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At The Money: Do Agricultural Commodities Belong in Your Portfolio? · Masters in Business

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Welcome, this is a farmhouse.
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  Speaker 1: We have cluster fizz in this time of the.
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  Speaker 2: Bad. Investors today can gain exposure to any asset class
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  Speaker 2: via ETFs, stock spawns, real estate, metals, energy, even crypto.
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  Speaker 2: One of the most overlooked sectors are agricultural commodities wheat, soybeans, corn, sugar, coffee,
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  Speaker 2: all sorts of diversified commodities, and the ETF structure means
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  Speaker 2: a very different kind of k one. I'm Barry Redolts,
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  Speaker 2: and on today's edition of At the Money, we're going
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  Speaker 2: to explore the question of whether agricultural products deserve a
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  Speaker 2: place in your investment accounts. To help us unpack all
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  Speaker 2: of this and what it means for your portfolio, let's
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  Speaker 2: bring in Sal Gilberti. He's the founder, CEO, and chief
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  Speaker 2: investment officer of Techrium Trading, best known for creating exchange
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  Speaker 2: traded products that give investors direct exposure to ag futures.
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  Speaker 2: He's also an old school commodities trader since nineteen eighty two,
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  Speaker 2: trading various agricultural and energy commodities. So Sal, let's start
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  Speaker 2: really basic. What makes agricultural commodities so fundamentally different from
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  Speaker 2: other commodities like energy, metals or equities or bonds as
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  Speaker 2: an asset class.
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  Speaker 1: Sure, and thanks for having me, Barry. It's always fun
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  Speaker 1: to be with you and talk with you. Let's face it,
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  Speaker 1: everyone eats and their animals eat, and that's what aggs
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  Speaker 1: are primarily used for. Although you know fuel now has
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  Speaker 1: come into the mix, but aggs are very stable command
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  Speaker 1: of these in terms of the downside historically, and you know,
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  Speaker 1: we all know past performance is indicative future results and
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  Speaker 1: all that, But the downside on eggs is very limited
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  Speaker 1: because farmers will just stop planting if they're losing money.
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  Speaker 1: And the secret with eggs is that demand continues to rise.
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  Speaker 1: So the combined global demand of corn, soybeans, and wheat
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  Speaker 1: since nineteen sixty, okay, rises every single year. It's a
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  Speaker 1: record or it's almost a record. So it's either the
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  Speaker 1: second highest ever or it's the highest ever, every single
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  Speaker 1: year since nineteen sixty.
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  Speaker 2: So is is that styla. Is that driven by population
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  Speaker 2: growth or is it driven by I'm thinking about beef,
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  Speaker 2: which seems to not only be benefiting from the whole
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  Speaker 2: keto trend, but rising wealth in the rest of the
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  Speaker 2: world means people are eating more protein and less of
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  Speaker 2: other things. What's the underlying driver of increased demand for commodities?
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  Speaker 1: You just hit it, Okay. Basically, the under line driver
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  Speaker 1: is a rising population and more importantly than that, a
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  Speaker 1: rising middle class, the people that rise from the bottom
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  Speaker 1: to the next level. Okay, So if you look up
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  Speaker 1: people who are in sustenance living, which they used to
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  Speaker 1: be defined as I think less than ten dollars a day,
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  Speaker 1: ten dollars equivalents a day of the moment they rise
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  Speaker 1: from that. There are hundreds of studies on this. They
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  Speaker 1: increase the protein in their diet, they increase eating meat,
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  Speaker 1: that's what they do, and that is a huge demand.
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  Speaker 1: The number one demand around the world for corn is
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  Speaker 1: feeding cattle, is feeding animals in general, feeding animals. The
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  Speaker 1: second highest demand is for fuel. So corn goes into ethanol,
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  Speaker 1: and corn goes into sorry, soybeans go into biofuels. And
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  Speaker 1: so what happens is the rising global population, the rising
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  Speaker 1: middle class, the growing middle class, which has become huge,
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  Speaker 1: by the way, I think, is a percentage of the population.
