Episode 41

August 23, 2024

00:51:15

Campfire Insights on Grain Markets, Rail Strikes, and Crop Trends | Guest: Ryan Copithorne

Hosted by

Ryan Denis
Campfire Insights on Grain Markets, Rail Strikes, and Crop Trends | Guest: Ryan Copithorne
What the Futures!
Campfire Insights on Grain Markets, Rail Strikes, and Crop Trends | Guest: Ryan Copithorne

Aug 23 2024 | 00:51:15

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Show Notes

Join Ryan Denis as he records live from the campfire in episode 41 of 'What the Futures' podcast. Ryan will be back in the UPL STUDIO next week! This episode covers a range of topics including the impending CN/CP rail strike, market insights on wheat, barley, and peas, and key updates on the 'Making Crop Marketing Cool' conference. Featuring a special cattle market update by Ryan Copithorne from Cows in Control, Ryan discusses yield reports, basis levels, and strategies for grain contracting amidst disruptions. The episode closes with personal anecdotes, housekeeping notes, and a look ahead to the challenges and opportunities in crop marketing for 2025.

Big thanks to show sponsor John Deere. 2025 on your mind? Head over to harvestprofit.com, cost and profit tracking software for savvy farmers!

Have a questions for the Pioneer Seeds Mailbag? Email [email protected].

Want to watch the video? Find us on YouTube right here!

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Want to hear more from Ryan and the What the Futures Podcast? Subscribe on our website: www.whatthefuturespodcast.ca

TIMESTAMPS:

00:00 Welcome to Episode 41: Fireside Chat

02:05 Camping Adventures and Market Updates

07:56 Conference Planning and Market Insights

14:17 Positive Moments and Family Time

16:23 Rail Strike and Market Implications

27:51 Market Stabilization and Crop Confirmation

28:15 Pioneer Seeds Mailbag: September Basis Dilemma

30:37 Cattle Market Update with Ryan Copithorne

32:42 Bullish Trends and Industry Challenges

42:34 Inflation, Risks, and Future Projections

50:59 Cash Flow Review and Wheat Delivery Tips

53:02 Conclusion and Upcoming Events

View Full Transcript

Episode Transcript

[00:00:02] Speaker A: Hey folks, welcome to the what the Futures podcast, where we break down complex market trends into simple, actionable advice. It's your quick guide to better farming decisions. Hey folks, welcome to episode 41 of the what the Futures podcast, usually recorded in the UPL studio. But we're camping once again here. We've had a tremendous summer camping so I am recording this right next to the campfire. We've got rain coming in this afternoon so we are trying to get this done before the clouds roll in. Alrighty, episode 41. Now, of course, what the Futures podcast is your weekly dose of clarity in the complex world of grain marketing, which is going to be a little more complex with a rail strike. I'm recording this on the eve, the day before the CNCP rail strike. So fingers crossed by the time you listen to this that it's over. But you just never really know, do you? Of course. I'm Ryan Denis. I've spent my career working in agriculture. I've been a grain buyer, I've been a grain marketing advisor, a coach, an analyst. Led a team of advisors as well for a short period of time there taking showing the road here with what the futures recording out at the old McDonald resort off Buffalo Lake. Alrighty folks, the story here for episode 41. I did take my notes on willa's, some of her drawing paper here. So big thanks to my four year, near four year old for the use of supplies here today. So I've got some camping stories to kick off in positive moments. I've got conference planning, so the making crop marketing cool conference. Got a bit of a planning update there for you. Of course we're going to talk markets, we're going to talk about the rail, we're going to talk about yellow pea specials out there. We're going to talk about yields and quality and a couple other things from the grain marketing perspective. Also a big shout out to everyone that made it to, what was it? Minute 57 in the last episode. I've got a pile of emails and thanks for tuning in, hanging on for that long. I'll have to get you guys got a prize drawn up here when I get back in studio, but those that hung on to the end got a chance to win something here, so that was cool. Of course, this episode as well. I talked about this a couple weeks ago, but Ryan caught the thorne. We did pre record a segment when we were at the crop tour, Pioneer seed crop tour with Jacob and Becky Boychuk. So of course Ryan is from cows and control and he's going to give us a bit of a cattle market update as the smoke blows across here and keeps the bugs off me. Yeah. All right, folks, you can hit the subscribe button, of course, usually in studio, in the UPL studio, but doing this one from, I guess, fireside chat, we'll call it almost a fireside chat. Anyway. Of course you can hit that subscribe button. It certainly helps me out when you do. And you get updated on all the latest alerts here from what the futures. Of course, you can also go to the website what the Futurespodcast CA put in your email address and get the, what are they now? Almost twice weekly emails. I'm sending a little marketing tidbits here and there. Kind of changed that up over the last couple of weeks. So go to the website to get in on those emails. Before we go any further, big shout out to our, one of our sponsors here, John Deere. John Deere has been with us since the beginning, and I got an email from Ben over at Harvest profit. They're doing a webinar here. Well, a couple webinars. And they actually will pull off a webinar almost whenever you ask. They're really good at that. But they have a theme here heading into 2025. They're really drilling down on the financials and looking for opportunities here for farms to maximize 2025. We all know 2025 is going to be a tough year on the farms, both in Canada and the US. And harvest profit being proactive, getting in front of this, trying to get folks organized to tackle 2025. And I'm gonna put his, I didn't write it in my show notes, but I'm gonna put Ben's email in the, in the show description here, because by the time you listen to this recording, you may not have had the webinar may be passed, right? It quite likely is. This goes out Friday mornings. This webinar is like Friday afternoon. But it doesn't change the fact that 2025, it's gonna be super. You're gonna have to have a very sharp pencil and stay on top of it. So check out the guys [email protected] they are the savvy financial tool for farmers here in the US, but also in western Canada. It's the one our farm uses here as well. All right, some housekeeping. So last episode, I just teased at the end, like, who's still listening to this darn thing? An hour of me solo not ranting. I guess I ranted at the beginning in regards to eggfinity, who still hasn't emailed me infinity. You know, send me an email, guys, let's figure this out. But an hour of me just going over all sorts of crop marketing questions and all your questions as well. So I teased like, minute 57, like who's left in this thing? Who's still listening? And I got emails from Montana, I got emails from North Dakota. I got an email from Jim. He's in like southwest Saskatchewan, not quite central, he's a little bit south of central, but that western side of Saskatchewan. I got email from Ian, I got, I got emails from young farmers that were just kind of, you know, starting out, maybe working with their, their in laws, which I thought was pretty cool. A few guys sent in their crop mixes and what they're planting. I thought, yeah, I got a whole bunch of emails so thanks for sending those in. I will respond to as many as I can here and it should be all of them. But yeah, thanks for tuning in to the end of the last episode as well. That was certainly unexpected and definitely the most emails that I've ever received. I see them all. I will respond to them all. And again, if you have any questions or you want me to talk about certain things on the show, that's where you can send them in. Ryanottefuturespodcast ca certainly motivating for me as well and uplifting to get all those messages from across the prairies and apparently in the northern us. And you know, somebody, there's a group of you in Australia tuning into this thing now as well. So yeah, send me an email if you're from Australia because all of a sudden the numbers just popped up there. So I'd be