#408 - Jordan Levi - The Largest Cattle Feeder In America

Summary

---

POWERS Podcast #408: Jordan Levi – The Largest Cattle Feeder in America

Date: March 31, 2026
Host: Chris Powers
Guest: Jordan Levi (Arcadia Asset Management & Five Rivers Cattle Feeding)
Theme: Insights into the U.S. cattle industry from the nation’s largest cattle feeder – operational economics, risk management, industry trends, technology, and the American beef business.

---

Overview

In this episode, Chris Powers visits with Jordan Levi—known as the “Kosher Cowboy”—who manages the largest cattle feeding operation in the United States. They discuss the state of the beef market, Levi’s journey from Chicago to becoming a major cattle trader, the complexity and nuance of risk and data management in feeding nearly a million head of cattle, and future trends shaping American beef.

---

Major Topics & Key Insights

1. The Current State of the Cattle Market

• The U.S. cow herd is at its tightest levels since the 1950s, creating unique supply dynamics.
• Despite higher prices, beef demand remains robust and has accelerated—particularly as shifts like GLP-1 adoption drive Americans toward more protein consumption, away from carbs.
  • "[Beef demand] is accelerating as more people take on GLP1s, which is really exciting because people are demanding protein instead of simple carbohydrates." – Jordan Levi [00:41:00]
• The increase in animal size and productivity (genetics, feeding) offsets the shrinking herd.

2. Jordan Levi’s Journey: From Chicago to the Cattle Business

• Grew up in Chicago suburbs, no ag background—his bar mitzvah theme was “Wall Street Jordan", already enamored with markets.
  • "...my bar mitzvah picture...was Wall Street Journal under my armpit." – Jordan Levi [00:04:53]
• Early exposure to markets—started as a runner at the Chicago Board of Trade at 14, then Babson College, then the London School of Economics.
• Started career as a trader at a NYC hedge fund; assigned to learn the “physical” cattle market via immersion in Texas and Kansas feedyards.
• "Kosher Cowboy" nickname: “I’m one of the few Jewish guys that are in the cattle business.” [00:04:08]

The Belted Galloway “Logo” Story

• Levi’s company logo—an unusual breed—comes from his first deal gone wrong:
  • "It's not like a black Angus, but it looks like an Oreo cookie...the first deal I ever got hosed on." [00:02:16–00:03:29]

3. Industry Economics & Risk Management

Cash, Futures, and the Role of Data

• Futures are a derivative of the “cash” market (actual cattle cycles and trades).
• Levi’s approach: heavy reliance on data, modeling, and understanding operational “biologics” (business and animal life cycles).
  • "If you don't understand how the data is presented or what the data actually means, you won't be successful." [00:10:50]
• Key variables: average daily gain, feed efficiency, and final outweight—modeled by location, buyer, date.
• Most competitors rely on “historic memory,” while Levi’s edge is dynamic, proprietary modeling and data-driven decision making.
  • "We rely more on models that are dynamic and ultimately I think that gives me a slight edge..." [00:16:13]

Curve Management: Push and Pull Dynamic

• Focuses on maximizing value between different months ("the curve") instead of binary price bets.
• Moves animals forward or back depending on pricing signals from futures markets, biological feasibility, and operational constraints.
  • "My home run is...for my returns to look like a 45 degree angle as opposed to an EKG." [00:33:01]

4. Challenges Facing the Industry

Herd Shrinkage & Demographics

• Weather (drought), regulations, and aging ranchers make rebuilding the cow-calf sector difficult.
• Even with economic incentive, herd expansion hasn’t materialized.
  • "The economics were suggesting grow the herd, retain the heifer, and people weren't doing it." [00:38:00]
• Fragmented industry: average cow-calf herd is 50 head; biggest operators have ~1,000.

Demand and Changing Consumption

• Demand remains high—GLP-1s and a shift to real protein are major drivers.
• International demand (esp. China) is key; as nations get wealthier, they eat more beef.
  • "Protein consumption increases...almost looks like a J curve." [00:51:03]

Competition & Global Trade

• Emerging competition from Brazil—labor and cost advantages, but not yet matching U.S. quality and infrastructure.
  • "Brazil has a competitive advantage...but I am confident that we'll still produce the premium product..." [01:59:15]
• U.S. imports lean beef for hamburger blends.

Technology and AI

• Rapid improvements in modeling cattle outcomes (weight gain, feed efficiency, etc.) using AI and large datasets.
  • "We're finding that those models are much more successful than utilization of averages..." [01:11:58]
• Virtual fencing and AI could improve management, but humans are still key for animal husbandry.
• Data aggregation and visualization are current frontiers.
• “Lobster Man”: Levi’s AI assistant for reading and summarizing information flows.

---

Notable Quotes & Memorable Moments

• On the “Caught the Cattle Bug” Moment:
  "I came there with a pair of Gucci loafers, pair of diesel jeans...Arrive at the feedlot at 5:30 in the morning...Feed truck just drops off a warm batch of feed. Steam's rising, cattle charge. And I was hooked." — Jordan Levi [00:18:45]

• On Industry Complexity:
  "It's a really easy business, but it's extremely hard. It's blocking and tackling—clean feed, clean water, clean pens. Sounds easy, but it's sometimes hard to execute." – Jordan Levi [00:19:58]

• Key Metric for Industry Health:
  “If you want a sustainable system, you have to adopt the US beef system to be most sustainable.” [00:47:26]

• On Trading Cattle vs. Paper:
  "99.9% of all futures that trade never see delivery...The futures contract is a 40,000 pound contract.” [00:21:41]

• On Letting Go of Losing Trades:
  "The first loss is the best loss...If we’re wrong and the animals are harvest ready, it’s time to go. Period. Just take the loss and move on." [01:15:09]

• On the Beef Sticks for Backpacks Initiative:
  "Started with 400 beef sticks a week, and now...we’re doing over 25,000 a week...Feeds people and it feeds the most vulnerable. So it’s pretty cool." [01:56:50–01:58:21]

• On AI's Role:
  "With the utilization of AI tools, we've been able to do some really cool stuff. The world has changed since the last version of Claude came out...whether the data is being optimized." [01:24:50]

---

Timestamps for Important Segments

• State of the Market, Herd Size, and Demand Shift: [00:00:00–00:01:13], [00:39:41–00:41:52]
• Kosher Cowboy & Early Beginnings: [00:02:16–00:08:06]
• Operations & Data-Driven Management: [00:10:23–00:16:49]
• Key Industry Metrics and Cattle Genetics: [00:16:53–00:18:21]
• Cattle Market Structure and Trading Curve: [00:29:03–00:33:39]
• Industry Fragmentation and Supply Chain: [00:55:55–00:58:39]
• Buying Five Rivers / Capabilities: [00:25:39–00:44:30]
• Technology / AI in Cattle Feeding: [01:11:58–01:24:50]
• Challenges: Drought, Demographics, and Expansion: [00:34:06–00:38:16]
• International Trade and Imports: [01:51:03–01:61:19]
• Letting Go of Bad Trades: [01:15:09–01:15:40]
• Beef Sticks for Backpacks Initiative: [01:56:50–01:59:00]
• Day in the Life & Use of AI: [01:91:37–01:94:55]
• Final Thoughts: The Future, Risk, and Market Outlook: [01:99:07–01:102:20]

---

Closing Insights

• The U.S. beef sector is both historically tight and at a technological inflection point.
• Operational excellence, technology (especially data/AI), and adaptability are critical for success.
• The industry is at risk due to aging ranchers and demographic shifts, despite strong demand and innovation.
• Levi balances traditional business values—honor, the handshake deal—with advanced data science.
• The American beef business touches national and global issues: nutrition, sustainability, trade, and technology.

---

For those looking to understand the business of American beef at massive scale—and the blend of traditional and innovative practices—this episode is a must-listen.

Transcript

[A]

That's what makes this market so exciting is you have structurally one of the tightest supplies, for sure. The tightest supply since the 1950s. And head.

[B]

Oh, really? As my next question, this is unique.

[A]

Yeah. So you have the tightest cowherd since the 1950s, offset by bigger beef production because an animal is bigger today than it was in the 50s.

[B]

Right.

[A]

So we don't need as many animals as we did in the 50s. What's interesting is that as the price has rallied, we haven't really rationed demand. In fact, beef demand is a unbelievable. And it has been for the last three years. And it's accelerating as more people take on GLP1s, which is really exciting because people are demanding protein instead of simple carbohydrates. As somebody, I could have sent you two profile pictures. They look very different. Lost about £40 on a GLP1Y. I no longer crave a bag of Doritos, but I will spend $15 on a bag of beef jerky. Like your profile, your taste profile shifts and you want protein as opposed to carbohydrates. It's fascinating.

[B]

All right, y' all have heard me talk about better pitch for years on the podcast. I'm super proud of their founder, Nico, who is a great friend of mine. He's one of the best young entrepreneurs I've come across. And in just two years he's built an incredible company that is now rebranding as collateral partners. And honestly, it makes perfect sense. From single family investment decks, to complete brand overhauls, ongoing partnership support, to market research, they deliver institutional grade work that actually moves capital. Think of them as the difference between looking like a startup and operating like an institution. They're really your entire institutional marketing department. The team you wish you had in house, but can't justify hiring ex Goldman directors who understand your business, ex PE associates who craft your narrative, and world class designers who make it all look effortless. Go check out collateral.com and mention the Powers podcast and they'll give you a complimentary one pager. Enjoy the episode.

[A]

You can't see it. I didn't wear it. But my, my logo is a belted Galloway. And a belted Galloway is, is a bastard animal. It's not like a black Angus, but it looks like an Oreo cookie. So it's got black and then a white stripe in the middle. And everyone always asks me, why, why a belted Galloway? Is that your company logo? And it's like, well, it's the first deal I ever got hosed on. So I Was living in New York City. I was feeding cattle, and I bought a load of cattle that were half black, and they were half black, but they had a white stripe down the middle. And I sent them to this feedlot in Greeley, Colorado. And manager calls me and he says, what did you do? It's like, I bought a set of half black cattle. He goes, these are Belted Galloways. They won't do anything. And I called Chaz, and I was like, dude, it's one thing to mess with me, but it's another thing to kind of hose me. He's like, well, what do you mean? I said, those are Belted Galloways. He goes, well, what do you don't know the difference? I said, yes, that's the problem. I said, they're yours. You keep them. And so anyways, cattle were feeding for 55 cents back then, and those cattle fed for, like, 50 graded, like, 70% choice. They did it all. But this is the first deal I ever got hosed on. Really Made it my logo.

[B]

That's so funny.

[A]

I have a whole herd of them at the house.

[B]

Why are they not good?

[A]

Oh, I mean, they're just. They don't get big.

[B]

Okay.

[A]

They don't marble. They're more for milk.

[B]

Yeah.

[A]

Or back in, like, the Scotland and Ireland, where they're. They're native of.

[B]

Yeah.

[A]

They're a utility animal. Like, you can milk it or you can eat it. And so they're just. They're not like an Angus or Charolais.

[B]

Yeah. So we have a lot to cover today. Excellent. Because there's a lot going on in the industry. I want to get to know your story, how you think about the industry, but I don't think we could get into any of that without knowing why you are called the Kosher Cowboy.

[A]

Oh, why?

[B]

Yeah.

[A]

I'm one of the few Jewish guys that are in the cattle business.

[B]

How many Jewish guys? Is it, like, on one hand? I could count them or you.

[A]

I had a lot of mentors, and one of them happened to be a Jewish guy, and I think they called him the Kosher Cowboy. And then when he passed away, I affectionately took it, but, yeah, Kosher Cowboy.

