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The HC Commodities Podcast
Food, Fuel & Weaponized: Soybeans with Walter Cronin
00:47:39
Food, fuel, geopolitics, great power competition and trade - Soybeans sit at the heart of it all. What are the big macro trends with the commodity? How has trade and geopolitics impacted it? How has new drugs like GLPs impacted it? And what is the outlook? Joining us once again is Walter Cronin, President and Co-Founder of White River Nutrition, a US soy processing company based in Nebraska, which alongside meal and soybean oil produces high -quality soy ingredients.
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Foreign.
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Welcome to the HC Commodities Podcast, a podcast dedicated to the commodities sector and the people within it. I'm your host, Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the commodities sector. Today we return to the subject of soybeans, food, fuel, geopolitics and trade. Soybean sits at the heart of it all. What are the big macro trends with the commodity? How has trade and geopolitics impacted it? How has new drugs like GLPS impacted it? And what is the outlook? Joining us once again is Walter Cronin, president and co founder of White River Nutrition, a U.S. soy processing company based in Nebraska, which alongside meal and soybean oil produces high quality soy ingredient. As always, you can really support the show by leaving us a positive review on the platform you're listening on and as always, I hope you enjoy the episode. Walter welcome back to the show.
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Paul. Thank you very much.
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Yeah, it's becoming a bit of a ritual to do our sort of ag and, and soybean in particular check in as, as one of the sort of world's most important commodities and very much at the center, a lens through which we can look at food trends, fuel trends, geopolitics and the broader trade environment and all that's going on there. So it's just a really instructive commodity to look at as well as being a very important one. So delighted to have you back to kind of get caught up on what was a rather rough 2025 in terms of the geopolitics and the trade angle and the fuel angle and see what's in store for us for 2026 and again, what it will herald and what it means for we can see in other commodities, but also what we see in food more broadly. Can you just. I know we've covered this a couple of times, but just to get remind me, why does, why does soybean matter.
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For your average reader? They have limited interactions or intersections directly with soybeans and normally that's when they go to a Japanese restaurant and order edamame and that's pure unadulterated soybeans and that's a 10 or 12 times a year, etc. And then they don't think about soybeans at that point moving forward. Except for everything we're going to talk about this year where soybeans is on the front page of the New York Times all the time. But just as we as humans need a balanced diet that includes protein and we're going to talk about the demands for Protein and the, the combination of the medical and the food community coming together to promote higher protein consumption. An animal needs to consume protein. And globally the go to protein for animals, primarily poultry, but also fish and dairy, is soybean meal, which is derived from soybeans. We process soybeans to produce soybean meal. That's 80% of our business and 20% is the soybean oil. But soybean meal as a feed ingredient is the growing ingredient in the world. As the world evolves and the population grows and GDP grows, soybean meal is becoming the go to crop because globally we can produce so much of it to meet demand. And that's primarily coming from Brazil.
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Okay, so thanks for that. And then one more piece of the puzzle and then we can get into how it's become on the front page of the New York Times so often has become a consequential world story and kind of sits both at the center, but also is emblematic of what the Trump administration is doing in this term and started in the last term. Can you give us some sense of scale? Because whilst it's enormous, it's also run by a pretty small club. Right? Can you give us who's producing this country's companies and where primarily the demand sits?
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The global leader and where the growth has come in soybean production is Brazil. Brazil has a very focused and expansive and growing biodiesel growth driven by policy. And the U.S. would be next. And I'm asking you whether just soybean oil, because the other one to consider is palm, which also plays an incredible role in vegetable oil trade for food, but also for fuel as well. So you have the global leaders, the global places to look for vegetable oil production that is being converted into fuels is Indonesia, Brazil, the United States, Malaysia, in that order. So palm first and then soy playing the major role. But soy is the growing source of feedstock for biomass based diesel. It's growing dramatically. And Malaysia as a, as a producer of palm used to be number one. Now in the far in the distance, number two is peaked and Indonesia has slowed. So it's really soybean production producing more soybean oil that's lending itself to greater and greater growth in biofuels from soybean oil. Yeah, the players, the who's who is really pretty much the same around the world. It's the names that we associate with agricultural trade. The quote unquote abcds, the Archer Daniels Midlands, the Bungees, the Cargills, the Louis Dreyfuses, those names are dominant Worldwide. And then we have the co ops, which is, which is very large segment globally of production. Those are farmer owned companies in the business of processing soybeans.