curious what you guys, what the Aussies are thinking at the show as well. Alright, so for housekeeping, I wanted to, I wanted to just give an update on the grain marketing conference, the making crop marketing cool conference. So we've, we've basically zeroed in on a town now. We are, we are going to do our due diligence, our very best working in Drumheller, Alberta. I think that's where the first one is going to be. We had a great meeting with a planner down in Drumheller. It checks all the boxes. There's, you know, obviously a great brewery in town, some good little hotels there, a few things to see, also family friendly. And so we're gonna go through the motions now of Drumheller and see what we come up with for venues and food and stuff like that. It's not a guarantee it's gonna be Drumheller, but we are zoning in on that at this moment, and we are also zoning in on early December. And you're going to say, well, Ryan, December is such a busy month. Why would you do December? Well, January is even busier. [00:08:16] Speaker B: All right. [00:08:17] Speaker A: You got farm shows prairie wide in January. And this is, this event is going to be a standalone event. You're going to get something out of this by coming to Drumheller, let's say, and spending a couple days. You are going to get good sense of your crop mark planned moving forward. So this can be a standalone event and we want to get to it before the end of the year because you guys, guys and girls, folks, you know, you guys are writing checks in December. You are deep into your crop planning in December. You are finalizing seeded acres. Many of you have that figured out in December when you're buying your fertilizer and all that stuff. Like a lot of that happens. So I want to, it's going to sound weird to say close the book on 2024 from a crop marketing perspective. You know, most of the work is figured out by then, I would say, and then get you guys on, you know, a good start for 2025 as well. So that's, that's what we're thinking. Early December there. So Drumheller, early December, there's going to be a Zoom call, you know, a week prior, maybe ten days prior to the event just to set you guys up for success for the event and maybe a bit of pre work that you're going to want to get done before you head to this conference. And then we're also, we've decided to do a Zoom call after as well, maybe a month after something like that, early January, get through the Christmas holidays, get into the new year, then do a follow up Zoom call for, and this is just for attendees. Okay. When you attend the conference, you'll be invited to the pre call and to the post call. And just to make sure that we're following up on some of the action items that come out of the conference, I've received emails from companies and individuals saying, hey, Ryan, I don't know if you would consider us, but, you know, we want to put our hand up to be at this conference. I had someone who's an expert on futures and options reach out and say, hey, I don't know if you found someone for that segment, but I'm interested. I've had a few analysts reach out and say, hey, yeah, we're interested as well. If you got a spot for us, we'll come in and share our latest ideas. It's really starting to take shape here, folks, on this conference and getting this organized and off the ground. There's still a lot of work to be done and Yvonne's doing a lot of the heavy lifting here on my end. But yeah, if you're a company, an individual that maybe you're a merchant, I'd really like some merchants to step up here and some of the big ones, we're not going to throw eggs at you or anything like that. You have a very important role in western Canada moving crop out of this country and you have a very unique relationship with the end users. And I'd love for you to come share your story. If you're a merchant with grains, connect or g three or Vitera or Richardson pioneer, come on down to drum Heller and share your story of moving the wheat crop or, you know, barley or lentils, whatever it is. Love to get a few of those folks engaged here as well. What else can I say about the conference? Honestly? Numbers. We're gonna start small, folks, and we're gonna make sure that every seat is filled. And so I don't know what to think for numbers yet. I would put this conference on for ten people if that's what it, you know, all that wanted to join, I would still put this on, but I. It's gonna be quite limited on this first run for sure. And as we narrow in on venue and dates, we'll start to get some. Get a bit of a waitlist going and yeah, go from there. Alright, I think that's about it from a conference perspective. All right. My song of the week. I was just listening to the playlist here, which is still kind of not great. I got to work on this music playlist that we have on YouTube. It's what the futures hashtag harvest 24. So about my song of the week, I'm gonna go with some Led Zeppelin. I believe we have the immigrant song on there, and I've been jamming out to that one here while camping. So let's go with getting the lead out, get some lead zeppelin going in the combine this harvest. Alright. Okay. Positive moments of the week. Oh, man, I'm a softie on this one. So we're out. We're having a great time camping. My first positive moment is my family. You know, Will is right across the fire from me hanging out here as I record. But we are going to hit 30 nights of camping this summer. That is a new record for me. I know we did 21 or 23 nights a couple years ago, but we are going to be at night 30 here. And I think, yeah, I think we might even pass this a little bit. We've been having a great time camping this summer. Very fortunate to be able to do this, obviously record this podcast from the fireside and be able to pull this off as well with the great folks helping me out. But yeah, over 30 nights camping, I know some of you might do more than that, but for us, you know, we drag, we've been dragging this trailer around all over Alberta and Saskatchewan all summer long here, and it's definitely a positive moment for me. We've made some great memories. And then my really soft one, my softy one is we're sitting at the picnic table here having supper like two nights ago. And so Finn's, he's now stringing along like two words. He's learning new words basically every day. His vocabulary is taking off. He's 19 months old and everything's just shooting off for him. He comes standing on the picnic table beside me, he gives me a hug and he says, I love you. And it was the first time that he had said I love you with the hug as well. Just big softy moment for me, but unexpected. Just kind of came out of nowhere and I had to like pause for a second and have him do it again because it was so special. Alrighty, so that's it for positive moments for this week. Okay, now let's talk about what's cool in crop marketing here. We're gonna get to the mailbag