inflation Archives - RCM Ag Services

11 Sep 2025

Agriculture, Cattle rcmagserv 0 comment

Bulls, Bears, and Beef: Risk Management When Prices Run Hot

Cattle markets are at multi-decade highs, and producers are facing both incredible opportunities and serious risks. In this first radio edition of The Hedged Edge, hosts Jeff Eizenberg and Ben Hetzel dig into the realities of managing cattle risk when prices are running hot.

Joining the conversation are Dwayne Bowman, President of Dakota Western Bank, and Joe McKitrick, a North Dakota rancher, who share their perspectives on:

Why tight cattle supplies are driving record highs.
The risks of inflation, feed costs, and consumer “trade-down.”
How bankers and ranchers view tools like LRP, futures, options, and forward contracts.
Opportunities in feed, grain, and basis markets across the Northern Plains.
Why communication and discipline are critical in today’s cattle market.

Whether you’re a rancher, banker, or market watcher, this episode will give you a practical look at how to navigate risk — and why now may be the most important time to have a marketing plan in place.

____________________________________

Check out the complete Transcript from our latest podcast below:

Bulls, Bears, and Beef: Risk Management When Prices Run Hot

Jeff Eizenberg 00:51

Welcome to the first ever radio version of the hedge edge podcast. I’m your host, Jeff Eisenberg, and I’m here, joined with my co host, Ben Hetzel. Ben, we made it big. We’re on the radio.

Ben Hetzel 01:02

Yeah, buddy, it’s fantastic to be here with you today, and I can’t wait to get into this, and I gotta thank you for all the work you’ve done to get this up and running gov of the inaugural show.

Jeff Eizenberg 01:14

Absolutely no thank thank you as well. Couldn’t have done it without you. And you know a lot of our listeners are going to recognize your voice straight away. You know you’re from the local lemon community. You’re the CEO and general manager of Scranton equity co op for myself, for everybody who’s listening, I’m a bit of a newer voice to the area, and the managing director of the host of the show, RCM, ag services. I thought it’d be a good idea just to give a little bit of background, Ben you and I, we teamed up about a year ago. Really, the idea that we had when we first got together was to support the local Co Op and the community around with additional education and information about risk management and hedging services that we’ve been providing in and around the Dakotas and throughout the I states and other parts of the country. But really, you know, the more we talked and the more we got talking about education, the idea of the show kind of came alive. And since this is the first episode, I thought no better person than you to give us a quick recap and give the listeners an idea of why, why we’re going to do this show. Why should they listen? So if you don’t mind, yeah,

Ben Hetzel 02:26

sure. You know, the landscape changes pretty drastically year to year, it seems like. And the way production, AG, is it has changed over my career. Anyway, one thing that hasn’t changed is the risk. I mean, there’s, there’s a ton of risk in production. Ag and and so our mission with this podcast is, as you said, that this inaugural start to what you used to do on the hedged edge, first you want to provide the farmers and ranchers, AG, producers, end users, any professional with tools and resources that they need to navigate the markets today and maximize margins, reducing risk in their business. Secondly, you know, I want to highlight the importance of building that right team. We’ve talked about our conversations. You know, that’s the banker, the insurance agent, suppliers, whether it’s agronomics or other, having that agronomist close to your business, your broker, grain buyer, metal buyer, and all also your people that are on the operation every day with you and, and it’s just, it’s all about bringing that team closer and and and minimizing risk In your operation.

Jeff Eizenberg 03:40

Yeah, no, that’s, that’s right, and it’s, it’s been kind of the heart and soul for you and for me our entire careers, and as you get talking to more and more people, least as I have and you’ve, you’ve shared with me, it’s also about longevity and legacy. For a lot of people, the ability to not just turn a profit this year, but set up their operations, their farm, their ranch, to pass on to the next generation. Pay back their banker today, you’ll find we’ve got a guest banker on the on the line, so he’ll be happy to hear that. And with all of this said, we’re excited to be able to share this platform with you. Each week. We’re excited to bring new guests and new new team members from around the local community together to have these discussions. So again, thank you for taking the time to put this one together. All right, now that we’ve walked through why we’re here, let’s jump into today’s episode, bulls, bears and beef. All right, joining us today. We’ve got Dwayne Bowman. Dwayne’s the president of Dakota western bank, and Joe mckich. Joe joins us from Bowman, North Dakota, where he’s actively ranching, and it has been his entire career in production agriculture. So gentlemen, Dwayne Joe, are you there? Able to able to hear us? I’m here.

Joe McKitrick 04:59

Do. Yes, Jeff, All

Jeff Eizenberg 05:02

right, thanks for jumping on and joining us. We actually Dwayne is in studio with with Ben, so we’ve got the two of them together, which is great. And Joe’s off in Montana today. So again, thank you both for jumping in you know today and where we where we’re going here with this first episode is, let’s just jump in and talk about cattle why not? Right? It’s the hottest market. There is grain markets. Well, we’ll save that for the end. But with cattle prices are at all time highs. Wanted to kind of start out with a couple quick stats, and then have you guys really share what’s going on, boots on the ground style. You know, I think many people have heard, if they didn’t already know, this is the smallest us cattle herd in 70 years, 70 years since 1951 there’s 86 point 7 million head out there on feed that is highly un contrast to the 2019 peak pre covid numbers, 94 point 7 million. So we’re way down. Number one, number two. This one’s pretty interesting. I think we all know it, because if any of you are like me, my wife goes to the store or Costco, they’re paying up big time for beef. The Department of Labor Statistics noted that the average retail ground beef price is over $6 a pound. That’s up over $2 or 50% from five years ago. So prices are through the roof and hitting our pocketbooks, but yet, still, the price keeps going higher. And we’ll get to some questions at the end as how do we cure this? But before we get there, I kind of want to hear straight away from Joe what’s going on out there in the field. You know that we talked last week, before we did this call about the cattle on feed report and cattle on feed had been pointing to lower placements nationally, and particularly in the south. But up by you in your area, it’s a little bit different. What’s going on?

Joe McKitrick 06:53

Joe, well, thanks for having me on Jeff. As far as placements go the North looks so much better than the South because of the screw worm issue we have and but one thing that you know is an interesting take on the placements is Texas. The Texas feeders are competing for feeders up north and feeders in Oklahoma because they can’t get the feeders, their feeder cattle out of Mexico right now. So it’s creating a demand up here that’s that’s higher than normal on a seasonal basis, and also making it so that the Oklahoma feeders are the same basis as we are dealing with here. So it’s kind of a unique situation to add on to, as you said, already a very large shortage of feeders in general. Yeah.

Jeff Eizenberg 07:48

And the the other part is that you’ve got some quality ground. Obviously, had good condition and good grass, so people are bringing it your way. Is that been something you’ve seen as well? A trend in your direction?

Joe McKitrick 08:00

Yeah, there was a lot of yearlings contracted early. People were, you know, excited about the price we saw in June with yearlings, so they went ahead and contracted them. You know, fear of the unknowns of the marketplace, as we saw now. You know, the market has fully gotten better and better, and there’s a lot of yearlings starting to show up last week, this weekend, next week. The, you know, in the three, four state area, sale barns are starting to receive a lot of yearlings, and receiving them on a very high demand. I mean, the prices just keep going up every day. The Northern index is, you know, some version of 375, 380, on an index sphere. So the prices we’re seeing are just phenomenal. But again, there is a, you know, there, there’s a visible shortage as far as what’s available up here.

Jeff Eizenberg 08:50

Yeah, that makes, makes good sense. And that’s the kind of the gets to the crux of the problem, right? It’s that we’re, we’re trending higher. There’s a lot coming in, and people are looking to sell, taking, taking profits effectively out of the market. How are people feeling about these high prices?

Joe McKitrick 09:07

Well, so 2025, brought in a, a whole new market for us. And like I say, in June, you know, we thought that as producers, they, you know, that was already record prices. And so everybody the video sales saw that to where the volume in June was almost a flip flop of a normal July, meaning the volume of July went to the June sales. And so it’s, it’s just a function of, you know, 2014 and 2015 isn’t a far distance in most people’s memories. And so they That was a short lived bull market. And so people just want to make sure they capitalize on what is in front of them. So, you know, we saw a lot of activity early. There’s still calves for sale, no doubt, but there is a lot of contractor calves already.

Jeff Eizenberg 09:52

And then Dwayne, from your perspective, people are selling. They’re taking profits. They’ve locked in. Some of the opportunity to market. Question starts coming back is, what’s next? Are they thinking about replacing this herd, and in what way are they able to leverage the banks to come in and support buying new calves at this at these heightened prices? Is it even feasible? What do you think?