[B]

And that started at what age?

[A]

Oh, I don't. I've been calling myself that for a long time. All the hockey dads, they call me the Kosher Cowboy. They even bought me a T shirt, says Kosher Cowboy. And, yeah, that's affectionately how I'm known.

[B]

Okay, so you grew up. Well, your bar mitzvah was.

[A]

Well, I'll Take you through the whole story.

[B]

Okay, let's hear the story.

[A]

Yeah. So look, I'm a Jewish kid from the Chicago suburbs. My dad was an automobile dealer. And about the only thing I ever saw on cows and calves were at a petting zoo. I didn't know the difference between a bull, a steer, a heifer, or a cow. None of that. And, you know, my dad, he wanted us to work, probably just like your dad and all the people in my industry. It's about 14 years old. My dad said, you're not playing golf every day. You're gonna have to come work. So what does that mean? He says, well, you're gonna start by washing cars. I was like, I don't know about that. So I said to him, all right, well, I'll do that. Did about for a week. And then I said, this isn't for me. There's an ad in the paper for a runner down at the Chicago Board of Trade. And I said, hey, I'm going to apply for this. He's like, go ahead. You're just not playing golf every day. So, all right. So I called up, I said, if you pay my train ticket, I'll come work for free. And so I started on the floor of the Chicago Board of Trade as a runner. And I worked every kind of spring, winter, and summer break down there until I graduated college. When I graduated college, I was fortunate enough to know what I always wanted to do, and that was to be a trader. And I don't know if it was the inspiration of great movies like Trading Places or. Or the whole scene of running through the City of Chicago and Ferris Bueller, but I knew that I wanted to. To be in the markets. And part of the motivation for. For going to the Chicago Board of Trade at such a young age. And I knew Even at age 13, I wanted to be in the markets. And so at age 13, Jewish boys become of age and you become a man and you have a bar mitzvah. And the bar mitzvah, after you read from the Torah, you have a huge party. And similar to, like a big wedding reception. And so my brother's theme was the Blackhawks in Chicago. My bro cousins was the NBA in mind, believe it or not, was Wall Street Jordan. And there's a picture of me with a Wall Street Journal under. Under my. Under my armpit as my bar mitzvah picture. And that was the theme. So graduated college in 1998 from Babson College, which is in Wellesley, Massachusetts, very strong entrepreneurial program. Completed the finance portion of my degree at the London School of Economics, having completed the general course and I went to work for a hedge fund in, in New York City. And on my first day they said, Jordan, you want to focus on metals or meats? And I said well, I'll focus on meats. I said okay, not so fast. Everything we do here we have a very strong physical element. We have to know the physical market in an effort to extract as much value out of the futures markets. And I said well, what does that mean? I said well you're not going back to Chicago. You're going to learn this cattle business. I said well where, where do I go? They said well that's for you to find out. So off I went to places like Hereford, Texas, Garden City, Kansas, Greeley Color. A person that got medals got to go to London, Paris and Geneva. So but found a great, great place in Hereford, Texas and learned the business and became my passion.

[B]

When you said that you pull as much value out of the futures forward, what does that mean?

[A]

So futures are the first derivative of the underlying market. So in my world the underlying market is cash cattle. The first derivative is futures. Second derivative is options on futures. So if you have a general understanding or a firm understanding of what's going on in the physical, the cash market in theory, you should be able to extract additional value out of the futures markets through speculation.

[B]

Who is, is, is the guy in Kansas City or in Kansas, the foot guy?

[A]

The foot guy in Kansas is, is

[B]

a, is a peer Rain always talks about.

[A]

Yeah, Rain is, he's, he's been.

[B]

Is that why that's a big hub though, that area?

[A]

No, if you look back to the old, the key areas, the key hubs were Chicago, Kansas City, Omaha and Fort Worth. That's where the stockyards were. So the trains would come, people would unload their cattle, they'd get harvested and then distributed throughout the country.

[B]

Okay, so you did, you. And so when you wanted to become a trader, like did in, in the, and I'm talking about like in the earliest memories of you thinking about being a trader, you just liked the fast action. I did. And the movement.

[A]

I liked the fast action. I liked, I liked how a bunch of guys that were, and women that were down on the floor, you know, they weren't necessarily the smartest people book wise but they were extremely intelligent with numbers or understanding psychology or when to buy and when to sell, when to press, when to get out. And I found that to be fascinating. I thought that would be an easy way to tell my parents I wasn't going to college, I was just going to be a trader. What I did find out is that going to college and having the entrepreneurial spirit, finding mentors within the business ultimately led to greater success than just stopping at high school and trying to bump some money off my dad to be a trader.

[B]

So you get to this hedge fund and they send you out into the wild. I'll ask this like a rhetoric. If I was now applying to your hedge fund and you did this, what would you tell me to go do? What did you do? How would I learn the cattle market from the physical side?

[A]

The business has changed a lot, but I think you still understand, have to understand operations. You have to understand the biological limits of an animal if you're going to trade cattle. Okay. Similarly, if you were going to trade gold, you'd have to understand how gold is traded, how it's stored. You're going to do cocoa, coffee, same thing. I think you got to understand the business in an effort to be a really great trader back in the day, if that's. If you're going to be a discretionary trader.

[B]

Okay.

[A]

Today most machines run trading and their algorithms, etc, there's still a market for discretionary traders and most of the commercial traders trade discretionary in terms of where they have their hedges. Today, I would encourage folks to be extremely data dependent and let the data help drive the decisions. But the data in a vacuum, this is where AI can be dangerous. If you don't understand how the data is presented or what the data actually means, you won't be successful with it. So that's a long way of me telling you, Chris, that I would ensure that they had some type of understanding of the biologics and the operation and then an appreciation for data so that they can become a, a successful trader that can calculate proper risk and reward work.

[B]

So if I said I want to learn the biologics and I want to learn the operation, what, like would I just go show up to a cattle feed yard and sit there for a few weeks and ask a bunch of questions?

[A]

I think a few weeks is probably not enough.

[B]

Okay, yeah, a few years, a few months.

[A]

We used to say you got to get into the belly of the beast. That's what my first, first boss said. Like, you got to get into the belly of the beast. Jordy. He's a British guy. Jordy, are you in the belly of the beast yet? And I would say I'm getting there, I'm getting there. But, but you know, as a trader, as a manager of Risk. And really, that's what I do. I manage risk for the underlying operation. I am trying to maximize the opportunity on a curve. The difference between where April cattle are trading relative to June cattle. I don't make binary bets. I don't make black red markets going higher, markets going lower. What I'm trying to do is maximize value based on the shape of the curve or the price differential between different months. And so if I have cattle that I want to push, I have to understand whether or not biologically they can be pushed. If I have cattle that I want to pull forward, I have to understand the mathematics behind it of what I'm giving up by trying to capture today's prices versus tomorrow's prices.

[B]

Explain the push and pull dynamic.

[A]

Right. So you got a set of cattle that are on feed.

[B]

Okay.

[A]

And all the same age. Well, sure.

[B]

Okay.

[A]

Yeah, within the same age. Right. And you bought them. You bought a set of cattle that all weighed, on average, 700 pounds.

[B]

Okay.

[A]

Okay. Those cattle are projected to go out at a certain outweight, let's just say 1500 pounds. For. For the sake of this conversation. 1500 pounds. You run a break even. You say, the cattle are going to come out in October and the futures market is X. And you say, all right, well, my break even is Y. X minus Y is either my profit or loss. Now, you travel down the road and it's six months later, and the cattle are close to harvest. They might be 30 or 60 days out. And you say to yourself, is my projection today still worthy of what it was when I made it? And the question is, do I want to bring the cattle forward? Because today's prices, today's futures curve is inverted, Today's price is higher than tomorrow's price. Or do I want to wait? Because maybe the curve has today's price lower than tomorrow's price. And so there's a cost benefit analysis that we run or I run mentally, utilizing this data. And then we decide push or pull or stay on target. I know it's very complicated for something very simple.

[B]

Well, I. Okay, so the big question, I guess, when I hear that is what data matters. When you're thinking about that.

[A]

All of it.

[B]

All of it.

[A]

Well, so there are key drivers I should back up. Yeah, let me back up. The reason I'm data dependent is I didn't grow up in this business. I didn't have edge. Right. One of my mentors, who's actually your neighbor, Tommy Winters. Great friend, great guy. Taught me a ton of stuff. In fact, I credit him for much of my success without his tutelage and information. But he grew up in this business, I didn't. And so I had to find some edge. And my edge was going to be in understanding the numbers behind the cattle. He knows because he grew up in the business biologically what an animal can do. What I'm trying to do is pick out the key variables that are the difference between profit and loss. So the key variables for me are average daily gain, feed efficiency. Average daily gain meaning weight, how many pounds of. How many pounds a day they'll. They'll gain per day. Feed efficiency, how many pounds of feed it takes to get one pound of gain and then outweigh. And so I run models based on that. Allow me to look at past performance based on location and buyer in weight and date to determine what I can pay for an animal. That's very different than my peer set. My peer set relies on historic memory and may have a database relies more on averages. We rely more on models that are dynamic and ultimately I think that gives me a slight edge, makes me the tallest short person.

[B]

And, and why wouldn't everybody have these models? Is it.

[A]

Well, I think. Well one, I've developed them.

[B]

Okay.

[A]

So they're proprietary but yes they are. They're not that sophisticated I think but we're constantly improving the models. Yeah, they're more sophisticated than that but, but some people aren't. Don't appreciate data and math as much as I do. Right. Or understand the importance of that. And so I spend most of my time mining data, running numbers and trying to improve my models.

[B]

How much, what's the daily average gain of a cow?

[A]

So anywhere a cow feed cows? Chris?

[B]

Okay, a steer.

[A]

Heifer.

[B]

Steer a heifer.

[A]

Yeah, a good one. Three to three and a half pounds for a steer.

[B]

And how much feed does it take to get em to three and a half pounds.

[A]

We try to convert those of six pounds of feed to get one pound of gain.

[B]

And then what's the outweight?

[A]

The outweigh could be 14 to 1500 pounds, sometimes bigger. We're getting even bigger than that.

[B]

And you. And that can happen.

[A]

Usually happens in under 200 days.

[B]

Wow, they're doubling in size.

[A]

Yeah, yeah, but see you picked up on that pretty quick. I didn't know that. Right. I said well why don't I just have them come out weighing a thousand fifty so I can hit the highest market.

[B]

And is that cuz cows are genetically different than like could I double in size in 200 days like humans couldn't do It. Is it a thing to a cow? They can get so fat so quick.

[A]

I think it's maybe specific to a bovine, but we've bred for these genetics. I have.

[B]

For a steer.

[A]

Yeah. I mean, I think we bred for these genetics. We've bred for two things. One, we've been bred for marbleization, which is the taste profile. And then two, we've bred for efficiencies. So we have created. And that's why the Belted Galloway, for example, is not a great animal genetically. It doesn't convert well, it doesn't gain well, and it doesn't go out weighing a lot of weight. An Angus, which is what we all tend to be eating anymore, has a significantly better profile for the key metrics that I've mentioned.

[B]

Okay, we're gonna. We're gonna put a little pin in that because we're about. We're gonna get back to data, but we do have to go back.

[A]

So we've jumped around.

[B]

Well, there was a. There was a point in your life, I believe it was in Amarillo, Texas.

[A]

Yeah.

[B]

Where you were like, holy shit, this is how I'm going to spend my life. It was like a eureka moment.

[A]

Yeah.

[B]

So what happened that day or that trip that was like, this is the thing.

