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From Negative Crude to Middle East Conflict: How Energy Markets Shape Farming · AG Bull

• 0:20
  Speaker 1: welcome to the ag bowl podcast.
• 0:21
  Speaker 1: Welcome to ag bowl media.
• 0:23
  Speaker 1: I'm sitting here live, live recorded in nesvik, at nesvik trading, here in nashville.
• 0:28
  Speaker 1: Now this youngster we're going to bring in here there is tyler stockton.
• 0:31
  Speaker 1: Tyler, I met you in Nashville.
• 0:33
  Speaker 1: Welcome to the Egg Bowl Podcast, my friend.
• 0:35
  Speaker 2: Thanks for having me, Tommy.
• 0:37
  Speaker 1: Yeah, so I'm supposed to look in the camera and you're down there on my laptop.
• 0:40
  Speaker 1: I got this all messed up, but hey, this is our first show.
• 0:43
  Speaker 1: I think we're going to do this once in a while.
• 0:45
  Speaker 1: Real quick.
• 0:45
  Speaker 1: Number one, welcome, and two tell us a little about yourself.
• 0:50
  Speaker 1: You're new here on the Egg Bowl podcast.
• 0:53
  Speaker 2: Yeah, so I've been doing energies for seven years now at all at Northdale.
• 0:57
  Speaker 2: I started at the bottom doing some billing and doing everything that to the customer, to dispatching, to sales, and now I've worked my way into a procurement manager role.
• 1:10
  Speaker 1: I like that, and tell us about where you grew up in the Great North.
• 1:15
  Speaker 2: Yeah, I grew up in the big, booming metropolis of Niche, North Dakota.
• 1:18
  Speaker 2: Yeah, maybe 400 people there now and now.
• 1:23
  Speaker 2: I've lived in Grand Forks now for seven, seven and a half years.
• 1:27
  Speaker 1: Now, if I remember from a past episode, young Marcus Hughes said there's a heck of a pizza place up in Niche.
• 1:31
  Speaker 1: Is that correct?
• 1:32
  Speaker 2: Just north of Niche, in Altona, manitoba, called Pizza Haven.
• 1:39
  Speaker 1: That's a long way to travel.
• 1:40
  Speaker 1: For a slice Might be tombstone for this cat.
• 1:43
  Speaker 1: Okay, who do you work for?
• 1:45
  Speaker 1: What do you do?
• 1:45
  Speaker 1: The stage is yours.
• 1:46
  Speaker 1: We'll go full screen on young Tyler.
• 1:50
  Speaker 2: Yeah, work for Northdale Oil.
• 1:52
  Speaker 2: It's been a company we've been around since 1967, so 58 years family owned, run by Scott Missy Reck.
• 1:59
  Speaker 2: Scott's dad ran the company until about the 80s.
• 2:03
  Speaker 2: He went through some hard times there with the 80s, as a lot of companies did, and he bought the company in 92.
• 2:08
  Speaker 2: One station, one truck he was driving going up to Winnipeg, manitoba, bringing fuel back down to Moorhead, down to the cities all over the place, and he's turned it into what we have now, which is mid-30s of gas stations.
• 2:22
  Speaker 2: Sometimes we question ourselves how much we have.
• 2:24
  Speaker 2: We run about 30 semis on the road between propane fuel and diesel exhaust fluid, multiple bulk trucks for fuel and propane, retail propane bulk, propane, wholesale fuel.
• 2:38
  Speaker 2: We have our own diesel exhaust fluid plant.
• 2:40
  Speaker 2: That's in Drayton, north Dakota.
• 2:41
  Speaker 2: We actually bought Prills from China at one point in time to make our first little bit of DEF and now we buy slurry and blend that there.
• 2:49
  Speaker 2: So a wide variety of services.
• 2:51
  Speaker 2: We touch Grand Forks in roughly a 300-mile radius up into Manitoba, western North Dakota, a little bit of South Dakota and into Minnesota, and recently we've just started railing some diesel fuel into various states in the US.
• 3:06
  Speaker 1: That's awesome.
• 3:08
  Speaker 1: I popped something up here.
• 3:11
  Speaker 1: I'm going to let me see if that's on the stage.