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  Speaker 1: We're in our lowest ever percent of people in the
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  Speaker 1: bottom bottom.
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  Speaker 2: Wrong is that that's amazing. Does this mean we're going
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  Speaker 2: to see beef b e f f b e e
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  Speaker 2: f e t f from you sometimes?
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  Speaker 1: SOO, No, it's really hard to get people to think
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  Speaker 1: about eggs is really hard. It's amazing to me. You know,
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  Speaker 1: we always say corn is in everything, right, so number
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  Speaker 1: one use is feeding animals. Number two uses ethymol production.
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  Speaker 1: It's in so it makes starch.
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  Speaker 2: Right.
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  Speaker 1: If you use paper, you're using corn. People don't realize that.
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  Speaker 1: So it's literally impossible for anyone anywhere on planet Earth
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  Speaker 1: to not be using corn every single day. They're directly
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  Speaker 1: or indirectly. It's not possible. And people don't understand that
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  Speaker 1: it's a vital commodity. And so going back to the
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  Speaker 1: original question, I believe you know it's a commodity, so
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  Speaker 1: it's volatile, but it has this floor because governments around
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  Speaker 1: the world subsidize food production. They subsidize their farmers because
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  Speaker 1: you don't want your your your populous to destabilize because
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  Speaker 1: they're hungry and you lose power. So everybody subsidizes their farmers,
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  Speaker 1: so farmers get used to op it break even. And
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  Speaker 1: that actually is I think you've mentioned it, the golden
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  Speaker 1: grain cycle. We can get into it, but grains kind
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  Speaker 1: of flatline to get used to trading there. And because
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  Speaker 1: that demand is very basically static, it's not a dynamic demand.
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  Speaker 1: It's just always growing. It doesn't really fall significantly when
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  Speaker 1: there's a disruption, which ninety nine times out of one
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  Speaker 1: hundred means it doesn't rain somewhere critical and one time
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  Speaker 1: out of one hundred means there's a war, there's a
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  Speaker 1: political upheaval, and you might the transport of grains, the
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  Speaker 1: access to grains might be limited. They explode higher, they
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  Speaker 1: go higher really quickly because people are afraid.
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  Speaker 2: Huh, that's really interesting. So you mentioned the golden grain cycle.
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  Speaker 2: Walk us through what that means. Where is corn, wheat,
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  Speaker 2: soybeans in that cycle today?
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  Speaker 1: Sure? So golden grain cycle was developed by Jake Hanley.
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  Speaker 1: I think you know him very well. And we looked
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  Speaker 1: at it and said look, because we just looked at
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  Speaker 1: the spot continuation, So the continuation price of the front
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  Speaker 1: month of futures over time and the bottom line is
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  Speaker 1: on corn as a prime example, between three dollars and
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  Speaker 1: fifty cents and four dollars over the last seventeen years, okay,
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  Speaker 1: actually approaching nineteen years since the renewable feels at two
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  Speaker 1: thousand and seven, two thousand and eight, corn doesn't go
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  Speaker 1: below that. It's I think it's traded, you know, a
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  Speaker 1: few weeks under three dollars and fifty cents. In the
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  Speaker 1: last nineteen years, I can tell you that corn has
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  Speaker 1: only traded under four dollars four percent of the time
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  Speaker 1: in the last four years five years. Sorry, So in
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  Speaker 1: the last five years, corn has only been under four
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  Speaker 1: dollars four percent of the trading days. So clearly the
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  Speaker 1: break even is between three fifteen, four and closer to
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  Speaker 1: four right now. So if you see corn down at
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  Speaker 1: you know, near four dollars, you you kind of, based
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  Speaker 1: on past history, you're saying, well, wait a minute, I
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  Speaker 1: have limited downside. And in the last nineteen years, three
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  Speaker 1: times corn has doubled from that price, okay, and twice
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  Speaker 1: because of a drought, and once because of the war
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  Speaker 1: in Ukraine, which was preceded by a drought in the
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  Speaker 1: Upper Midwest and problems with China grain production and so
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  Speaker 1: wheat production, so you had a wheat problem that kind
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  Speaker 1: of started the rally. And then Russia invaded Ukraine in
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  Speaker 1: twenty twenty and everything went bonkers there twenty twenty two,
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  Speaker 1: I guess, and everything went bonkers. The rally started in
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  Speaker 1: twenty twenty and wheat and then it went to the
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  Speaker 1: whole grain complex. So if you've got an asset and
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  Speaker 1: you say to somebody, I got this asset that trades
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  Speaker 1: at X, and when there's this by disruption every four
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  Speaker 1: to seven years, it goes to two X and then
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  Speaker 1: it trades back down to X and then you know, repeat, gatherins, repeat.