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And just, just the mechanics there, just so I kind of get this level set right for all of us. Okay, so you, you make the soybean and, and then you have an option of how you crush it. Well, you can crush it domestically and export the soybean oil or you can export the. Can you just let me ask this more effectively? I'm sort of thinking like, how do we, when we talk about soybean and the macro picture, do we have to spit it into the meal and the oils? Or like, can we, you know, which one drives which, if you'd like. And, and how do we sort of, what are the key terminology and thinking that we have to do?
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Yeah, in the last 20 years, we've evolved specifically in the United States to a processor of the soybeans rather than an exporter. And historically on big round numbers, we grow a 4 billion bushel crop and we export half of it and we process half of it. And that trend is changing in the United States, particularly as we are domestically. We're growing our domestic demand base specifically for processing soybeans into the meal, into the oil of which we can talk about, we'll export some of that. But that trend in the United States is unfolding because of domestic fuel policy. So greater and greater demand for soybean oil to go into fuel streams, plus the rise of Brazil, who's just the dominant beast basically in global soybean export trade and will continue to be. So the US percent share of global soybean trade continues to decline, but we're processing more soybeans. So our share of soybean meal trade globally is growing dramatically. So it's a change in which of the products were exporting.
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Okay, so then you've got this complicated picture of biology, geography, policy, and just bog standard economics.
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Right.
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The biology piece, the geography piece of that is obviously one of how good the harvests are that can sometimes be completely forgotten, but it can play a major role. And the other, of course, is the policy which you've alluded to taking us back to, you know, Brazil's dominance is directly, I would argue, as a function of U.S. policy or trade policy back from the first Trump administration. Is that a fair statement? And that, can you use that to kind of tee us up to what, what is, what has happened in 2025?
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It is a fair statement. Many, many older traders, when I first entered in the business sort of go back to the Jimmy Carter embargo of exports to Russia due to its invasion of Afghanistan as the first shoe that dropped that gave the global importer reason to consider other origins other than the United States. It was the sort of first time that the US Was willing to leverage its breadbasket role to the world. And that trend then gets another sort of gets energized again when in Trump administration, number one, there's an embargo by the Chinese not taking US Soybeans due to trade policy and tariffs. So that was the sort of re. Energizing of the US Isn't a reliable partner and will leverage food supplies if they have to. So that has lent itself certainly to Brazil's growth. But really it's, it's a demand pull, it's a global demand pull in soybeans. And the elephant in the room on the import side is, is China. And that element of Chinese growth in imports and that's due to GDP growth. And the Chinese loving protein in all forms goes hand in glove with the ability of Brazil to grow and supply all the needs of China for their imports, or at least be so dominant that the United States and Argentina fall in line in providing supplies as well. But it's really, it's a Chinese importance in a Brazilian export that is, that drives all this essentially.
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So, well, let's take us up to 2025. So we had the, the LA. In 2020, 2019, 2020, the Trump administration executes a trade deal with China where they promise to acquire some billion dollars worth of soybean as part of a broader settlement. And you know, we all remember prior to that, the Trump administration had been trying to pay out farmers in that first trade spat. Did that just pick straight back up again in 2025? How did, how did soybean start hitting our radars pretty early in, you know, what became sort of liberation day and tariffs and all the rest of it.