[A]

Yeah. It's kind of a funny story. So I was living in New York City and I was working for this hedge fund, and this was my first pen of cattle that I put on feed. And I went to go look at it, and I didn't know any better. I came there with a pair of Gucci loafers, pair of diesel jeans. Arrive at the feedlot at 5:30 in the morning. The big old fella has got a cowboy hat on and a pair of Wranglers. He looks me up and down. He's like, what are you doing here? I was like, well, I came to see my pen of cattle. He's, oh, you're Jordan. Yeah. Well, let's go look. So I have a warm cup of coffee in my hand. Sun's rising over the panhandle sky. Feed truck just drops off a warm batch of feed. Steam's rising, cattle charge. And I was hooked. I was like, I want to do this. I want to do this along with what I've always wanted to do, which is trade. And I said, I caught the cattle bug.

[B]

And it was that. And you never lost it?

[A]

No. In fact, I try to relive that moment nearly every. Every time I go to a feedlot. I want to watch the sunrise. I want to watch the Steam come off the bunk? I mean, yeah, oddly enough, it, it hits on all senses, including.

[B]

So what is happening in that? What, what. That's obviously something that happens every single day in the cattle world. So what's actually happening early in the morning with.

[A]

Yeah, so cattle get fed either two or three hot meals a day within about 10 minutes of each other every single day. And cattle love consistency. So you try to deliver that feed to the bunk and to those animals every single day within 10 minutes of each other. And so it's, it's a marvelous experience. I think it is. My mom thinks it's crazy, but I think it's cool. And what I, what I most amazed by cattle and the industry is the amount of sophistication and consistency that's required to be effective. And so it's a really easy business, but it's extremely hard. It's blocking and tackling clean feed, clean water, clean pens. Sounds easy, but it's sometimes hard to execute.

[B]

And they're coming in. So you're down there. How many did you own? 50.

[A]

Yeah, so that time I think I owned like 200 head.

[B]

Okay. This is a really dumb question.

[A]

Yeah.

[B]

But my brain trips when I think of this. You now, I believe, own and manage like 900,000. When you, if I were to go. When you go. When I, When I think of trading stock, I. I just feel like I'm trading paper. Obviously it's equity in a company, but it's kind of paper when you start trading animals.

[A]

Yeah.

[B]

So let's say you're on the Chicago trading floor and you say, I'm going to buy 6, 600 head of cattle today.

[A]

Yeah.

[B]

So do you know which sick is it exactly these 600 or do they go into a pool of thousands and just say the first 600 out of here that are £700, you're coming with me.

[A]

So it's. The futures contract is a 40,000 pound contract.

[B]

Okay.

[A]

And about 99.9% of all futures that trade never see delivery. So then when the contract is about to expire, within the last 30 days, the contract goes into delivery and a seller of the contract has the right to deliver and then along has to take it. Most of the cattle that we hedge never actually go to the exchange. When the cattle are sold in the commercial market, we lift our hedge and move on to the next trade. So we assign futures contracts to different marketing windows. So I might know I have a thousand head of cattle that die in March, thousand head of cattle that market in May, et cetera. And I'll assign the futures contracts to those. So. So 40,000 pound contract, not a per head. It's about 30 head per contract.

[B]

So what.

[A]

What.

[B]

What did your career look like from the morning you got the bug until you started Arcadia in 2009?

[A]

Yeah, so I. I worked for that fund from 1998 to 2003 in New York City, and I kind of got, I don't know, worn out of the city, and I had about 25,000 head of cattle on feed, and I was running a pretty good futures book. And I was approached by two oil and gas guys that had just bought some feedlots from the bass family. The two guys were Aubrey McClendon and Tom Ward, who founded Chesapeake Energy. And they came and asked if I would feed some cattle with them. And I said, sure, fed some cattle with them. And then they came back and they said, hey, we have a meeting with you. I said, sure, sure. Where? I said, oklahoma City. Said, all right. So it was like a couple days before Thanksgiving. I fly from New York City to Oklahoma City. Said, hey, we want you to manage the risk for this, and in addition, maybe run a spec book for the family. Said, yeah, sure, I'll do that, but what's it take? And he said, well, what does it take? And I said, well, I gave him a number, and they said, all right, we'll see in two weeks. And I was like, oh, my God. New York City to Oklahoma City. But spent. Spent most of my time from 2003 to 2009 managing the risk for. For the new entity called Heritage Feeders, and also running a fairly large spec book for the family. A couple of the traders that I worked with in New York City decided to leave as well. And with the family's capital, we started our own fund. I think we raised a total of 350 million in addition to what the family had. And we traded it really well. My partners in 2008, at the Christmas party in New York City, tried to pull a coup against Mr. McClendon. And they said, hey, we want more of the pie. He says, you're not getting more of the pie. This is our money, and you're doing really well, and it's great. And he looks at me, he goes, jordan, how are you getting home? Which was, are you with us or with them? So I'm going with you, sir. Let's go. And so we had a good run. 2009 came, and. And we called it. Called it an end for. For a variety of reasons. And I started Arcadia Asset Management. So Arcadia Asset Management at the time ran a derivative program and a fiscal program. I've had the same great investors since that start. It's a fund of funds out of New York that have been unbelievable for me in terms of their patience and their understanding of commodities in the cycle. And so I formed Arcadia in 2009. And in 2017, 2018, my partners and I decided to purchase Five Rivers cattle feeding, which is the world's largest cattle feeder with a one time capacity hovering around a million head.

[B]

What is the difference between a derivative book and a physical book?

[A]

Yeah, so the physical book is the actual cattle themselves.

[B]

You own those cattle.

[A]

We own those cattle. Using institutional capital to create a return.

[B]

Okay, okay.

[A]

The derivative book is just merely speculating on, on the price of commodities. So today I spend 90% of my time managing the risk for the legacy physical program plus the Five Rivers program.

[B]

What was it like to work for Aubrey?

[A]

He was unbelievable. He was great. I mean, and you can't say the

[B]

most charismatic person in the world.

[A]

He was incredible. He was, he was a tremendous mentor. But you can't mention Aubrey without Tom.

[B]

Yeah.

[A]

And he's also incredible. And I still have the opportunity to talk to Tom every quarter. And he was a great mentor as well. But I learned a lot from both of those guys. I learned the power of leverage. I learned the risk of leverage. I learned a lot about risk adjusted returns. I learned a lot about utilizing data to make really good calculated decisions. And so watching their success in oil and gas and then translating that into the cattle market really worked well for me. I was talking with your neighbor today. Generally speaking, oil and gas guys are so disinterested in the returns in cattle. You know, we try to make low double digits. Oil and gas guys try to make that every single day. Yeah. And so, you know, it, it was a, it was a great experience.

[B]

You, you, you, you said you define your ROI early because you're not in oil and gas. Walk me through how that actually works when you're placing cattle. What does that discipline look like?

[A]

Yeah. So I remember having a conversation back in the day with, with the, with the principals of heritage feeders, Aubrey McLennan and Tom Ward. And I said, well, I need a defined roi. They're like, what do you mean? I said, well, how much money do you want to make? And they said, as much as we can. Well, that's not how it works for me. If you tell me I want to make X percent, I can manage to that. Right. I know what type of risk profile to take versus the return profile. And I know that they didn't want drawdowns and they just wanted upside. So we had to start defining what our ROI was. What is a reasonable return on these cattle? And it's something that I instilled today in my students at Colorado Date. It's something that we try to manage for at Arcadia, which is when we buy a set of cattle, what is a suitable return for us once we have that return that we can lock in based on the forward curve and our break even projections? I could start to maximize that return by moving things along the curve, not making binary bets on whether the price is going higher or lower. I already decided that I'm comfortable with this return. I buy the cattle, I have a break even. I sell the futures. And now I'm going to try to maximize that by moving that hedge from different months based on a variety of factors. Am I confusing you?

[B]

Oh, for sure. But that's okay. I can keep asking questions.

[A]

Yeah.

[B]

Can we talk about what those variety of factors are? And if at any point you're like, that's my secret sauce, I can't talk.

[A]

I mean, look, I. I can. Yeah.

[B]

Are you sitting at some, like, spaceship with screens with data?

[A]

We have a reading desk at, at the office that would look a lot like a New York City trading desk. We have, you know, eight people on the desk. And it's a collaborative environment. We all have four screens, and I have a Bloomberg and everybody, you know, three of three other people have a Bloomberg. And so, yeah, we're, you know, we're looking at a variety of things. We're looking at the cattle on feed report. We're looking at grain prices. We're looking at international meat values. We're looking at imports and exports of beef from Argentina or, you know, or Uruguay. And we're looking at who's importing it and who's exporting it. There's a whole bunch of things that go into making these trading decisions. It's not this for sure. And so as an aside, I like to give back like you do, Chris. Yeah. And so in the spring semester, and I've been doing for the last six years, I teach a commodity trading and risk management class at csu. And I. I do it for free. And one of my first bosses made me put together this research production schedule. Research production schedule. And it was the key things that made the cattle market move. And it started with beef prices and cattle prices, and then moved on to cattle on feed. And now that research production schedules, like 200 lines and so there's 200 lines of spreadsheets that I have to input the data where now my analysts do. And we're. Claude. Input the data and. And I look at a variety of charts that help me make decisions as to where I think the relationships between certain months are going to move. I don't necessarily make a bet that cattle are going higher or lower. And I think that's a huge differentiation between myself and a lot of my peers. People always want the price to go higher. I'm price agnostic. Where I'm not is. I am often worried about the shape of the curve and whether or not there's an anomaly between certain months. And if I can capture that anomaly by moving my hedge from one place to another.

[B]

Okay. The questions just might seem dumber and dumber.

[A]

No, you're a real estate guy.

[B]

But that is. That is okay.

[A]

Yeah.

[B]

What is the curve showing me? Like, what makes up the curve?

[A]

So a lot of things. The oil guys have a curve too.

[B]

Okay.

[A]

Right. So they look at a strip of crude oil prices.

[B]

Yeah.

[A]

Today, the front month crude is at 90 bucks.

[B]

Yeah.

[A]

You go two years out, that might be at 70 bucks. Right. So the curve is inverted.

[B]

Correct.

[A]

Cattle can be similar based on seasonality and supply and demand.

[B]

Yeah.

[A]

Okay. So if supplies are tight, we may have a curve that looks very similar to crude oil today. And it's telling me to move cattle forward, all else equal. There might be times where there's an abundance of cattle. And now you have a curve that's in a carry where the back end is much higher than the front end. And it's incentivizing the producer to carry those animals or incentivizing the crude oil guy to not bring it out of the ground.

[B]

Right.

[A]

Okay. And so we're looking for the market signals to tell us whether to keep the cattle where you projected them, move them forward or push them back.

[B]

And. Okay.

[A]

And that. That's what differentiates me as opposed to I buy an Animal with a 2.20 break even and I hope it goes to 250. Yep. I'm just trying to hit singles and doubles and then maybe steal a base every now and then by what I do on the curve.

[B]

What would a home run setup look like for you, given your strategy? Whereas most cattle traders, it sounds like a home run is just prices run and they got their home run. Those are probably the same cattle traders that if prices don't run, they get cleaned out, right?

[A]

Well, yes.

[B]

What does a home run look like for you then?

[A]

My home run is, is usually an attaway from my investors. Yeah, I like to, I like to

[B]

tell people you get out of boys.

[A]

Oh, I've got the best investors ever. I get atta boys. And I get, you know, slapped down every now and then too. But they're, they've been awesome to me.

[B]

Great.

[A]

I guess what I, what success looks like to me is for my returns to look like a 45 degree angle.

[B]

Okay.

[A]

As opposed to an EKG.

[B]

Okay.