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  Speaker 1: So stage one of the golden grain cycle is trading
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  Speaker 1: sideways X, stage two is going to two X, and
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  Speaker 1: stage three is going back to one X.
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  Speaker 2: So it sounds very much like these are trading vehicles
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  Speaker 2: that you're looking to take advantage of these disruptions such
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  Speaker 2: as war or droughts. What are the other variables investors
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  Speaker 2: should be aware of? Obviously whether the war and Iran
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  Speaker 2: sent fertilizer costs skyrocketing. I've been reading about farmers complaining
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  Speaker 2: about that and then government policy I'm I'm watching I've
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  Speaker 2: been a big fan of both Harry's Farm and then
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  Speaker 2: Clarkson's Farm on Netflix, both of them complaining about policies
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  Speaker 2: in the UK which are now taxing farm estates and
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  Speaker 2: taxing fertilizer and taxing everything from tractors to what have you.
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  Speaker 2: How significant are our government policies and what are the
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  Speaker 2: other variables investors should be thinking about?
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  Speaker 1: All right? Sure, so in order, the main variable is
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  Speaker 1: always weather, okay, and then geopolitical upheaval like a war,
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  Speaker 1: all right, And like what happened with wheat when Russia
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  Speaker 1: invaded Ukraine. Between Ukraine and Russia, they're they're you know,
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  Speaker 1: over almost forty percent of the world's exportable wheat supply,
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  Speaker 1: and everybody was afraid it would get locked in. Well,
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  Speaker 1: it didn't get locked in, so you had this this
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  Speaker 1: price spike. And the reason price spikes is because you
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  Speaker 1: run out of grain. Right. Remember you plant grain in
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  Speaker 1: the spring, it grows all summer. There's a big pile
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  Speaker 1: at harvest in the fall, and then you take from
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  Speaker 1: that pile. The whole world's taken from that pile autumn, winter, spring,
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  Speaker 1: and summer, okay, because it's still growing, it's not harvested yet.
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  Speaker 1: And in general, at the end of that cycle, you
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  Speaker 1: have about six months supply of wheat in general, okay,
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  Speaker 1: Historically you have about three or four month supply of
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  Speaker 1: corn and soybeans, all right, so if there's a disruption
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  Speaker 1: and that's that big pile is reduced by you know,
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  Speaker 1: ten thirty percent. Now you're approaching zero in corn soybeans,
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  Speaker 1: all right. So that's why the price generally in July
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  Speaker 1: takes a spike if they realize it's not going to
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  Speaker 1: rain in the US corn belt and there's the weather factor. Okay,
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  Speaker 1: prices spike and go up, and they run up in
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  Speaker 1: the next year. What we've seen is a lot of
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  Speaker 1: money coming into our ats. I mean, we we had
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  Speaker 1: I don't know, two hundred hundred and fifty million in
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  Speaker 1: our agg ETFs right before the Iran War broke out,
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  Speaker 1: and now we have eight hundred million to a billion,
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  Speaker 1: depending on the day. But the price hasn't really gone on.