Dwayne Bowman 10:17

Well, good question. You know, it wasn’t that many years ago, I remember sitting down with one of my producers, you know, it’s probably six, seven years ago, and you know, when we were doing projections on there, and we figured, you know, we needed to get to about $1.70 on a cap to break even for him. And you know that time abs are probably worth about $1.45 and needed to see $1.70 so here we are. Fast Forward, you know, to 2025 and we saw $3 and then we saw $4 and now I’ve even seen some five point cans at about five bucks. So it’s gone up so fast that, you know, I think, if anything, there’s some fear now in the market, as Joe referenced, you know, it’s 1014 2015 that was very short lived. So everybody’s still got that fresh in their mind. But yet, you know, right now, this is it’s going to be, it’s going to be awfully fun. When it comes to the end of this year, these guys are going to have the most money they’ve ever had in their pocket. Last year was a really good year for us in the ranching country here, but we were dry, you know. So yes, you were getting record calves at record cap prices, but they weren’t hanging on to a lot of extra heifers. You know, they were selling down, still on numbers, just because we were so dry, they didn’t have hay in their hay yards. The pastures look pretty bleak. And now this year we’ve received, you know, tremendous rainfall along with these record prices. So there’s a lot of optimism. You know, your question as far as, are they going to replace right now? You know, I would say on the cow calf site, you know, really, that we’re not seeing a lot of demand to increase their numbers. You know, they still remember when they paid 2800 bucks for a red heifer 10 years ago, and never really did pay for that red heifer. So paying 4500 now, there’s not a lot of guys doing that. They’re, they’re holding their numbers. So they might buy a few back, but they’ve also, they’re selling that call Cal for 2300 bucks so they can afford to buy back. You know, $1,000 more, $2,000 more on the feeder side, I think we will see the guys. You know, they’re going to continue to to buy, you know, whether it’s yearlings or whether it’s feeder calves, because they’re coming off of, you know, probably the most money they’ve ever made. So they have to put that money back somewhere. You know, they’re, they’re either, they’re either going to be paying income taxes, which both of them like to do, they’re going to have to put it back into cattle. So it’s, it’s going to be a little more challenging on the on the hedging side, when it looks, when you look on the board and and you’re looking at, you know, a $300 loss at this point, but yet, they know they’re going to have to put it back into cattle.

Ben Hetzel 12:18

Yeah, it’s going to be really interesting. Jeff, too, you talk about what happened the last time we seen prices spike, and this one being such an extreme, comparatively value wise, as a producer myself, small scale, you try to try to remember those things and do things different this time. So whether using futures and options or an LRP product to mitigate some of that risk. You might find yourself looking back on this last summer, earlier spring, and I wish I wouldn’t have bought that insurance or put that position on as a cow calf guy. Now, feedlot guys that are buying numbers and doing that, you know they got to be prudent and hedge their risk diligently. But you know, as a cow calf guy that maybe 10 years ago, never even thought about hedging those calves this year might have been looking, and maybe even in the last few years, looking at hedging them. They’re born or unborn, possibly, you know, and as that product’s changed, it’s it’s made it a little bit different this year. It seems like it’s a little more expensive early on, but the value is much higher too. So value of using that tool, but, you know, we’ll get into that a little later. I think Jeff too that, you know, it’s, it’s still not a, it wasn’t a mistake to to buy that insurance. And some people, probably, I’ve heard it from others that they probably think, man, you know, I wish I would have done that. It’s, it’s kind of a trap that I think producers can get in, and hopefully we can shed some light on why that’s that’s a good thing to be doing anyway. But going forward, it’s going to be interesting to see what the trend is. Continue to edge these calves right after they’re born on an LRP, or start getting into futures and options and understanding those tools that are available to them. I think the trends will definitely depict a new direction based on what’s going on this year.

Speaker 1 14:17

If you want to listen back to this episode or find past episodes of The hedged edge visit kbjm.com or kndc radio.com under Listen Live and podcast options, or either stations free mobile app under podcasts.

Jeff Eizenberg 14:32

Ben, you mentioned something when we spoke the other day about the kind of misconception in the country that the banks are actually forcing people to put on these hedges and lock in losses. And you know, when you’re talking about losing on the calf rate as you buy it, what are your What are you guys thoughts in general, about this?

Dwayne Bowman 14:51

Yeah, like speak a little bit on the bank side, you know, I mean, no, I mean, we’re not forcing guys to lock in, you know, to put on losses. Obviously, the guys that are buying feeder cattle. Buying yearlings. We want them to be prudent and be doing some hedging, and just they’re putting so much money on the table right now, so they know they have to have some type of protection on there. But I don’t think anybody’s going to force anybody into taking a losses. We’re hoping you know that they’re going to be able to when they’re buying. Hopefully that that it looks like a break even at at worst, but definitely be doing need to be doing some type of protecting on, on their end, on the cow calf side, you know, as Ben talked about, you’re seeing more and more guys that are getting comfortable using LRP, a great tool to help kind of take, you know, to lock in some prices for them. And then we’re seeing a lot more guys that are just forward contracting, you know, a lot more hitting the video sales early. And they they understand that so much better. You know, hedging is a is a scary word for a lot of lot of producers, still. But when they forward contract and just know, hey, October delivery, I got 398, that 650, pounds, they know exactly where they’re so they like, they like that part of it. But the hedging is, is definitely going to be, definitely going to be a big piece going going forward, on the on the feeder side, on the fat site, just because there’s so much money at play this year.

Ben Hetzel 16:02

Yeah, that brings up an interesting point the way in that, when we talk about grains, and just for a moment, even though we’re not going to spend a lot of time on today, but oftentimes, in this geography, forward contract, particularly the because you could lose it, you could get hail, you could get lots around different things that happen to lose the job or lose the quality that you’ve guaranteed to the market. So that’s where the futures and options piece or or a product like LRP would would really kind of protect you. But we were pretty comfortable selling cash. And, you know, generally, if they’re on the ground and they’re healthy today, you’re going to be able to be able to sell them. And you know, you it wasn’t that long ago we had a storm called Atlas. If your cattle are contracted in November and we’re in a wet cycle right here, as you mentioned, and it’s you wonder if that’s crossed some producers minds, like, what happens if we get a bad one, you know, maybe they aren’t selling 100% likely not. But if they’re selling a high percentage, and the risk is there that something could happen, it’s usually doesn’t devastating level, but there’s some risk there.

Joe McKitrick 17:15

Going to your comment Ben, about, you know, hedging and doing something with the cow calf side. And we’re, I’m hearing it a lot in our travels that, you know, that was just a waste of money, or the put option, they bought more so the lrps, but they were a waste of money. And, you know, all too much marketing and egg is done on a recency bias. So you know, now that we got 2025 the big run of 25 under our belt, and the recency bias says that was a waste of money. You know, that’s one thing that I’d encourage, is that, you know, don’t give up on adding some protection, because the time that you don’t need it is right around the corner is the time you do need it. And obviously 2025 if you did nothing, that was the best case. But typically somewhere right around the corners when, when you do need your hedging program. So I think that’s an important piece of that conversation.

Ben Hetzel 18:10

Yeah, and I’m glad you went there, because I, I’ve felt like we, we had to touch on that, because, again, you know, personal experience, and obviously you live it every day. Dwayne sees it every day, Jeff, he’s he’s in the trade every day. It’s so important to protect yourself against the risk. And if you’re making money, when you put that edge on, it wasn’t a waste, waste of time or effort or money, because your point is market turn at any given moment, and you’re going to need it, because it may fall faster than it came up, and it catches you by surprise and but yeah, and that was part of that misunderstanding too. Is, you know, a lot of people get in that trap. Well, yeah, I wasted that $60 a head on my LRP, which, when I bought LRP, I said to my agent the day I did it, I said, Well, tomorrow, this might be a mistake, which it was, because it rallied big time. The next day, they said, This may look like, not be a mistake. It may look like a mistake. And I hope I’m wrong in doing this, because that’s a unique tool, just like an option, that it’s a fixed cost, and if the market keeps running, you’re going to capture some of that gain. It’s really unique. And I think producers need to know that, you know, just because you buy that product doesn’t mean you out of the market. You still have opportunity.