• 3:14
  Speaker 1: I popped up your website See if you can see that Should be there.
• 3:18
  Speaker 1: It is.
• 3:19
  Speaker 1: There you go.
• 3:20
  Speaker 1: This will kind of rehash what you just said on the physical delivering of fuel the gas stations, the whole deal.
• 3:30
  Speaker 2: That looks right, that's us.
• 3:34
  Speaker 1: So you wear a lot of blue logos and everything else, right?
• 3:37
  Speaker 2: Yes, yes, we do.
• 3:39
  Speaker 1: That's awesome.
• 3:40
  Speaker 1: Okay, here's what I wanted to talk about.
• 3:41
  Speaker 1: One and and you know if you're a farmer or you're a rancher or anyone else uh, uh, you're using, uh, you're using, this fuel, so it is impossible to farm without energy.
• 3:54
  Speaker 1: And then farmers are growing corn and soybeans, and that soybean oil is becoming an energy, and that corn as we know, one third of the crop of corn gets turned into energy.
• 4:06
  Speaker 1: Talk about what you do on a day-to-day basis, and this is an introductory video of you and me getting together, but as we start to meet more, hopefully we do this once a month.
• 4:17
  Speaker 1: We are in by far one of the most dynamic energy markets we've been in in quite a while, correct?
• 4:23
  Speaker 2: Yeah, since COVID.
• 4:24
  Speaker 2: Yeah, last four or five years.
• 4:26
  Speaker 1: Well, let's go back.
• 4:27
  Speaker 1: So five years ago we had COVID.
• 4:28
  Speaker 1: That was wild.
• 4:29
  Speaker 1: We traded negative crude Thanks for bringing that up.
• 4:31
  Speaker 1: And then we did Russia invaded Ukraine and we traded $130 crude.
• 4:38
  Speaker 1: So for our viewers and listeners we've traded negative 39, full disclosure, that was on the deliverable, okay.
• 4:46
  Speaker 1: But even the second and third month went down to $10, $11.
• 4:50
  Speaker 1: Like real crude oil went to $10 because the earth was taking what?
• 4:55
  Speaker 1: Four or six weeks off to fix the unfixable right.
• 4:59
  Speaker 2: Yeah, we hit the pause button on everything and no one knew what to do for a while.
• 5:02
  Speaker 1: That's a great way of putting it.
• 5:03
  Speaker 1: We did hit the pause button One of the strangest times of our lives.
• 5:06
  Speaker 1: Then we get out of pause, from going to really low prices, from shutting down to uh, just an epicenter of a place that uh, just the middle of the world, russia invade ukraine.
• 5:17
  Speaker 1: Then we take it all the way opposite, from negative or ten dollars up to 130.
• 5:23
  Speaker 1: Have you been involved in the fuel business through all that?
• 5:26
  Speaker 2: yeah, I was in a couple years before covid and so we saw those, those lows, those weird times.
• 5:31
  Speaker 2: I mean we were buying propane at one point in time from out west for a nickel a gallon, something like that they were just giving it away, Giving it away literally.
• 5:41
  Speaker 2: Yeah, almost it felt like it.
• 5:43
  Speaker 2: It felt like we were almost robbing the place, but I mean, everything was low.
• 5:47
  Speaker 2: We had farmers contracted out for three years at you know a little over $1 to $1.50, something like that.
• 5:52
  Speaker 2: So it was fun to see that kind of hang around.
• 5:55
  Speaker 2: And as that Russia-Ukraine stuff kind of took off, we had some lingering contracts from that still in there.
• 6:00
  Speaker 2: So as crude and diesel prices started to rise up, we had a few farmers that were still paying $1.50 to maybe $2 for fuel as prices went up into $3.
• 6:14
  Speaker 1: That's amazing when I think of hedging, when we talk about what I do or what you help people do in the futures and options market back in the day.
• 6:21
  Speaker 1: Part of the reason Southwest Airlines was so successful was when crude oil prices were rising.
• 6:27
  Speaker 1: During the 08 to 10, 11 inflation, we had a commodity boom.
• 6:32
  Speaker 1: You're too young.
• 6:33
  Speaker 1: But in 08, 9, and 10, we had a face-ripper of a commodity market and Southwest was very hedged okay.