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Yeah, it's really. The 2025 event has not even come close to what happened in 2018. 2019. In 2018, 2019, the Chinese just fully stopped and were not taking US soybeans and the US soybean farmer and the trade had nowhere to go with soybeans and soybeans backed up into the United States trade benefiting the soy processor in the United States. And we had a growth in carryover stocks like historically we've never had before. So incredibly impactful. And the Chinese filled in everything they needed from the Brazilians in this go round in the 2025 version. The Chinese have come to the table much more quickly than I think people realize. And they, they have a delayed program. So we'll be down about 50% year on year of exports to them. But they're taking the Soybeans. And so 12 million tons has, has traded, as you said, about a billion, about a billion dollars worth has traded to the Chinese. That's a trade it still has to execute, but they are week in, week out, executing. But it's interesting, the Chinese came back to the table much more quickly than most people realize. And so moving forward, the Chinese have made a commitment to 25 million metric tons next year and the following. And we'll see. But in the meantime, they continue all during this period to buy Brazilian soybeans. They've kept the Brazilians happy with purchases. And Brazil is going to produce sequentially another record crop. And we continue year on year, year out, with the Brazilians growing anywhere from 3 to 6% every year in total production and increasing their dominance. But for some reason, this year the Chinese came back and renegotiated and took US soybeans. And this, this speaks to the vulnerability of the Chinese with soybeans. And this is a point I know you read what I, what I often put out that by far, there's not a food security risk anywhere in the world greater than the Chinese imports of soybeans from the Americas. So a trade of 110 million metric tons that comes from the Americas, it's all over here. And so as I've said before, should the Chinese decide to invade Taiwan or move that way, rather than the US Navy going towards China, it just goes to Brazil and Argentina, the major ports there, and says, no soybeans leave. We embargo them ourselves. And the enormity of the Chinese food security risk becomes very, very clear to everyone. 110 million metric tons is very hard for people to get their minds around. It's so big, and that's all on the ocean between the Americas and China. To sort of get perspective on it, I try to put it this way. It's the equivalent of a half pound of food per person in China imported per day.
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The energy and resources sector is experiencing unprecedented change. To help navigate this change and capture its opportunities, HC Group launched Enco Insights, a global advisory network dedicated to the sector, providing senior advisors and subject matter experts to investment and infrastructure funds, law firms and corporates. Enco Insights leverages HC Group's 20 years of connections in energy and commodities to give clients the expertise they need. When the stakes are high and insight matters. Learn more@encoinsights.com and out of interest. So two questions spark from that. One is obviously, well, and a statement that, God, you know, we don't need to be giving anyone any ideas on more embargoes and stuff, but, you know, do we have any sense of strategic stockpiles and how long they last? And then secondly, this might be. Might, might be chalked up as one of the dumbest questions I asked. But when you look at a map, China's a pretty much similar latitude as the U.S. you know, have there been any attempts to try and grow a domestic crop?
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Yeah, the stocks are often pointed to as a strategic reserve that can limit the impact from any type of interdiction that the US May make in supply chains. And we're showing that obviously in Venezuela right now that we're willing to make those types of strategic moves. But, Paul, we'd be talking about weeks that those stocks could serve the Chinese consumer. And in regards to their ability to become a producer, a domestic producer, they've shown no ability to do that at all. There's a lot of press, there's a lot of initiatives, there's a lot of discussions about reduction in soybean meal inclusion as policy as well as promoting soybean production domestically, and it never amounts to anything. And the Chinese just grow their imports 3% year in, year out.
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Yeah. And is that, do you think, a geographical, a climate hurdle or a technology hurdle? Obviously, you know, one of the most phenomenal things that's happened over the last 70, 80 years has been the yield on these core crops, primarily as a result of technology, both sort of hardware as well as software in the genetic form.