Dwayne Bowman 19:29

No, you’re right there. You know, Ben, that’s exactly what we’re hoping for. You know that you never have to use that tool. You know, as Joe said, the best thing the person could have done this year was nothing. Well, that’s we’re right around the corner from where you you know, things could turn the other way, really, really fast. And it’s, it’s the insurance, you know, it’s just the insurance that you’re going to be able to sleep at night having that protection on. Obviously, the bankers, we want to have that as well. We want to have that risk covered. The producers need to have that same thing. And it’s, you know, that’s why we put crop insurance on, you know, that’s why they put hail insurance on, so they can sleep better at night. They hope they never have

Jeff Eizenberg 19:58

to collect on it. Yeah, we’re talking. Working with Dwayne Bowman here, the president of Dakota, western bank. So Dwayne, when we talk about that right there, the relationship with the banker, I think that’s so important. You know, we have a lot of people that you know doing futures and options and other transactions that require the bank to be aware and communicative about where they stand with their potential gains, losses and margin calls. And, you know, we’re on the radio waves, and we use the word margin call, somebody might turn us off straight away. But the reality is that that can happen, and having that open line of communication with the bank in advance is paramount. And so, yeah, I just give you this chance to speak to that. And you know, the way that your bank handles, kind of working with their, their ag loans, whether it’s cattle, grains, whatever it might

Dwayne Bowman 20:47

be, yeah, I mean, the biggest thing when we’re putting their, their operating note together, or putting their note together to purchase the feeder cattle, obviously, a big part of that, a piece of that, is the risk protection, and it’s going to come at a cost, you know, whether it’s going to be put options, you know, and we’re going to build that in, or whether it’s going to be crop insurance. Going to be crop insurance, you know, we’re going to build that into the into the note, we have to manage our risk, and they’ve got to manage their risk. So it’s just, it’s a cost of doing business, but it’s, it’s no different than, than any other business out there. Like you said, it’s, uh, I think if anything, it’s just a lot of lot of producers still are just scared, you know, they don’t know enough about the marketing. They don’t know enough about risk protection, futures contracts, things like that. They’re they don’t have enough knowledge on it yet, but it’s a necessary piece to continue to get educated on. And that’s where I think this, this show is going to be kind of exciting, because hopefully it’s going to provide some opportunities for producers to get educated.

Jeff Eizenberg 21:38

Yeah, thanks, Dwayne, that’s that’s the goal. And really appreciate your feedback and being there to answer those questions in office, and you know they’re there locally. So that’s that’s great. Switch it over to Joe again, where Joe mckich from Bowman? Joe one kind of old trading fallacy out there. Maybe it’s the truth. Maybe it’s not. Is that higher prices cure higher prices. And so here we are. We’re higher prices. What’s it going to take the cure? Cure these higher prices. For the consumer, really? I mean, the the rancher, hey, keep on going. But for the for the consumer, we’re feeling the pinch we’ve got. The other day, I actually, I got a text message from friend up there and in Bismarck, and it was a picture of McDonald’s, and below the drive thru window, it said, financing available. So we all know beef is expensive. What’s it going to take?

Joe McKitrick 22:33

Well, I think you know, going to the McDonald’s conversation, the CEO was on again, and he talked about, it’s his lower to middle income consumers that they’re having a hard time getting them to come in the door. They’re skipping breakfast and eating at home, and he’s assuming that they’re skipping a meal altogether. So any of the consumers that have a household income, I think he used of 100,000 or less, they’re seeing a decrease in traffic. And so, you know, that’s always the fear. You know, the Packers, the funds, their job is to, you know, get prices as high as they can. They’re not really in it for that longevity of as much as today’s price. And what can they make a profit out of it today and and, you know, so that just say, what is going to limit demand? That’s to be seen. But obviously, if McDonald’s is saying that we’re limiting some demand today, the concern is permanent demand loss, since beef high and the wife goes home and makes a different meal, and then the family is okay with that meal, you know, based on pork or chicken, five years down the road when beef not as high, obviously, chicken still going to be cheaper, pork still going to be cheaper than beef at that time. Are they going to stick with that and not, you know? So we have more permanent demand law. There’s already conversation with a few fast foods are mixing pork with their beef for for ground beef. So concern of permanent demand laws is what is on every producers radar, that that the ones that we sustain the industry over a 20 year span, and we’re not just in it for the short term gain, like a fund is or, you know, packer is for the day. So I think that’s the real conversation is, how high do we have to go? We went to 475, and made during covid, and there’s a lot of forecasts that will get there fairly easy again that’s to be seen.

Jeff Eizenberg 24:28

Yeah, you know, from from where I sit, I’m feeling more and more as I talk with gentlemen like yourselves, then it’s really going to take the rebuilding of the herd and the numbers getting higher to drive that pricing back down. What are your thoughts? How long is it going to take to really, truly rebuild a herd?

Joe McKitrick 24:47

Well, so there’s two packers that have came out recently and said that, you know, we’re dealing with anywhere from three to six more quarters of really tight supply. And then, you know, getting to more normalization. What? How? However they define it. They did not define it in their in their notes. But you know 2027 being closer to more normalization. So assumably, we’re going to see some herd expansion somewhere along the journey that provides that

Speaker 1 25:15

want more agricultural market expertise. Listen to full episodes of the hedge edge podcast, wherever you get your podcasts, or visit RCM, ag services.com, get the complete market analysis and strategies you need to succeed.

Jeff Eizenberg 25:29

The other question that’s going to come into play here Dwayne is interest rates. You know, we know President Trump’s been pushing for lower rates. What are your thoughts? How is interest rate play going to either support or impact the the herd expansion on the cattle side,

Dwayne Bowman 25:47

yeah, you know, really what I’ve seen the last few years with rates going up, it hasn’t had nearly as much impact on the Ag side as you’d expect. You know, land prices have been strong as ever. Have continued to go up. So in a producer actually said this to me the other day. He said, you know, interest rates, to me don’t mean, don’t, don’t mean nearly as much as as commodity prices. And he’s right. You know, commodity prices and weather are a much bigger factor and impact than interest rates. So I think we’re going to see interest rates go down. I don’t think that’s going to have a big impact on what cattle prices do, you know, like you were talking what kills, you know, high prices. You know, it’s high prices. And I think what, what we’re finally going to see at some point right now, the consumption, beef consumption in the US has been very stable. The last three years, it’s been right around 58 pounds per capita. So that isn’t changing. So at what point, you know, does the price cause them to go elsewhere? Chicken is still, you know, twice the consumption that beef is, but you talked about, you know, the $2 difference there is, I don’t think it’s enough difference right now that the consumer still knows that they enjoy, that their lifestyle, they know what they like. And we are, we’re definitely in a in a lifestyle to where we know what, what we appreciate, what we like, and as long as we can afford it, we’re going to continue to stay that way, like you talked about financing, you know, I thought this was kind of interesting. I heard this the other day about, you know, people love convenience, so DoorDash, you know, they love that. And you know, they’re gonna order that cheese burger from McDonald’s, and they’re gonna get fries and they’re gonna get their frosty. And next, you know, they’ve got a $17 meal, and they’re paying five bucks data delivered. So they’ve got 22 bucks, and they’re putting it on a credit card that they’re not paying off at the end of the month. Jeff, so you’re right, yeah, and that’s the lifestyle. So it’s going to come a point when they can’t, you know, make those payments, when they really are feeling the pinch. That’s where there’s going to be some lifestyle changes. And then we may see some adjustments on beef.

Joe McKitrick 27:36

I think Dwayne brings up a good point there too. That’s worth noting. Is the even though beef high, it’s not like chicken and pork are dirt cheap. Those competing meats have done a good job of trying to follow beef up, yet stay a little bit cheaper so that they maintain their demand. But if you notice that, you know that those meats are that’s just kind of in a silent move. So it’s not as big a disparity as one would say.

Ben Hetzel 28:07

The interesting thing would be the margins at the production level, you know, is, is the producer that’s raising, you know? And I know it’s all pretty well confinement related production, but where’s the margin, and all that landing. Jeff, you and I had a conversation the other day about what some of these fast food chains might be doing to encourage that middle class, lower class consumer to come into the store or the restaurant and and buy some, buy the meals, or whatever fast food. And it’s really interesting, they’re, they’re focusing a lot. If there’s traditionally a burger joint, you know, say, McDonald’s or or one like that, that, you know, first thing a lot of us think of is the Big Mac or some kind of a quarter pounder type thing. They really focus in there. They’re happy their daily specials, or whatever the meal deals around chicken.