[A]

Okay. And so most commodity returns look like an ekg.

[B]

Okay.

[A]

I can mute the volatility through risk management, and I think that that's what differentiates me.

[B]

Okay. Let's talk about the current market then.

[A]

Yeah.

[B]

And then maybe we can weave in just how you're applying your thought to it. Sure. It's a tight market right now.

[A]

Yes.

[B]

What is causing that?

[A]

You've had many years of drought.

[B]

Okay.

[A]

I don't have to go real far from the Dallas Fort Worth area to see those drought areas.

[B]

So. Can I stop you just real quick, please. Does some of your thinking think about weather patterns into the future? Is that kind of something that we.

[A]

Yeah, I mean, similar to the oil and gas guys, we have a meteorologist that we pay, that give us weather forecasts how far short term and long term. They would tell you that their long term forecasts are not that accurate, but they can sense changes from El Nino to La Nina. And, and yeah, so those types of things play a role. You know, it goes back to that kind of research, production schedule. Things don't matter until they do. So you look at them and you may look at a certain data point for three, four years and it doesn't matter. And then one day it does matter. So, yes, we do look at long term weather patterns. And you know, there's, there's a, there's a political element too, as I understand it. In the state of Texas, for example, which used to be one of the best cow calf areas in the country, you would have to have animals that were not hunted to get an ag exemption on your land. As I understand it, that's changed. So now you can have deer that you want to harvest for hunts. Well, that's a lot easier to manage deer in a high fence than it is to calve a cow. And so we're seeing some of these secular things that are making it harder for us to grow the cow herd. So you got weather, you got some regulation in Texas specifically, and then you've got demographics. You grew up in El Paso. I'm sure you Were around a few kids that were on ranches. Are any of them back? No, no, they're up here.

[B]

Yeah, right.

[A]

They don't want to go back and do that work. So we're not making the American cowboy. And so who's going to calve the cow? The economics, which suggest, especially late last year, that we would have grown this cow herd by now. And we're not. It's staying stable. And so if the economic forces aren't allowing for it, there's something systemic. One of it could be weather and the other could be demographic. So margins for the cow calf sector will have to expand in an effort for us to get more supplies. But what's interesting about the cattle market is it gets tighter before it gets looser. When you bring a heifer that you're going to breed out of production takes about three years from the time you pull a heifer out of production till you get a stake on the plate. And so for those of us hoping for growth in the cowherd so that we have more animals and we can reduce the beef price for our American consumers, it gets tighter before it gets looser.

[B]

And that's because that heifer is pulled. They need to grow up and mature to where they can become a mother that's having correct calves on a regular heifer otherwise.

[A]

Right. So that heifer would have been destined for the process and then become meat. You take one out and then you're losing meat. You're losing meat. And then.

[B]

And then it also takes a while for them to be able to reproduce.

[A]

You're catching on. Chris, you're ready to come work?

[B]

I think I'm at Five Rivers. I'm Five Rivers. Arcadia Beef Sticks.

[A]

Yeah, all of it.

[B]

Be a TA at your class.

[A]

Yes. We need someone to grade papers.

[B]

Okay. You said we expected it to grow, but it didn't. So now again, my mind would just say, did they just not have babies? Because cows, you don't get to make the decision if they're pregnant or not.

[A]

Right. But you, you make the decision whether or not you want to breed or sell. So you, you have 100 cows, you get 95 calves. Let's just say half of them are bulls that you're going to make into a steer. So you sell those. Now, what do you do with your heers? Do you either breed them or do you sell them as well? Well, the economics were telling us to

[B]

start breeding them because prices are high.

[A]

Prices are high. And the output, the calf, when the animal delivers is worth a lot of money. And so the economics were suggesting grow the herd, retain the heifer, and people weren't doing it.

[B]

Why?

[A]

I don't know.

[B]

Really?

[A]

Yeah. I mean, that's. That's the mystery, right? You and I took the same Econ 101 class, right. You provide an economic incentive to somebody and they do it well. The economic incentive is there and it's not happening. Could be weather, right? Could be drought. Could be this demographic shift that I talked about. Or it could be the leverage, right? You're just like, man, I got to pay down the note. It's been so hard for so long that I'm going to sell this heifer and pay down the note. But it defies economic logic, which is very interesting to me. Hopefully this year the economics are big enough that we'll start to see the retention and begin to grow the herd again.

[B]

So you're long reproduction.

[A]

I'm not long for reproduction. I am champion reproduction.

[B]

That's what you want to see happen?

[A]

That's what I want to see happen for a variety of reasons. Look, I make the industry makes more money when the supply is tight because prices go higher. When you have abundant supplies, prices go lower. But I don't want this to be a, you know, a business that we produce something that the American public can't afford. We want to keep our consumers forever.

[B]

Right.

[A]

We want to build consumers for eternity. And so to me, I think that, you know, a healthy price equilibrium, if you will, is. Is the best thing for the market. And so in order to do that, we need. We need more animals.

[B]

And when you're speaking of demographics, that's demographics that want to work in the industry, not demographics that are consumers of beef.

[A]

Correct.

[B]

The trend is not that people aren't eating beef.

[A]

Correct. In fact, it's the exact opposite. Yeah. That's what makes this market so exciting, is you have structurally one of the tightest supplies, for sure. The tightest supply since the 1950s in headcount. Oh, really?

[B]

As my next question. This is unique.

[A]

Yeah. So you have the tightest cowherd since the 1950s, offset by bigger beef production because an animal is bigger today than it was in the 50s.

[B]

Right.

[A]

So we don't need as many animals as we did in the 50s. What's interesting is that as the price has rallied, we haven't really rationed demand. In fact, beef demand is a unbelievable. And it has been for the last three years. And it's accelerating as more people take on GLP once, which is really exciting because people are demanding protein instead of simple Carbohydrates. As somebody, I could have sent you two profile pictures. They look very different. Lost about £40 on a GLP1.

[B]

Yeah.

[A]

I no longer crave a bag of Doritos, but I will spend 15 on a bag of beef. Jer, like your profile, your taste profile shifts, and you want protein as opposed to carbohydrates. It's fascinating.

[B]

I think it's the GLP1s. It's also just. We're coming out of that weird where they were making impossible meat and all this crazy stuff. People just want to be on protein now.

[A]

They want to be on protein and real protein. And beef protein is, you know, the best. It is the best.

[B]

For the record, what's your favorite part of the cow?

[A]

Oh, it's the ribeye.

[B]

Okay.

[A]

Number two would be a skirt steak. And not many people would tell you that.

[B]

I've never heard that. Why?

[A]

It's a. It's a wonderful, marbled piece of meat. I love it. In fact, if there was a skirt steak on the menu tonight versus a ribeye, I'd probably have a skirt steak, because I haven't had one in a while. I've had rib eyes all the time.

[B]

I don't know where you said you're having dinner in town tonight. Do they have a steak on the menu?

[A]

I hope so.

[B]

I hope so.

[A]

Yeah. I'll find a steak.

[B]

You'll find a steak.

[A]

Yeah.

[B]

Do any of your stakes make it to Fort Worth?

[A]

I imagine they do, but you would

[B]

know, like, you kind of do, but.

[A]

Yeah.

[B]

You're not. You're not that long into the supply chain, correct?

[A]

Yeah. I mean, Five Rivers, as the world's largest cattle feeder, is still only 5% of the US beef production.

[B]

Okay, we're going to get back to storytelling real quick. So we just glossed over the. The story that you just bought the largest cattle feeder in the world in 2018. What was the setup for that? You bought it from the Brazilians, Correct?

[A]

Yeah. So I always didn't want infrastructure. So my legacy Arcadia cattle feeding program, which still exists today, took a very opportunistic approach to cattle feeding. When margins were good, it played, and it played big. When margins were poor, it would sit on cash or give that cash back to its investor base. And so as 2018 came on, we had gone from a very tight cowherd to a growing cowherd, so the supplies were going to be abundant. And that was interesting to me because it meant, one, I'd be able to have capacity utilization at the feedlots. And number two, my day one margins should be better, meaning I can hedge in a margin. I knew, I knew the market wouldn't go straight up, but I knew that I'd be able to capture a margin, hedge it and as Ron Popeil said, set it and forget it. Okay. And so you had this macro backdrop of the cattle industry which was growing, which mean it would be quote unquote easy to fill the feedlots.

[B]

Okay, okay.

[A]

At the same time, I bought, or we bought Five Rivers from JBS usa, which is the world's largest protein producer. And for a variety of reasons, JBS needed to sell the feedlot operation to delever their balance sheet. And I saw the opportunity. I had fed at Five Rivers Feedlots. They were the best feedlots I had seen in the industry, had world class management, had a understanding and appreciation for technology, had in house veterinarians, in house nutritionists, had a massive data set that it was storing, utilizing some of it. And I said this really fits well with what we're trying to do. And so I worked with my investor base to, to, to seize the opportunity. It was a long road, but I had, like I mentioned, very patient investors and supportive investors and eventually you got a bot.

[B]

So if I show up to a world class feedlot, what am I showing up to? How large are they?

[A]

Well, so our, you know, our feedlots are averaging about 60,000 head.

[B]

Okay.

[A]

Our biggest feedlots are in excess of 100,000.

[B]

And how many acres per head?

[A]

We try to Give them about 300 square feet per pen per animal per pan. So you know, we get, we get arrows thrown at us from the coast. But the truth of the matter is my cattle have more space than the average New York City studio apartment. So, you know, and that's scientific. We try to maximize the space, but also maximize performance. I think one of the most important things that we take away from livestock production, specifically feedlot production, and even on the ranch, we don't treat the animals well, they don't treat us well. So we have to give them proper care. We have to give them the utmost care. Clean water, clean feed, consistency, all the things I mentioned earlier. But when I'm looking at a feedlot, it's the details that matter. Is the pen clean? Are the water tanks clean? Is the quality of the feed coming from the mill that are on site? Is it of tip top shape? Can always tell how good a feedlot operates when you go into the mill. If it's a mess, then the rest of the organization is a Mess.

[B]

Right.

[A]

If it's clean, then the rest of the organization is clean. And so you're looking for those types of details and you're looking for proper animal handling, which all of my peers do. Some do it even better than others, but you know, it's the details that matter. But these feedlots, in terms of capex and expenditures were, were the best I'd seen.

[B]

Grass versus grain.

[A]

Yeah, green. But let's keep one thing in mind. All cattle are grass fed. All of them.

[B]

Okay.

[A]

In fact, they spend two thirds of their life on grass.

[B]

Okay.

[A]

The last third is what gives it its flavor profile in the marbleization.

[B]

Okay.

[A]

And that is what you and I love. And that's what the international consumer is beginning to love. Once you have American grain fed beef or North American grain fed beef, you never want anything else. A lot of people talk about how great Argentine beef is, right? Well, it's grass fed, but it's the cooking process. If you took our beef and put it in the same cooking process on one of those cool grills, you would have an even better experience. And so to me, and I'm biased, I think grain fed beef is the best beef in the world. It happens to be the most sustainable beef in the world too. And I think what you'll see is the story is told through the years is that if you want to be a sustainable system, you have to adopt the US beef system to be most sustainable. And that's because we maximize for flavor, but we also maximize for performance. That feed efficiency, that average daily gain and the average outweigh what's in the grain. You said primarily, it's primarily corn. So the diet is an 80% more or less corn diet.

[B]

Okay. So I show up to this feed yard. There's how many. There's 60,000 head of cattle. They're not all in a pin.

[A]

No. There, there's about 300 in each pen.

[B]

So these are massive. Yeah.

[A]

I mean they're about a section big.

[B]

And there's veterinarians on staff, there's. How many employees are on.