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  Speaker 1: The price went not maybe ten percent. The reason is
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  Speaker 1: people are positioning for next year. The fertilizer story is
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  Speaker 1: a twenty twenty seven story. So farmers will fertilize mid season,
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  Speaker 1: okay around now, just to get they call it side dressing,
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  Speaker 1: and that'll boost the yields. That's going to be cut
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  Speaker 1: back around the world. But a lot of farmers pre
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  Speaker 1: treat their fields, especially corn farmers, in the autumn. They
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  Speaker 1: get ready so they can get in there in the
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  Speaker 1: spring and get everything down, so some of the fertilizer
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  Speaker 1: is either priced or goes down, gets laid down in
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  Speaker 1: the autumn for next spring. If the fertilizer price remains
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  Speaker 1: high in the autumn or the availability remains limited, you
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  Speaker 1: will affect next year's yields. And I think that's what
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  Speaker 1: investors have done. And back to your point, if it's
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  Speaker 1: a tradable product, it's more a strategic allocation because these
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  Speaker 1: these doubles that have happened prior to now and again
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  Speaker 1: historical not making any predictions, you can't, We're not allowed.
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  Speaker 1: But if you have to be prepositioned, and I think
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  Speaker 1: investors are saying, well, wait a minute, if I stick
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  Speaker 1: one percent of my portfolio and corn or beans or
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  Speaker 1: wheat or whatever, it's my downside is pretty limited based
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  Speaker 1: on history. If I'm buying within ten percent of the
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  Speaker 1: break even price, and my upside is like ninety percent
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  Speaker 1: based on history, okay, and it's going to be stable
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  Speaker 1: because assuming you know, setting aside the one or two
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  Speaker 1: days every couple of years that are black days, those
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  Speaker 1: black days where everything goes down, grains really remain stable
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  Speaker 1: in their portfolio stabilizer.
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  Speaker 2: Huh.
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  Speaker 1: And so people are kind of layering into trying to say,
• 11:38
  Speaker 1: maybe the stock market's f a fy, maybe I'm getting
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  Speaker 1: a little too risky. Bond's kind of moving tandem with stocks.
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  Speaker 1: What am I looking for that has, you know, a
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  Speaker 1: lower correlation? Everything's correlated on certain days. Grains have some
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  Speaker 1: of the lowest correlation around besides natural gas and sugar.
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  Speaker 2: Huh. Really really interesting. One of the thoughts I always
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  Speaker 2: consider when I'm looking at at agricultural products or commodities
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  Speaker 2: is as a hedge to inflation. Prices go up on food,
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  Speaker 2: prices go up on key commodities. Either are a lot
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  Speaker 2: of different ways to hedge inflation. Owning the commodities that
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  Speaker 2: go up is a significant aspect of this. How do
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  Speaker 2: investors use commodity tfs as an inflation hedge?
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  Speaker 1: They do? I think when people see inflation coming or
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  Speaker 1: feel it coming, and you know, any commodity we're grain focused, right,
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  Speaker 1: But any commodity if you see down at its break
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  Speaker 1: even level and it's really you don't have to be
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  Speaker 1: an expert in that commodity. Look at a chart, look
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  Speaker 1: at a long term decade or two chart wherever it
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  Speaker 1: flatlines it's usually at the round the same number. That's
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  Speaker 1: your break even, that's your future's equivalent break even costs.
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  Speaker 1: Everybody can see those charts. That's when you might want
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  Speaker 1: to layer in because you're downside based on history is limited,
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  Speaker 1: and you're upside. You know, you can move steadily up
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  Speaker 1: with inflation, which we have. Again, that break even price
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  Speaker 1: of corn used to be three fifty. It's clearly around
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  Speaker 1: four dollars now.
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  Speaker 2: Maybe a look fine, really really interesting. You know, the
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  Speaker 2: first time I ever heard of a USDA crop report
• 13:09
  Speaker 2: was frozen orange juice futures from the movie Trading Places.
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  Speaker 2: How significant are these USDA reports to these underlying ag products?
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  Speaker 2: Do investors need to track this the way equity or
• 13:25
  Speaker 2: bond investors track non farm payrolls?