Jeff Eizenberg 29:05

Yeah, I think we, think we saw, we looked it up. McDonald’s CEO came out and said, Oh yeah, we’re gonna bring back the value meal. And they have six new value meals. Well, five out of six are chicken, chicken related. So there, there you go. They’re trying to drive towards profitability. Shifting course here to the last question. Ben, I think this one is really slated for you, if you think about it, you know you got your finger on the pulse of the grain market, there at Scranton, at the at the elevator and the Co Op. Where are you feeling like the opportunities are in thinking about from the feed side and from the ranching side, is there really, is this a level that people should be coming in and thinking, Okay, how should I lock in and forward price some of my my feed?

Ben Hetzel 29:51

Yeah, we’re seeing some increased interest in locking in grain longer, earlier, longer, you know, whether or not you. Seasonally, this is traditionally. Maybe we’re coming into that, that lower price point where nervous ramps up the volume hitting the facilities and basis widens out. But I think some of them are trying to get ahead of it, even trying to figure out, how can we get some corn or maybe a different sheet stuff laid in earlier and have more of it on hand. I’ve actually heard of some feed lots building bins because they want to store more supply, which, you know, there’s all kinds of arguments around whether that’s a good idea or bad idea. It depends on your operation, probably as much as anything of what, what’s prudent there. But, you know, we got a big drop, especially geographically for us, we’ve got some pretty big drops staring us in the face, and it’s going to be tough to keep all of it moving at once. You know, locally, we’ve got as good a wheat drop as we’ve had. And it may not be a record, but it’s, it’s not gonna be too terrible, far off. And for some producers, and you know that’s, that’s just one of the crops they’re raising at extremely high levels of production this year, sharing a lot of good yields on other other crops, whether it’s keys, canola, flax, all of them are really good this year. And then we got probably what looks to be one of the the best corn crops I’ve ever seen. And I know Dwayne and and Joe. You guys travel this area a lot, too, and it kind of looks like Minnesota around here. You know this corn you drive down the road, you can’t see over the fields, and a lot of times the corn doesn’t get that Paul and and the height of corn isn’t always the the whole story, obviously. But when you talk to growers, it’s they’re just talking about how phenomenal is. So there’s opportunities coming for these guys buying feed. I guess to me, anyway, it feels like basis should widen out, you know, a little bit anyway, from where we’re at. And the big question will be how much export business that we pick up because of the lack of the soybean export program. You know, the facilities on the coast, the P and W, the Gulf, they’re going to have to elevate grain to keep the facilities buzzing. So they’re going to be looking to fill it with corn or wheat, you know, here in this this next quarter. So, you know, it looks like, even if China were to come in and be interested in some beans, it’d be tough for the US to execute on the P and W a bean program with what’s been put on the books for corn. So as long as demand stays high, maybe we, maybe we slot no here, you know, protect your risk on the board, you know, and, and the basis risk based on seasonality,

Jeff Eizenberg 32:44

makes sense, and Joe as your what’s your sense on that bin building at the on the feed lots, something you see as you travel?

Joe McKitrick 32:53

Well, there’s a lot of conversation about how to take advantage of it. You know, for the first time in probably two decades, you know, like southwest Kansas has a negative corn basis in areas and there’s just a loop. There’s a massive amount of corn growing this year, and like Ben saying, it looks like Minnesota in areas that are fringe acres, and maybe they’re normally 60 to 85 bushel or 100 and 100 plus.

Ben Hetzel 33:21

So yeah, say it 150 plus.

Joe McKitrick 33:25

Oh, yeah. I mean, I never thought we’d have a hot, you know, a 2023, corn crop, again, in the fringe acres, but it looks like we’re going to, and, you know, you get into western Kansas from north to south is there is a mountain of corn this year western South Dakota, same thing. So, yeah, there’s conversation of how to, you know, there’s a lot of places that are going to make a wet corn pile that would maybe normally make a small one, that are going to make, you know, one day last three quarters of the winter or something. And so, yeah, there’s a lot of conversation how to take advantage of this, you know, the large crop and and really large basis at harvest too.

Jeff Eizenberg 34:05

Looking ahead into 2020 end of 25 and end of 26 What are your thoughts, Joe,

Joe McKitrick 34:12

so 25 was a a demand driven market, and as we go into 26 we’re getting into a supply driven market, where the shortages of supply or the constraint is becoming the larger, and so the structure of the market changes. The safety of a demand driven market is greater this you know, the clarity of that it’s going to go higher is greater than a supply driven because there’s so many outside forces that could affect supply exports the Mexican import. So I think the you know, the conversation leads to what could potentially put a final top in this market, and and one of them is the NCBA is putting a lot of pressure on the USDA to do something about this Mexican feeder cat. Import situation, the Texas yards, you know, there’s a lot of Texas yards that make a living off of feeding Mexican feeder cattle. And in fact, the largest feed yard conglomerate in the US is only at 40% capacity, and not totally because of no imports of Mexican feeder cattle. But there’s a, you know, that’s a part of the situation. So, you know, what could put the final top in is, you know, the opening of the border. The other thing that’s, you know, transpired since last week is the Trump’s tariffs are now under pressure, judicially, yes, and if something like that changed to where Brazil could ship directly to the US. And so when you add in that, we’re increasing Australian imports as fast as as they can do it. And then you add in the Brazilian side, and then you put this, you know, the screw worm situation, in the rear view mirror. That’s a lot of headwinds for the market to keep going higher. And so then the supply driven side of it in 26 becomes a question mark of how, how is that going to affect supply? Obviously, demand is not going to fall out of bed, so we still have demand, but we don’t have demand as a driver. That takes us to a whole nother level from here, where, whereas supply of supply stay tight, we could go quite a bit higher. But given the factors at bay that are being held at bay, if any of them come alive again, there is serious risk to the market. And as we talked last week, there’s a lot of air gap to the market too. We came a long ways, really fast in 2025 and markets like to take it away as quick as they put it on too.

Jeff Eizenberg 36:42

So that’s the old other trader story. Yeah, take it away as fast as it came. Yep, exactly.

Speaker 1 36:48

If you’re enjoying today’s show, check us out on Facebook. Just search RCM, ag services for market updates and tips. Find us on Facebook today.

Jeff Eizenberg 36:57

Dwayne Ben, any

Dwayne Bowman 36:58

final thoughts? Well, I think, just to piggyback a little bit on what Joe said, you know, I think he’s exactly right. You know, the, I would say the imports is going to have even a could have a potential bigger impact than, than we keep talking about. You know, our US, cattle being down. I think we’re down 500,000 but we’re, what do you say? Jeff, 86 point 7 million cattle in the in the US. But I think globally, it’s 1.5 7 billion, you know. So the US is really a small piece of this. So the imports could have a have a huge impact. Tariffs could have a big impact, compared to the demand side, as Joe talked about, I think that’s going to stay pretty

Ben Hetzel 37:32

stable, yeah. And I think one, one last comment I have in regard to the beef talk, what a scenario to be in, though, good demand, as good as it’s ever been, not only domestically, but good demand for us, beef globally. And now you’ve got some supply constraints that can fuel the fire. So from a commodity standpoint, it really doesn’t get any better than that, you know. And so one without the other can be fun, but if you have them both, and you’re on the right side of it, it can be really exciting. But again, you know, where does that end? Where’s the party shut down? And so that’s, that’s really what we’re here talking about. And navigate markets and situations that whether it’s good or bad, like you said, Jeff, so happens the cattle market is fun to talk about today. Wheat markets, so, you know, we’ll get into that. But regardless, if you’re at the top, there’s tools out there, you know, RCM, egg services, whether it’s Jeff out in Ohio, some of the other brokers around the mid states here, or myself in Scranton, North Dakota, Scranton, equity. The tools are there. We’re more than happy to help people understand them, and that’s why we’re talking about it.

Jeff Eizenberg 38:50

That’s good. Well, you know, again, today’s been a great day. It’s been great to kind of talk with all of you guys. Obviously, Dwayne and Joe for joining the show and Ben shared at the beginning is that this is the most important part, is that you’ve got a team around you. There’s people in and around the area that are knowledgeable about different parts of the business, that have had different types of experiences. Come if you’re on the on the grain side and the you’re talking to a rancher, ranchers talking to a corn or wheat farmer, it’s just a different conversation. And you can learn something you pick something up, obviously, having great quality relationships with your bank, your co ops, your brokerage firms, again, be super important, particularly in these difficult times, whether the top or bottom of a market, the emotional cycle that We’re in is real. And again, our goal, and having having this show on the radio is is to be able to share experiences like Joe’s and Dwayne’s events in my my own through throughout the radio waves, and get some feedback from you all, and hoping that you stop into the co op or give Ben a call, or just check in on. The podcast and catch up with us next week.