• 6:40
  Speaker 1: And then other airlines said, oh my God, we've got to model ourselves off of Southwest.
• 6:45
  Speaker 1: So they started getting hedged at higher prices and then crude oil fell apart.
• 6:50
  Speaker 1: So it can go both ways right.
• 6:52
  Speaker 1: You could be explain that a little bit.
• 6:55
  Speaker 2: Yeah, it can go both ways.
• 6:56
  Speaker 2: And I mean as our strategy as a company.
• 6:58
  Speaker 2: It's not really necessarily trying to hedge the market to make a profit one way or another.
• 7:04
  Speaker 2: It's more of a tool that we use to present to whether it be farmers, construction companies, any kind of commercial company, any sort of end user or other wholesale companies as a way to, you know, set a budget and kind of you know, we see these things coming up in the market, we can see there's turnarounds coming in in refineries later this year.
• 7:23
  Speaker 2: Hey, why don't we lock some fuel in, as we see basis should kind of rise at that point in time, expect some higher prices, especially if it's during harvest time, and lock something low and kind of fix your budget so you know what you're paying for the next year or two years or three years, if it makes sense to do that.
• 7:41
  Speaker 1: And you guys use like a structured product, like a particular FCM, will make markets and help you hedge that risk right.
• 7:49
  Speaker 1: You won't click the button and do the futures and options, but you call a group and they do that for you, correct?
• 7:54
  Speaker 2: Correct.
• 7:55
  Speaker 2: Yeah, we go through a third party to do it.
• 7:56
  Speaker 2: We have all the data in front of us and then, as soon as we finish our phone call, we'll make our next phone call, send out the email and lock everything in right there all righty, you're teaching me already now.
• 8:07
  Speaker 1: Last time you and I talked about this, we were up in broadway having a couple, uh, white claws or two and, uh, you know, it was all a little blurry in the morning but that was fun, I believe we went to the stage and I don't remember if the music was good, but the company was good and the boss was kind enough to buy us, uh, quite a few white claws, right, right.
• 8:23
  Speaker 1: I kept telling them there for my wife, but I was drinking them With that.
• 8:29
  Speaker 1: Tell us what like last week was like.
• 8:31
  Speaker 1: You wake up and you look at your phone and crude oil is up $9 a barrel.
• 8:37
  Speaker 1: What's life like for you?
• 8:39
  Speaker 2: Yeah, you know it started even before we woke up, before we even went to bed.
• 8:43
  Speaker 2: We've got a group text between a few of us here in the office and we're sitting there.
• 8:46
  Speaker 2: I can't believe it was a group text between a few of us here in the office and we're sitting there.
• 8:48
  Speaker 2: I can't believe it was Thursday night.
• 8:50
  Speaker 2: So a couple of us got done playing softball on Thursday night and next thing you know we have a, we have a text sense.
• 8:55
  Speaker 2: We'll look at these fuel markets and you look at looking at the heating oil futures.
• 8:59
  Speaker 2: They're up.
• 9:00
  Speaker 2: They were up over 10 cents at that point in time.
• 9:02
  Speaker 2: So we knew we were in for a day in the morning.
• 9:04
  Speaker 2: And you come in and look and you know it's up 14, 15 cents and you try to figure out what's going on.
• 9:10
  Speaker 2: And the first thing you see is everything going on with Iran and Israel.
• 9:13
  Speaker 2: And then you see the videos of the missiles coming down and you realize how real everything is.
• 9:18
  Speaker 2: And you know you try to be as proactive.
• 9:21
  Speaker 2: But when it happens overnight, guys are calling what's going on?
• 9:24
  Speaker 2: You tell them but at that point it's too late.
• 9:27
  Speaker 2: But you can protect against anything going forward because it seems like this could drag on for a bit.
• 9:31
  Speaker 2: Protect what you can and hold on to your something.
• 9:40
  Speaker 1: I'm going to do lightning round here before we finish for today.
• 9:43
  Speaker 1: But if I'm sitting in my office in Mayville, north Dakota, and I'm a farmer and I buy a tanker load of fuel that could be red diesel or it could be road grade, right, yep, what's that called?
• 9:54
  Speaker 1: Number one, number two Clear and dyed.