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Right. It's a water issue for certain. That is, as I read the analysis, that's the, that's the number one impediment. But the genetics and the, and the genetic evolutions have been very beneficial to the United States, extremely beneficial to Brazil. The ability of what we call Roundup Ready soybeans. The ability, and I know this is controversial, the ability for, for a farmer to use glyphosate to, to reduce weed production, which increases the ability for the plant to yield as well as increases the storability and transferability of soybeans. Those benefits have had a profound effect. Where this year, 2025, the crop that we've just harvested will be a record yield, not total record production because acreage was down, but a record yield for the U.S. so we're getting, we're starting to get the Step function occurring. Tremendous advancements on the corn side as well. And that's just, that's just missing on the Chinese side. They don't have access to that.
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That's great. So that set up sort of the, you know, I'm a farmer and I'm growing soybean and I'm, you know, in the us I'm annoyed at Brazil for taking my market share. But the why behind that? The other element of course, is the fuel bit. And whilst it's probably quite a tough question, it's also probably the most profound one to ask, which is in the absence of, let's say the epa, there was no renewable fuel standards, there was no decarbonization mandate. You know, what would happen to the soybean, what would happen to the farmers, what would happen to the soybean industry? Are those soybean oils immediately directed elsewhere? Are they still useful or would that have a catastrophic impact on the sector?
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Catastrophic, no, but it would certainly be impactful. The soybean, just a level set. So as we process soybeans, 80% of what we're doing is producing animal feed so that the soybean meal is primarily why we're producing soybeans. 20% is the production of the soybean oil and the percent half of that, so 10% of what we do as an industry is produce the feedstock for biomass based diesel. So it's a much smaller component of what we do than say ethanol is for corn.
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Yeah, that's the comparison, right, isn't it? With ethanol? My statement would largely be true. Right? I mean it would have a profound impact on corn.
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It would be a total collapse on the corn side, a total collapse of the economics of land ownership and the entire economics of the ag economy would get, I mean it would just be in free fall without ethanol. And this gets to a point, and I know we've talked about this on some of the other ponds, of this incredible productivity that just lends itself to greater and greater production of both corn and soybeans globally. And there's been historically what we call the food to fuel argument. And as the production grows year in and year out, it just, it sort of makes the food, the food side saying we're going to run out of food, we shouldn't be converting these crops into fuels. It becomes less and less meaningful.
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Yeah, you're not making those trade offs. What is kind of meaningful though? And, and we're talking, the day after Trump was in Iowa talking about raising the ethanol mandate from 10% to 15% and you know, the comments there were great. You know, in general were, that's great for farmers, that's terrible for taxpayers. And it's a fuel. It's just a huge fuel subsidy.
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Right.
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Well, and not to get into that, but it's kind of a. I do find it quite sort of the. There's somewhere in there quite a thick irony about sort of small government farmers reliant on effectively massive government handouts for an industry that probably wouldn't stand up without those.
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No, it's true. But I would urge you to look at it from this perspective. And we really had a very real world experience as consumers. Okay. So food security is not free. It just isn't free. And policy was developed to secure food as well fuel with the biofuels policy. And it is the large support that makes what we do in agriculture possible. So I would give you the example, and it's a very, very real world example. The consumer faced real egg trauma this year, or I should say over the last 18 months in watching profoundly volatile pricing and availability of. Of eggs, a single commodity. Right. It lent itself to a political campaign. The egg pricing and egg availability was disastrous for the Democrats and it was a great tailwind for the Trump presidency. That's just one small experience for the consumer of what a market could look like for every agricultural commodity they buy. That supply shock due to avian influenza that impacted egg production and caused the volatility in pricing and supply was very disconcerting to the consumer. So fast forward in time where we say, okay, we're not going to support bio and fuel production. We're going to go more free market in policy and not have strategic processes. I'm not talking about full handouts, but have a strategic demand base that's reliable and plays a role in the economy. Fast forward to a period of time without that. And I would argue the volatility that the consumer experienced in eggs in both price and availability would play out in nearly everything that they consumed.
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Yeah. Which is a very cogent argument. And I take back my former statement.
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No, but could the consumer really handle that? They couldn't. They absolutely couldn't.