16 Nov 2022

Agriculture, Cotton, Podcast rcmagserv 0 comment

What the hell is going on in logistics and is there any relief in sight? with Woodson Dunavant

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

_______

Quick Links from the episode:

For more information visit Dunavant.com, follow @Dunavant_LTL on Twitter, and check out their LinkedIn & Facebook.

Questions for Woodson? Contact him at: woodson.dunavant@dunavant.com

And last but not least, don’t forget to subscribe to The Hedged Edge on your preferred platform, and follow us on Twitter @ag_rcm, LinkedIn, and Facebook.

_______

Check out the complete Transcript from this week’s podcast below:

What the hell is going on in logistics and is there any relief in sight? with Woodson Dunavant

Jeff Eizenberg 00:14

Welcome to the Hedged Edge by RCM Ag Services where we’re getting out the field and onto the mic to bring you weekly market updates, commentary from commodity experts in monthly interviews with the biggest names in agribusiness. Welcome to winner at least it feels that way after the one of the warmest falls in recent memory. Today, the hedged edge is back online with a guest who could potentially be the most important guest of all time on this podcast. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers and global supply of grain is scarce, are tasked with the question, What the hell is going on in logistics? And is there any relief in sight? To help address these questions and more I’m joined today by a man who needs no introduction to most in the physical commodity sector once and done event with the done event logistics company based in Memphis, Tennessee, what’s in is the Senior Vice President of agriculture and Global Network Development for the company. And as part of the fourth generation of done event family to work for the company. He worked across the globe specializing in cotton trading from 2001 to 2009. And spent four years in equipment leasing, what’s in currently serves as logistics sales and business development for event focusing on the international market. He’s a member of the executive board of directors for Donovan Enterprises, Inc, and is on the board of directors of the Memphis Cotton Exchange and the Memphis cotton Museum. He received a bachelor’s degree in finance from Auburn University. Go War Eagle. What Dr. Woodson, welcome to the show.

Woodson Dunavant 01:59

Thank you. Thank you. Thanks for having me, Josh. I appreciate it. Glad to be here.

Jeff Eizenberg 02:02

Yeah, it’s good times. I mean, my first question your Memphis with the river being as crazy as it is really concerned for the catalyst industry and the restaurant industry. You know, I’ve I’ve had lunch at Blue City cafe over there on Beale Street. The guy told me he’s, he’s, you know, cooking up 180 fish a day. What? How’s he doing in all this? Oh,

Woodson Dunavant 02:26

to be completely frank, he’s doing just fine. Because all his cat fish are not coming out of the river. They’re coming out of the cat fish farms. They’re all in the delta. So he’s gonna be okay. He’s gonna be quite alright.

Jeff Eizenberg 02:36

He’s alright. Okay, well, I thought maybe they were you know, he’s grabbing them off the bottom fish at the Mississippi or something?

Woodson Dunavant 02:42

No, but they are finding each day that goes by you get somebody on the news saying that they found a civil war piece of memorabilia or something, you know that the river hasn’t been this low. And however many years and you know, you’ve got all these treasure hunters that are down there looking for some and things of that nature. But, you know, the real crux of it is what is it doing to the to the grain shippers right now. And it’s a mess. In some cases, you know, the river, where we used to be able to do two barges pass on one another. Now, in some cases, it’s just one line traffic. And then throw on top of that, typically, some of these barges will be able to go to three, you know, far out, and now they’re only able to go you know, back to back, if that makes sense, to lane single. And then add in that to the fact of the river being as low as it is, then they can’t carry the payload that they would be in years past as well. So you push all that back to the farmers pocket. And you know, his supply chain costs have really, really gone up a B, he can’t move the volume that he’s used to moving. So what is he doing? In some cases, you know, they’re just going to sit and put their put their product in their in their bed or their silo, until until things get better, which, you know, there’s there. I don’t know when that’s going to happen. You looked at Long long term forecast, things of that nature, you know, a couple couple inch rain in the Midwest, it isn’t going to move the river level up by 10 feet. So you know, we’ll just have to wait and see how that how that goes.

Jeff Eizenberg 04:26

It’s kind of a wild ride right now. And yet, the pictures and the images are stunning people sending drones to give you pictures. I do sense. I don’t want to get too into this before we get a little bit more background. But I do have a question and maybe we’ll tackle it a little bit later about about those drunk drunk foot photos. I feel like a little more a little. Maybe not exactly the river. They’re like the tributary so kind of make it sound a little worse than it is. Yeah, so what you just described is pretty pretty dire. Um, Before we get too far into into the state of things, Watson, I think it might be best if you could just to share your background of the company. And you know why we’re even talking with you about logistics. I mean, you guys have had an extensive knowledge of logistics systems, both rail, barge, freight, etc. So if you could maybe just share a little bit of that background, and then we can jump into these problems. And hopefully, you’re not going to solve the world’s issues by the end of this call.

Woodson Dunavant 05:32

No, there’s no question that that’s gonna happen for sure. We might need a beer, a glass of wine to really get to the bottom of it. So yeah, so don event is a family company that started in cotton trading with my grandfather, back in the 30s. In the 40s. My father took it over, took over the business in the 50s, when his dad passed away when he was in his late 20s. So he was sort of thrown into the fire. Early on, he was down on on Front Street, where we were all the cotton traders were at that time buying cotton from the Delta and and shipping it to the US textile mills, you know, the manufacturers who were ever on the East Coast, and even in the northeast,

Jeff Eizenberg 06:18

they no longer exist, right? Yeah. So,

Woodson Dunavant 06:21

you know, we used to consume between, you know, call it 10 and 15 million bales a year domestically, and right now, we’re just north of two. And, you know, we’ll talk about this later. But, you know, manufacturing coming back and things of that nature, you know, is that, you know, is that gonna go back to 10? million? No, is it gonna go to five? I doubt it. But who knows? You know, we’ll, again, we’ll hit on Mexico and other things like that later. But yeah, I mean, it is the US textile industry is very, very small. So. So what does that mean? So, as we transitioned into that, it mean, it meant that there was a blow up in the international world for textile manufacturing, primarily in in Asia, Southeast Asia, subcontinent, so on and so forth. So as as manufacturing, went overseas, my father went overseas as well, to be able to sell, sell cotton. So we were buying cotton, you know, from the 80s and 90s, early 2000s. Were buying cotton anywhere in the world, that cotton is being grown, and then we’re selling it to the manufacturers. So

Jeff Eizenberg 07:35

you’re buying from Australia, India, all over the world,

Woodson Dunavant 07:38

anywhere there was yeah, it was Becca, Stan, Brazil, Australia. Tragic. I mean, you name it, wherever it was being, wherever it’s being grown, we were there, buying it, and then selling it to the manufacturers. So in the mid 70s, my dad made the first sale of cotton to China, which was a huge development. I think that was in 72. And then Sunday eight, we made the largest sale of a million bales to the Chinese government. So that was really a big thing for both our company as well as us. cotton industry. And now today, cotton is, excuse me, China is still the largest consumer of us cotton in the world. They have a large crop themselves, but they they have a major surplus of need of imported cotton.

Jeff Eizenberg 08:32

So thank you, Nike and Adidas and everybody else, right?

Woodson Dunavant 08:37

Yeah, yeah, exactly. All clothing, upholstery. But you know, even stuff that you wouldn’t think of what cotton goes into is manufactured over there. And a lot of times brought back over here as well.

Jeff Eizenberg 08:52

So with all those purchases, and sales, then comes the logistics portion. Correct?

Woodson Dunavant 08:57

That’s right. That’s exactly right. So it’s still cheaper for the retailers kind of looking from field to fabric here from for us to ship a bale from St. Mississippi, to Shanghai, and then bring that bring that shirt back here to Memphis, it’s still cheaper to do that than it would be to do it here in the US, which is really, I mean, you can’t blows your mind. Really, the that’s the way it is. But that’s the way it is. So

Jeff Eizenberg 09:25

I got to ask a question about that. So it’s so interesting to me, the way you describe it like that, is it you’re gonna get the bail here, you ship it over, and it comes back. And then is it just because you have this, your network of the supply chain there is so strong that you’re able to from a net con economies of scale, have enough flow that you have enough movement between the vessels that you’re able to then you know, take it over. You don’t have to sit on a container for, you know, six weeks for it to manufac Asher, and come back. But you have enough flow where there’s always a container ready to come back the other way?

Woodson Dunavant 10:06

Yeah, I mean, that’s Jeff, that’s really deep. And I really wish I could tell you that, yes, we were involved from the field in the US all the way to the manufacturer. And then back here in the US. There’s so many different segments of that Donovan is not involved in that entire supply chain. Well, that would be really cool. If we were Yeah, it’s just there’s so many different pieces to make that puzzle all come together.