and then we're going to turn over to Ryan Copperthorn with cows and control. So cool. And crop marketing, some of this stuff's cool and some of it is frustrating, but the rail, okay, as of recording this, it sounds like the, the federal government's going to allow this to go, the strike to happen for at least a couple days. I think it was real ag. John Heaney with real AG was talking about a billion dollars a day is what the rails move here. So we're going to lose a billion dollars a day from a, you know, economy standpoint to allow all this to happen, this duopoly, you know, we're, our hands are tied. And all this farmers across western Canada, your hands are tied again, as of recording, the strike hasn't started yet. I just not sure how this is going to play out. Hopefully short and sweet, but this is the chaos that starts with this. All right, so we had a canola basis of minus, let's call it -32 in Alberta, it might have been -34 anyways, doesn't matter. Doesn't even matter where it is, but it goes from -30 to a -50 and it says, you know, rail, the strike, you know, that's being potentially the issue here. So, you know, here you go. We're going to move it to a -50 later that day. It moves to a -80 basis. Okay. And to go with that, buyers, I know you're listening to this, but buyers reaching out and asking farmers to lock in basis, and I would say that this is, well, as the strike starts, it'll be the worst time, but basically the worst time to lock in basis right now for, well, two reasons. Number one, you know, we don't know how long this rail strike is going to last. Why would you lock this in right now, especially if it's for like, October, November, December. Number two, it's gonna be three points to this. Number two, the yield reports coming in aren't great. So, you know, basis levels should improve in this country into next year to 2025. Base yields are not great. My third thing, my final point, my most important point here is that even though basis levels, you know, you might have a basis and futures locked in and have a delivery contract, there's a few grain companies. This is the chaos of this, of this baloney. There's a few grain companies that have said, we're not taking any of our contracts right now. We're not taking anything. We're not taking our contracts where we don't know what to do while we sort through this rail strike. So instead of, like, just honoring the contracts they have, because they have space and they have contracts, they're not even, in some locations aren't even doing that. They're sitting on their hands saying, well, we don't know what to do right now. And that's the chaos of all of this. Now, every day that a strike goes on, it's going to cause a ripple effect that, you know, we can't catch up. We can't catch up. Like, you can only load so many trains a week or a month, and there aren't as many blanks in the calendar as there used to be. Like, back in the day when I was buying grain, we still had the canadian wheat board. And so we get allocated cars, and then all of a sudden, the last minute, you know, head office would move those cars to a different location. A lot of people didn't actually know that. Farmers didn't know that. But as a grain company, we be allocated these cars, and then they'd say, yeah, your cars are coming on Friday you're gonna dock, fill x amount of thousands of tons of this and this. And then all of a sudden, the cars would move and they'd say, well, you know, what's going on? Where are these cars? Well, the rail didn't bring them, but in fact, what it was was our head office saying, yeah, we actually need those over at that other location instead. So I don't think people actually realize that that's often what happened when a company would get blanked out on cars. Anyways, you know, we used to try to load three trains a month. Now, it's more than that. The line companies do more than that. Many of them do more, especially when they own their own cars that are just going back and forth. They're doing more than that. But to make up, to load an extra train, it doesn't just really happen. It. You're trying to find a spot in the calendar to put it in, because once you get started, you. You know, it's full tilt in your calendar and you're trying to find a spot. So maybe it's like around Christmas, you throw another one in, or it's during May, in spring, and you try to get caught up, because other than that, you're kind of full out anyway, with your plan. Now, any grain company can reach out, say, Ryan, you're false on that, but let me know either way. That's how I see it. Yeah. So anyways, this whole rail thing, you know, it can cause lots of issues. Now, if we would have had this massive crop and this rail issue, then basis would have gone backwards and not recovered as fast, or it would have took a long time for recovery. But now with the light crops, it's still a mess and a disaster. But I expect basis to recover a lot faster. My next topic here is the yield and weight update. And I put a check mark beside peels because I'm seeing a lot, a lot of good peels, guys. Like, nothing scary bad for many. Like lots of really good pea yields and actually lots of really good lentil yields as well. All right, I'll throw those in there together. Where we get into barley, we got light barley in Alberta. We got smaller barley yields everywhere. Like, that's pretty consistent. And then my early canola yields have not been good at all. Maybe 2020, 5% less than average. And then wheat. I don't have a lot of wheat numbers coming in. It's been a lot of barley and pulses so far. But the wheat that I do have in a couple reports from Saskatchewan, a couple reports from Alberta, and below average yields and some bushel weight issues as well. So, you know, when I start looking at this crop in western Canada again, I'm not a genius. I don't know all the numbers, but it certainly doesn't look as burdensome as it did in July. And so, with that basis, we'll recover faster. And grain companies, I expect they're going to be scrambling here a little bit. Now, I've got some important things to tell you at the end in eating your veggies, just in regards to how to deliver your. Your wheat. Okay. Yeah, I'll save it for eating your veggies. So, yeah, from a yield perspective, that's where we're at. From a rail perspective, that's where we're at. Pea specials. I wanted to just mention yellow pea specials everywhere across the prairies. When I was checking out rail issue with some of these grain companies, like, what would happen? Everybody seemed to have space for September, and so that was what kind of made me sad a little bit, because that meant that farmers didn't pre contract grain. And so, you know, wheat specifically, I kind of hoped everyone would be filled up on wheat for September, October, November, because that means that you looked at $9 hard red 950. Hard red 859, 950, and said no. And now