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  Speaker 1: I think so. And the reason is, you know, granted
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  Speaker 1: you it's not quite as dramatic because you may not
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  Speaker 1: be as good at predicting the numbers of saying payroll right,
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  Speaker 1: and those numbers get adjusted, as do the ag numbers sometimes.
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  Speaker 1: But I think everybody knows here there's there's a whole
• 13:44
  Speaker 1: sub industry with an agriculture that's watching. They kind of
• 13:47
  Speaker 1: know what the USDA is going to put out. But
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  Speaker 1: the USDA is the gold standard. So when that report
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  Speaker 1: comes out, all of your hedge funds, all of your
• 13:56
  Speaker 1: pension funds, all the big institutional investors, who quite honestly
• 14:01
  Speaker 1: you know they're looking for opportunities, they also want to
• 14:03
  Speaker 1: cover their rear, all right. So if you've got the
• 14:06
  Speaker 1: USDA as your gold standard, you just follow that. So
• 14:10
  Speaker 1: if the USDA confirms what everybody else already knew, okay, fine,
• 14:13
  Speaker 1: you're a little late to the game, but you're probably
• 14:15
  Speaker 1: gonna be okay anyway. So, yeah, those reports are really big.
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  Speaker 1: The scary thing, Barry, you and I can probably both
• 14:19
  Speaker 1: relate is when we give speeches now and I say
• 14:22
  Speaker 1: how many people have seen trading places? Far more than
• 14:26
  Speaker 1: half the room now has a blank look on their face.
• 14:28
  Speaker 1: Nobody under thirty five even knows what the.
• 14:30
  Speaker 2: Movie is really going off. God, it's just that I'm
• 14:33
  Speaker 2: genuinely I'm genuinely shocked at that.
• 14:36
  Speaker 1: We require our interns to watch it. You gotta watch.
• 14:39
  Speaker 2: It's Eddie Murphy's It could be his very best movie.
• 14:43
  Speaker 2: So so you mentioned earlier drought, we talked about war.
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  Speaker 2: Given the rise of prediction markets, everybody's trying to figure
• 14:52
  Speaker 2: out what's going on. How much of information about either
• 14:57
  Speaker 2: weather or geopolitics or whatever, even a poor harvest, how
• 15:02
  Speaker 2: much of that is already embedded in crop prices.
• 15:07
  Speaker 1: Most of it is the one caveat again, as I've
• 15:10
  Speaker 1: referenced earlier. If you get a drought in the US
• 15:13
  Speaker 1: Midwest around July or August, which is what they call
• 15:17
  Speaker 1: kernel phil and podfill, okay, currents when the corns get
• 15:20
  Speaker 1: their kernels and when the soybeans get their fill their pods.
• 15:24
  Speaker 1: If you're too dry and hot in that period, it
• 15:27
  Speaker 1: hits hard. In the US being the you know the
• 15:30
  Speaker 1: world's second largest producer of both those commodities. Now we're
• 15:34
  Speaker 1: or exporter, we're second to Brazil. Now that hurts a lot,
• 15:38
  Speaker 1: but you can see it. Okay, So by the end
• 15:41
  Speaker 1: of June, if you're looking at the if it's been
• 15:43
  Speaker 1: dry and hot and the fourteen day forecast says it's
• 15:45
  Speaker 1: going to stay dry and hot, you see that price
• 15:47
  Speaker 1: start creeping up. And you can look back in drought
• 15:49
  Speaker 1: years in the charts, the price charts, so it gets
• 15:52
  Speaker 1: built in, but you don't know how bad it is
• 15:54
  Speaker 1: until harvest. So you kind of in drought years you
• 15:57
  Speaker 1: get this slow dribble up and then when you get
• 16:01
  Speaker 1: confirmation in autumn and late autumn, then you get that
• 16:04
  Speaker 1: winter time spike up. Seasonally, though the corn low is
• 16:08
  Speaker 1: there's double low. One is that the middle to late
• 16:10
  Speaker 1: August is a good time to look at layering corn
• 16:13
  Speaker 1: in if you're so inclined to do that to your portfolio,
• 16:16
  Speaker 1: because that's when people have a really good idea that
• 16:18
  Speaker 1: the crop is going to be good or bad. And
• 16:20
  Speaker 1: then October first is actually when you do a twenty
• 16:22
  Speaker 1: years smooth or thirty year smooth seasonal. October first, the
• 16:26
  Speaker 1: first week of October is the cyclical low. The actual
• 16:30
  Speaker 1: absolute price low often occurs in August, so August when
• 16:34
  Speaker 1: you get a good read on the crop, it rained
• 16:35
  Speaker 1: during that critical time, everybody's happy. And then October because
• 16:39
  Speaker 1: the whole big pile is on the ground, everybody's feeling comfortable.
