you need to milk them. They can't handle, you know, you can't let em sit like that. It doesn't, you know, it was a great example, by the way. It was over the pandemic, you know, where a lot of people were curled up in a ball, you know, nervous, sucking their thumb under their desks, waiting for the pandemic to pass them by. Farmers and ranchers were out there feeding the cattle. They were out there planting their. I mean, nothing changed for them. They couldn't get under the desk and start to shake and cry and suck their thumb waiting for the virus to pass them by. So life does not stop. And I think that that was a great lesson too. So yeah, it was, it formed us all. It was a pretty great way to be brought up. And I think that the world, like I said, would be better off if a lot of other people had that same experience.
- [05:14]
A
Yeah, I'm a Chicagoan too. I grew up and actually my roommate in college, they also traded on the Mercantile Exchange. Scott, you probably talk to a lot of traders, farmers and business leaders every day, every week for sure. What gives you the most optimism right now when it comes to the future future of agriculture and the rural American farm?
- [05:35]
B
You know, I lived in London for 16 years. I served on a board of a technology company there. And I'm a real big fan of technology. So outside of the ag ecosphere, I'm really, really excited about artificial intelligence. I mean, it's very dangerous. Trading it has been very dangerous. You have some great days and some bad days. You just hope you're a little bit up by the end of the week. But I'm really, really intrigued by what agricultural and the crossroads between agricultural and artificial intelligence is, you know, doing. I'm seeing some things that are just where they're extraing the ground so you know exactly how to program how much fertilizer to put basically where in a square foot. I mean, it's. There's so many things I think that are going to be reshaping the industry and giving the farmer a chance to do other things. I'm really excited about yields and the potentials that you'll be able to do there and how you can be more productive. I mean, that's what artificial intelligence is. That's what that technology is, you can run more efficiently and be more productive. And I think that that those two words when it comes to agriculture and farming and ranching, I mean, are probably the two first words in the bible of farming and ranching. So I'm really excited about what technology can do for the industry. And you know, I tell it to people all the time. You know, agriculture has been really affected by technology and everybody says, well, how's that? I mean, you know, if you think about it, in the 1930s we had, you know, the average bushel per acre for corn was 30 bushels an acre. You know, they haven't changed the size of an acre in a hundred years, but we're pulling out 200 bushels an acre. So talk about technology affecting your yields and productivity and affecting efficiency. There you go. There's a hundred year case study. So just think what artificial intelligence, if we lay that on top of that's, going to do to things. So I'm really excited about the future and I see the machinery and the robot tractors and it's, it looks like it's going to be a fun ride.
- [07:16]
A
Awesome. Scott. So your Ermia Agricon keynote address is titled the Cow Guys Playbook, I believe. And it's making sense of chaos and agriculture and financial markets for ag insurance professionals. What's the first signal they should watch to distinguish real risk from market noise?
- [07:37]
B
You know, I don't know how much they do this, but you know, there's only three things we can trade in this world and then there's thousands of derivatives off of them. Right. So one of them is, and I put them in three silos. One silo is going to be equities, you know, the stocks that you can trade at the New York Stock Exchange. Right. So cash equities is one. Another one is interest rates. Anything that's affected by interest rates, that would be euro dollars, bonds. Also you might see currencies in that silo. All right, so those are those two silos and the last one would be obviously commodities. And so if you really want to be a great insurer in the commodities sector, you need to know what's going on in those other two because there's so much money involved with what we do today and so many funds and hedge funds and high frequency trading and that trade everything all the time. And the capital movements from one silo to the other are ginormous. You can start to see stresses in the bond market that might be telling you to be careful about what's been happening over in the agriculture market. Or you can see, you know, we were hot and dry in Chicago when normally you'd see corn trading higher because of it. But because we've got a calamity in the bond market, everybody's liquidating corn to pay for their bad positions in bonds. So you can see things happening. You have to look at the whole thing 3D. You can't just be a one dimensional person looking at just AGs. You need to see the stresses in the bond market, you need to see the stresses in the currency market to kind of get a bigger picture view of what stresses might be happening to the producers out there in the country. I think that's the most important thing that I've taken away from it is it's not, it's no longer just one dimensional, it's now a three dimensional story. And you have to put them all together to read it that way to stay safe and try to stay ahead of the game.