[A]

So Five Rivers has about 610 employees. And it's 13 feedlots in seven different states. Six different states.

[B]

Okay. What, what makes a great location for a feedlot? I'm a real estate guy.

[A]

Yeah. I mean that location. Yeah. So you know, right next to one of your buildings would make a great feedlot. Yeah, yeah. See if we can help you out.

[B]

We got topgolf, an industrial building and

[A]

then a feed line.

[B]

Yeah, we. Perfect, perfect.

[A]

You know, access to Green.

[B]

Okay.

[A]

Access to.

[B]

You're not growing, you're importing that.

[A]

Correct. So you want to be close to rail.

[B]

Okay.

[A]

You want to have good kind of dry weather. Okay. And you want to have good proximity to a harvest facility. This makes the Texas Panhandle one of the greatest places to feed cattle. Makes Garden City a great place to feed cattle. Makes a lot of these places in Nebraska great places to feed cattle as well.

[B]

So do you want more feed yards or do you have enough?

[A]

I mean, look, I'm. I'm like you, man. I. I want to grow. I've. I still got some energy in me. I'll be 50 in May, but I. I still think I got some. Some growth. I want to. Five years ago, I would have said, yeah, I want to grow. Today, I want to. I want to grow kind of judiciously, like, I want to make sure it's the right opportunity for growth because the cattle supply is a little bit tougher. But, yeah, bottom line, I'd like to grow.

[B]

What's your. What's your. If you had to make a prediction, what will happen to the cattle supply? If we were sitting here 10 years from now, is it. Can it only go up at this point, or can it get worse?

[A]

No, I think the easy answer is we'll have less animals and bigger outweigh to create.

[B]

What is creating bigger animals?

[A]

Just. Yeah, but I think that's the easy answer because that's the trend.

[B]

Is that because we're using steroids or.

[A]

No, I mean, we're not changing many of the technologies that we've used for the last 20, 30 years, since I've been in the business. We're just breeding them better. We're breeding them for efficiency. We're breeding them for marbleization, you know, and we might peek that out. But I still think that the US Cattle industry is. Is wildly viable and has a massive future.

[B]

So you think the herd will continue to get smaller, but the outweigh. It'll get larger? Yeah.

[A]

And we've seen that in every cycle, you never get back to the previous cycle high in terms of head purely

[B]

because we don't need them.

[A]

Correct. Yeah. At the end of the day, we're still kind of a ground beef nation. As one guy wrote, most of the beef that we consume is. Is by a burger.

[B]

There is nothing better than a hamburger.

[A]

There is nothing better.

[B]

If I had one final meal, I swear it'd be a bacon cheeseburger.

[A]

On Saturday. I. I was actually talking to you, and I was putting my dog. I had this pug that I've had for 15 years, she was blind, deaf and diabetic. Anyways, to keep my mind off it, I was texting you. I celebrated with a. With a bacon double cheeseburger plane from McDonald's.

[B]

It's the best.

[A]

It's the best.

[B]

It's the best.

[A]

Yeah.

[B]

Do you even think about international consumer or you only focused on the domestic consumer?

[A]

Well, so I'm always consumer minded. And I think what's really cool about protein consumption is as nations get wealthier, the protein consumption increases. And so it almost looks like a J curve, to be honest with you. What we have seen as China in particular, as they've gotten wealthier, they've demanded a higher quality of beef.

[B]

Yeah.

[A]

And so China has been an incredible import or export partner to the US up until recently, like the last two years, because once they've tried it, they don't want anything different. So, yeah, I'm always mindful of the consumer. There's no reason to buy something they don't want.

[B]

Argentine beef imports have quadrupled.

[A]

No, they have not.

[B]

Okay.

[A]

The quota has quadrupled.

[B]

What does that mean?

[A]

That means that they can bring it in, but they don't. They don't have it. That's the.

[B]

So what's been the actual effect? Well, you saw the questions.

[A]

I saw the questions on Twitter. It's a great question. So here's the bottom line. It was a great tweet. It knocked the price of cattle down. It created a good opportunity to either lift hedges or convert to options. Yeah, absolutely. Because if you did the math, you know that the beef doesn't exist. So it got the headline, it dropped the market. You could buy it. That was great. But it doesn't exist. Okay. And so that doesn't mean that one day it won't. But I know at a minimum it's three years, right? Because we just talked about from birth to box is three years. Right. Or from the time you retain a heifer till you get one on the plate is three years. So I know it's at least three years, but those cattle don't exist.

[B]

So why even create the. The law?

[A]

Well, I mean, it's not. Well, the. The president, regardless of how you feel about him, is very, very bullish. Excuse me. Very effective on Twitter. And you saw what's happening to oil prices today with a tweet. And his tweet allowed beef prices to go lower. He said, see, look, I got beef prices to go lower. Actually, just cattle prices for a couple days. And he Said, look, I got it to go lower, but that's not sustained. The beef doesn't exist in Argentina.

[B]

So you just mentioned days when you're trading. Are you trading by the hour, by the day, by the week, by the second?

[A]

No. So I used to be accused of over trading, okay? And so I do. By my old boss, Joe.

[B]

Okay.

[A]

He's listening.

[B]

The British guy?

[A]

No, that's Simon, his partner at the time. Anyways, Joe's the. He's. He's my Mr. Miyagi, okay? He's the one that taught me research, production schedule. And he used to accuse me of overtrading. And he was right. I think the answer is, less trading, more profits. That's what I teach my students, is less trading, more profits. You can find a bigger move if you're constantly trading. You don't get to see the forest through the trees as a discretionary trader.

[B]

So how often are you making a trade?

[A]

I mean, I'll. I might move some stuff around daily or every other day, but we don't make big trades, you know, we make, you know, big decisions monthly.

[B]

Could I ask you what would fall in the big decision camp?

[A]

Well, how many cont. Like, you know, 100. Lot.

[B]

Big meaning volume?

[A]

Yeah.

[B]

Not big meaning certain circumstance.

[A]

Correct. Okay, yeah. Volume, like. All right, that makes sense. Let's go ahead and execute it in size.

[B]

And do you usually see that coming, or is it you wake up some mornings and you're like, it's time to, you know, Something showed up on our radar. Let's. Let's make it happen.

[A]

Start. We start with a macro picture. Every January, we get an inventory report and we say, all right, well, this is the macro picture for the cattle market in terms of supply.

[B]

Yeah.

[A]

And then. So we have this macro thesis, and then that thesis is tested and adjusted every month with a cattle on feed report.

[B]

Yeah.

[A]

And then it's adjusted and tested every week with the weekly information. And so we're constantly challenging our.

[B]

Our.

[A]

Our macro thesis as to the supply and demand of cattle based on the information that we're getting monthly, weekly, and daily.

[B]

You have your macro thesis in January.

[A]

I mean, it generally carries over, but, yes, we get confirmation in January.

[B]

What would need to happen for your macro thesis to have totally missed?

[A]

So I was anticipating some type of expansion in January because it's unexplainable to you. Well, and that was the thing. Right. So that's. The miss is I was tempering some of my bullish enthusiasm for the market. Okay. Right. I'm more concerned about the Curve. But I still have a bias. Higher or lower. Right. It's by nature. And I was tempering some of my bullish enthusiasm because I was expecting the USDA to say, expansion is here and we're starting to grow the cowherd. And I was expecting that because the math that I was running would have suggested that there was plenty of economic incentive to do so. The USDA did not report expansion in their January report. And so I had to adjust my overall thesis, which was maybe higher prices are here for longer than I thought.

[B]

You own and feed 900,000 head of cattle.

[A]

I have capacity.

[B]

You have capacity to do that. So when you say we thought they would have expanded, can't you just look within your own herds and say, either. Aren't you the proxy.

[A]

No, those. That's last year's calf crop. Yeah.

[B]

But you still might want to expand what you currently have. Is that the wrong question?

[A]

Why can't expand it? So if you look at the. And this is one of the things that drew me to the cattle market is it's very fragmented cattle. Me, actually, Tommy Winters taught me this. Cattle may change hands six times before they're harvested. And because of all of that, there's a tremendous amount of opportunity in the supply chain. So at its very core, you start with the cow calf operator. He has the beautiful ranch in South Texas. Okay.

[B]

Okay.

[A]

He is the factory. He produces the calves from there, they go to pasture. From pasture, they come to me from me, they go to the harvester. Okay. I don't have a lot of access to the cow calf guy. Ah, he's way upstream.

[B]

Got it.

[A]

Okay. So that. That's the differentiation. The other thing is, this is going to shock you is the average cow calf herd is 50 cows in the United States, a big operator has a thousand. And so it's extremely fragmented. It's very challenging to figure out who's expanding, who's not. So then you rely more on the weather.

[B]

Okay. But still, even when I hear that you're a smart guy, it's not like when a cow gets pregnant. It's happening in a snap of a. Like, this is a process. So couldn't you have just called your cow. Cow calf friends and said, you making more or not this year?

[A]

Well, yes and no. And they may have said yes, but I. I generally am. Everything happens at the margin. Right. So I may know the biggest producers who have the best balance sheets.

[B]

Okay. Right.

[A]

What I don't know is. Is the mid tier and the low tier.

[B]

Yeah.

[A]

I probably could have made More calls.

[B]

Is that fair?

[A]

Yeah, I think so.

[B]

I mean, could we add that to our data set? Let's. Let's get an AI robocaller.

[A]

We can have an AI Robocaller. Are you expanding or are you not?

[B]

Yeah. And then it'll come in on the data screen.

[A]

Sure. But I would tell you nine out of ten times the model. Yeah, the P and L model saying that this would. History would suggest this type of return generates expansion is probably a more effective use of time. It was wrong.

[B]

On year 10, if any AI developers start cow caller AI.

[A]

Yeah.

[B]

Cow calf collar AI. I think I have a business for you. Brazilian competition.

[A]

Yeah.

[B]

You worried about them? I mean, may not be the right word.

[A]

I am. How do I put this? I'm worried about all competition.

[B]

Okay.

[A]

But I can only control what I can control. I try to produce the best product for the best price every single day and eliminate as much risk as I can for to generate returns. Brazil has a competitive advantage in some respects, and that competitive advantage resides on the cost of labor. But they don't have the infrastructure that we have. However, in my 20 plus years of being in this business, maybe 30 now, we are beginning to see that infrastructure come. And so I do think that Brazilian beef can become a formidable competitor. But I am confident that we'll still produce the premium product of the world because of our feedlot infrastructure. They can try to imitate, potentially emulate. But those that have tried have never done it better. That doesn't mean it can't happen. But if cost of production is cheaper, they can certainly steal market share.

[B]

This might be the dumbest of all the questions I've asked when we're talking about Argentina and Brazil.

[A]

Yeah.

[B]

What we're talking about is them at. We're importing beef after they've been harvested. Not we're actually importing the Correct.

[A]

We are stock. Correct. We are importing the harvested beef. But let's make one thing clear is that the US produces the highest quality fatty beef.

[B]

Okay?

[A]

So your prime steaks, that's the envy of the world. Your choice steaks, Your certified Angus beef, the second envy of the world. We need imports from places like Argentina and Brazil to make burgers because we produce so much fatty beef that we have to combine it with lean beef.

[B]

Right.

[A]

We don't have enough lean beef in the United States to satiate everyone's demand for hamburger.

[B]

So if I go to central market and get a 93.7lean, that's.

[A]

You're getting that. That's 100% domestic. Most likely. But it's when you go to Burger King. McDonald's.

[B]

Yeah.

