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Medieval Invasion In Modern Times · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the egg markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_00: Today is March 4th.
• 0:26
  SPEAKER_00: I've got Pat with us here today.
• 0:27
  SPEAKER_00: How's it going today, Pat?
• 0:28
  SPEAKER_01: Good afternoon, Mike.
• 0:29
  SPEAKER_01: Doing well.
• 0:30
  SPEAKER_00: Awesome.
• 0:30
  SPEAKER_00: Well, we're going to talk a little about the uh medieval invasion in modern times today.
• 0:36
  SPEAKER_00: How's that sound?
• 0:37
  SPEAKER_01: Interesting topic.
• 0:38
  SPEAKER_01: I uh uh I want to uh spend uh uh a little bit of time today uh just trying to provide a little bit of discussion or perspective on what's uh is uh what the potential ramifications are going forward here as it relates to this Russian-Ukraine conflict.
• 1:00
  SPEAKER_01: And there's gonna be all kinds of analysis and opinions on uh what the corn market's gonna do next week or what impact that might have on hogs and and all of those things.
• 1:10
  SPEAKER_01: And I I'm uh certainly happy and willing and have been all week long engaging in those discussions, which has uh uh been very interesting.
• 1:18
  SPEAKER_01: But having a conversation, Mike, about um about uh just the what what really is uh the the the ramifications from a from a longer term perspective of this this conflict that's taking place uh in uh uh between Russia and and and Ukraine and and uh in the region in the region of uh Europe and and Russia.
• 1:43
  SPEAKER_00: Awesome.
• 1:44
  SPEAKER_00: Well let's get started, go over a little bit of the timeline here and uh just see where your thoughts started with all this, kind of how they how your reactions were through the beginning stages of this uh conflict or war, whatever you want to call it, and uh kind of how commodities reacted or historically react in these kind of environments.
• 2:03
  SPEAKER_01: Right.
• 2:04
  SPEAKER_01: So initially, uh I think it was last Wednesday night uh when the the uh the first uh uh shells started flying through the air, uh the initial reaction in the commodity markets was bullish, and the thought process was is that as the Russians invade uh the the Ukraine region that you know there would be some disruptions for some period of time as it relates to world trade flow and grain flow and perhaps uh oil flow, those sorts of things.
• 2:33
  SPEAKER_01: And then as the night progressed on that night, uh uh it became increasingly obvious that this was more than just uh uh a bit of a warning shot.
• 2:43
  SPEAKER_01: Uh the the Russians were invading seven different places at uh at the same time.
• 2:49
  SPEAKER_01: Um it was uh quickly escalating from conflict to something uh much more significant and serious than that.
• 2:56
  SPEAKER_01: And then at that point we saw a little bit of a, not a little bit, kind of a big sell-off in commodities.
• 3:02
  SPEAKER_01: And uh and which I guess makes some sense too.
• 3:05
  SPEAKER_01: I you know, it it uh um regardless of the impact that uh a conflict or a war might have on uh on world uh grain trading flow, um, there's generally the attitude that you'd rather sort of a risk-off sort of an attitude.
• 3:23
  SPEAKER_01: You'd rather not be involved or engaged or invested in commodities in times of uh geopolitical conflict.
• 3:30
  SPEAKER_01: And so so really in a 24-hour period, we saw these markets sort of trade both phenomena to you know disrupt uh to grain trade because of conflict, uh now sell-off, we just uh risk off attitude because of a of a war.
• 3:45
  SPEAKER_01: So um so we saw that in a 24-hour period, and then since then, all kinds of fireworks, of course, and all of these commodities, as it's become uh increasingly apparent that the uh supply of uh of uh commodities that that normally would would come out of that area of the world is is not going to be available for some period of time.
• 4:07
  SPEAKER_01: And some of that is is is real stuff.
• 4:10
  SPEAKER_01: Uh you know, Mike, the uh there's there's about 13 million corn acres in the Ukraine.
• 4:16
  SPEAKER_01: Um Iowa's 12.9, so they have the same about the same number of corn acres as what Iowa does.
• 4:22
  SPEAKER_01: Uh but interestingly, they they export 1.3 billion bushels of corn equivalent a year, and we export about 2.4.
• 4:30
  SPEAKER_01: So they make a significant contribution uh to the world trade.
• 4:35
  SPEAKER_01: I guess a bit of a reminder from a strategy perspective as to why the uh why Russia is interested in that that land mass.
• 4:44
  SPEAKER_01: But um it does six does make a significant contribution to the world trade.