• 9:56
  Speaker 2: Yeah, on road for the clear and off road for the dyed Yep.
• 9:59
  Speaker 1: Okay, I'm going to ask you a question.
• 10:00
  Speaker 1: If you don't know it just say you don't know.
• 10:02
  Speaker 1: But I got a feeling you know.
• 10:11
  Speaker 1: Where did that oil come from?
• 10:11
  Speaker 1: Which oil the?
• 10:12
  Speaker 1: Oil that made that final fuel if I'm in north dakota, yep, oil gets taken from the ground and then it gets refined.
• 10:15
  Speaker 1: Start from the ground to the refinery, to northdale yeah.
• 10:20
  Speaker 2: So most of the most of the oil up in in this area I shouldn't say most, but a good, a good chunk.
• 10:25
  Speaker 2: I think it depends on, obviously, how they buy, but a good chunk of it does come up from, uh, from canada.
• 10:30
  Speaker 2: So when we those tariffs were a thing, you know, the crude and the, the tariffs, the trading became a big conversation, especially up here.
• 10:37
  Speaker 2: We do a lot of cross-border work, so that would have affected a lot of things that we do as a company.
• 10:42
  Speaker 2: Um, and then it comes down here, gets refined in mandan, north dakota refinery or down in the cities there's a couple of refineries down there and it gets spread between the New Star pipeline and the Magellan pipeline, new Star being fed by Mandan and the Magellan being fed by the pipelines in the cities, the refineries in the cities.
• 11:00
  Speaker 2: So then their product gets refined in those refineries, gets sent down the line and of course you have increased costs as it comes down the line and eventually it gets up to us either in Grand Forks is the end of the line, so we get some decent prices here, with being the end of the line, they kind of send it here to discount it but stops in Fargo, moorhead, jamestown, alexandria, sauk Center, throughout the area all have their own terminals that we can pull out of.
• 11:27
  Speaker 1: And if, if I said the word the rack, it's not a place you buy clothing or laundry or anything.
• 11:34
  Speaker 2: What is the rack?
• 11:35
  Speaker 2: The rack is the loading part of the terminal itself.
• 11:39
  Speaker 2: So you drive by and you see all the big white tanks sitting there.
• 11:42
  Speaker 2: I mean those whole various products, your different grades of gasoline, your different grades of diesel fuels, some additives in there, possibly some jet fuels or some aviation fuels, but those are all fed to what they call as the rack.
• 11:54
  Speaker 2: So you see the semis pull in and I know here in Grand Forks there's three arms in this rack and the semi will pull up.
• 12:00
  Speaker 2: They go through their computer selections of whatever hook up the hoses in there, open everything, and that rack is where the loading actually happens into the semi Okay, and then we put it in one of these beautiful Northdale tankers.
• 12:16
  Speaker 1: Amazing how that got up there.
• 12:17
  Speaker 1: It's like someone clicked a button.
• 12:19
  Speaker 1: Have you spent much time at these refineries?
• 12:24
  Speaker 1: Like, do you guys go on tours?
• 12:26
  Speaker 2: We haven't yet.
• 12:27
  Speaker 2: I know Scott probably has.
• 12:28
  Speaker 2: I've spent a little bit of time at the rack here in town, the terminal here.
• 12:32
  Speaker 2: We have a pretty good relationship with the Did have one.
• 12:35
  Speaker 2: He just switched in and got a new job but we had a good relationship with the guys up there.
• 12:38
  Speaker 2: They do a lot of work for us when we need some things and they Okay.
• 12:44
  Speaker 1: If I say the word tariffs, how does that affect your business?
• 12:54
  Speaker 2: Being us.
• 12:54
  Speaker 2: I think it affects us more than most.
• 12:55
  Speaker 2: We do bring down a good chunk, and a good chunk in 99, 90, 95% of our diesel fuel does come from Canada.
• 12:58
  Speaker 2: So when those were first a conversation, I mean our life kind of went on hold.
• 13:04
  Speaker 2: As far as you know, we're calling our supplier, we're calling our, our customs brokers, we're calling the border.
• 13:09
  Speaker 2: What is this affecting?
• 13:10
  Speaker 2: What is it not affecting?