[A]

Right. That is. That's partially US product. Yeah. I mean, it is a blended product. There isn't enough lean product to satiate all that demand for a burger that the masses generally. And you shouldn't eat. 937 was terrible. Really? Yeah. What do you.

[B]

Well, if you were trying to lean up, you would.

[A]

No, I mean, the fat's good for you, buddy.

[B]

Just don't have what you're doing at 80 20.

[A]

Yeah, I'm an 8020 ground chalk guy.

[B]

Oh, we're gonna. We have to have a. Yeah.

[A]

If you're not. If you don't have a fire on your grill while you're cooking a burger, you're doing it wrong.

[B]

The way we'll celebrate this podcast is you and I are just gonna go have a steak.

[A]

Yes.

[B]

Maybe have a. If I could start a restaurant.

[A]

Yes.

[B]

What I would start is everybody wants to serve you sliders, but I think that's a mistake. They're kind of burnt. They're too small. What you need is what I call the table burger. You just order a burger off the menu. Say, just cut that thing. Everybody loves a table burger.

[A]

I love this.

[B]

And so if I had a restaurant and if.

[A]

If you're listening, it'd be called table burger.

[B]

It would be called table burger. And I promise you, it's the best appetizer. It's. Pull the burger off the main menu.

[A]

Yeah.

[B]

And serve it as an appetizer.

[A]

Brilliant. I love that table burger. Yeah. The problem is the way people eat burger. Like, I don't like ketchup.

[B]

Really?

[A]

Oh. I think it's the most vile thing in the world. So what do you do? I. Generally plain.

[B]

Maybe you don't like ranch dressing on your burger.

[A]

I mean, I'm not a native Texan, man. My wife is. She loves ranch dressing. I learned to dunk my pizza and ranch dressing. What's your.

[B]

Where's your favorite burger spot in the country?

[A]

Oh, I mean, my favorite fast food burger is probably in and out. It's pretty good.

[B]

Oh, well, that's real meat.

[A]

Yeah. I think the most overrated burger is most of your audience. Texan.

[B]

Yeah. Texas.

[A]

La. Disappoint them. I think whataburger is overrated.

[B]

Well, since they got bought by private equity.

[A]

Yeah.

[B]

It's gone way downhill.

[A]

Kind of like Portillo's.

[B]

Yeah.

[A]

Do you have a Portillo's here yet?

[B]

I've never heard of it.

[A]

Oh, it's so good.

[B]

I gained, like, 40 pounds on water burger.

[A]

In college, it was just the water burger.

[B]

We had a friend in college that, not the Coors Expedition that was burnt orange. So he was the water burger guy. And as a pledge, you would get to drive his whataburger addition to Whataburger and pick up waterburger. It was awesome. Screwworm.

[A]

Yeah.

[B]

Do you care about it?

[A]

Yeah, I think I do care about it. I care about it on a, on a multitude of levels. One, I don't want screwworm in the United States. My, the, my mentors fathers talk about what a gruesome thing screwworm was. What's different today is we have technologies, hopefully, to eliminate the screwworm if it came here and came on our animals. I worry about the million and a half head of feeder cattle that we used to get from Mexico into the United States. That's a big reason that beef prices in the US Are high, because we don't have those cattle. And so I'm, I'm, I'm grappling with the supply relative to the risk of, of the worm. I'm not a, not a scientist and I just, I manage my risk with the cards that I'm dealt and the cards that I'm dealt today tell me that the, the border staying shut and I have to manage risk accordingly. I guess my other big concern is that, you know, we make a lot of money as an industry on the value add, turning an animal into beef. So we would take the raw commodity, Mexican steer, and turn it into something value added. The Mexican industry is beginning to see that, so they're ramping up their production and I'm afraid we'll never see a million head cross again. They'll stay down south and they'll do the value add, I. E. The production of harvesting animals.

[B]

You said that a, it might trade six times before it's harvested. Is there anybody that's vertically integrated that, that owns them through all six stages?

[A]

No.

[B]

Why?

[A]

I think the closest vertical integration you ever saw was that packers like JBS own the feedlots, five rivers. The amount of land that it would take to be 100% vertically integrated would, would be in the trillions.

[B]

So it's a land constraint.

[A]

It's a land. Yeah. And it's a, it's a space constraint as well. So the best ground in the country is you get one animal per 10 acres. So if you're going to harvest as an industry, 500,000 head of cattle a week. 550,000 head of cattle a week. It'd be pretty hard to be vertically Integrated.

[B]

You've said multiple times, my job is to make a great product. What is the perfect cattle, heifer or steer? What. What would have been the perfect outcome? Is it a certain weight? Is it a certain. If you could hit a home run with one cow.

[A]

Yeah. The one that makes money. That's the perfect cow.

[B]

One that makes money as a consumer. Yeah.

[A]

I think, you know, look, when I say my job is, it's really the job of the team and the 610 people.

[B]

Correct.

[A]

And they produce an incredible animal. But the best animal would, you know, best commodity animal would, would feed cheaper than all the other ones in Grade Prime.

[B]

Right.

[A]

That would be, that'd be the best.

[B]

There's been, Clint. Plant closures in Tyson and layoffs in Nebraska.

[A]

Yeah.

[B]

What should I think about that?

[A]

Yeah, so you have that backwards. They closed Tyson, closed a plant in Nebraska.

[B]

Okay.

[A]

And then they went to a single shift in, in Amarillo instead of two shifts. What you were to think about that is there's just not enough cattle for the industry to harvest. And so they rationalized space and, and made reductions.

[B]

Auction yards are going digital.

[A]

Yeah. So I think the fallacy is that there are auction yards. Cattle still come to auction, if you will. Like Oklahoma City is still, well used to be the world's largest and they'll get 6 to 10,000 head of cattle. It sounds good to have a digital platform. And there are plenty of cattle that sell digitally and they call them video sales. Those video sales are still require somebody to video them. And so there's a, there's a market for all of it. And, and I think we see that. So you have video sales, you have regular auctions and then you have private treaty where a buyer would come out and look at them and describe them to somebody like me and we either buy them or not.

[B]

What do you think's the best way to market and sell?

[A]

I think all of them. I believe in diversity.

[B]

Okay.

[A]

Yeah. I think there's a market for everything. Otherwise they wouldn't exist. Right.

[B]

What do you think about ranches aging out?

[A]

Ranches aging out or the rancher.

[B]

The rancher, sorry.

[A]

Yeah, I think we spoke to that earlier. I think that's one of my biggest concerns is, you know, a 65 year old man doesn't want to calve a cow anymore, whereas he's 75 and the kids aren't coming back. And so what happens to those ranchers? Do they become conservation easements? Do they become hunting facilities? We put horses on them, buffalo or bison. I think it's a. It's a huge concern and I don't know how to solve it because the economics aren't solving it for them yet.

[B]

So it'll probably become a incentive thing.

[A]

I hope so.

[B]

I mean, you're seeing it in trades.

[A]

Yeah.

[B]

More people are now blue collar works becoming much higher paid, but it just hasn't trickled its way down to.

[A]

Right. And I think the nice thing about a lot of the blue collar work is you still get to live in cities and eat at restaurants. I mean, and it's not a 24 hour job. Ranching is a 24, 365. Cattle got to eat every single day.

[B]

Okay, well, this, this podcast is timely because there was a big tweet that came out this week. Peter Thiel invested whatever at a $2 billion valuation in it. They called it the Calgorithm AI that basically could create virtual fences and move cattle at the click of a button. And you wouldn't need people, you wouldn't need fences. You could get rid of a lot of this stuff.

[A]

Yeah, you still need people. Look, who am I to bet against Peter? Right. He's one of the greatest investors of our generation and our time. And I'm really excited to see real money move into ag tech because I think it has opportunity. I think virtual fencing makes a lot of sense. I think it allows us to be more sustainable. It allows us to rotate and do the Allen savory methods, if you will. In terms of grazing, they still can't. A computer can't calf a cow. If a cow needs help pulling a calf, there's very few things my iPhone can do. And so it still requires people. We're on the leading edge of technology in confinement, in feedlots, and at the end of the day, the human is still champion over the technology in terms of animal husbandry and identifying kind of sick cattle. And so I don't believe that the. The collar will replace humans completely. I do think it might replace having to build a lot of fence, which is good.

[B]

What's animal husbandry?

[A]

I mean, taking care of the animal.

[B]

Oh, okay.

[A]

Yeah.

[B]

I didn't know if that was matchmaking.

[A]

No, no, that's a fair question.

[B]

Husbandry.

[A]

Yeah. You. You tripped me up there. That was pretty good.

[B]

That was. I didn't know. Is there. Are there any places. Because AI is the flavor of the. It's not just the flavor. It's here. Is there any other places where AI or technology is being used that you've seen? Interesting. Yeah. I mean, outcomes.

[A]

I think so. Mostly on, on the procurement of cattle. We're, we're doing some real interesting stuff internally in terms of identifying opportunities, utilizing AI. In my world, I'm really trying to narrow variance. So what is my projected outcome versus my actual outcome? Because I'm substantially hedged, it's more important that I narrow my variance than it does that the price goes up because I've locked in my price. So if I can narrow my variance in theory, I can buy more cattle or I can be more accurate in my returns. And so we are using AI models to help us predict the three things that I talked about outweigh feed efficiency and average daily gain. And we're finding that those models are much more successful than utilization of averages or linear R squareds.

[B]

If you could solve the biggest problem in the industry right now, what would the problem be?

[A]

Make it rain.

[B]

That's it?

[A]

Yeah, a few things. Few things can solve problems better than green grass. I mean, that, that is, that's the big one, is we gotta bust the drought again.

[B]

And it's the drought over the whole country or just over some of the feed yards.

[A]

It's not feedlots, but the cow calf areas.

[B]

The cow calf areas.

[A]

So areas where you have historically built the factory, the cow calf operation are under drought again.

[B]

So when they reach your feed yard, they don't need to be grazing really. They don't graze, they're just eating.

[A]

Correct. They spent the first 2/3 of their life on grass and the last third they'll spend with us.

[B]

And how old are they by the time they get harvested?

[A]

We try to. They're under 30 months. Is, is really what we tried to do. So they're about two, two and a half years old.

[B]

And are most of the. Are they being moved to your feed yards by cattle drive or by truck or by train or by truck? All by truck.

[A]

All by truck, yeah.

[B]

How many can fit on one truck?

[A]

About £50,000.

[B]

Which is how many?

[A]

Depends what they weigh.

[B]

Oh, it's £700. So it's like 65?

[A]

Yeah, 65, 70.

[B]

And you're taking on 60,000. So there's, I mean, that's just truckloads after truckloads.

[A]

Yeah. Yeah. Are you in that business, the trucking business?

[B]

Yeah.

[A]

Oh, God, no. I have a 12 year old. He's hard enough.

[B]

Is that harder than the cattle business?

[A]

You know, that's a good question. Raising kids is hard, but I'm pretty lucky. Got a good partner and a good kid.

[B]

You obviously want your trades to be in the money. Rain gave Me this question.

[A]

Yeah.

[B]

He said livestock is a commodity that dies.

[A]

Yeah.

[B]

With cattle, the animal is on feed and you're burning cash every day. How do you make the call to take the loss and move on? Versus thinking if I just hold a little longer, this will work out because that's where people get destroyed.

[A]

Yeah. So one of my mentors early on always told me the first loss is the best loss. Okay. And I kind of live by that. So if, if we're wrong, we just. And the animals harvest ready, it's time to go.

[B]

Okay.

[A]

Period. Just take the loss and move on. Okay. Because if you don't, that's all you focus on. It's like a bad real estate deal. Right. If you're always focused on the one bad one, that's all you think about.

[B]

Right.