• 4:48
  SPEAKER_01: In addition to that, they have 18 million wheat acres as well, and also a large percentage of that uh gets exported to other parts of the world.
• 4:57
  SPEAKER_01: And so um, and so when you I guess consider just from a a physical literal sort of a thing, uh the likelihood of the availability of supply from that area of the world is going to be limited for an extended period of time.
• 5:12
  SPEAKER_01: Uh the marketplace also is worried or considering, uh and I and appropriately so, the uh ability for them to plant this year's crop.
• 5:22
  SPEAKER_01: Um spring is is over the next 30 to 60 days, just like us, right, Mike?
• 5:29
  SPEAKER_01: So so it's uh um it's uh and there's there's I mean just logical, real life sort of things.
• 5:36
  SPEAKER_01: Like I'm not sure if I want to be planting wheat when there's uh you know tanks on the road beside me, or can I call up my local co-op and uh and get a uh get a diesel truck to deliver fuel to me in the middle of a war to to to put it in my four-wheel drive, my steiger or whatever, you know.
• 5:53
  SPEAKER_00: So um talk about the problem of uh getting your commodity or product sold at the end of it.
• 6:00
  SPEAKER_00: It's like the co-op could be blown up.
• 6:01
  SPEAKER_01: Yeah, that's right.
• 6:02
  SPEAKER_01: And uh or the ship at the port isn't gonna show up.
• 6:06
  SPEAKER_01: And I would just to not to pile on to that sort of observation, but I just think it's worth noting that the same challenges also likely, similar challenges also likely could occur in Russia as well.
• 6:17
  SPEAKER_01: And so, I mean their their trade will also be disrupted, which I is the real point of this conversation as it relates to trade sanctions and those sorts of things as we go forward here.
• 6:26
  SPEAKER_01: But the reality of, you know, there's some Russian wheat farmer that's uh the camshaft went out of his Deutz Alice this week, and and uh he's probably not going to be able to order parts from Germany and get them flown over to his uh to his shop anytime soon.
• 6:42
  SPEAKER_01: So there's just in the the reality of things as it relates to production and the movement, the normal movement of goods and and um uh products is going to be be limited pretty significantly.
• 6:55
  SPEAKER_01: But the other part of that that I wanted to to talk through here just a little bit is and again back to the title, uh Medieval Invasion in modern times.
• 7:06
  SPEAKER_01: I find it um I find it interesting from a bit of a of a more one step back and I like to think up perspective of um are we uh are are we still doing this?
• 7:18
  SPEAKER_01: Like are are we just gonna like load up uh uh our machine guns and a tank and and head over uh to our neighbors and and try to steal some dirt from them?
• 7:29
  SPEAKER_01: Um I thought that's something we did in the old days and uh and uh to uh try to pull this off in the day and age of social media and it try to pull this off in it in uh in Europe.
• 7:41
  SPEAKER_01: Yeah, when I mean we've we've got machine guns firing trying to steal dirt from our neighbors, sometimes, in some cases our cousins, is it just just as a reminder, um in and our neighbors are in Poland and Germany.
• 7:55
  SPEAKER_01: And I and I I think it's uh a little bit easier for Western civilization to not pay as much attention to these things if it happens to be happening in places like Africa or Rwanda or Afghanistan.
• 8:09
  SPEAKER_01: But I don't know that we're gonna be able to ignore too much of this that's going on, especially as it progresses.
• 8:15
  SPEAKER_01: This conflict that's now a war progresses, and if there's more loss of human life, if there's more atrocities that that happen to civilians, um, I don't know that the West is gonna be terribly tolerable of such things.
• 8:30
  SPEAKER_01: And so um so then it makes you wonder how do we get out of this deal?
• 8:36
  SPEAKER_01: And I think a couple weeks ago on our podcast we talked about this.
• 8:39
  SPEAKER_01: I don't know how the the Russian Ukraine conflict even back then was going to just somehow not end up being a thing, right?
• 8:50
  SPEAKER_01: Putin wasn't gonna back down.
• 8:52
  SPEAKER_01: Is he gonna back down now?
• 8:53
  SPEAKER_01: It's gonna be pretty hard for him too.
• 8:55
  SPEAKER_01: Every step he takes, it's harder to take a step back.
• 8:58
  SPEAKER_00: More committed every day.
• 8:59
  SPEAKER_01: Exactly.
• 9:00
  SPEAKER_01: And every day that that happens, and the fight and the harder the Ukrainians fight, uh the more damage that it causes, the more oppulsive it is to the West.