• 13:11
  Speaker 2: What are these tariffs going to end up being?
• 13:13
  Speaker 2: Is there anything we can do to lessen this, prevent this?
• 13:17
  Speaker 2: Just a lot of phone calls and a lot of unknown.
• 13:19
  Speaker 2: That just kind of had a had to unfold over a day or two or three is our first calls to the, our custom brokers and the border.
• 13:28
  Speaker 2: They're like we don't even know what this is affecting, what the amounts are going to be.
• 13:31
  Speaker 2: It just got announced they haven't been, they hadn't been fed information yet.
• 13:35
  Speaker 2: So we kind of had our own little pause for a few days, cause if we would have pulled products from Canada and we would have got the tariffs, I mean we're paying a quarter or more a gallon than we should have been.
• 13:47
  Speaker 2: So we just kind of paused, put off everything you can and function as minimalistic as possible for a few days.
• 13:55
  Speaker 1: So you've been through a lot.
• 13:56
  Speaker 1: You're a young man.
• 13:57
  Speaker 1: How long have you been involved in this business?
• 13:59
  Speaker 2: Going on seven years, at least seven years, in.
• 14:00
  Speaker 1: August, so you're very qualified to talk about this.
• 14:03
  Speaker 1: You survived COVID, you survived the Ukraine war.
• 14:06
  Speaker 1: We now have an Israel-Iran war.
• 14:08
  Speaker 1: Today is June 19th and upon recording this episode, crude oil closed at 12 o'clock noon up $2.
• 14:15
  Speaker 1: And the Dow Jones was down 400.
• 14:17
  Speaker 1: They'll open again at five central and the markets are extremely volatile.
• 14:21
  Speaker 1: Crude oil is approaching 80.
• 14:23
  Speaker 1: The Trump administration had promised lower fuel prices.
• 14:26
  Speaker 1: Drill, baby drill.
• 14:27
  Speaker 1: Where is all this?
• 14:29
  Speaker 1: Drill baby drill.
• 14:31
  Speaker 2: I don't know where it's at.
• 14:32
  Speaker 2: We've been waiting for it for a while.
• 14:33
  Speaker 2: I think part of it too.
• 14:37
  Speaker 2: You look across everywhere.
• 14:38
  Speaker 2: We're at the moment not able to even pull some stuff from Canada.
• 14:43
  Speaker 2: They're two of their biggest refineries, at least from the guys we pull from there.
• 14:47
  Speaker 2: They had some issues.
• 14:51
  Speaker 2: They've been down for a month and they're not exporting anything to the US.
• 14:53
  Speaker 2: So I think these refineries down here have a lot of excess product and you can see that in the basis in the area.
• 14:58
  Speaker 2: I know there's a lot of places that have a negative basis or a very low basis.
• 15:01
  Speaker 2: I'm talking 10, 15 cents below where they normally are this time of year.
• 15:05
  Speaker 2: So even though we see all these prices keep rising, that basis is staying low.
• 15:10
  Speaker 2: So relatively good buy in theory, as compared to where it could be should there be a shortage of product, which is a good thing.
• 15:18
  Speaker 2: They don't have a shortage of product, but there's a lot of room for that basis to come up to where it normally is.
• 15:24
  Speaker 2: And yeah, they, they should start drilling up.
• 15:28
  Speaker 2: There's some action kind of happening out west, so we've heard from from some guys out there but uh williston, etc yeah, yeah, western north dakota, out in the, the basin there, and we're waiting for it to pick up, but we haven't heard too much on it yeah, real quick before we wrap up.
• 15:45
  Speaker 1: Uh, I'd like to do this once a month with you, if that's okay and for people listening.
• 15:51
  Speaker 1: Some people will be watching this on YouTube.
• 15:52
  Speaker 1: If you're listening, you're probably on Apple or Spotify or another device.
• 15:55
  Speaker 1: Of course, we're going to ask people to click, like and subscribe.
• 15:59
  Speaker 1: We'd love you to click on all our social medias Facebook, Instagram.
• 16:02
  Speaker 1: Whatever you can get ahold of the good folks over at Northdale Oil, whatever you can get a hold of the good folks over at Northdale Oil, but the basis.
• 16:11
  Speaker 1: I know what that means.
