Will Ags Save Your Portfolio? With Jake Hanley

Summary

The HC Commodities Podcast

Episode Title: Will Ags Save Your Portfolio?
Host: Paul Chapman, HC Group
Guest: Jake Hanley, Managing Director at Tucrium
Date: November 19, 2025

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Overview

This episode explores the case for investing in agricultural commodities—particularly via ETFs (Exchange Traded Funds)—in a time of escalating global volatility and transformational shifts driven by geopolitics, digitization, and rapid technological change. Paul Chapman is joined by Jake Hanley of Tucrium, delving into the macroeconomic backdrop, cycles in agricultural markets, the structure and logic of agricultural ETFs, and what the future may hold for investors seeking diversification and resilience.

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Key Discussion Points & Insights

1. Setting the Global and Market Context (01:00 – 04:30)

• Pivot Point in the Global Economy:
  Jake Hanley describes 2026 as a period of “great acceleration,” where the world is undergoing profound, rapid changes not seen before, driven by technology, geopolitics, and changing economic cycles.

• Commodities Supercycle Thesis:
  Hanley recounts that Tucrium predicted a commodities rebound in their 2020 outlook, expecting a new bull market reminiscent of the early 2000s, though the catalyst (COVID-19) was unexpected.

• Historical Parallels:
  He frames current events through a historian’s lens, comparing the rise of recent populist movements and global competition for resources to past eras marked by contention, both domestically and internationally.

  “What I know from history in populist movements is that it creates a period of contention and stress not only internally, but also internationally… You’re automatically going to have instability and competition.” — Jake Hanley [05:18]

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2. The Golden Grain Cycle Explained (07:25 – 11:31)

• Three Stages of Grain Markets:

  1. Stage 1: Prices trade near the cost of production (long periods of stability due to global subsidies and stable supply-demand balance).
  2. Stage 2: Supply constraint arises (often weather-driven), triggering prices to spike as reserves are drawn down.
  3. Stage 3: Production recovers, prices fall back toward production cost.

• Current Position:
  Hanley believes we’re currently in Stage 1, with prices at or below production cost and thus “potentially at a level where there’s very limited downside for agricultural commodities”—setting up the next big move should a supply shock occur.

  “We believe we are firmly in stage one with prices trading at or near the cost of production… which sets the stage for a potential Stage 2.” — Jake Hanley [10:56]

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3. The “Great Acceleration” and Its Implications (12:18 – 18:16)

• Historic Rate of Change:
  Hanley asserts “never in the history of mankind has the rate of change been as fast as it is right now,” with AI, robotics, and energy demand shifting at unprecedented rates.

• Uncertainty and Volatility:
  The rapid pace makes planning and capital allocation incredibly challenging (“there’s so many varying forecasts… private markets… are expanding far faster than the regulator’s ability to keep up”).

• Volatility as a Constant:
  Despite recent periods of relative calm, Hanley stresses that volatility “is always bubbling right at the surface, ready to jump.”

  “Every time I hear [farmers say], ‘we just want some certainty, we just want some normalcy,’ I have to scream: it’s not coming back.” — Jake Hanley [13:10]

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4. Agriculture’s Unique Place in Portfolios (18:16 – 23:25)

• Global Demand Driven by Diet:
  Hanley explains how increases in wealth—especially in developing economies—lead to higher animal protein consumption, driving consistent demand for grains.

• Diversification & Resilience:
  Agricultural ETFs offer low correlation to stocks and bonds, helping to “zig when others zag” and increase portfolio resilience in disruptive or inflationary environments.

  “That resiliency comes from having assets in your portfolio that zig when others zag.” — Jake Hanley [21:19]

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5. Risk Premiums and Government Intervention (23:25 – 31:26)

• Event-Driven Upside and Policy Risks:
  Hanley and Chapman dissect events where prices did not react as expected (e.g., oil post-Iran, wheat after the Ukraine war), discussing how fundamentals and policy interventions (such as subsidies and trade tariffs) act as both stabilizers and depressors of price.

• Supply Chain Adaptability:
  The wheat market’s reaction to the Ukraine war illustrated how markets can initially react sharply but then revert if supply chains adjust.

  “The initial reaction was, ‘Oh my gosh, 30% of the world’s wheat exports are coming offline.’ That didn’t happen. And so… wheat prices came down.” — Jake Hanley [26:08]

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6. Mechanics & Nuances of Agricultural Commodity ETFs (31:26 – 36:11)

• ETF Structure and Roll Yield:
  Hanley explains the mechanics of Tucrium’s ETFs—spreading exposure across futures contracts to mitigate negative roll yield (the cost of maintaining long positions in contango markets).
• No Yield, Just Exposure:
  Unlike stocks, commodity ETFs don’t pay dividends or yield; returns are entirely based on the movement of the underlying commodity prices (and the financial structure of the ETF itself).
• Backwardation Can Help:
  In backwardated markets, ETF structures can capture positive roll yield.

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7. Long-Term Deflationary Pressures vs. Shock Events (36:11 – 39:38)

• Productivity and Yields:
  Chapman notes that technological advances have kept agricultural prices low by boosting yields—potentially a long-term deflationary driver.

• Shock Potential Remains:
  Hanley acknowledges yields may keep climbing, but argues that cycles of surplus and sudden shortages will continue to create significant price volatility and investment opportunity.