that price is, you know, six something and seven. So, yeah, so I was a little bit disappointed to hear that, that there's all that space available. But what happens is, now you have the start of it. Yellow pea specials. Alberta, Saskatchewan. Kind of all over the place, people looking for yellow peas. Trains are coming. Whoops. I shouldn't say it like that. Trains are not coming, but they have space, and there's demand for them at the coast. And so, you know, there's a chance for you to fill those early trains and get those peas moving. I'm expecting to see specials in everything this fall. Again, with the light yield. I expect to see specials in canola, specials in Wheatley, even some specials in barley. And so, for you guys, I got to throw this in there now, but I don't want you to jump to delivery right away. Like, if you produce something that's lower weight or quality issue, you actually need to stay patient. Like, there's that early farmer that catches it before everybody else and hauls in a whole bunch of stuff before spreads get nasty. But in this case, you know, for those listening, I wouldn't be jumping to deliver until I send samples to everybody and make a game plan. I've already heard of large farms phoning and looking to buy old crop grain, old crop barley, old crop wheat to blend in with their harvested light stuff, which is genius, right? You go and buy old crop heavy wheat for $7 or 725, whatever it's gonna take it to buy it. And then you, you know, blend it in with your new crop and make sure you don't get any discounts like it's genius to do. But we are hearing of reports of that. All right? So when you come to come see your late barley, it comes to your late wheat. Nobody knows what to do yet. Nobody knows how to discount this. Nobody knows how to move it. It's all very fluid. And I don't want you to jump to conclusions right off the hall. Sometimes it pays, but I'd be very cautious with that right now. Let the dust kind of settle, make your game plan go from there. And in fact, just imagine you've harvested your wheat, you have light wheat. You talk to some of your buddies in other areas, their wheat is heavier. They have nothing to gain. They don't have anything to gain price wise. They just produced a heavy wheat. It's not going to count. It's not going to turn their nine, eight, nine dollar wheat into something better. But maybe you can give them a bit of a premium to get some of that weight to blend your weed off. You know, there's ways to do this and we'll see. We can find examples and talk farmers through these scenarios. I don't know if we can pull it off, but we'll certainly try. Okay, our last thing, pro crop tour, so that's corn and beans in the US is just confirming the big crop. Okay. It's confirming the big crop in the US, but the market is stabilizing. It's stabilizing right now because it's saying, oh, it's a big crop. Yes. Where this is being verified with the pro farmer crop tour, but it's not bigger than what we thought. So prices for soybeans, prices for corn stabilizing right now just with confirmation of this big crop. All right, let's move over to the pioneer seeds mail bag. Now, that's it for what's cool in crop marketing, the mailbag. Just one question that I'm going to tackle for this week because we already talked about lots of stuff, but pioneer seeds mailbag, I am drawing for one more bluetooth speaker and bucket cooler here. It's one last one here at the end of August. But do I lock in my September basis? That is the question that came in this week. Now here's the unfortunate part about this, you may be forced to lock it in. You may be forced to at the deadline. Now it might be a deadline of August 30, like end of the month here to lock in your September basis. I'm not sure. But you need to read your, your conditions and talk to your buyers to sort out this basis if the strike is going to linger. Because honestly, for me, like if I had locked in, let's say for example, I had locked in $700 canola futures and basis is it went from -30 to -80 I would love to just get paid out on my futures then give me the spread. If futures are 575, give me my $125 and I will look at doing a basis or a contract later on when all this settles. I don't think you should be forced, just like the grain company on the flip side, you know, they're not going to be forced to take your grain. They've got 90 days after that, after the end of the month there to take your grain should be the same for you where you're not forced into taking a basis that is being impacted by the rail company. But do I lock in my September basis today with those moves? No. But if you're at a Vitera or somewhere that hasn't made a big basis move yet, you may want to do it, but it does not guarantee you movement. I'm already seeing companies say, hey, we're not taking stuff right now. We're trying to figure this out. Even though there's a contract, it does not guarantee you movement either. Okay, so do I lock it in? My preference is no. If they haven't made a basis move yet, then maybe because this rail thing does not help basis and it may not help basis for well into October, November depending on how long this lasts. Right? Alright folks, let's turn it over now to my pal Ryan Copperthorn with cows in control, pre recorded at the pioneer seed meeting the other day, is going to give us a cattle market update. I'll come back with eating your veggies. [00:28:17] Speaker B: All right, thank you. I'll try and keep this swift and brief, but I'm Ryan Copperthorn and it's a real pleasure to be invited here and this is a beautiful operation. You guys have done a great job hosting this. I come from down west of Calgary and I'm a fourth generation rancher down there. The last few years I got into this business, started a business called cows and control because I realized that grain farmers are doing risk management, feedlots are doing risk management, but very few ranchers were, very few small feedlots were. And as far as I'm concerned, they're probably the people that need to do it the most, because there's one turn. You have one group of calves to sell or one group of yearlings to sell a year, and most people weren't doing any strategy or management on it at all. So that's how I got into the business, trying to promote that, and I kind of do what Kyle's doing on the cattle side. So generally, when you look at the cow calf producer, they're generally selling calves into the lows of the year. If you're selling calves off the cow in the fall, which is kind of what nature dictates, most people end up selling cattle at the low point of the year. And so it's trying to find those opportunities to price in at higher prices. The other thing we see quite a bit is people doing emotional buying and selling. And when bred, cows were like, $800. Nobody wanted them. When they should have been buying cows, they weren't buying cows, they were avoiding