• 16:11
  Speaker 1: Like if I'm in Mayville, North Dakota, and corn at the Board of Trade is trading $4.50 and they have a minus 50 cent basis where you get $4 for your corn.
• 16:19
  Speaker 1: Basis in what you're talking about.
• 16:21
  Speaker 1: You say that word so loosely as if everyone understands it.
• 16:24
  Speaker 1: Explain in your world a negative basis and a positive basis.
• 16:28
  Speaker 2: Yeah.
• 16:28
  Speaker 2: So what that basis trades against is heating oil futures, and heating oil will be the benchmark in a lot of places.
• 16:37
  Speaker 2: Right now the average is typically somewhere between 15 to 18, maybe 20 cents positive.
• 16:43
  Speaker 2: So we'll take round numbers If heating oil was $2.50, then our price at the rack if it was a 15 cent positive basis, will be $2.65.
• 16:52
  Speaker 2: And right now we're seeing in some places as little as a negative 5 cent basis.
• 16:56
  Speaker 2: So take that same $2.50 heating oil you're looking at $2.45 from the rack for us to pick it up.
• 17:05
  Speaker 1: And then the difference is what you charge on top of that, and that's your margin, and that's how you guys make money correct?
• 17:11
  Speaker 2: Yeah, a little bit of margin cover our freight costs to get it there and put it in your tank.
• 17:15
  Speaker 1: That's about it, I mean it'd be no different than the Milkman A little bigger truck.
• 17:19
  Speaker 2: Well no, they make milk trucks just as big, but a little bit different delivery, but same process.
• 17:25
  Speaker 1: Right, I like it All right.
• 17:26
  Speaker 1: Today we had Tyler Stockton on from Northdale.
• 17:31
  Speaker 1: We threw this together.
• 17:31
  Speaker 1: We said let's do something.
• 17:34
  Speaker 1: You've been wanting to do this for a while and I wanted to do it in studio with you in Mayville.
• 17:38
  Speaker 1: But the software works pretty good and we got someone clicking the buttons doing a great job.
• 17:44
  Speaker 1: But next time we come on, how do people get a hold?
• 17:45
  Speaker 2: of you.
• 17:46
  Speaker 2: They can get a hold of you.
• 17:46
  Speaker 2: They can get a hold of us at the office.
• 17:48
  Speaker 2: Call the Northdale office 701-757-0668.
• 17:53
  Speaker 2: Or you can call my cell phone I'll put that out there, I suppose 701-520-9056.
• 17:59
  Speaker 1: You're going to get all types of creepers calling you and texting you now.
• 18:02
  Speaker 1: I'm going to text you at 1 in the morning.
• 18:05
  Speaker 1: What was I going to tell you?
• 18:06
  Speaker 1: Next time?
• 18:06
  Speaker 1: We'll have that ready for you on a pop-up and bring some subjects.
• 18:09
  Speaker 1: We want to keep educating people.
• 18:11
  Speaker 1: A lot of people can talk about corn futures, bean futures, but you cannot run a farm without energy and you are in the energy business.
• 18:18
  Speaker 1: So with that I want to thank you as a first-timer.
• 18:22
  Speaker 1: You did well.
• 18:29
  Speaker 2: And you think we can drag Marcus on possibly, and maybe even the boss man, right, I think we could drag them both on.
• 18:32
  Speaker 2: You know, marcus's dad is a banker so he's got banker hours today on a golf tournament and Scott's out playing in Charleston, south Carolina, at the moment but he's visiting his son in the Marines so I won't give him too hard of a time, but we'll get them both on here well, we thank his son for serving.
• 18:43
  Speaker 1: Okay, thank you, my friend.
• 18:44
  Speaker 1: Thank you, tommy allisafi.
• 18:48
  Speaker 1: Agbo Media Agbo Podcast coming to you, recorded here from the Nesvik Trading Studios here in Nashville, tennessee.
• 18:53
  Speaker 1: Young Tyler Stockton.
• 18:54
  Speaker 1: I met him in Nashville.
• 18:55
  Speaker 1: He's a fine young man and with that we will close the show, we hit, end recording and we'll see you all next time.
• 19:01
  Speaker 1: Thank you.