  “I don’t see an end to what we’ve… come to see from time to time again… some type of supply and production shock where you’re dipping into those, those excess reserves.” — Jake Hanley [38:08]

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8. Population Trends, Demographics, and the "Fourth Turning" (39:38 – 48:42)

• Demographics and Long-Term Demand:
  Discussion of forecasts that depopulation or declining populations—especially in China—could pose risks or changes to global demand, but likely not within the typical investment horizon.

• Portfolio Construction:
  Hanley emphasizes the similarities between different grain ETFs in terms of risk/return but notes narrative-driven flows (e.g., war spikes wheat, trade war shifts soybean flows).

• Fourth Turning Thesis:
  The episode closes with a discussion of Neil Howe’s generational cycles—arguing that the “Fourth Turning” (a period of maximum crisis and rebuilding) aligns with today’s volatility and may not be over until around 2033.

  “The fourth turning just means you’ve gone through this ultimate period of maximum crisis where everything has broken to pieces and all that is left to do now is to start putting it back together.” — Jake Hanley [47:00]

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Memorable Quotes

• “You need to have resiliency as you’re thinking about your investment portfolio. Just as, you know, I hope policymakers are thinking about resiliency as they’re reshaping the world in trade negotiations.”
  — Jake Hanley [21:09]

• “I truly believe that the prices are a scoreboard and reflection of reality and what’s going on in the world.”
  — Jake Hanley [24:24]

• “Every time I hear it, I have to scream: it’s not coming back. I’m sorry, but you’re not going to get it—simply because the accelerated rate of change is historic and it’s not anything that we’re used to.”
  — Jake Hanley [13:10]

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Notable Timestamps

• 01:00 – Setting the macro context and worldview for commodity markets
• 07:25 – Explaining the golden grain cycle and its stages
• 12:18 – Introduction to the "Great Acceleration" thesis and volatility
• 18:16 – Why invest in agricultural ETFs? Diversification and demand
• 23:25 – Risk premiums, event-driven moves, and the role of government intervention
• 31:26 – ETF mechanics, roll yield, and structural differences from equities
• 36:11 – Technological progress, deflation, and the likelihood of continued shocks
• 39:38 – Demographics, China's demand, and the long-run view
• 45:32 – The Fourth Turning explained

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Book Recommendations

• The Fourth Turning Is Here by Neil Howe
• The True Believer by Eric Hoffer (on mass movements and mass psychology)

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Tone & Style

The discussion is highly knowledgeable and conversational, blending historical context, market mechanics, and larger societal narratives with practical insights for investors and asset allocators. Jake Hanley brings a grounded, historian’s perspective mixed with pragmatic financial acumen.

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Summary

This episode argues that agricultural commodities—despite periods of stasis and deflation from productivity gains—still offer a strategic hedge and resilience in portfolios given the unpredictability of supply shocks and the unique role of food in global stability. As the world faces what both speakers portray as an accelerated, chaotic era, ag ETFs are positioned not as steady yielders but as anti-fragile assets that may “save your portfolio” in times of acute crisis.

Transcript

[A]

Foreign.

[B]

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're talking agriculture and the case for investing in agricultural commodities, particularly ETFs, and why that case is enhanced in the more volatile world we're in today and the perhaps much more volatile world we are in tomorrow. Our guest is Jake Hanley, Managing director at Tucrium, a US based ETF issuer with a specialization in agricultural commodities. As always, please do leave us a positive review on the platform you're listening on and as always, I hope you enjoy the episode. Jake, welcome to the show.

[A]

Thanks for having me, Paul.

[B]

So looking forward to the discussion. We are the genesis of this and sort of the root of it is around agricultural ETFs. The what, the why, the how to some extent, but you know, to kind of get there and the thesis about why you and Tucrium think they're important. We've got some sort of background work to do on the state of the, the economy, where, where society is headed and also sort of how these, how ags assets have performed historically in such events. I know at the moment you've been doing a lot of work on your market outlook for 2026, so we're going to kind of lean in on that. But can you just, I guess without talking about ag specifically, can you just sort of set the scene in terms of yours and Tukrim's worldview at the moment? And you know, obviously from our shared notes, there's a feeling that we're at a pivot point.

[A]

You know, looking at the 2026 outlook, we want to take the opportunity to recognize that we're more than halfway through this decade. And I always look forward by looking back just to see where, where we've been. And back in 2019, actually Paul, we were writing our 2020 outlook and had this idea that maybe the next decade of the, the 2000s would be a period of a resurgence in commodity prices. If you remember back in, in the first part of 2000s, we certainly had a bold market in commodities, culminating in 2008 with, with oil up in the 140s. And then of course we had that 2010s where commodities were really in a perpetual bear market for the most part. And so looking at the world shaping out in 2020, we had the impression that commodities prices would make a comeback. And boy, were were we right for the wrong reasons. Of course, we didn't anticipate that Covid would take the world by storm and all the supply disruptions that went along with that. However, as the years have unfolded in the last few years in particular, geopolitical conflict was certainly top of mind for us. Of course, in 2019, we were in the middle of a trade war with China, which has resurfaced. And so those types of concerns about limited resources, particularly in a, in a world that is accelerating the rate of change and growth is accelerating at a pace that we haven't seen before. You know, we were writing about those challenges and we are doubling down on that view. In 2026, Outlook will be titled the Great Acceleration. And that just has everything to do with AI and robotics in this new space race we're in.