them. And now that cows are four or $5,000, everybody's pile in and at the top here, I think this is something we have to manage as well. So I just wanted to take you through, and I'm going to keep this very high level because I know some of you aren't in the cattle business, so this would be a very macro level presentation. But I just wanted to show you that the cow herd is down now to levels that we haven't seen since the seventies and the eighties. And so our cow herd is down 35% since 2005. And we're seeing the same thing in the US. The cattle herd just keeps shrinking down there. We're getting less and less cows, less and less ranchers, less and less grass acres. But the strange thing is on this chart, if you look, the blue is the cow herd, and the orange is the number of cattle that are in feed lots since 2005. So we've got, like, this super low cow herd, and yet we have more cattle on feed than we've ever had. And so, like, what's going on here? There's a big anomaly there, and the same thing in the States. You hear people talking about the cowherd in the States is lowest it's been since 1950. So when Elvis was playing. But you look at the beef production, we're at record beef production. 2022 is the highest amount of beef produced in America ever. So you know what's going on here again, and this is all coming down to this efficiency of our industry. Some of it's this, they found out that they can feed Holsteins and they've infused the dairy cattle into our beef system. I would say that this trend is maxed out. There's 10 million dairy cattle in North America and it's not growing. And they've already put 6 million of them in the feedlots. So if you factor out replacements and such, I think this trend is maxed out. But they're now starting to cross Holsteins with Angus and what they call beef on dairy, which are a lot more efficient animals. Our grading system right now solely focuses on marbling. So when you go to buy steaks at the store, you see that aaa marbling, that's what they're grading this beef on. They don't care if it's a us based Holstein or Alberta raised Angus steer that was selected for tenderness or whatever. All they care about right now is marbling. And so that's why we're seeing so many of these dairy cattle entering the system, because there's no difference differentiation. The other thing that's keeping these feedlots full is they're making these animals bigger. And so to make them bigger, they stand in feedlots longer and longer and longer. And we're also getting more efficient. The genetics are better, we're using hormones, we're using beta agonists, all these things to make these animals put on more weight more efficiently. And so what it's doing is replacing the amount of cattle that we need. As we make these cattle bigger, we need less and less cattle. So we're seeing, you know, if your carcass weight goes up 10%, that's the same as getting rid of 10% of your cattle, or the need for the 10% of your cattle. So this is an anomaly that's going on. This is all in the name of efficiency. But what it's doing is it's replacing a lot of ranchers, replacing a lot of forage and grasslands. So the packing industry right now, they're kind of losing money right now. So one of the things they're doing is slowing down their kills. They were killing like six days a week here a few years ago, now they're down to four days a week. And the other thing they're doing is allowing these carcasses to get bigger. And so, especially with cheap grain, too cheap grain is helping these carcasses get bigger. But as they let these carcasses get bigger, it means they're getting surrounded by more and more cattle. And they're the slowing down the production lines. So it's just like if you're on an escalator and the big fat guy at the bottom didn't get off, you know what would happen to that escalator? It would just back up full of people. And that's exactly what's going on in the cattle industry right now in these feedlots. But I don't think that's going to last forever. Joe Biden down in the states threw a billion dollars at the packing industry down there and he created this massive rush for building out packing plants down there. And so we're going from a situation where we had too many cattle and not enough packing plants to now we have too many packing plants and not enough cattle. And so there's, in next year alone, there's going to be seven or eight plants open up in the US that are going to equate to the total slaughter. Amount that we produce here in western Canada is opening up next year in the US. And so these cattle or these plants are going to be fighting for supply. So this is a very bullish thing, I think, because there isn't enough cattle to fill these plants right now. And I think when that opens up, it's going to be very bullish for cattle prices. These are all the grants that were given in the last three years. With Biden's billion dollar plan. His goal was to break the packer monopolies down there, but I think he's going to hand it back to them. This is what the kill looks like in Canada. There's about 15% of our total supply right now goes to the US. I would expect that that number is just going to keep getting higher and higher, especially when those plants open up. We're going to see a lot of cattle go south. And so where this impacts farmers here in Canada is, you know, we're going to lose cattle, so we're going to lose demand for feed grains. We're going to possibly a lot lose a few feedlots and maybe a packer. But again, that's going to be extremely bullish for cattle prices because they're going to have to bid like crazy to keep these cattle in the country. This is what the ten year cattle cycle looks like. People talk about ten year cattle cycle. Generally, prices rise for five years and then for the next five years they cool off. And so from 2009 to 15, we had a major bull market. 