- [09:15]
A
Okay, speaking of staying ahead of the game, at Agricon sessions we, we seem to be covering, you know, multitudes of risks from, you know, climate risk, liability gaps, emerging exposures, cyber. Has market volatility itself become a permanent exposure that insurers and producers must actively plan around?
- [09:38]
B
Yeah, there's no doubt about it. I mean, my father got in the business in 1961. He's passed away, unfortunately. But if he saw the business today, he would not recognize it at all. I mean, the market access has changed things. You can trade instantaneously from your phone if you want to. Now whether it may be corn, bonds or stocks, it doesn't matter. You can be on an airplane, in the back of a taxi cab or in the cab of a combine and you've got market access. And so just the quick market access is one thing that makes things more volatile. But number two is you got international quick market access. So you've got people in India that are trading corn. There's so many things that go into it now because technologically speaking, we've connected the world so tightly that the capital flows and also the artificial intelligence and these algorithms that kind of, they read the headlines and then they all start to trade it at once. You've probably seen movements like that. You have to understand that you're playing poker against a machine and you have to let it do what it's going to do because it's going to run you over if you don't. So I think that's the big difference is, is that I have, I have to realize that I'm at a table and I have to know the people that I'm trading with or against because it makes a big difference about their capital, how much they've got and what they're doing. Because they've got electric eyes that read the headlines and trade and they don't care what's in the rain. And a lot of times they get it wrong. But because they're so big, it doesn't matter. You can be dead, Right. Nobody wants to be dead. Right? Right. You want to still be alive. So, yeah, just because of technological advancements, the amount of people that we're bringing into the arena and the amount of artificial intelligence that comes with it is making everything a lot more volatile and there's just going to be no way to get around that.
- [11:09]
A
Great Scott. If you could leave ag insurance professionals attending our agricon with one mind shift, right. Of a future thought, something they should start doing differently on Monday morning, what would it be?
- [11:24]
B
Well, I tell you, I feel like a lawyer nowadays more than I am a trader or a market, you know, financial analyst because, you know, I end up reading so much and I see a lot of because of the show I have on RFT tv, a lot of people are trying to always give me things to take a look at because they want to come on the show. But I would say I kind of touched on it a little bit earlier. You need to be looking at things three dimensionally now. This one dimensional thing, the way that my father grew up trading, you know, he was a corn trader for Cargill. You can't just be a corn trader for Cargill anymore because something could be happening in beans, it could be affecting corn or something going to be happening in bonds that's affecting corn. And so you need to have that three dimensional perspective on everything. You can't afford to try to be a specialist if you're going to be looking at risk because all of those risks are tied. And we've seen it happen with how things kind of roll over, over the globe. When we have big problems, systemic risk problems, everything gets hit. Right. Because there's money being pulled and pushed everywhere. So the idea that you can be super focused on one area I think might be okay for somebody that's really small. But it's going to be hard to stay out of the way of the big money when it comes rolling. Because if you don't have a three dimensional point of view, you're playing the game with one arm tie behind your back.
- [12:37]
A
Scott, this has been a fascinating conversation and I really appreciate you bringing your unique perspectives across markets, commodities, global risk to our insurance, agriculture audience and our listeners. These are exactly the kind of real world insights IRMI has been proud to deliver at our conferences for quite some time. And speaking of conferences, I gotta plug this we're especially excited to have Scott, who will be our keynote speaker at Agricon, which is taking place August 31st through September 2nd in Nashville, Tennessee. You can go to ermi.com to register and hear directly from Scott, along with a lineup of leading experts covering most of the important issues facing agricultural insurance today. And don't forget, great networking opportunities at our conference too. So for now, thanks for listening and we hope to see you at our conference.