[B]

Yeah, so let's, let's stay at that 2019 moment. Can you just recap, I guess, the fundamental thinking behind, you know, the commodity super cycle that was to come? Right. And you know, there's a lot of sort of a lack of, you know, there's a Jeff Curry sort of revenge of the old economy, a lack of investment, you know, because you, commodities, you know, moves in cycles. You have this really, as you said, very bearish periods driven a lot by the discovery of shale in North America, you know, and, and, and low interest rates and so forth. That meant it was far better off doing financial engineering and sticking your money in a, in a tech company that was in, in real world assets and stuff. Yeah. Can you just tell us a bit about your reasoning there and kind of what that, what the threads have been through to today?

[A]

Yeah, I think when you put yourself back into, you know, even that period slightly before that with the election of President Trump and that tumultuous period, 2016, 17, 18 and 19, what became clear to me and by the way, my background, I have a history degree. I studied US History with a self focus on monetary policy and history of central banking. And so I tend to look to the world through the lens of a historian. And when you look back at other periods in history where you've had populist movements in the United States, President Trump is, is a populist. There's, there's no other way to say it. And the United States was dealing with populist movements on both sides and Goldwater.

[B]

Huey Long, you know, the list goes on. Right, right.

[A]

And so what, what I know from history in populist movements is that it creates a period of contention and, and stress not only internally, but also internationally. Again, the idea with any populist movement is that you want to create the most value for your group. And in a world of fixed resources that creates competition for resources. And of course, it's not just the populist movement inside the United States. We've seen this continue to play out in other countries as well. And so if you go away from the Thomas Friedman era of the early 2000, where the world is flat and everybody's getting long and we can move everything, you know, just in time, inventory to more America first or China first, or France first, you name whatever country comes first, you're automatically going to have instability and, and competition. And that shows up in the markets, which of course are a picture of the world.

[B]

Yeah. And you do have these very strong redistributed policies going on. Right. I mean even before COVID but absolutely accelerated by it. That suddenly creates all of the inflation which is, you know, okay, raises commodity prices. It doesn't sort of inflation adjusted. It doesn't necessarily. And then we kind of go through this period of financial tightening, reducing the money supply as a response to that inflation. That's how it kind of had a depressing impact on commodity prices today. You know, we, the, you know, we kind of, there's a lot of talk about blockchain, all that good stuff. But really it, it seems like AI is kind of depends on what your YouTube algorithm is. But it's mainly for me, you know, AI, power consumption, you know, you know, technology, sort of acceleration as you point out. Can you. Yeah, so that's obviously a key focus for you guys. So where, where have we been the last couple of years with obviously the drop off in commodity prices and, and, and how is that going to change?

[A]

Yeah, well, how is it going to change? I, you know, we can give you some, some ideas of how we think it might change, but of course root that back in in history. And so, you know, another key element in, in looking backwards to look forwards is we talk consistently about something called the golden grain cycle. Okay, we'll use corn, but this applies for wheat and soybeans as well. So just tapping into agriculture for a moment. The golden grain cycle just points out very succinctly that there are three major points in a grain cycle. And actually this I think could apply to most commodities, but for corn in particular, if you pulled up a 17 year front month futures chart and you can find it on our, on our website, we update it monthly under the golden green cycle, you can picture Paul, that prices tend to move at or near the cost of production. For an extended period. And the reason for that is that supply and demand are roughly balanced.

[B]

Definition of a commodity.

[A]

Right, right, exactly. And at the same time, especially in agriculture, production is subsidized. You have, you know, crop insurance, federally subsidized, et cetera, et cetera. So farmers are going to plant, by the way. That's the same across the globe. No country wants their people to go starving. And so they make sure that farmers plant, they do what they can. And so prices are going to trade at or near the cost of production. Very seldom will dip too far below production costs because of course, farmers are still going to need to make money. And that's stage one. And so if you think back to 2014, right through 2020, actually those six years, corn prices, wheat prices swaying, prices basically moved sideways. Okay, again, stage one, stage two is when you have a supply constraint, something happens. Typically for the grains, it's going to be a drought. So production fails to keep up with demand and the world now is dipping into their excess reserves. Of course, on the Wazi Report, we see then ending stocks. And so you're dipping into existing supplies to the extent that they're there. But next year's production isn't going to keep up. And so that puts upward price pressure. If you think back to the corn chart, corn went from roughly a cost of production national average of $3.50 a bushel to over $7. Right. Even up to $8. So you're talking about a doubling there. All right, that's happened three times since 2007 when we came out with the RFS standards, that stage two, that when prices run up to the upside, stage three is when production finally catches back up with, with usage and prices continue, you know, begin to trickle down. That will take typically one to two years to get back to a stage one, because, you know, in the United States, of course, we have one growing season and so it can be, and we've seen it since 2022, kind of a drawn out period where prices come back down toward those production cost levels. And so looking back again in 2019, as we were writing that outlook, you know, commodity prices generally have been trading roughly sideways. Certainly that was the case for, for agriculture. In our view, it was only a matter of time until there was some type of production issue where prices would, would go through that stage two cycle and advance rapidly. And of course, where we sit right now, we believe we are firmly in stage one with prices trading at or near the cost of production. A lot of soybean farmers right now are selling at a loss in the United States. And so we do think that we are potentially at a level where there's very limited downside for agricultural commodities which sets the stage for a potential. Stage 2. Who knows when that will come?