2015 to 2020 we had a bear market. Now we're into this five year upswing. We should be peaking in 25, 2025 or 2026. We won't peak until we actually see the cow herd grow. And one of the things that's different this time is that in the last bull market we had, in 14 and 15, the US was building cows like crazy. They were holding back heifers, they were growing their cow herds. They had good moisture. They were actually growing their herds rapidly. This time they're not doing that. So even though we've got record cattle prices right now, there's no evidence of them holding heifers, no evidence of them growing their cow herd as of yet. So this is interesting. And it takes two years to turn that heifer into a cow. So this is all, as far as I'm concerned, this is all ahead of us in terms of bull markets. And we have a strong demand rally going on, too. It isn't just the supply. So the beef prices just keep making all time highs. And I don't know where the money's coming from to buy these steaks, but they are. The consumer loves the grain fed beef. Right? Now. When you look at the demographics in our industry, who is going to build this cow herd? I don't know. When the average age of the farmer is 60 years old, I'm not sure who's going to calve all these heifers out that we need, need to grow this cow herd. So we got a bit of a demographics issue that we have to resolve. We're seeing a lot of young producers get pulled away from the ranching industry. And I'd like to see that reverse, I call it shiny object syndrome, but they're getting pushed into technology, they're getting pushed into other trades. A lot of them switch to farming. We're not seeing the ability to grow this herd. Our producer numbers are down less than half in 20 years. And the same thing we're seeing with forage acres, we're seeing our forage and grassland acres have been cut in half in the last 20 years. So it's going to take some pretty good prices for longer to get people incentivized to grow this herd back. So these are all things that I consider quite bullish in terms of the cattle industry. This is a chart that I like to show people, especially young people, to show that commodity prices are at century level lows here. People don't realize that because we had that big run up in the last couple of years. But honestly, these commodities are so cheap compared to other asset classes like stocks and bonds and such. And the last time we were here was 2000, which was right ahead of the big China rally in 2000 to 2015. The other time we were here was the start of the 1970s. So we're sitting here at the cusp of very low commodity prices relative to other asset classes. This is what it looked like in the 1970s. The grain prices quadrupled in that period, and cattle prices tripled. But one thing you'll notice is right in the middle of that thing was an awful deflationary correction, a nasty pullback in that grain market. And I think, honestly, I think that's where we are right now. The two thousands looked exactly the same. Corn prices went from two bucks to eight bucks. They quadrupled. Cattle tripled. Exact same pattern. Massive deflationary correction in the middle. If you look at today, we've had our initial run up in grain prices, and now we're in this horrible correction. When you listen to Ryan talk, it sounds like it's never going to get better. Maybe, but it's, you know, and it's true. I mean, the fundamentals in the grain look terrible right now, but that's always the way they are. It's just like $900 bread cows a few years ago. So if we overlay those same trajectory from those previous cycles, you're looking at potential dollar twelve corn and $4 fat cattle like that sounds pretty pie in this guy's stuff. But that's how big those cycles are when they happen. So I don't know how long these deflationary waves are going to last. You know, this one might be a year or two, I'm not sure, but there's potential for these kind of movements. This is what inflation looks like. When you take those inflationary periods where those commodity prices really run. Inflation runs in waves. And so we've gone through the first wave, which was a Russia Ukraine wave, and now we're in this sort of pullback deflationary cycle that we're in right now. That's normal, but it runs into, it'll run two or three times like that. So I don't think inflation is behind us. So that's all sort of pie in the sky, like bull case for why I think these cattle prices are going higher. Let's look at a few risks here. And today was a very, it's very appropriate. I'm talking today because it's. Today was not a good day on the markets. So one of the things I'm concerned about a little bit is this blue line is the cattle price and the Orange line is hog prices. And so those two generally track each other I just went to Safeway last week and I bought two pork tenderloins about 2ft long to put on my smoker for $7.96. A steak is $32. So, you know, how far and how long can we stay elevated over pork prices? And then when I overlay corn onto that, you can see the corn follows the same track. What I want to show here is the last cycle we had corn topped out in 2012, then pork, which is the orange, topped out, and then the cattle topped out. Here we are now, corn is topped out. 2022, the pork has topped out. And here's cattle in the nosebleed section. I don't think it's going to last. I see a correction coming and I think today was possibly the start of it. We'll have to see. But a correction being short term in nature, I still maintain a very bullish position, but I think there's a short term pullback coming here. We're not short of beef in the world. There's lots of beef in the world. We're actually just short of grain fed beef. North America is the only area that really produces grain fed beef, and the world really wants more grain fed beef. That's why our prices are so high. But when you compare our prices in North America to, say, Australia or Brazil, we're twice as expensive. And so the question I have is, when do these countries down here learn how to grain finish? And if they do, if they see the margins in this beef where we're at, where we're twice as expensive as they are, you're going to see a lot of grain finishing in South America. So this, to me, could be one of those bullish factors that maybe kicks the grain industry into gear. The other thing we got coming down the pipeline is this election, and both sides, whether you're Democrat or Republican, are talking about tariffs and protectionism and America first and buy american. The free trade agreement's up for negotiation in 26. And then we've got the. There's a voluntary country of origin labeling that's coming into effect next year, which could cause some segregation of canadian cattle, which might mean discounts on canadian beef. So this is a bit of a risk in the cattle industry. And then there's this disease stuff that's floating around like this avian flu never seems to go away. It used to be a bird flu, and somehow Bill Gates is trying to turn it into a cow flu, but it keeps raising its head and we're not sure why because it's very, you know, it really doesn't have anything to do with cattle, but they're trying to make it into a cattle disease. So should we be afraid of all these things? Generally, I'm long term extremely bullish. As I said, I just think there's a pullback due, and I think there's a lot of those risks that we have to be cognizant of. And this is why I'm trying to get ranchers and people in the cattle industry looking at more risk management, looking at covering themselves as best they can. This is what cattle prices look like. The last six, seven years, it was a flat market. But you can see even in that flat market, the returns were going up and down. By 2020, 5%. That's typical. And so now we've jumped up into this nosebleed that volatility is what we call that movement in prices. Volatility. That volatility is going to get bigger as we go along. The