Jeff Eizenberg 10:31

We don’t need to get too in the weeds. But I’m curious if you were involved

Woodson Dunavant 10:35

with with our customers with helping them move it from the field to the oversee port, and then we sort of lose track of it there. And then on our on our import side, you know, we’re responsible from once the goods hit the port in Asia, to deliver them here to the United States and the distribution facility got because there is there is a dark area, there are a gray area that we’re not involved at all,

Jeff Eizenberg 10:58

leave that to somebody on on their side that can speak a language and manage that process got

Woodson Dunavant 11:03

Correct, correct. That’s right. That’s right. So so we did all the all the cotton trading, you know, the mid 2000s, come along, you know, 2007 2008, I’m sure some of your your, your readers will remember those days now crazy thing for when the spec and hedge funds got really involved in commodities that they thought they needed to commodity bucket in addition to their bond bucket and their equity bucket. And that really changed things from us where we’re trying to keep a hedged book with against our long physicals, the market would run up, we’d have short futures against our physicals. And then, you know, in order to hold those positions, we’re having to send money margin to keep those positions. And it just got, it just got too much for my dad and our family, whereby, you know, our net worth was on the line. And it just, it became really uncomfortable from a family standpoint, from a from a financial standpoint, everything and so he, you know, had the foresight to look at possibly marketing our cotton division. To sell it, we had multiple suitors. At the end of the day, Louis Dreyfus Corporation was the one that came in and bought all of our cotton trading people and divisions around the world. So we had things that they did not have in Central Africa, in Brazil, and Australia. And so it really helped them put together, you know, the full global portfolio footprint that they needed to go to the next level. So

Jeff Eizenberg 12:42

it’s no surprise today, they are the largest of, you know, knowledge. They’re right there. Yeah,

Woodson Dunavant 12:48

that’s correct. And we were in Donovan Donovan was right there with him, we were doing between four and 6 million bales a year globally, you know, between one and $2 billion of revenue, we were spending, you know, upwards of $250 million a year in logistics. And so that’s when the whole logistics thing for us sort of sort of tipped itself off. And when we were when we made that sale to them, you know, they they did not want any of our people that were doing the logistics. So we, we kept those people and we’ve built this this Threepio, which we will go into more detail about.

Jeff Eizenberg 13:25

That’s great. So then how many people that are on the team today, across the globe? As I know, you have global operations?

Woodson Dunavant 13:32

Yeah, it’s really hard to say, to put a number a finger on an exact amount of people, we’ve got a lot of contractors, we’ve got agents, we’ve you know, so it’s a real hard number to put, I mean, it’s north of 200. But it could balloon up to if you include contractors and agents and all that. I mean, it’s a really big number.

Jeff Eizenberg 13:57

Sure, not to mention all the people that are involved in you know, running the rail or you know, trucking etc, you get to put everyone together in the 1000s. So it makes makes good sense. Okay, well, that’s a that’s one heck of a ride for you. You’re in the family and obviously, to get to where you guys are here today. Now, it would have been seen that natural that you’re also still heavily involved in cotton.

Woodson Dunavant 14:27

We are we, we do so we do freight forwarding for a lot of our old cotton competition. We do a lot of a trucking and logistics for them. The whole bucket of Donovan logistics, it’s probably 10 or 15% of what we do. So it’s not it’s not it’s not as big as I would like it. But it’s still it’s a core. It’s a core business for us. And, you know, we do everything like I just said from documentation to try Looking to ocean freight in some cases. So yeah, cotton is in our blood and we can’t get it out of our blood, nor do we really want to so the side that we’re in now, we don’t have any risk for, for cotton and being able to be in the business without risk is a good thing.

Jeff Eizenberg 15:17

Yeah, I agree with that, you know, that’s, we’re all in that business. And it’s, it can be heart palpitating. So, okay. 15% is cotton, what other products are involved in agriculture, or if if it can be shipped your yours,

Woodson Dunavant 15:35

if it’s if it can be moved in a container, Jeff, where we’re going to be involved in it. So, you know, we’ve done everything from Peanuts, to soybeans, to corn to Rice, tobacco, alfalfa, you know, just anything agriculture, you know, we’d like to, for someone to come to us with a challenge of, you know, we’re only able to get 20 tonnes in a container, well, let’s bring it to a major city or a big place where there’s heavy weight, translate it, and we’ll get 25 times in the container. So for every five moves, you’re getting a free container. So every four, so yeah, that those are the types of things we like to look at with with our customers is how can we do things different? How can we maximize our plate payload? How, you know, how can we how can we be a solution to something that they need help with and that that’s how we grow our businesses is people come to us with problems and we help solve.

Jeff Eizenberg 16:32

Yeah, well, listen, that’s, that’s, that’s a great service. And obviously, you’ve been able to continue to grow. So you’re, you’re based in Memphis, would that also then insinuate that a majority of the operations and movements starts and ends there on the river? Or are you also focused on the ports and the International terminals as well?

Woodson Dunavant 16:56

Yep. So Memphis is home. Obviously, Memphis is where our headquarters is. Memphis is, is near and dear to our heart. And Memphis is great. We love Memphis, we see the growth. We’re very bullish on Memphis. As you know, we’ve got all five major railroads here, which only Chicago has that going through them. We’ve got the largest freight airport, with FedEx moving through here. We’ve got our 40 corridor, trucks moving, you know, east to west connecting the east to west coast. 50 fives connecting Mexico with Canada. So we’ve got, you know, road rail runway. You know, it’s all here. And so we’re, we’re very bullish on that. But to your question, no, Donald’s moving product in and out of every major rail hub in the United States, as well as port, we concentrate in the southeast, and then the Gulf, Houston and Dallas, Memphis, Savannah, Charleston, Norfolk, Baltimore, Wilmington, and then an inland we’re, we’re Nashville, and Memphis in Atlanta. And as I said, Dallas, so we’re really focused in the southeast, and then the Gulf. But we’re also moving product in and out of the P and W, in the northeast, as well. And in southern Florida. So there’s no real you know, we’re, we’re spread all across. So we’re lucky in that regard.

Jeff Eizenberg 18:29

That’s great. I guess it really kind of circles back to, like I said, at the beginning, you’re one of the most important people in the world to be talking to you right now. If you’re, you know, you’re so spread out that you are touching so many different pieces of the overall logistics. gameplan, or footprint, let’s call it that. And we all have been hearing about all the problems that are out there. And I guess, before we just say today, this is the problem today. It seems as if this the backups and the issues and the increasing costs and everything kicked off with COVID with the COVID pandemic, and then it’s just really never cleared the system. And then now we have new problems, right, we’ve got drought and other conditions. Was it was this is it fair to say that that was really that was the kickoff the Genesis? And is is that portion of it? Or is it portion of that portion worked itself through and we’re now facing other problems? Where are we at?

Woodson Dunavant 19:31

Yeah, I mean, COVID changed the supply chain. Things are not going to go back to the way they were pre COVID. Right? Post COVID COVID, whatever. I mean, it’s not going back to the way it was right. That’s crystal clear. The question is, what is it going to do in the future because it’s going to change again. You know, rates went through the roof. Now they’re crashing back down, both from mostly frame rates, breakpoint rates, yes,

Jeff Eizenberg 19:58

interest rates are going straight up. Yeah, interest rates going up

Woodson Dunavant 20:01

freight rates going down. I mean, we’re, we’re in a freight recession right now, you know, importers have, you know, they couldn’t get their hands on enough inventory. Well, now they’ve got too much inventory, and they can’t move it. The consumer is not buying as much as he was, you know, they all got scared last year, a lot of the retailers and they couldn’t get their product in for Christmas time. So they brought it in super early this year. And so you know, they are chock a block full these warehouses. I mean, I was reading this morning, Jeff, historically, historically, warehouse levels are about call it 10%. In terms of in terms of vacancy rate, and okay, right now, you’re at, like, want to say, like, around 3%. And it’s literally around 10% For the last decade, and so at 3% Now, it’s a good time to be in the warehouse business. Now. It’s done like, yeah, yeah. So you know, all that’s going to change, you know, everybody’s gonna go out and get their warehouse space, and then then demand is gonna go up, you know, and then things will change. But as it stands right now, being in the warehouse business is a very good business to be in.

Jeff Eizenberg 21:18

Yeah. And then you mentioned, when we talked to a couple of weeks ago, something that kind of speaks to that you said Amazon did their, their Black Friday, Black Friday, a week, thoroughly, which forced even more warehousing to be space to be taken up?