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Yeah.
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And. And they showed that they, they went to vote for a president. Many it's the polls or the sort of postmortem would. Would tell you they went to vote because of their outrage over that one singular eggs on the border. Right.
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It drove everything and.
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Right.
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It's a very, you know, and actually, you know, there's plenty, you know, who'll be listening to this in Europe who are wishing that Europe would have done the same with its battery industry in the UK for example, where you are subsidizing these technologies, these vital industries, because you need them when the stuff hits the fan. Right. And arguably as well, actually in the long run, the cost of the subsidy is less than the potential cost of the trauma, but it's hard to account for that.
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That's it. That's the very thing, Paul. That's absolutely it. It's pennies on the dollar relative to, to the alternative.
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Yeah. So where does, where does the current administration sit with respect to these biofuels that affect soybean? And then secondly, I want to kind of, we want to move on to the really interesting stuff about how diets are changing and all the rest of it that, you know, again, we should be soybean investors like Scott Besant was. But let's, let's start on renewable fuels.
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So the advent of historically soybean oil and other vegetable oils only had one pathway into the fuel streams and that was through biodiesel. And biodiesel has its detractors in that it's a chemical process for its development and it must be blended for it. And that would be post production blend of the diesel for it to move into the stream. So it has completely separate handling requirements and logistics, et cetera.
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It's a different chemistry. Whereas renewable diesel is straight in.
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The advent of renewable diesel is really exactly what the fuels industry and the consumer wanted. Chemically, it can't be distinguished the difference between renewable diesel and petroleum based diesel. And so all the logistics, all the infrastructure remains can serve the interest of renewable diesel at the same time, at any blend rate, et cetera. With petroleum diesel there's no distinction and that's proved to make it extremely popular. And so the growth in renewable diesel and the growth in demand is almost been without friction from the consumer side, an extremely high level of satisfaction. So when you look at the trajectories of the two biomass based diesels, renewable diesel and biodiesel, biodiesel is dying a slow, quiet death and renewable diesel just continues to trend higher. And that's not going to change. The consumer has spoken with their dollar, they want renewable diesel. And so we have a policy in the United States that's extremely expansive, sitting, waiting to be finalized. Expansive as announced by the EPA in June by the Trump administration. Unfortunately, no, no follow through, no finalization. Here it is post January 1st and we're still operating without finalization from the Trump administration. It's been the elephant in the room since, since June. But if in all the indications from, from Washington D.C. it's, we are moving forward, we are going to have this, this incredible expansion in terms of blend rate requirements. If that is the case, the renewable diesel industry will begin growing again. First, the first thing that will happen is we'll, we'll drain historic rins that remain available so, so the blender of record can still access legacy rins that have been produced. That would be the first thing that will happen. Then capacity utilization will ramp up dramatically, which has been hanging around the high 60s, low 70s of renewable diesel production capacity. And then we'll get into a very dynamic phase in the market where the renewable diesel industry starts moving towards 100% capacity and begins demanding soybean oil from the domestic producer, which should be very beneficial for the ag economy and specifically for the soybean producer. That's what's ahead of us.
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Yeah. And is there any sense of, I mean, on timelines, I mean, it's just obviously that has created a very torrid year of uncertainty across the board. You can see that in earnings across, you know, dedicated renewable fuels businesses as well as the refining arms of majors and so forth, which is a dual story of other, you know, ethanol as well. Is there any sense on timelines on that and how confident, seems people are confident that will go through.
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Yeah, it's been, as I said, the elephant in the room since the June announcement by the Trump administration without follow through, without finalization, it appears to be imminent. That's the new cycle coming out of Washington. If you look at some of the equities that would be impacted on the feedstock on the soybean oil production side companies like Bunge and ADM, their equities are soaring. Bunge is up over 28% a year to date. So, you know, the first 28 calendar days of the year, first 17 or 18 trading days, whatever it is, up 30%.