blue line is kind of what the cumulative wins and losses in terms of gains and losses in the price of cattle over the last 20 years. And so you win some, you lose some, but over the 20 years, it's kind of flat overall, the cumulative wins and losses on prices. The orange line is, what if you just didn't lose money in those bad years? What if instead of losing 20%, you lost 2% because you had it hedged? That's the difference in cumulative returns over 20 years. This is what we're trying to target when we're doing risk management. When Warren Buffett, the greatest investor ever, was asked, how do you make money? His number one rule was, don't lose it. And I'll close off just with a theme here. This whole regenerative agriculture, it's kind of like sustainable beef. We don't know how to define it really well sometimes, but at the end of the day, I think there's a lot of opportunity for some integration with cattle and crops. You know, up till now, there's been a lot of segregation between cattle and crops. I believe there's a lot of opportunity and optimism for combining and finding synergies between cattle and crops. And it might be when I look at these young producers in the cattle industry that can't afford to buy ranches, they're going to have to be renters, they're going to have to go out and find land to run cattle. And I wonder if there's an opportunity, working with the farming industry where we put some legumes into rotation or we put alfalfa back in rotation or grazing stubble. Grazing cover crops, whatever it means, because I really think that the farmers are the ones that are actually going to grow this cow herd. It's not going to be the cattle people. There aren't any cattle people. There's dang few of them out there. When you look at the trajectory of this renewable fuels thing in the grain side, a lot of that's a turned into hype because they found out they could import, you know, brazilian sugar, or they could import chinese cooking oil and all that stuff to replace it. But at the end of the day, they're building these plants. These plants are on the go. There's four canola plants coming on and there's ten in Canada. And the US is building plants like crazy. So somewhere they're going to be encouraging this renewable fuels thing. And so when you look at a lot of the farmers in the states especially, are starting to look at these carbon intensity scores, and when you look at the metrics they're asking for, they always seem to say cover crops and solutions on the fertilizer side. So this sounds to me like opportunity for cattle integration and the opportunity to work together on those. And I always close with this slide. Just reminding, especially the guy with funny socks in Ottawa that cattle represent and keep intact ten acres of grassland or more every year. They're the ones that pay for that grass to stay intact. And the grass is where you have the birds and the animals and the creeks and the streams and all the wildlife and the environment they're trying to protect are held together by cows. And it's the same with your croplands and the corners of your croplands. We need to, if you want to know how well the environment's doing, count the cows. And our cowherd is shrinking. If we want to improve the environment in this country, we need more cows. That's a biased view, but I think it's an objective view, too. So this is my website, cows and control. I have a monthly newsletter I put out. It's a free newsletter and you don't have to be a client to sign up. And like I said, it's been a real pleasure to talk to you and I hope you enjoy the rest of the day. One quick question. [00:47:48] Speaker A: Alright, folks, always great to have Ryan Coffee thorn on the show. We're actually going to try to get him on next week as well to talk about the fall cattle run, but he's a good dude and does good things in the cattle market. All right, eating your veggies is brought to you by the lunchbox crew. If you want to have your meat and potatoes as well. Head over to Ryandini Caddy, see how you can join the lunchbox tour later this fall. A couple things for now. Number one, folks, you need to do your cash flow review. This is one from last week. I'm carrying this one forward because in the event of a rail strike that lasts any length of time, a week or two has a ripple effect. How does that impact your cash flow? What is your plan? Can you move something to a domestic market that does not rely on rail? Are you going to take your cash advance out this year? You haven't done it for a while. That takes time. That might be the plan. Review your cash flow needs against your contracts. Figure out your game plan. Uber important right now. Nothing more important than that. Okay. Number two, don't deliver your wheat until you get a sense on the grade and protein spread on that, that matrix. Right? My favorite time of year, trying to figure out what wheat to deliver where. Because some companies are going to try to take advantage of you on this. They're going to try to take advantage of you on these spreads. And I don't know, is this the first time ever where a public platform like a podcast, is going to shed light on grade and protein spreads? Maybe it's been done before, folks, but we're going to cover it off each and every week in the month of September. And I'm going to keep you guys in the loop as best I can to yeah, don't deliver wheat until you figure out that grade, that metrics or that matrix on where to deliver what and how this is going to look. And it is all a negotiation, folks. If you have all your wheat contracted with one company, but they're the worst for spreads, don't fret, don't stress about it. You can hold them accountable as well. We've done it before in the past with success. You can do too. Hold them accountable. Keep everybody honest out there. And last thing for this week, just think about this keeping crop marketing cool conference. And if you would consider coming down to Drumheller in December, hanging out for a couple days and solidifying a crop marketing plan here for 2025. Alright folks, that's it for episode 41. I will be back in studio, back in the UPL studio next week. Thanks for hanging on this long. Of course, share the show with a friend, your cousins, your uncles, aunts, whoever's farming or involved in agriculture. Please share the what the Futures podcast with them. We are picking up some great momentum here, but you know, everyone's got lots of time in the cab of a combine, swather, sprayer, tractor, whatever it is right now. Hey, maybe they want to hear this voice come across on the podcast. Alright folks, that's it for me. Ryan, Denis. I am out for episode number 41. Of course, fireside. Gotta throw another log or two on here. Willa, do you want to give us a wave? I say bye. She does not want to say bye. All right folks, have a great weekend.

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