[B]

Yeah, yeah. And again, as you said, this is something that follows. Most commodities follow this, many commodities follow this cycle. The cycle length, if you like the, the whatever the correct mathematical term for the, that is, you know, the period is obviously determined on how long it takes to turn around. So these were, you know, copper mining, it's 13 years. Right. Whereas AGS, it's, it's a, it's a season. Okay, so, so let's, we'll, we'll put a pin in the golden grain cycle and that sort of thesis. Let's go back to just before we sort of talk about what's kind of what's been going on in, in with regards to the AGS, ETFs and how they've been faring just a little bit more on your, sort of your thesis at the moment. And this kind of great acceleration you mentioned, can you just piece that together for us?

[A]

Yeah, kind of tie that all back in. So the great acceleration thesis is simply that recognizing the fact that never in the history of mankind has the rate of change been as fast as it is right now. And think about what that means for planning and projections, capital allocation. You know, there's so many varying forecasts even of what could potentially, you know, come to fruition. You mentioned earlier just, you know, AI and the electricity demand and the power that is needed to support AI. Well, if you look at forecasts from the IEA or Deloitte, you know, they're, they're vastly at odds with Deloitte, you know, putting up something like 30 times growth in the AI data center requirement. Right. So AI data centers are going to need 30 times more energy than they did in 2024. IEA is something much less than that. And so, you know, is it going to be a 30 fold increase or is it going to be a tenfold increase? And what does that mean for me today as a business owner, as a capital allocator? It's very hard to know. So with an uncertain future that reflects back on uncertainty in today's markets. So I keep hearing, I spend a lot of time listening to agricultural media, as you can imagine. And a repeating theme is these farmer types or commercials that are coming on saying we just want some certainty, we just want some normalcy. And I just, every time I hear it, I have to Scream. It's not coming back. I'm sorry, but. But you're not going to get it simply because the accelerated rate of change is historic and it's not anything that we're used to. That's going to continue to create consternation, obviously for individual allocators and business folks, but for nation states and for everybody around the globe, understand that private markets, private business and capabilities are expanding far faster than the regulator's ability to keep up. And that is something that's going to create opportunities, of course, to make a lot of money in new fields operating in sort of a Wild west environment. And we can just look at crypto markets as a, as an example of that. But of course, that could create significant instability across capital markets. And so we are in this period of heightened uncertainty. I'm going to suggest that that volatility is always bubbling right at the surface, ready to jump. And so that's just a reality that we're going to have to work with. During this period of this great acceleration.

[B]

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[A]

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[B]

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[A]

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[B]

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[A]

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[B]

Give clients the expertise they need when the stakes are high and Insight matters. Learn [e-mail] we have covered that volatility stories, actually in a year where volatility has died down, ironically in commodities, despite all the events that have happened. But whether it's cyclical or whether it's structural, and there's certainly pieces there that government intervention and so forth and increased geopolitical tension. But I guess what you're leaning into there is what we've been describing as digitization, kind of from a small lens on the commodities sector, how that's impacting, impacting the efficiencies, how that's impacting decision making and breaking down some barriers to entry and raising up others. You're. I guess you're. It's kind of fascinating. Like, put it like, actually the digitization, the technology piece, that's the bit that's really accelerating, that's exponential. As I'm stealing this from your notes. Right. Versus the linearity of policy making, which is almost ground to a halt and isn't even linear anymore. Right. It's horizontal. And the response to that rapid change is kind of government intervention. Right. Is sort of fingers on scales and so forth, because, hell, we need a critical minerals sector. But it's also kind of the, you know, the huge pressure to open up to alternative investments, to unaccredited investors and all that. You know, there's lots. There's so much kind of going on that, that you point out that in and of itself, it's AI Robotics. You know, yesterday Amazon came out and said they're going to do away with 600,000 jobs by the end of the decade in, in the, in their warehouse. Right. Just going to make, I mean, absolutely profound changes occurring, some positive, some negative. That itself is, is going to create so much volatility driven by policy, driven by reaction, all this kind of stuff. Where does that. Just staying on ags, right? What is, what does that mean for ags? Have we seen it? Because unlike, say, the renewable sector, which is a technology, not a commodity, right. Which often I think gets kind of missed, AGS in particular is a finite. It's pretty finite. And although yields have been going up, there's only so much land. There's only so much land that can grow various crops, climates. There's lots of restrictions there. So what's the thesis about agricultural commodities and why ultimately you should own the ETF kind of thing?

[A]

No, yeah, sure. Well, I. We can't give financial recommendations or advice.

[B]

No, no, no, of course not.

[A]

No, no. But yeah, I'll stay away from saying you should. But what I can tell you, you know, the conversations we have with, with investors and around this, this very idea. So, you know, corn, wheat, soybeans are grains lumped together. Technically. I have one client investor who always points out, you know, soybeans are actually a legume. I say, yes, I know, but we're going to refer to them as, as part of the grains.

[B]

Okay.

[A]

You know, these, these products are primarily used across the globe as feed for animals. And it's funny, in the United States, not everybody gets that we understand corn for ethanol, but just a general investor with whom we deal with who's buying ETFs, you know, not necessarily trading a commercial futures account, they go, wait a second, corn's used for animal feed? Well, yeah, that's its number one global use.

[B]

And in, in China in particular.

[A]

In China in particular and soybeans. Right. And you know, you look at, even as the rest of the, the developing markets, you know, in this, it's a study I haven't looked at in a little while, so I won't give you the exact numbers, but the, the basic idea is pretty simple, and I think widely accepted. And that is as societies moved from sustenance, living, you know, where you're the bottom, you know, quintile of income and you get a little extra money in your pocket, one of the first things you do is increase the animal protein in your diet. And so that certainly we saw play out, you know, in China for, for sure, with the world's largest hog herd.