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Our good friend Greg.
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Yes. Yeah, exactly, exactly. And so the process of capital and markets seem to be moving. I will tell you, from our perspective as a small soy processor where we're providing soybean oil to the food sector and the animal feed sector and the renewable diesel sector. We're still, it's. The markets haven't, have not moved. The consumer is really been willing to wait to see real finalization. And so the activity in the soybean oil physical trade is as quiet as it was as it's been since June. And that's been a problem. It basically has sat like a wet blanket on what should be a very dynamic phase for growth in the US agricultural space. And it hasn't happened. The difference is we're starting to see money moving into equities, et cetera, et cetera. That suggests people believe this. It's imminent. Hello, I'm David Hunt, founder and managing.
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B
The longer term story as well that soybean sits at the heart of is that changing of food taste, food demands consumer expectations. You know, as you mentioned earlier, it sits at the heart of some of the concerns over weed killers and so forth. But one of the things I've, I guess we've been you've been tracking, which I find fascinating, is obviously the rise of GLPs in semi glutath rides, whatever they're called in in the US which might surprise actually some of our listeners in Europe. Just the prevalence and penetration of those drugs over here. And we can see some notable politicians and people around the world who've lost a lot of weight using them with profound good effects on health and all the rest of it. But that's, that's had a direct and clearly visible impact on the market, on various demands, but also is allied to other health trends. Can you just give us some sense of what you're seeing and where soybean might fit in that puzzle?
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The GLP1 phenomena is unfolding. I think we touched on it in our last podcast together, but it's sort of like unfolding right on schedule. And so in the last two or three weeks we've had announcements about oral versions of the GLP1, which has sent some of the equities of some of the pharmaceutical companies soaring because the consumer has, has, you know, some of the complaints about GLP1 include gastrointestinal discomfort, nausea, and then just fear associated with having to jab yourself to deliver to deliver the GLP1 therapy. The advent now of and growth of use likely accelerates from a lot that I read in conferences that I've attended. Likely now accelerates as the GLP1 user can access an oral therapy as opposed to a jab. And also the Development of a whole range of GLP1s. It was very limited to three, and now it's growing significantly. And the dosage and the understanding of what makes a patient satisfied, there's a lot of creativity going on in the dosage space. But regardless of which GLP1 drug that's being used, there are a number of things that make this different than other therapies. Number one, it causes lean muscle mass loss. That is very significant for the consumer and that there has to be an offset to that. So there's a lifestyle change that has to come with the GLP1 drug that includes a change in diet, which we'll talk about in a second, but also an increase in exercise to maintain resistance against muscles, so there's not a loss of muscle mass. And the GLP1 drug drives hunger away and satiation for extended once the patient has eaten. So that every, every mouthful has to be impactful. There. There's no room for consuming something that doesn't, that, that doesn't support the GLP1 process. And that has to be protein. And so that the requirements on protein, generally speaking for a patient on a GLP1 drug are 180 grams of protein for a woman and 200 grams for a man. And you have to remember that's daily protein consumption. But there's also a caloric lid because there's weight loss trying to be achieved as well. And so you can't achieve those protein minimums by going and eating 25 pork chops. That's not possible. So the consumer has to have a very lean source of protein. And if we think about smoothies and shakes, et cetera, they naturally lend themselves to protein powder addition. And that's a common trend in Europe, that's a common trend in the us we have these stores that produce smoothies and something can be added and normally a protein powder can be added. And that's a very efficient way to deliver a very pure protein source that doesn't carry a lot of calories. And that process is playing out in dairy with whey proteins, which are incredibly popular both in the US and in Europe, and in pea protein as well, which is very popular. The process on the soy side is we're getting more tailwinds from the consumption of poultry, which we're going to have another sequential record in the US and eggs. That's where it's really manifesting itself in diet change. But one of the, you know, Europe is really the epicenter of the uptick in growth because what we've seen In Europe and here I'm talking about soybean meal particularly, which is soybean meals. We know when countries or a country is increasing soybean meal that shortly thereafter there will be more poultry, more eggs, more dairy produced. We know that the meal is going to be, is going to be used as a feed for the production of human foods. Europe has had a profound uptick in soybean meal imports. They were up 25% last year. I mean, that's amazing. And that's coming from a very flatline base. So the perspective from, from the time I entered into the business 36 years ago and started my career was always a focus on south of north. Right? Those were the, that's where the population was. That's where the potential for growth was. That was the major importer. What I would say now, here, 36 years later in my career, and this is just the beginning, is now you have north of south growing at rates of consumption of soybeans via soybean meal that are approximating south of North. So it's a global phenomena right now in protein consumption, mostly south of North. It's changes in diet plus population having a big impact. But here in north of south, it's more the change in diet because obviously our population growth is not the same as south of North. It's really change of diet that's having this profound growth in protein demand. And this is a trend that's just beginning, it's just beginning to unfold right now.