• 16:41
  Speaker 1: Those are good times to look at layering these things
• 16:44
  Speaker 1: into your portfolio.
• 16:45
  Speaker 2: Really really interesting. China has become the dominant buyer of
• 16:50
  Speaker 2: so many agricultural products as well as other commodities. How
• 16:55
  Speaker 2: has their growing economy and even geopolitical importance changed the
• 17:00
  Speaker 2: way grain markets trade.
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  Speaker 1: It has changed the way commodity markets trade as I've
• 17:07
  Speaker 1: watched China for decades and as they become a net
• 17:10
  Speaker 1: importer of something. So when they became a net importer
• 17:13
  Speaker 1: of crude oil, that changed the crude markets. When they
• 17:16
  Speaker 1: became a net importer of corn, that changed the corn markets.
• 17:20
  Speaker 1: When they became a net importer of wheat, that changed
• 17:23
  Speaker 1: the wheat markets. When they know increase their importation of soybeans,
• 17:28
  Speaker 1: they are the soybean market. Okay, so China buys most
• 17:32
  Speaker 1: of the world soybeans that are available for export. Only
• 17:35
  Speaker 1: three countries exports soybeans, basically Brazil, the United States, and Argentina.
• 17:39
  Speaker 1: Product Guy is a little blip there, but you can't
• 17:41
  Speaker 1: really see it on a pie chart it's so small.
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  Speaker 1: And so those three countries if they have an export problem,
• 17:46
  Speaker 1: China has a problem because China, China is the largest swineherd.
• 17:50
  Speaker 1: They feed swine, you know, soybean meal, and so they're
• 17:53
  Speaker 1: gigantic importers of soybeans. So yeah, if China imports are not,
• 17:56
  Speaker 1: the interesting part is soybeans. They've kind of matched that,
• 18:00
  Speaker 1: but on corn and wheat. Every year, if you look
• 18:02
  Speaker 1: at long term trends, they increase how much exactly. It's
• 18:06
  Speaker 1: just like oil, the amount of oil the import just
• 18:08
  Speaker 1: keeps going on.
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  Speaker 2: Huh really really interesting given the role of China, the
• 18:12
  Speaker 2: riseing role of China and commodity imports, what was the
• 18:16
  Speaker 2: impact of all the mayhem the past year with tariffs.
• 18:19
  Speaker 2: Did that have a significant effect on how much US
• 18:25
  Speaker 2: grain farmers were able to export?
• 18:29
  Speaker 1: Kind of because in Trump's first term, when he did
• 18:32
  Speaker 1: the tariffs, that changed everything, So that affected things more.
• 18:35
  Speaker 1: China basically shifted towards Brazil as their first first sort
• 18:39
  Speaker 1: you know, choice for so I mean imports toward the US.
• 18:42
  Speaker 1: So what kind of that persists?
• 18:44
  Speaker 2: The US has fallen behind Brazil and exports to China.