[B]

Okay.

[A]

And so as economies continue to develop and, and people are making and earning more money, they are going to continue, I believe, to consume more animal protein. And so that creates a natural demand for grains. And we can see that as you look at the Wasde report, the usda, when the government is open, we'll put that out monthly. And you can see that the grain demand continues to march higher. And so that idea of sort of perpetual demand growth, there are years where you'll dip a little bit and then the next year will be another record, really underlines the entire thesis for the grain commodities. Somebody looking at it as a long term investment, however, will say, well, hold on a second. You know, Jake, you just said for six years corn moved basically sideways. There's an opportunity cost I'm missing on other investment opportunities. If I, you know, buy and hold something for six years and I gotta pay fees, but it doesn't go up, you know, so what's, what's the real benefit there in that standpoint? Our conversation for those types of allocators is, you know, look, if you're looking to buy and hold for a longer period of time, you have to look at the historical correlations and potential diversification that agriculture can serve inside of a portfolio. And a lot of the, you know, direction that we're going to take in talking about the great acceleration is resiliency. So you need to have resiliency as you're thinking about your investment portfolio. Just as, you know, I, I hope policymakers are thinking about resiliency as they're reshaping the world in trade negotiations, okay? That resiliency comes from having assets in your portfolio that zig when other zag. I mean, this isn't rocking science or anything new for the audience, but understand that corn, wheat, soybeans in the ETF package can help provide that potential diversification benefit as well as perform well to the upside when you get into that stage two, right, when there is another supply or production concern.

[B]

We just had Mark Crandall on at the time of recording. He hasn't come out, but yeah, by the time people hear this, Mike Crandall have Been on for two episodes. One of the founding fathers of Trafigura and instrumental in Mark Rich in the early days and so forth. You know, he talks about how like the natural setup a lot of these commodity flows is that on a day to day basis they don't make any money, they often lose money. But you're there to capture these events. Right. And, and, and they, they, they're anti fragile in the Nassim Taleb sent phrase in that sense, although he probably dispute that. Blah, blah. But you know, just taking that, I kind of. You go back to the kind of world we're in today, right? And lots of discussion around whether risk premiums are really, you know, you know, wheat goes down after, you know, invasion of Ukraine, oil goes down after the US bombs Iran. I mean like it, it feels like there's sort of a, the true risk premium is not, aren't or they're being discounted at the moment, considering how volatile the world is. And then. Well, let's tackle that. And then I want to tackle like how you start dealing with the world of increased government intervention. And as you've already pointed out, food is absolutely ground zero for any government. You know, food and shelter. Right. And if governments get the food bit wrong, they quickly are no longer governments.

[A]

Yeah, yeah, absolutely. So, you know, I, it's interesting it, that idea of bombing Iran and, and watching oil prices not react. I mean it's, it's shocking almost. But I, I can't speak to that specifically because I don't cover energies as close as I do the grains. But I can talk about wheat and the war in Ukraine and, and perhaps the lessons that I learned there in observing that conflict and wheat in that period apply to energy markets right now and as it relates to the strikes on Iran. And that was simply, you know, it was, it was somewhat telegraphed in that.

[B]

Okay.

[A]

We wrote about it in our 2022 outlook in 2021. At the time we said it looks like Russia is getting ready to mobilize an invasion of Ukraine. And of course, you know, Jen Psaki was the press secretary at the time. She said in January it's only a matter of time. And yet when the missiles started to fly, the tanks started to roll, the troops started shooting each other, wheat prices did Paul spike. And so in that early part of the war, we saw wheat prices jump and you know, make new, new highs eventually before coming back down. And I point to that because we wrote about it, obviously the White House was warning about it, and yet the wheat market reacted as if it was surprised, it was one of those moments where, know, I, I truly believe that the prices are a scoreboard and reflection of reality and what's going on in the world. Okay, that's just. It makes sense to me. And so I would think that if Russia's really about to invade Ukraine, they, they should be showing up on the board. Well, it wasn't. And so it made me scratch my head. I said, well, maybe they're not going to invade Ukraine. And maybe, you know, what I'm reading is wrong. Well, boy, oh, boy, they did. And they surprised the market. I can say that because wheat prices shot up. Now, to your point, wheat prices came back down. I mean, they peaked in 2022 and have basically been moving lower ever since. And the reason for that was, and remember this, about 30% of global wheat exports come from the Black Sea. So there was a significant, you know, crisis unfolding at that time. But the reason wheat prices came down is because the wheat was still available. And fundamentally, when your supply can meet demand, or at least the market anticipates that it is likely to do so, that is going to put pressure downward on prices. And that's exactly what happened. It took a little while, but the Ukrainians are very resilient. Europeans helped out. They started moving wheat westward over rail almost immediately. What took while was getting the, the grain initiative signed, you know, with the help of Turkey and negotiating the Black Sea corridor. And so grain continued to move through the Black Sea. Some of it was going up the Danube, you know, again, moving west. Now, that's the reason wheat prices came back down. It was the fact that wheat could still get out. The initial reaction was, oh, my gosh, you know, 30% of the world's wheat, wheat exports are coming offline. That didn't happen. And so with, with striking Iran, maybe that's, that's the thought of the energy markets too, saying, oh, my gosh, this is a crazy event. Oil should be spiking. But looking at the reality of the situation, there's enough supply, you know, that we didn't have to necessarily worry about bombing Iran.