[A]

And then you don't get to play offense. When a good opportunity comes around, you're just like, oh, that deal, that deal, that deal, that deal.

[B]

Right.

[A]

And I think it's the same thing with a cattle deal. If you got a bad set of cattle and the market isn't going your way, you just got to get rid of them.

[B]

How long does it take to get rid of them? A day?

[A]

Usually if you sell them, they, they're. When you sell them, they have about a week to pick them up.

[B]

But from the, the time you decide, how liquid are they? From the time you decide to sell them, how long until they're sold? Is that a 24 hour window or

[A]

you and I could shake on a deal and it's sold.

[B]

Okay.

[A]

Yeah. And that's what's really neat about the cattle business. Your, your viewers and, and listeners are going to be shocked by this. There's no contracts. I call you up and say, hey, you want to sell a thou, you want to buy a thousand head of 600 pound heifers? They cost 300 bucks a pound or $3 a pound. You say, sure, that's it. That's it.

[B]

In real estate, you have to have attorneys go back and forth for 45 days drafting a PSA, then you have 30 day. It takes forever.

[A]

Yeah. It's crazy.

[B]

So really, most of your stuff happens off contract, all of it.

[A]

I mean, if we buy something three, six months out, there's a contract and a little bit of down money. But 90% of the cattle we purchase is over the phone via text message, instant messenger handshake, and it's done. Now you gotta know who you're doing business with for sure. But those that have played the game poorly are no longer around from the

[B]

time you have purchased, how long until you know, if the trade's gone bad? Does that happen relatively quickly? Is that months into ownership?

[A]

Well, I think you run a break even on every animal or on every lot that we buy. Okay, right. So we, we have these projections and our models tell us whether or not, you know, what the cattle should do, all else equal. And sometimes the cattle don't do what you think they're going to do and you've got your hedge on and you just got to finish them and feed them to term. That's other times they outdo your projections and then other times they're right on your projection. So you'll know pretty quickly whether or not cattle are going to be any, you know, relative to your projections.

[B]

How much does input cost play into your day to day?

[A]

Huge.

[B]

Okay, what are you tracking? Fertilizer?

[A]

No, we're tracking corn.

[B]

That's it. Yeah, and, but all that goes corn and hay and.

[A]

Yeah, but, and then so we we spent a lot of time on the supply and demand economics of, of the corn market. So we talked about the thesis in the cattle market. We also formulate one for corn as well because the input is such an important part of, of the pricing and the mechanism. And so we try to do a really good job again of not trying to have our input prices look like an EKG, nice 45 degree angle so that we have the more consistency, the more consistent our returns.

[B]

How much corner you going through a day?

[A]

Gosh, I wish you didn't ask me that a lot.

[B]

Let's back into it real quick. I think it's like you said, they eat six pounds a day.

[A]

Well, that's six pounds of dry matter. No, six pounds to get one pound of gain. They gained three pounds.

[B]

So eating 18 pounds a day.

[A]

Yeah, but then that's dry matter. I think something like 2 million.

[B]

Are you the largest consumer of corn in the country?

[A]

We would be the largest consumer of corn for feedlots, but I think the ethanol plants use more than us. Some of the chicken guys, stuff like that. No, we're not the largest.

[B]

I mean that's a lot. So do you buy direct from the farmers?

[A]

So we do as much direct as we can. But generally speaking we have to import our corn from other states. So we buy them from big grain handlers and grain brokers.

[B]

So you don't really have to think about the cost of fertilizer, natural gas, because that all gets baked into what the cost of corn is going to end up.

[A]

Correct. But it is Part of our modeling. Right. So we might say, all right, we're bullish or bearish corn. Do we want more coverage than we need or less coverage than we need based on the inputs that you just discussed?

[B]

So one way you could get out of whack would just be over ordering corn.

[A]

Yeah. Or under.

[B]

Or under.

[A]

Right. Try to make it as much of an arbitrage as possible. Yeah. And that's a unique aspect to what I do. And I put arbitrage in quotes because there are projections involved. But I try to take out as

[B]

many variables as possible based on how much corn you buy. Could you technically. Do you have enough knowledge to be a corn trader? Would you know how to trade that market?

[A]

I used to know how to trade corn. I've got a pretty astute group of people that trade corn in our office. Oh, really? Yeah. Well, they hedge the corn. I think what's really cool about Five Rivers and this is what drew it to drew. Part of my love for it is we have 13 feedlots and they all act as entrepreneurial units. So they buy their own corn, they buy their own cattle, and they're responsible for their own P and L. They send that information up to us and then we manage the risk around it. And so they're the real corn traders because they're constantly buying it. We'll give them our opinions. We may have strong opinions sometimes. And if they don't execute it, we might hedge it by buying futures and stuff like that. But it's that cooperative competition that's the secret sauce of that organization.

[B]

If I wanted to enter the industry and we know things are kind of consolidating, Is there market for new incumbents and entrance or is it a. This isn't worth your time?

[A]

No, I think there is, especially today. And the reason for that is it's taking way more capital than it ever has taken before because the price of the input feeder cattle plus, plus the price of the other input corn is. Is extremely high relative to history. Specifically feeder cattle, not so much corn. So it's taking a tremendous amount of capital to play this game. And so if there was ever a time, now is a pretty good time. But there's also a tremendous amount of risk when prices are within a pitching wedge of all time highs. So manage risk according.

[B]

We have to infer that we think beef prices are going down. That's what the curve should be telling us right now. Or does it still show them going

[A]

up because the curve is rather flat because the market's trying to decipher what happens here. Prices could go down if the Mexican border opened here pretty quickly. Prices.

[B]

I know we don't want illegals in America, but we also won't let their cows in either.

[A]

I guess that's.

[B]

It's like. It's a total shutdown.

[A]

Yeah. There's a total shutdown.

[B]

I did not know that.

[A]

Yeah. So there's no Mexican cattle moving and it's generally a million to a million and a half head of cattle a year. So it's a big number that just

[B]

come up through south Texas.

[A]

Yep. And they're. They're, you know, inspected by the. The state vet and the US Vet and then they go to pasture feedlots throughout the country.

[B]

And they have not been coming in.

[A]

Yeah, almost. I think it's over a year now. It's a big deal.

[B]

Do they come down from Canada?

[A]

Oh, yeah, absolutely. That border is open.

[B]

They have good cows.

[A]

Cows. Yeah. I think the further you get north, the higher the quality of cattle.

[B]

Really?

[A]

Yeah.

[B]

So where your feedlots are all over the country.

[A]

Yeah. So Texas, Oklahoma, Kansas, Arizona, Idaho and Colorado.

[B]

If you were going to get started in the industry, is there a certain amount you would need to start with?

[A]

A lot? Yeah. I mean you can. You could put a single pen of cattle on feed.

[B]

How much is a single pen?

[A]

Well, I think if you wanted to lever it, you could probably put 500 doll down. That's the one neat thing about cattle is it's highly levered. That's how we're able to generate the returns. So it's generally 80% leverage, 20% equity. So $500 down times a thousand.

[B]

So 500,000 bucks and that would get me a TH000.

[A]

Yeah.

[B]

And you want to.

[A]

I got a pen open.

[B]

Would I be able to go see them and pet them?

[A]

Oh, yeah, sure. We even harvest one for you.

[B]

So if I bought a thousand from you.

[A]

Yeah.

[B]

This is tied back to an earlier question. I would be able to show up at a lot and you'd be like, those are your thousand.

[A]

Absolutely.

[B]

It wouldn't be 50,000 out there and.

[A]

Nope.

[B]

And it's like you.

[A]

Oh, they're. They're easily identifiable by owner. Absolutely. You have your own pen. They have their own identified ear tag. And I would show you your thousand head.

[B]

Do that. Does the. Is the. The brand that they take from the cow calf operation. That's the brand they carry forever?

[A]

Yeah. And not all states brand.

[B]

Okay.

[A]

Not all areas brand.

[B]

So you identify through tags.

[A]

Yeah. So when they come in, they get an identification like an earring.

[B]

Yeah.

[A]

And a tag. And it has an individual identification number and then a pen number and then the owner. And so all that's traced back. It's. It's very secure.

[B]

Some.

[A]

You can actually tokenize it. If we were back in. In that world. Because you can identify.

[B]

You probably think about that still.

[A]

Yeah. Every now and then, my mind's always turning. Probably like yours, Chris. What?

[B]

So, okay, I asked you what the biggest problem is. What's your biggest idea for the industry?

[A]

Like where.

[B]

Where do you spend a lot of time thinking about the future?

[A]

Yeah. I mean, my big ideas really revolve around data aggregation.

[B]

Okay.

[A]

And then data visualization and then data optimization. And that's. That's for me. And hopefully the. The industry does something similar. But to me, we're spending exorbitant amount of time trying to maximize the data that we've collected since inception. And with the utilization of AI tools, we've been able to do some really cool stuff. And I've been hyper focused on this the last 10 weeks. The world has changed since the last version of Claude came out. Anthropic has done a tremendous job of bringing AI to people where they work, which is on Excel and PowerPoint. And once they put it in my face, I was able to see the power of it. And then what we've been able to do with our data has been incredible. So that's a long way of saying that I don't necessarily have an industry goal. My personal goal is to maximize the data, to make better decisions from an industry perspective. I would love for the industry to continue to be great stewards of its community, but be more verbose about it. So we all live in these communities. We give to our places of worship. We do great things in the community for 4H and FFA, but we don't really talk about it. And so as a result, we're often looked at as the evil animal producers, when in fact, the communities do really well because we're there. So that's one of my goals and dreams for the industry, is to be more verbose about the great things that we do for the communities that we live in.

[B]

Well, we're starting right here on this podcast.

[A]

Yeah.

[B]

We're being about as verbose as we can be.

[A]

Absolutely. If I can, I can. I brag on one thing I would love.

[B]

I think I know what you're gonna say.

[A]

Yeah. So along those lines, Arcadia and Five Rivers, and our investor base, our primary investor, started a program called Beef Sticks for Backpacks in the state of Colorado. So there's about 400,000 food insecure kids in the state of Colorado. They get most of their meals at school, breakfast and lunch. And then on the weekend there are these gaps. And the gap is there's no food. And so there's these backpack programs throughout the state. We have them in Texas as well, where they give them these foods just so they have something to sustain them over the weekend. Those bags are pretty heavy in carbohydrates because we're just trying to give them calories. So our group, my wife and I co founded this, this, this thing called beef sticks for backpacks. And we put a beef stick in every backpack program we can find in the state of Colorado. Started with 400 beef sticks a week, and now with an awesome board and tremendous support from our partners, we're doing over 25, 000 a week. So it's pretty cool. It's 1 ounce beef stick with 9 grams of protein. All of it's produced at Colorado State University. And it's awesome. And that is some of the power of what our industry does. Feeds people and it feeds the most vulnerable. So it's pretty cool.

[B]

And that's just in Colorado.

[A]

That's just in Colorado. Or actually, our inspiration was a program

[B]

in Texas called what or what did it do?

[A]

Snack pack for kids. And they were making the bags, but the thing that the kids liked the most was a beef stick in there. So my wife and I said, well, what if we can just make the beef stick and then identify the programs? And so that was the route that we took. So awesome. Yeah, it's really, it's. It's my favorite thing we've done.

[B]

And there's 49. I mean, you're just in Colorado right now.

[A]

Yeah. So we're trying to give the blueprint to other states to do it. We have.

[B]

How does it work?