• 9:11
  SPEAKER_01: And so um let me just say this one more uh different way if I could.
• 9:17
  SPEAKER_01: Uh the other day uh I heard that uh the US government isn't willing to impose more sanctions on Russia at this time, specifically uh stopping buying uh crude oil out of out of Russia because they don't think that US citizens are willing to pay that price.
• 9:43
  SPEAKER_01: And I'm not so sure that that's true.
• 9:46
  SPEAKER_01: I'm not so sure that US citizens or for sure private enterprises um aren't willing to be more aggressive in placing sanctions on Russia than what the European Union is today or the US government is today.
• 10:03
  SPEAKER_01: I think as we move forward here that it's gonna become um increasingly um easy for consumers, for companies, and for governments of Western civilizations to say, you know what, we will do without their crude oil.
• 10:22
  SPEAKER_01: You know what?
• 10:23
  SPEAKER_01: We will figure out a way not to not to utilize the natural resources that are available to the rest of the world in the Ukraine in exchange for the atrocities to stop occurring that are occurring today in the Ukraine region.
• 10:37
  SPEAKER_01: And so when we think about that, we I I want to think about it from a little bit longer term, bigger picture, global perspective, and say, you know what, there's really only three places on the planet that produces food that aggressively are able to supply other places in the world.
• 10:55
  SPEAKER_01: One we're blessed to be in the middle of in the United States, right?
• 10:58
  SPEAKER_01: United States and Canada.
• 11:00
  SPEAKER_01: Um Brazil and Argentina is the other breadbasket, and that third breast bet breadbasket is the Russia and Ukraine region.
• 11:07
  SPEAKER_01: The rest of the world rev largely relies upon those three bread baskets for their food.
• 11:13
  SPEAKER_01: And so um so this is a this is a little bit uh a lot bigger deal than a conflict between uh Russia and the Ukraine, and the rest of the world is now paying attention.
• 11:24
  SPEAKER_01: And so I'm I'm uh I'm curious if there's an out that allows for all of these things to sort of settle back in and allow for what world trade was as it relates to energy and food uh as recently as two weeks ago.
• 11:42
  SPEAKER_01: But it's hard to figure out what that out is.
• 11:44
  SPEAKER_01: And so I suspect that we're uh all in the middle of uh trying to figure out um the this current disruption that's taking place, how that permanently alters our trading partners from a food and energy perspective, what ramifications that has on the commodities that we produce here in the US.
• 12:06
  SPEAKER_00: Interesting.
• 12:07
  SPEAKER_00: A few of the talking points that I was kind of running through while uh you were uh going through that, you know, the national gas average for the US was three dollars and sixty-six cents last week, probably gonna be over four bucks, it sounds like this week.
• 12:20
  SPEAKER_00: So we're gonna start finding some of those things out pretty quick, and this is without any sanctions on that yet.
• 12:25
  SPEAKER_00: Uh, you know, I had a friend from the valley send me a picture today, and it's like five and a half to six bucks for gas over there.
• 12:32
  SPEAKER_00: Um so we'll it's doesn't seem to be getting any cheaper buying gas at the pump here going forward the next few weeks.
• 12:38
  SPEAKER_00: You know, uh we're seeing commodities reach some major highs, 14-year highs for the wheat markets, uh crude oils up to about two third 2013 levels.
• 12:48
  SPEAKER_00: Um we're gonna start finding out how important some of those things are, like you mentioned, are um coming forward.
• 12:54
  SPEAKER_00: In other aspects, rather than just corn and wheat, for example, Russia is the biggest supplier of palladium and the third largest producer of oil, nickel, and aluminum.
• 13:04
  SPEAKER_00: It is also a top exporter of coal and steel.
• 13:07
  SPEAKER_00: The biggest impact they're ex uh they're thinking of right now will probably be um access to losing metals, it sounds like so uh a few of the things that um we'll be focused on uh going forward in the next coming weeks, I guess, Pat.
• 13:21
  SPEAKER_00: Any closing words for our listeners today?
• 13:23
  SPEAKER_01: I'd tell you, I uh well, first of all, I appreciate everyone's time and and uh taking the time to listen to to Mike and I this week and and uh please don't hesitate to give us a call.
• 13:33
  SPEAKER_01: Uh we did not take a deep dive today on on uh marketing strategies and uh approach for individual commodities, but sure would would look forward to that opportunity to have that discussion on an individual basis.
• 13:45
  SPEAKER_00: Thank you, Pat.