[B]

I think you're right. I think it's also that you've got a lot of mean reverting algorithms out there as well. There's incredible pressure to get, you know, those things start whirring pretty quickly when, when prices spike, that one more piece just to get in. And so, so then you've got this, you've got this world of increased government intervention. You've got the fact that food is Central, you know, no politician gets re elective if you know, as inflation is so profound. Right. Although note today's CPI numbers don't include food and energy, which are basically the two things that are going up. That helps. That's a story that's global, not just local. You know, how does, how does, how does owning exposure to agricultural commodities, you know, is it is it is. How are they robust to tariffs? Are they protect, are they, is the fact that, you know, I mean the fact that the government's always going to come and subsidize farmers. Obviously it's a key political story at the moment in Washington over the fact that China isn't buying US Soybeans and has an impact on markets in any, you know, doesn't that just, isn't that a constant downward pressure on prices?

[A]

Yeah, it's a constant downward on pressure, a downward pressure on prices. For the simple point that we subsidize production. So when you subsidize supply, you put downward pressure on prices. When you subsidize demand, you put upward pressure on prices. This is why health care costs go up. This is why, you know, tuition costs continue to rise. We subsidize demand in those sectors. We subsidize supply when it comes, when it comes to food. And so those, those policies act as a natural lid for, for prices until there's those supply shocks. And again, historically in the grains, it's been, you know, weather, weather related. The other side of it with tariffs and trade policy that can create backlogs that simply have to do with finding new customers, new logistical routes to deliver the products to the buyer. And so, you know, this, this tariff war, the trade war that we're in with China, obviously it's hurting American soybean farmers in a big way right now. However, again, if, you know, you look at the reality of the wasde, there's another 74 million metric tons of soybean importers out there somewhere. And the United States only needs to sell, you know, 44 million metric tons somewhere around there according to the September numbers. And so there is another market for the United States to market to. Fundamentally that's supportive I believe, for, for U.S. soybeans, it's just a matter of time of finding those markets. And so I would say that yes, policy is always going to need to be consideration for commodities, well regulated markets where you have all these considerations. But fundamentally for soybeans in particular, there's an opportunity to sell into that demand. Hello, I'm David Hunt, founder and managing director at Hyperion Search Founded over a decade ago, Hyperion Search has helped organizations from major utilities to startups recruit their leadership teams and key individual contributors to accelerate both their growth and the energy transition. Our three main verticals are renewable power, energy storage and E mobility. The energy transition and the talent that delivers. It has been our passion since day one. To find out more, visit hyperionsearch.com or listen to my Leaders in Cleantech podcast, available on all platforms.

[B]

The one question I kind of, I still don't really get my head around this and I know and I get told sort of, you know, there's, there's sort of benefits to the role and all this kind of stuff. Obviously, you know, the one great thing about, or traditionally the one thing about owning a stock was it produced a yield. The value was based on that yield. And you know, you got the benefits of compounding interest. When you hold a commodities etf, you're, it's just purely. Correct me if I'm wrong here, and I know, I think, I think I'm wrong, but ultimately you're just exposed to the price of the underlying commodity and you're not getting any. You're not benefiting from sort of the role and any other. Is that right?

[A]

Well, so that's interesting. We can get into the structure of our funds to speak to this point. Agricultural commodities are typically in contango or a carry market. And that's the idea where the cost of carrying the product month over month, you have your insurance, you gotta keep it dry, et cetera, et cetera. There's costs to carrying the product that's built into the curve. And so take the soybean ETF for example, that is based off of our proprietary benchmark where we hold the second to expire contract, third to expire contract, and then the November following the third to expire contract. So as of today, soy S O y B holds January 26, March 26 and November 2026. Now if you. And actually let me pull up the curve right now just so I can speak intelligently to this, you have, come on, there we go. Right now you have January 26th at 1062, we're going all the way out to November 26th at 10 1080. So you are in a carry market. And what that means, Paul, is that as we sell the nearby contract and buy the further dated contract, right, we're never, we're never taking delivery of soybeans, God forbid, okay, we're, we're paying, there's a negative roll yield in that because we're selling relatively low and buying something at a higher cost. So that negative roll yield does weigh on the fund's performance over time. So that is something to keep in mind. Our funds were designed to hold three different contracts and go out across the curve for the reason that we wanted to help mitigate that negative rule yield when it's there. If you think to, you know, the very first generation commodity ETFs that came on the market, something like oil, the popular oil ETF held 100% of its holdings in the front month contract.

[B]

Yeah. And just got sold against it. Right.

[A]

Like over and over and over again. You, you had a transition and you know, there's 12,000% turnover or 1,200% turnover. And you know, if you're in a contango market, that's really going to weigh on the performance. So with soybeans, corn, wheat, we roll roughly a third of the portfolio five times a year to rebalance to the benchmark. And of course the opposite is true when the curve is backward dated. It can work to your advantage and so you can capture that power.

[B]

Exactly. Different indexes, depending on sort of how aggressive the salesperson is, will tell you different things or how proud they are of their index. But essentially you're making a bet and you want to make the bet or you want exposure to the underlying commodity prices and the kind of the, you know, there are very, very well known ones in energy. And I guess the, the point here is that when you look at the agricultural sector, you, you've got, there's, there's nuances, there's differences, there's, there's criticality, there's, there's, you know, there's not the same technology kind of disruption that is currently happening in energy to some extent. But also we know that in volatile times, in periods of stress in the global economy, agricultural prices shoot up. Right. So you look at what happened in, in the financial crisis, obviously then you subsequently had the, you know, the Arab Spring. You look at what happened during COVID you're, you're seeing significant run ups in the, the value of a basket of, of, of corn or soybean or whatever, whatever it might be is, is, is sort of the, the general sentiment, if I'm not wrong. And the argument is like, hey, you could look around the world today and say we're, you know, far from things kind of returning to normal like prices might suggest. It seems like we might be on the cusp of quite some disruption.