[A]

So we, we buy beef or we get beef donated from, from, from the packing house. So we buy the beef from the packing house, we have it delivered to Colorado State University that has a meat lab, they call it, which is like a mini packing house. And then they make the beef stick. So they, they grind the beef, they put it into a casing, they smoke it in a smokehouse, and then they package it, and then the food bank comes to pick it up, and then the food bank distributes it to all the backpack programs that they've identified in the state. So it's. It's pretty amazing. State of Wyoming's doing it now. It's been the passion of the first lady of Wyoming. So she created a program and they're also doing a program in Pennsylvania and I think Nevada starting one as well. So.

[B]

Awesome.

[A]

Yeah, that's lead by example, but I hope every state does it.

[B]

Do you have like a big industry conference or.

[A]

Yeah, we have.

[B]

Where do you see all your people?

[A]

Yeah, so we all descend upon some city once a year and they call it cattlecon. It's the National Cattleman's Beef association annual meeting. And I think the last one was in February. It's usually a week before the Super Bowl.

[B]

Is it a good one this year?

[A]

Yeah, Nashville's fun.

[B]

Is there anything that came out of that that we didn't talk about today?

[A]

No, it was actually a rather benign meeting. But I think what you find. Yeah, I mean, when prices are high and people are making money, there's not a prices are low. That tends to, to bring out everybody. And that's when you start highlighting the issues in the industry.

[B]

Does the government have to intervene at some point?

[A]

No, I'm. Do they have to intervene in your industry?

[B]

No, but they do intervene with farmers and there's a lot more programs, I guess.

[A]

No, that's a fair point. The cattle industry has generally been a hands off. It wasn't until the COVID era where they received direct payments in terms of intervention. I don't believe in direct payments for the cattle producer, but I do believe in programs that allow for risk management or cheaper forms of risk management. So there are livestock risk protection programs and I'd love to see those expanded so that people that are creating the calves, the cow calf sector, have an opportunity to manage risk and a subsidized put, if you will, that will allow for them to expand the herd.

[B]

Okay. I'm just kind of fascinated by the idea of what your day, a day in the life looks like.

[A]

Yeah.

[B]

So you're on the road right now, but did somebody send you today's data? Did you have a. You go into a Bloomberg, where are you getting.

[A]

Yeah, so I've got my Bloomberg on my, on my laptop. I've got it on my phone today. Yeah, of course. I know everything that's going on up until 1:30. Equities are higher, oils lower and cattle is higher. So.

[B]

Yeah.

[A]

And then throughout the day, as the research production schedule is being filled out, I'll get that stuff. So the daily reports and I'll look at those charts. There's some internal reports that I get in the morning and, and this morning I actually got six reports from, from My. My agent, which is I've affectionately named Lobster Man.

[B]

Wow.

[A]

And so I've been working on creating an open claw agent that reads a bunch of emails that I get. So I have it sandbox to just receive emails on AI markets, things that are not proprietary to my industry. And then it brings it in and then it sends it to AI to digest and then sends me a summary. So that's new for me, but it's taken a lot of work. But I've got, like I said, I've kind of gone all in. So I've got Lobsterman and he looks to open router and open router chooses the best model for the best price. And then it comes in, reads the emails, delivers me a PDF to my phone and to my email. So.

[B]

So did you make any decision today that you were not anticipating making yesterday from Lobster Man?

[A]

Yeah, no, that's the majority in the office is like, oh, he spends all.

[B]

Lobster man runs a company now.

[A]

No, Lobster man does not run Lobster Man. I could have read all the emails. I could have read probably a hundred years where the emails summarizing them, but it's summarizing it for me. Yeah, it was, it was a nice brief because I knew I was gonna be on the road, I knew I was gonna be able to read everything today. So I, I got a bunch of information that I would have gotten. I would have been had the normal time to read it. So it's been helpful.

[B]

But do you pretty much read the day at the same data every day like you've just.

[A]

Yeah, man, for 30 years. To a lot of the new sub stacks, if you will. There's a couple macro guys I like to read. And then every Monday I know what charts I'm gonna get and Tuesday I know what I'm gonna get. Thursday's a big day for charts and information, so I look forward to all that.

[B]

So what's your time?

[A]

The weekends are my big reading days. So if I. I'll start printing stuff throughout the week and then I'll devote some time on the weekend to, to read through all the stuff I missed.

[B]

So what's your time split from trading to actually walking the feedlots and being like, was that the early days and now you don't have to be on site?

[A]

Yeah, I mean, I never was really on site. I would, I would come visit and. And the truth of the matter is they do much better without me there because I know enough to be dangerous. So I spend 90% of my time either in the office or in Investor relations, if you will. And probably 80% of my time in the office, 10% investor relations type stuff. We have a great team. I've got a woman that kind of runs the Arcadia program. She's been with me since she's been an intern.

[B]

Wow.

[A]

We've got a CEO of Five Rivers who's been there since it's his only job. He's only worked for Five Rivers and a great executive team around him. And so that's the engine that drives the machine. I sit in meetings, I offer my opinion, and I represent the investor and the executive team in the executive team.

[B]

So that's unbelievable.

[A]

And then, you know, but I do spend, you know, I try to schedule meetings after the close and after lunch. So between, you know, 7:30 and one, I'm. I'm primarily focused on markets and helping build the strategy for. For the Risk team.

[B]

And you just love this stuff.

[A]

Yeah. I mean, every day is awesome. The only thing I'd rather do is fly fish. Really? Yeah.

[B]

Do you fly fish?

[A]

Oh, yeah. You?

[B]

I fly fished.

[A]

Yeah.

[B]

I don't fly fish.

[A]

Got it. Yeah. That's the only thing I'd rather do. Other than that, I'm everything I do, I love.

[B]

So you live in Colorado?

[A]

I do.

[B]

And that's a big cattle.

[A]

Yeah, I mean, it's one of the original kind of places.

[B]

One of the guys on. On X. My buddy. Lumber trader.

[A]

Yeah. Yeah. Who is that guy?

[B]

He's been on the podcast.

[A]

Oh, yeah.

[B]

He says he lives around the corner.

[A]

Well, I figured out who he was, and yes, he lives literally right around the corner.

[B]

Yep.

[A]

I.

[B]

But I've never met, I guess, traders all over the. He's a lumber trader.

[A]

Well, that's good.

[B]

Is this a big trading community or.

[A]

Cattle is volatile. Wait till lumber is. That is volatile.

[B]

Yeah. Super volatile.

[A]

Yeah.

[B]

Do you. Do you trade anything else or just trade cattle?

[A]

Yeah, I mean, I manage the risk on cattle. Occasionally we'll. We'll be worried about input prices for natural gas or we're distillate, so we might make some trades there. But I. I spend most of my time managing the risk on the cattle side, a little bit on corn.

[B]

But I keep saying trading and you keep saying managing risk.

[A]

Yeah.

[B]

So the question is, how much risk actually is there? That's a really weird question. But you said my job is just to manage risk.

[A]

Yeah, my. My job is to.

[B]

How bad. How.

[A]

That's my primary function.

[B]

Maybe the question is, like, how bad could it get quickly for some new.

[A]

Well, think about all the leverage. Right so, So a lot of.

[B]

It's A lot of the risk is purely because you're so levered.

[A]

Correct.

[B]

Yeah. And so a limit move, 20% swing, you're out.

[A]

Yeah, yeah. And that can happen.

[B]

Or a limit move, swing, and you're negative. You're down 100.

[A]

Yeah. So we try to avoid that.

[B]

And is it. Is, is the leverage, lines of credit, Is it just a revolver?

[A]

It's a revolver. I mean, the industry, you know, our leverage is the same as everybody else houses. It's a pretty standard leverage. So.

[B]

But if you're making. Okay, this is a little. So. So it's a revolver. You're just pulling on it as you need it. Because if you're doing deals with no con in real estate, the banks is right up your. You know what. As you could ever imagine, if you're trying to buy something, you're just saying

[A]

we buy it and then. Then it's in our control in confinement. It's auditable at that point.

[B]

Yeah.

[A]

The cattle sell and we get a check and we pay back the line or we pay back that portion of the revolver.

[B]

If you wanted to play them, if, if you wanted to play the cattle markets through a public stock or how would you play it?

[A]

You can't. There's no kind of public entity that feeds cattle. So that's. It's interesting. You could buy process. I think Wall street doesn't necessarily have an appreciation for the amount of leverage.

[B]

It's hard because if anybody was public, it would probably be. Y' all just give it a size.

[A]

Yeah, I don't. I don't know.

[B]

We're.

[A]

We're pretty.

[B]

I'm not saying you want to be.

[A]

I'm just saying in terms of size. Sure. There's a couple of us that.

[B]

There's probably a reason why you've chosen not to.

[A]

I mean, I don't. I haven't really spent a lot of time thinking about it, but, you know, bottom line is Wall street may not have an appreciation for the leverage

[B]

or anything that we. That we didn't communicate to the listener today.

[A]

No, I think we've done.

[B]

Do they know everything they need to know about the cattle feeders of America?

[A]

I. I think they have a pretty good feel at this point.

[B]

Market high.

[A]

High and probably not breaking anytime soon materially.

[B]

That's your position and, and soon being the year 2026.

[A]

Yeah. I mean, we might put in a. Yeah, I don't think we're going to see a material break in prices in 2020.

[B]

Size of herd, probably not Getting larger. Going to continue to get smaller. The size of cow gonna grow.

[A]

Correct.

[B]

And real quick, you get better marbling. If the cow is actually larger because they're fatter, they have more fat on them.

[A]

Generally speaking, yes. Okay. But that's not. It's not linear. I mean, you can have. You can have a really good animal that's not massive. Marble.

[B]

Yeah.

[A]

And a really bad animal be massive and not marble.

[B]

AI is having some impact, a lot. A lot of it. On the.

[A]

The data side, I think AI is potentially can have an impact. Just know that it's too early. Yeah, it's exciting for us. We're spending a lot of time on it.

[B]

The only input you're really focused on is the price of corn and feeder cattle, so. And feeder cattle.

[A]

Yeah, those are the two inputs. I mean, natural gas will become a big one. If these data centers all come like we think energy costs to fuel our. Our. Our mills are going to be expensive. So, yeah, we're gonna have to watch that close to.

[B]

We could power data centers from Cal farts. They say Cal farts is the biggest. What do they say? It's the biggest source of.

[A]

Of methane.

[B]

Methane.

[A]

You want to know something amazing?

[B]

Let's hear it.

[A]

Cows don't fart.

[B]

Really?

[A]

Yeah, they burp. So it's all respirated.

[B]

And why is it so bad?

[A]

I don't know. I'm not a scientist, but I know that methane has a bigger impact despite it leaving the atmosphere quicker.

[B]

Okay.

[A]

So the. If the quickest thing to do is to reduce the amount of methane into the atmosphere because it has the highest impact. So methane has a high impact, but it doesn't last long. Long. So if you want to change what's going on in the atmosphere quickly reduce methane.

[B]

Okay, maybe my last question. Does what you do show a leading indicator to the broader health of the American economy, or is it. Are they separate?

[A]

You know, beef consumption still is, but used to be highly correlated to disposable income.

[B]

Okay.

[A]

And so we tend to either be a lead to disposable income being tighter or a lag that says disposable income. Got tight. But I would say in this part of the cycle, it's probably not a leading indicator.

[B]

And we're long GLP1s.

[A]

We are long GLP, which means we're

[B]

GLP1 users are going to want to eat more protein.

[A]

I believe they will. Yes. That's what our data says. There's a few articles you could find here and there that would be contrary, but the research that I've read is. Yes. More protein.

[B]

Jordan, this was awesome.

[A]

Well, thank you. This was a great experience, and I'm humbled to have been part of it.

[B]

Thank you for coming to Fort Worth.

[A]

Thank you.

[B]

This was awesome.