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B
I don't know if you have any stats on the penetration of GLPs, but you know, certainly the US is, it feels like we all know lots of people on them, but you know, it seems like that's going to Europe as well.
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It's 12% of the population of the United States right now uses GLP1 therapy.
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B
Yeah. Which is what, like 30% of adults? Right? I mean, like.
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Yeah, I mean they're on it for life basically.
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B
Yeah.
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And until the therapies change. But as it stands today, someone who enters into the glp, full therapy. So lifestyle change, diet change and the use of the drug is on it for life.
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B
Nice to be a, nice to be a pharmacy.
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A
Right.
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B
But the question in some ways is if you're a farmer today, you know, your, your risks are now way beyond the weather. Right. And they always have been. This is a bit of a fiction in some senses, but, but certainly now you're affected by the weather, you're affected by domestic policy, you always have been. But also now being a tool in International trade. It seems like of the various commodities out there, soybean does have the multi utility facet to it that it seems to weather storms better than others because it does have that diversity and function of it. My question is how are farmers faring in this? I mean, it sounds pretty brutal what's been going on. And secondly, can the markets themselves weather being used so bluntly as tools of international power politics?
- [39:32]
A
Yeah, it's a very, very difficult time period. Even the farmer's very busy producing the crop. Right. And so for our company, we're very busy doing risk management. So we're in the markets every day trading physical soybeans and physical meal and oil and using the futures market for hedging, et cetera, in reading the Bloombergs and we're getting all the instant updates, et cetera. And so we have opinions that are formed by just non stop news cycles, et cetera. And not that that makes it any easier, but we have that the farmer who's out busy doing what he does in terms of production is just watching these prices move with dramatic volatility. And it's all the components. Soybeans are moving because of the trade issues with China, soybean meal is moving under higher volatility because of tariff policy. And then soybean oil's moving because of biofuel policy. So to your point, you've always, weather has always been the primary risk. But policy as a risk specifically for the soy farmer is this, this is a new world order. The corn farmer has gone through this because especially in the United States, we're the largest corn producer in the world and 40% of our production of corn goes for ethanol production. So that's something that really since 2004, 2005, when we as a country ramped up our total ethanol production that's been ongoing for the last 22 years or so. This is a relatively new world for the soybean farmer. And he's challenged, he's challenged in Brazil, Argentina and he's challenged in the United States to make a return. And a lot of that is just associated costs of equipment, seed, technology and land. And those costs are going up much more rapidly than the revenue that he's returning that he's achieving from his production of soybeans. And that's a not sustainable trend right now. And so to what you said earlier, we had the Trump intervention with a emergency funds distributed to farmers in the US and that is sort of been a quick fix. But the long run is right now that it's very, very Difficult, challenging for the farmer to break even at current prices. And the inflation that's coming from equipment and seed and fuel, et cetera, is not showing any abatement. And the reality is prices are not keeping up, Yields are. The problem has been in price, it hasn't been in yield. Prices of, of soybeans and corn are not keeping up with the inflation and all that the farmer needs to invest in to produce a crop.