[A]

Absolutely. And so if I'm looking at managing a strategic portfolio for an institution or, you know, an individual retiree, I'm going to have some exposure to commodities and I'm going to diversify that commodity sleeve to include agriculture. Because even though you have all these broad macro stories that can tie into each other, the truth of the matter is, as you point out, Paul, energy is different from agriculture. Right. You know, each of these commodities does have its own fundamentals that it's going to march to. And what's impacting the soybean market right now is not exactly the same narrative that's impacting the corn market. And so having that diversification can potentially help long term, I believe.

[B]

Yeah. And there's a couple of pushbacks I have and I accept. Was it John Maynard Keynes that said, in the long run we're all dead? So some of these might not apply, but have certainly come up. Right. So one would be when I talk to our clients and colleagues and friends in the agricultural sector and you take the long view, it's absolutely astonishing, particularly in the U.S. but how modern agriculture has ex, you know, increased yields, you know, dramatically over the last 50 years. Right. So, you know, and without that you could imagine a world where, well, that's why we have such cheap food and such massive plates of food here in the, in the US in particular. So that's one deflationary aspect. Can you sort of talk to that a little? You know, is, is there sort of any thesis that we're kind of starting to get to the tip, the maximum we can do with the one technology.

[A]

You know, maybe I, I don't typically talk about scarcity as it relates to a linear time frame and what do I mean by that? So, you know, are we coming to a point? I think, Paul, what I read into your question is where we're not going to be able to produce enough food anymore.

[B]

No, no, no, Let me, let me sharpen my question, which is one of the deflationary aspects of owning agricultural commodities is that every year, despite weather impacts and all the rest of it, yields seem to continue to outperform and impress. In other words, the application of, you know, molecule level editing, plant support. All this piece with, combined with modern technology, combined with sort of industrialization has meant that yields continue to go up. And my point just being in ten years down the line are we have we doubled the amount of soybean we get out of a particular acreage and you just can't overcome that deflationary pressure.

[A]

No, I see, I see what you're saying. So yeah, we'll, we'll Demand. Will the production supersede demand permanently? So where you don't have these, these massive price moves from time to time, the answer is yes, that is, that is absolutely possible. But I would say that there is still a market function which will, which will balance that out. And that market function will show up in a couple ways. One is finding new uses. And so we see that with biodiesel and things of that nature. And the other side of the function is lack of, of demand will eventually mean we don't have to spend as much money subsidizing production anymore. And, and the market will, will balance in that way. And so I don't see an end to what we've, you know, come to see from time to time again, which is you have a growing surplus and bumper crops from year over year and then you have boom, boom, some type of supply and production shock where you're dipping into those, those excess reserves and then you got to rebuild those, those supplies again. I think that is, that's just natural for, for any commodity market and to the point where we can get more and more production. Well, that's a good thing. It might have something to do with land values. If you want to talk about, you know, where those impacts could show up. They could show up on, on farm land values, but I, I just would see a self correction again either by demand or lack of additional subsidies.

[B]

Yeah, yeah. And then this is probably way outside the purview of an investor's lifetime, but we had Todd Thurman on an episode talking about depopulation. He's. I don't know if you come across him, but he's interesting to follow on LinkedIn. He's, he's an animal livestock economist and spends a lot of time in China. And you know, his, his sort of thesis is that actually in, you know, depopulation or population decline is going to become. Happen sooner and more dramatically than, than certainly the UN predicts and probably as society is anticipating and that will have a profound impact on, on agricultural commodities. But again, that's, that's 2,080s problem in some senses or 20s problems problem rather than, you know, the next five years.

[A]

Thanks for watching him. I'm, I'm. I'd like to, to, to look into his thesis there.

[B]

Well, you can listen to an episode of the HC commodity podcast. Oh good.

[A]

I'll make sure, I'll start there. Thank you.

[B]

Yeah, if I was, if I was more prepared, I'd have that episode. N. But if people just search back, you'll find Todd Thurman, It's a, it's a great episode.

[A]

All right.

[B]

Yeah. And, and by the way, there's another YouTube rabbit hole for you. Is, is China population and all of the, the various efforts by hedge funds and investors and all the rest of it to, to pick apart cell phone usage data and so forth to try and get a, a better, better estimate because obviously it's a profound commodity story if actually their population isn't as big as they say it is at 1.4 and is perhaps declining more quickly. But anyway. Wow. Right. Yeah.

[A]

Good.

[B]

Okay, so, so great stuff. The, you know, just out of just one final piece and I kind of want to move on to just a little bit about sort of the, the future and what keeps you up at night. Is there. Is there. You know, you've got various ETFs, corn and soybean focused. How do you know? How do those, the dynamics between the different agricultural commodities play out? As you say, they have, they have very different roles in the, in the food supply chain. You know, is there, is there any difference there when it comes to kind of that macro story about owning them in times of volatility, in crisis?