• 18:48
  Speaker 1: Yes, absolutely, And Brazil's beans buy and large have been
• 18:51
  Speaker 1: cheaper lately anyway, and so China just you know, tar
• 18:54
  Speaker 1: if or not, they're going to go where the cheaper
• 18:55
  Speaker 1: beans are. When China buys our beans, now it's the
• 18:57
  Speaker 1: state buying them because our beans are marks and they're
• 19:00
  Speaker 1: sending a political signal of goodwill towards the Trump administration. China,
• 19:05
  Speaker 1: i will know, saved the world by cutting down on
• 19:08
  Speaker 1: their crude imports. Their cruit imports largely were to support
• 19:13
  Speaker 1: their strategic petroleum reserve. In the last couple of years,
• 19:16
  Speaker 1: they've been importing much more than they actually used to
• 19:18
  Speaker 1: boost up their reserves. China is the number one reason
• 19:22
  Speaker 1: that crude demand went down since the Iran War has started,
• 19:27
  Speaker 1: and China has saved the world. China saved energy price.
• 19:30
  Speaker 1: Everybody said one hundred and fifty two hundred dollars a barrel.
• 19:32
  Speaker 1: If it weren't for China cutting back on their energy imports,
• 19:35
  Speaker 1: we would have seen that.
• 19:37
  Speaker 2: I think a lot of people in the United States
• 19:39
  Speaker 2: underappreciate how aggressively and let's just call it clever, China
• 19:46
  Speaker 2: has pushed into alternative energy everything from geothermal to solar
• 19:52
  Speaker 2: to wins not a surprise. There's certain things that you
• 19:56
  Speaker 2: can't replace crude oil with, but everything else else they can.
• 20:00
  Speaker 2: They seem to have really made an effort to do so.
• 20:02
  Speaker 1: Correct And I you know, don't quote me on this.
• 20:04
  Speaker 1: I don't know for sure, we have to go look
• 20:06
  Speaker 1: it up. But I think their fossil food usage is
• 20:08
  Speaker 1: still going up like you can't, you can't do without.
• 20:11
  Speaker 1: And the fact that, thank goodness, they were filling their
• 20:15
  Speaker 1: strategic patroleum reserve versus actually needing the oil. So when
• 20:20
  Speaker 1: the Iran Iraq work, they're not going to pay eye
• 20:22
  Speaker 1: prices to fill fill some reserves. So they just stopped
• 20:25
  Speaker 1: importing all that crude and that has helped us tremendously.
• 20:29
  Speaker 2: China is not doing this because they're advocates against carbon
• 20:34
  Speaker 2: and climate change. They're doing it for strategic reasons. But
• 20:38
  Speaker 2: let's talk about climate change for a moment. I know
• 20:41
  Speaker 2: in New York our growing season is longer. I know
• 20:45
  Speaker 2: there are I'm a gardener, and there are certain plants
• 20:50
  Speaker 2: that I can plant now that fifteen years ago I
• 20:54
  Speaker 2: was told, Oh, there's no way that'll survive in New York.
• 20:57
  Speaker 2: What does the changing temperature bands the changing climate. What's
• 21:04
  Speaker 2: the impact on crop yields? Is this a persistent upward trends?
• 21:09
  Speaker 2: Is this going to help prices or is this just
• 21:11
  Speaker 2: going to create more volatility?
• 21:13
  Speaker 1: I think more volatility because rain makes grain, and a
• 21:16
  Speaker 1: warmer earth. Honestly, God, rain makes grain.
• 21:19
  Speaker 2: I love that.
• 21:20
  Speaker 1: A warmer earth. Okay, the atmosphere when it's warm, holds
• 21:24
  Speaker 1: more moisture and so you actually get more rain. So
• 21:28
  Speaker 1: so global warming has been really good for crops around
• 21:32
  Speaker 1: the world. It's a really good thing for crop production.