Woodson Dunavant 21:36

That’s right. That’s right. So and it’s not just Amazon. I mean, it’s all these retail guys, they’re all in the same boat together. So, you know, with with, you know, interest rates dealing with they’re doing geopolitical unrest, unrest and Ukraine, and in that area, diesel costs through the roof has really got me concerned, both in North Europe and in here in the, in the United States. I mean, there’s just a lot of uncertainty right now. And, you know, we’re just gonna continue to service our customers and do what we know to do, and just sit back and watch, you know, some of those other things that are outside of our control, but at the end of the day, affect me, my business, your business, my pocketbook, your pocketbook. So, you know, a lot going on right now. And obviously, the China and Taiwan deal. I mean, it, there’s a lot to be keeping around right now.

Jeff Eizenberg 22:34

Right. And there was a period in time when, you know, we saw the pictures on the news of, you know, 500 or 1000 boats back at the LA port. And, you know, a lot of that issue cleared the port issues

Woodson Dunavant 22:50

that cleared up, or I wouldn’t say it’s, I wouldn’t say it’s cleared. But it is, it is working itself out. The issue now is in Savannah, I think they’ve got 20 or 30 vessels awaiting birth there. So you know, once everybody saw everything in LA, they were like, alright, let’s switch everything to the East Coast, into the Gulf. And so you’re having some residual stuff there on the east coast, but you know, it that’ll work itself out, especially with demand dropping right now, I mean, a lot of our import clients have, you know, where they were doing, call it 30 to 50 containers a week of product, you know, they’re less than 10 an hour. And that’s, that’s material, you know, that that’s a massive drop in volume, the ocean carriers are pulling, pulling service out of the market to try to stabilize rates. So where they had four vessels that were on a string from Shanghai to LA, well, maybe they’re only doing two now. So you know, that that’s what they do in order to get their rates back up as they pull capacity on the market.

Jeff Eizenberg 23:58

But sounds like the airline industry, I think I paid like $800 to fly to Dallas a couple weeks ago, like really good. Two years ago, you were giving me a flight for $120.

Woodson Dunavant 24:11

We looked at going out west for spring break. And I can’t even tell you what it’s going to cost to fly a family of five from Memphis to Utah. I mean,

Jeff Eizenberg 24:22

we’re doing it we’re going to Park City and thankfully, I have a friend who has a place to stay but man, aside from that, I’m not

Woodson Dunavant 24:32

Yeah, it’s, it’s, it’s crazy. So so that’s what the that’s what the ocean liners do, as well to take capacity out of the market in order to stabilize rates. So, you know, they’ve done quite the ocean carrier community has done quite quite well in the last couple of years. So we shall see. You know, we should see how they prevail going forward, but I would think they’re going to be okay.

Jeff Eizenberg 24:59

Okay. circling back to commodity markets here. And I’m curious to the back to the river, I guessing that believe something like 60% of all US exports run through the Mississippi, and you were describing this one lane traffic versus multi lane. You know, as I start to think about what this is going to mean, have you seen a shift where people are, your customers are starting to, you know, hire rail and truck and, you know, incur those additional costs that are associated with having to move off the river? Or are you or our or our people, like you said, farmers just stuffing their bins full and the rest of world has to wait?

Woodson Dunavant 25:44

Yeah, I think that’s what you’re gonna see. I mean, you look with demand slowing down. That’s a good thing right now, what you would never say the demand is a good demand slowing down is a good thing from a farmer’s perspective. But to answer your question, I mean, we’re not seeing the grains go from, from a barge to, to the road, for example, me, you’re not, you’re not seeing, because at the end of the day, most of those sales are our bulk sales. So the product has got to move in bulk, you know, and it’s not going to be able, you’re not going to be able to move it to Memphis, and then, you know, I guess you could bulk rail it and translate it at a port. But if you’re not already doing that, in order to set something like that up, I mean, your costs are gonna go through the roof. And so yeah, I think it’s just kind of a sit back and wait, right now do what they can and try to fulfill the contracts if they can, and just just do their best. I mean, look, what the dollar is strong as it is, you know, that’s hurting them as well. So, you know, the farmers are going to be okay. But, you know, they’re just gonna go through a rough patch. And unfortunately, right now, from a timing standpoint, you know, all the crops are coming off right now. And so, you know, they want to get them on the move and get get them out and get ready for new crops. But that doesn’t look like that’s going to be the case next year.

Jeff Eizenberg 27:03

Well, you know, people can wait for close, they can’t really wait for food. So at some point, the basis is going to have to shoot straight up or, you know, they’re gonna have to figure out other solutions to get moving unless, of course, we you get some of the rain. And I guess, you know, you’ve been doing this long enough. 2012 was another drought year, and because we’re reading that the river was, you know, significantly low at that point. What was your experience in that timeframe? And how long did it take before you started seeing things kind of working more normal? Again? Not March or April or May that this? Yeah. potentially even subsides? Yeah. It?

Woodson Dunavant 27:44

I mean, it just depends on on on weather. Really? But yeah, I think spring is what you’re looking at. Once you get the snow melt off from the Midwest. That’s what typically always give the river its strength in its in its last as is that Snowmelt Runoff from north to here. And then that obviously takes it all the way down to New Orleans. So yeah, I think it’ll be spring, at the earliest. So, you know, hopefully, we can get, you know, enough enough rain and wet weather around here to be able to come back up a little bit, but it’s not going to be able to go back up to where it needs to be until until the spring.

Jeff Eizenberg 28:30

Let’s shift over here a little bit. You’ve mentioned the work and expansion of the company over the years. And, you know, I read an article that you guys posted, maybe earlier this year, on the growth in Mexico, do you just maybe talk to us a little bit about what you’re seeing there? Is it? Is it what’s what problem are you solving by expanding into Mexico?

Woodson Dunavant 28:55

Well, we’re, what problem we solve. And so we’re helping solve our customers problems. That’s what we do. And, you know, we saw an opportunity, with things in Asia slowing down of people and things moving, you know, not reshoring to America, but nearshoring to America. And you know that that’s where Mexico comes in. I mean, I’ve talked to multiple people, you know, over the past few months and even years, you know, maybe the quality of the product produced in Mexico doesn’t meet what it is in China, but they are somewhat competitive from a labor standpoint. So if we can get that quality then then I think you would see a massive, massive move to manufacturing in Mexico. So we saw an opportunity we’re it done event has operations at every border crossing from Laredo all the way to Tijuana, and everywhere in between. So we’re moving product both in and out via truck and rail. We have cross docking, we have warehousing. So you We’ve got a gentleman that runs that operation for us who use, I still need to introduce you to and your team, because I think y’all would be benefit to hear from him and what his capabilities are and how, you know, he can help you and some of your customers out with what he’s doing even enter Mexico, not not to mention the border. So we’re very bullish on Mexico, and the US and where that partnership is going to go from here. And so we are

Jeff Eizenberg 30:28

going both ways, right? You’ve got grains and other goods going into Mexico. And then as you’ve just described a little bit ago, how if there’s a chance for us to match the labor and quality, then if we move some of our texts will like, not us. But if some I’ve heard that China is buying up some textile factories and whatnot in Mexico, if they could replicate the work there, but just be closer to us that, then now you’re going the other way, right? You’re bringing it back in?

Woodson Dunavant 30:58

That’s exactly right. That’s exactly right. And, you know, it’s just it’s been a great venture for us. You know, the more and more we look at it, the more and more we like it, and the more bullish we are on it. So yeah, I’m very, very happy with where we’re going there, for sure.

Jeff Eizenberg 31:14

I was talking with a group today, and he was talking to me about Mexican ports, and how the terminals are hardly back over there, and only the largest vessels coming in. Is that been your experience as well, that these port contractors are very long and extensive? And just to break into that it would be difficult? And ultimately, I guess that would mean that there’s better chance for some of this rail and solutions? Yeah,

Woodson Dunavant 31:42

I mean, you know, I think in Mexico is a lot of people know, I mean, you’ve got to know the right people in order to get things done. And, you know, while while there might be longer contracts in place, I think that, you know, you can still get things done if you know, the right people there. Right. So, you know, I think that’s what the name of the game is there for sure.