[A]

That's a good question. You know, when we're conducting research and writing our commentary, it really is for that retail investor audience who doesn't necessarily have a sophisticated background in these markets. And so we will point to some basic differences around trade partners. For example, you know, China is critical for United States soybean exports. They're important for corn, but they're not critical. Right. So there's, there's other markets there. When we talk about wheat, we usually just point out to the fact that wheat is grown everywhere in the world. For the, for the most part, wheat is, is biblical. Wheat is geopolitical because it's grown everywhere in the world and because it is human food, it's a very sensitive topic. And so, you know, the types of things we cover as it relates to wheat are different than from, from corn and soybeans. But generally when you look at the function of these ETFs inside a portfolio, they have very similar behavioral characteristics. Low correlations to stocks and bonds all follow the, the golden grain cycle. And so for an investor who is going to pick one over the other, it truly becomes a, a narrative surrounding that commodity. So in 2022, our ticker we a t wheat took in a lot of money relative. You know, I think it had $300 million in it before the war started. And in four or five sessions we were up to $700 million. You know, that was a big day for, for the wheat ETF for corn. Go back to 2019 where we had some flooding in Iowa. Corn prices, you know, went up 10, 12, 13%, whatever it was at the time. So money came into the corn etf and even right now in soybeans, we've seen some money trickling in I think as people are trying to position in front of the US Chinese talks that hopefully do happen coming up, I believe just next week. And so there are different narratives surrounding each one, but from a functional basis inside of a portfolio, there's a lot of similarities.

[B]

Yeah, fascinating. And you know, you have to hope that as we record today, the U.S. canada talks are off because Canada repeated some words of Ronald Reagan. So it's even, even the, the anticipate. The talks alone are, are volatile these days. Right. Whether they're going to happen or not. But the, I guess the one sort of question and it turns out that in our notes here you mentioned Neil Howell and I've actually got Neil Howell's book in my audible cue to listen to. It's been there for a year. So this will spur me to read it. But I guess there's kind of like, you know, and, and this is outside the purview of a podcast on the commodities. But there is a certain amount of which there might be a tipping point in, in the amount of disruption that's coming driven by technology, driven by populism, driven by a whole technology that's driving populism, I would argue. And then the response of legislators or lack of versus society to that massive, profound and rapid change. There's a sense that actually you could reach a tipping point where some of this stuff starts become quite dangerous indeed. And it might be good if your ETF still, you know, the markets are still functioning and so forth. You know, we all, we all have very different problems if they're not. But can you just, I guess without, you know, it's sort of Halloween time too scary. Yeah. Well, I mean what, what is, what is. What is the Neil Howe thesis on this?

[A]

Oh so well, Neil Howe. It talks about turnings and the name of the book is, his latest book is the Fourth Turning is. Is here and so the basic framework there. And, and by the way, I mean mental models and frameworks are helpful, but they are just that they are, they are only frameworks. What I find interesting about this framework is that Neil how looks at demographics and really he's looking at generations and how every four generations, call it 80 years or so that cohort typically replays itself. And so I, I'm, I don't have the book right in front of me, so I forget the actual names he gives to each generation. But there's a generation of people who are very community oriented, right? They've been through some tragedy at some point. So they're, they're in the first turning where they're rebuilding society and they all work together. And he would point to the 1950s, right, coming out of the Great Depression and World War II as, as kind of being that generation. And then from the, the first turning till the fourth turning, you get a little bit more rebellious, right? So, you know, the kids don't listen to their parents and then their kids don't listen to their parents. Everybody's got to go figure out something for themselves. And eventually it all breaks again. And that fourth turning is when everything breaks. And based on his framework, he pointed to. And they wrote the. Strauss was the co author's name, I believe they wrote their first book in the late 90s. They said somewhere around 2008 would be the beginning of the fourth turning. Well, okay, so we had the green financial crisis in 2008, and they also posited that the end of that fourth turning would be somewhere in the, you know, 20, between 2025 and 2035. And so right now Neil Howe is saying it's roughly 2033. The end of the Fourth Turning just means you've gone through this ultimate period of maximum crisis where everything has broken to pieces and all that is left to do now is to start putting it back together. And so that framework, fun times ahead.

[B]

I wonder if he anticipated the fact that the first generation, all those 80 year olds are still cling, you know, I mean a gerontocracy is a pretty good way of describing the certainly United States politics, but actually global politics, when you look at, you know, who's got, who's in power and yeah, maybe, maybe, maybe there's, I don't know, some of them are still hanging around, but. Okay, well, our first HC Commodities podcast book recommendation is go read the forth turning and not get too scared.

[A]

Yeah, I would, I would read that one. I'd also make one more book recommendation to read True Believer by Eric Hoffer. It's about mass movements and mass psychology. Fascinating read, fascinating reading.

[B]

Okay, well, I will, I will. I'll add that to the Audible queue.

[A]

That's a shorter book, by the way.

[B]

Okay, great. Well, Jake, it's been a real pleasure having you on actually. And look forward to hopefully having you back on in a year or two where you can tell us how boring the world's been. And, and you know, I know probably not good for business but the ETF has been calm and stable. But you know, it's, it's, we've done, we've covered ETFs in oil and getting energy, we've covered ETFs in power. So it's kind of been great to get a, a look at the ag side and kind of plays back to some of the episodes. We've done war and wheat and so forth. So thanks for coming on and yeah, I hope to have you back on in the future and I'll put links to to cream in your ETFs in the show notes.

[A]

Thanks a lot, Paul. Appreciate it.

[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.global.