- [42:28]
B
And is that because, okay, you've had fantastic yields, right? It's been good on that front. Is that also because, is there a touch of complacency in the market? Kind of like we just had Jeff Curry on arguing cross carbohydrates and hydrocarbons. There's some complacency out there about, you know, don't worry, there's tons to go around and all the rest of it. And could you see, I know soy's been ticking down to the ten thousands. Could there be a dramatic turnaround in that narrative with events or perhaps a shock, you know, or concerns about harvest and so forth?
- [43:07]
A
Yeah, and there's really, there's no better example of that than the Ukrainian war, which you've got a, you know, a legacy breadbasket in the world that was over, over the last decade, really coming into its own in growth in production of wheat and then their oilseed, which is sunflower seed, really coming into its own and becoming a dynamic producer now impeded by a war going on, still able to produce, which is incredible, but we're starting to feel the effects in the markets of, of the war and the impact to infrastructure, all this going on, and the markets could care less. Basically there was a very brief two week period of Ukrainian war premium that was built in a number of years ago and since then, nothing. So you have a major production center in the US that any particular moment could have a dramatic change in its ability to ship products into global markets and the markets absolutely could care less. So I would 100% agree with that complacency. It's been a profound sort of flattening of the global production curve. So as I said, Ukraine has come on. Brazil has been the biggest producer expansion in production. So Brazil has come on and then you have year round production. You have an easing of the concern that a drought in North America means no response in production is available for a full calendar year almost, and that's changed. You have the luxury of production in the north and production in the south. So you have a year round supply. But nonetheless we sit fairly balanced. And so if you look at what's happened in Brazil this year with another record production and you had a record yield, not record production because we had a decline in acres in the US But a record yield. And yet the supply balance, balance is fairly tight.
- [45:08]
B
Yeah. And there's no more Brazil's going to be discovered.
- [45:11]
A
Right.
- [45:11]
B
Like, it's not like, you know, we, there's infinite land here, right there.
- [45:15]
A
We don't have, we don't have stocks sitting of significance sitting anywhere in the world. And it is a change of perspective. It wouldn't take much to change the perspective on. I'm, you know, I'm uncomfortable with that amount of supply. We need to urge more supply, more production and more storage of strategic grains globally so that the cushion is there and right now the cushion is not. And that can change very, very rapidly.
- [45:45]
B
Yeah. Or God forbid China starts buying lots because it does perceive a large disruption coming up which obviously we're seeing that on the Strategic Petroleum Reserve side of things. What can we divine on intent via soybean buying?
- [46:00]
A
They walk a fine line in that regard. They really do walk a fine line because again they, they expose themselves to the supply chain and the supply chain is over here, it's in the Americas. And the Chinese must have been made to feel very uncomfortable with the US intervention in Venezuela. Just a quick change in a source of petroleum for them. And it happened very rapidly. And the same thing can happen. It would be very simple to, to prevent trade or exports of soybeans from both Brazil and Argentina to China. That would not be difficult to do for the US to do that.
- [46:44]
B
Well, Walter, as always, it's fascinating. When should people reach out to you at White River Nutrition?
- [46:50]
A
Anytime and always. And please follow me on LinkedIn. I try to post when I have time and I try to sort of lay out the view of an expansive view of the, of the soy complex inclusive of Brazil, Argentina and the Chinese demand and give a perspective. So check in on my linked insight.
- [47:10]
B
Excellent. Well, I look forward to having you back on in a year or so and hopefully none of the catastrophes have happened and renewable fuels continue to march forwards.
- [47:20]
A
Great. Thanks, Paul.
- [47:23]
B
Thank you for listening. To find out more about HC Group, our global offices and our expertise in search within the commodities sector, please visit www.hcgroup.
- [47:39]
A
Com.