• 21:36
  Speaker 1: That might sound counterintuitive to people. Our phones ring off
• 21:39
  Speaker 1: the hook when you get the occasional storm and you know,
• 21:41
  Speaker 1: a million or two million acres flood out in the
• 21:43
  Speaker 1: US and you get the new you know, flying helicopters
• 21:45
  Speaker 1: over as far as you can see all these farms
• 21:47
  Speaker 1: are underwater, and we get the call. You know, what's
• 21:49
  Speaker 1: that going to do to food prices? Well, they popped
• 21:51
  Speaker 1: up a little bit, but you might want to sell
• 21:53
  Speaker 1: the rally because the only we plant four hundred to
• 21:56
  Speaker 1: five hundred million acres in the United States, you lose
• 21:58
  Speaker 1: two million acres. No one cares in terms of the
• 22:01
  Speaker 1: absolute price. The only thing would care of those poor
• 22:03
  Speaker 1: farmers who are underwater. That's it. And hopefully they have croffitsure.
• 22:06
  Speaker 2: So everybody who's flooded out, the one less than one
• 22:09
  Speaker 2: percent suffers, but the rest of the rain brings more crop.
• 22:13
  Speaker 2: You're saying absolutely really really interesting. You know, we've talked
• 22:17
  Speaker 2: about everything but technology, and I mentioned I'm a fan
• 22:21
  Speaker 2: of Clarkson's farm and Harry's farm and some of the technology.
• 22:26
  Speaker 2: Just looking at these tractors run themselves like autonomous vehicles
• 22:32
  Speaker 2: have been on the farms for years, long before any
• 22:36
  Speaker 2: of the robotaxis that are out there. What does improving
• 22:40
  Speaker 2: technology due to agricultural productivity? Are we seeing precision irrigation,
• 22:47
  Speaker 2: better seeds, higher quality machinery? What is this doing to production?
• 22:52
  Speaker 2: What is this doing to quality? And what does this
• 22:55
  Speaker 2: mean for price?
• 22:56
  Speaker 1: It's buy and large raising everything except the price. So thankfully,
• 23:00
  Speaker 1: everything you just mentioned has worked perfectly because that again
• 23:05
  Speaker 1: back to nineteen sixty, that rising global demand for combined corn, soild, beans,
• 23:10
  Speaker 1: and wheat. If you look at this the supply line,
• 23:14
  Speaker 1: it follows that very closely. Other than a drought year, okay,
• 23:17
  Speaker 1: So except in a drought year, we generally grow as
• 23:20
  Speaker 1: much or more than we need. And that's only because
• 23:23
  Speaker 1: of genetic engineering of seeds, okay, of amazing technology where
• 23:28
  Speaker 1: you know tractors now not only can there be autonomous.
• 23:31
  Speaker 1: They used to run three to five miles an hour,
• 23:34
  Speaker 1: all right, and you had a kind of guess at
• 23:36
  Speaker 1: your fertilizer. Now they run nine miles an hour across
• 23:38
  Speaker 1: these fields, adjusting the fertilizer every three feet, okay, based
• 23:43
  Speaker 1: on the analysis and the soil. They've got these these
• 23:46
  Speaker 1: amazing laser weaders, so you can you can actually go
• 23:50
  Speaker 1: over your you know the just chemicals zapp in these wheels.
• 23:55
  Speaker 1: You could do stuff without chemicals, and you know there's
• 23:57
  Speaker 1: more and more organic land being set aside for less chemicals.
• 24:01
  Speaker 1: I mean, it's all so wonderful. All the technology is.
• 24:04
  Speaker 1: It's a beautiful world. When you look at agricultural technology,
• 24:06
  Speaker 1: it's amazing.
• 24:07
  Speaker 2: So to wrap up, anyone interested in having exposure to
• 24:11
  Speaker 2: agricultural commodity products, whether you think the price trend is
• 24:16
  Speaker 2: going to go higher or just as a hedge against inflation,
• 24:20
  Speaker 2: check out some of the ETFs you can get that
• 24:22
  Speaker 2: can give you exposure to wheat, soybean, sugar, or any
• 24:26
  Speaker 2: combination of things. I'm Barry redults, you're listening to Bloombergs
• 24:31
  Speaker 2: at the Money