Jeff Eizenberg 32:04

Is there other any other countries or regions that you’re focusing on other other than, than the Mexico opportunity? And obviously, you’re doing things in Asia? But yeah, I mean, you coming on? You

Woodson Dunavant 32:18

know, we’re, we’re pretty bullish on Vietnam, we’ve got a contingent going over there, I think in the next three weeks or so to go check things out, you know, they suffered from a lack of land and people, but, you know, they, everything that they’ve done is is very impressive. From a port infrastructure standpoint, from a manufacturing standpoint, from a labor standpoint. I mean, you’ve got invest foreign investment from all over the world going into Vietnam right now. And, you know, we’re, we’re quite bullish on on the goings on there, and so much, so I was, like I said, we’re sending sending three executives over there in the next few weeks to go to go investigate further and for sure, do you?

Jeff Eizenberg 33:05

Are you taking a translator? And are you on this? Are you on this contingent?

Woodson Dunavant 33:11

So luckily, we, you know, we don’t really need translators, we have agents and people that we work with, over there that are able to do that for us. So years and years and years ago, when we travel over there, you’d have to, you know, you’d have to have a translator, whether it was in China or Vietnam, or wherever, in Asia, you’re going nowadays, you know, with with as many agents in the network that we have, we’re able to go over there and get around and you know, to be completely honest, English will get you a lot further than you think, especially in Asia. It really will

Jeff Eizenberg 33:45

you heading on this trip, or you’re,

Woodson Dunavant 33:47

I’m not unfortunately, I wish I would I wish I was Vietnam was one of my top countries in the world that I’ve ever visited, both from a food standpoint, from a people standpoint, from a manufacturing. I love love Vietnam is awesome. Vietnam, Thailand and South Africa are the top three for me, for sure.

Jeff Eizenberg 34:10

Sounds good. So you know, this has been a it’s been a great conversation, what’s in it for you know, my takeaway from what you’re saying here is that we all need to think differently in the new environment moving forward, that it’s going to take strategic partnerships, it’s going to take innovation from different companies like yourselves, to come up with better solutions to move products and goods. And achieve really at the end of the day. Our goal of our company and the people with our clients we work with is to help them maximize their margins. And so it sounds like you’re very much aligned with that perspective.

Woodson Dunavant 34:48

Absolutely. Absolutely. If you get if you get if you’re comfortable in your supply chain right now, watch out because there’s a change coming and you know it like I said, we’re here to provide solutions when customers have problems, or they want to look outside the box, that’s, that’s who we are. And that’s what we want to help them do. And, you know, it’s a new normal that we’re in, you know, it may only last another three to six months, and then we could be hair on fire was something else. I mean, who knows? That will happen? Because, you know, I wish I could tell you that, you know, things will go back to the way they were. But as we all know, once you have a catastrophic, cataclysmic shift in supply chain, which we have had pre COVID to COVID to now. It’s a new way of doing business. And yeah, so it’s, it’s fascinating. The one thing that we didn’t touch on, was, I think you want to real quick on the rail issue.

Jeff Eizenberg 35:46

Oh, yeah, please. Yeah. What’s the story? Are they is it Congress is the only one that could solve this or what’s going on?

Woodson Dunavant 35:52

So they did they have originally they had said the 19th of November, they just extended it to December 4. And so they’re gonna have another couple three weeks negotiation, which I view is a very positive development. At the end of the day, Congress and or president are gonna have to step in, because if you were to have that happen, I mean, you talk about you think that the LA Long Beach strike was a big deal. You talked about stoking inflation. I mean, it would be tattered. Strophic, if we had a major rail, strike, I mean, you know, 40%, of, of all goods, in terms of weight is moving on the rail. And if you if you were to stop that, I mean, you can’t get from a food from a retail from you. I mean, you just goes on down the list. I mean, it would be I can’t imagine that the government would allow that to happen, though, they will step down at the 11th hour, if it gets to that point and put their foot down, they have to,

Jeff Eizenberg 36:57

yeah, I mean, everything with the just in time production that we have here and consumption in the United States, if even a day or two delay when we’ve seen with, you know, weather conditions or something backs things up, and it takes months for it to work through. So if you started if you had weeks or months off, oh, my goodness, you’re,

Woodson Dunavant 37:19

I mean, to your point, even even five days, like something like that would set us back by, you know, three or four months. I mean, it’d be crazy. So I do not think that that will happen. So you can come back and poke me when they do strike and then everything shifts.

Jeff Eizenberg 37:36

Instead, it was not gonna happen. Place your bets. Yeah. We get it. I appreciate that insight. Because then yeah, you’re at the pulse of it. I mean, I assume that the people in the rail industry don’t want it to happen either. But they also want to be paired paid fairly and get proper compensation. So

Woodson Dunavant 37:53

that’s right. That’s right. You can’t fault him for sure. Yeah,

Jeff Eizenberg 37:56

that’s exactly it. Well, no, this has been extremely good and extremely helpful beneficial to I think everyone listening and, you know, welcome, welcome. You obviously share it yourself. I always have one final fun question for everybody. And it’s what is your favorite extreme sport that you either participate in or would participate in if you maybe were back in your yet 20 year old buddy?

Woodson Dunavant 38:20

Oh, Lord and mercy, stream sport?

Jeff Eizenberg 38:25

I mean, you talk duck, honey, that’s kind of the kind of counts.

Woodson Dunavant 38:28

Okay, well, if that counts, then I will. You know, it’s an extreme sport, in some cases, for sure. Yeah. And I really enjoy it. So. Yeah, I mean, that would be that would be it for me. For sure. I was thinking more like MMA or boxing. Oh, yeah. Well, you could do that too. I mean, I really miss heavyweight boxing. And, you know, back in our day was was was when Tyson and Lewis but even before that, I mean, you know, we would block an entire night out, you know, to get ready for the boxing match. And I mean, it’s it feels like it’s gone. Like, MMA has just totally taken it over. But I mean, I feel like there’s still a space for good heavyweight boxing, and it just, it’s gone. It feels I just, I really miss that.

Jeff Eizenberg 39:15

Maybe Tyson was the pioneer of it, because when he bit Holyfield’s ear, nowadays, MMA if you’ve met somebody there, they might be like, yeah, that’s okay.

Woodson Dunavant 39:23

That’s right. That’s right. There’s no doubt there’s no doubt so

Jeff Eizenberg 39:26

pretty good. Oh, what’s the what’s the best way to get a hold of you have people had to want to want to connect?

Woodson Dunavant 39:33

Yeah. So reach out to me. My email address is very simple with some data of it. I’ve done have a.com Email me, you can give me a call. And happy to talk through anything with anybody importers, exporters, domestic domestic folks here in the US anything cross border. If I don’t know the answer, I’ll put you in touch with somebody here. That does. We’ve got we’ve got IT experts all over the place. Donovan, I’d be happy to put you in touch with whomever you need to talk to. So we’re, we’re really excited with our growth and where we’re going. And, you know, we’re just we’re in a we’re in a really good place right now. So, Jeff, I appreciate you doing this. I’ve enjoyed getting to know you over the past few weeks, and hopefully this won’t be the last time I talk to you.

Jeff Eizenberg 40:24

Yeah, we’ll do it again. We’ll check back in whenever fills back up. All right.

Woodson Dunavant 40:27

Sounds good, Jeff, appreciate it. So much

Jeff Eizenberg 40:29

Appreciate the time. Yep. Take care. Thank you.

This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.

10 May 2022

Agriculture, Fertilizer, Podcast rcmagserv 0 comment

The Tug of War on Fertilizer Prices —Are Prices Staying or Going with Dick Stiltz

There is an agriculture tug of war happening across the nation, impacting America’s farmland. Fertilizer prices are continuously fluctuating, and it has us taking a page from “The Clash” should we stay or should we go?! And, we aren’t the only ones. Many farmers are asking their agronomist and chemical salespeople, “What will fertilizer cost me the rest of the season, and what are my options if I don’t want to go all-in on my typical fertilizer treatment plan.”

In this episode of the Hedged Edge, we are joined by a special guest who needs no introduction in his local circle, Dick Stiltz. Dick is a 50-year veteran of the fertilizer and chemical industry and is the current Agronomy Marketing Manager of Procurement fertilizer and crop protection at Prairieland FS, Inc in Jacksonville, IL. He is at the pulse of the current struggle and here to discuss the topic at hand…Should we stay or should we go…

Episode Quick Links:

https://www.prairielandfs.com/

https://twitter.com/PrairielandFS https://www.facebook.com/PrairielandFS/

IF you have additional questions, contact Dick at dstiltz@prlfs.com.

Tag: inflation

Bulls, Bears, and Beef: Risk Management When Prices Run Hot

What the hell is going on in logistics and is there any relief in sight? with Woodson Dunavant

The Tug of War on Fertilizer Prices —Are Prices Staying or Going with Dick Stiltz

Disclaimer