Latest / The Vance Crowe Podcast / Ag Tribes Report: Dwayne Faber; Oddly positive farmers, Dairyman want more $ and Heifer Shortages
Transcript
- Vance Crowe (01:04.57) Welcome to the Ag Tribes Report. I'm your host, Vance Crowe. Each week I bring on a co -host that represents the perspectives of one of the many Ag Tribes that collectively make up the U .S. and Canadian agriculture. We review four news stories, discuss the one of their Peter Thiel paradoxes, and I asked them about a worthy adversary that they think is worth checking out on social media. This week, I met with Dwayne Faber, a dairy farmer and comedian from the Pacific Northwest. And we are going to discuss the recent polls suggesting that farmers are positive about the future of ag. The latest news on the size of the American dairy herd with so many heifers being bred to beef cattle. the latest on milk pricing battles being fought by the American Farm Bureau, which is a wild situation. If you don't know how pricing happens in milk, you are in for a treat. And we're also gonna chat just a little bit about the potential for Starlink to surpass the rural broadband initiative. So, Dwayne Faber, welcome to the Ag Tribes Report. dfaber84 (02:07.607) Thank you for having me on, fans. This is a pleasure. Vance Crowe (02:10.971) Well, the first story that I think is worth us chatting about comes from the Purdue Center of Commercial Agriculture, where they say in a regular barometer that they put out that farmer sentiment is improving despite financial performance concerns. We can see that when you look at the price of corn and soy, even though it's declined and say the Eastern Corn Belt 11%, the sentiment they are saying is going up. People are saying, The shift is primarily attributed to fewer respondents saying that conditions were worse than earlier in the year and fewer saying that they expect bad times in the future. The results were collected during from July 15th to 19th. So I have to ask you, Dwayne, what do you think? Are the people in your tribe feeling optimistic and excited about the future of ag? dfaber84 (03:03.267) Well, I think that those respondents must have been out at the lake for the summer and having a great time, really optimistic, having a good day when they were interviewed for that because it's certainly hard to make the case where you go from $5 corn down to high 380s now where anybody would be optimistic if they are bullish on grain along the grain market or a corn and soybean farmer. What's interesting is there's always disparity within agriculture. The dairy market has been improving, that's been getting better. Certainly the cattle complex has been good for the cattle producers. So those are two areas that are optimistic. What's interesting out here in Washington state, we've got a lot of potatoes, russet potatoes, we have the hop industry, apples, cherries, and a lot of these industries are really struggling right now. They're actually mirroring the corn and soybean market. across agriculture, there's... been a lot of bloodshed and it hasn't been good and we're coming off several years of good times but it's interesting how it always ebbs and flows and I'm not sure who they interviewed there but... Vance Crowe (04:07.064) Yeah, and I mean, one thing I'll say is if you were collecting surveys from July 15th to July 19th, I mean, now so much is changing. But I was on message boards this morning looking around at what people think about the price of commodities, and they're talking, surely this must be the bottom. We're gonna have to clear out those bins for 23. It can't go much lower. And when you're talking about things like bottoming out, it's hard to imagine that people are like, it's gonna get better. But, you know, I don't want to be a naysayer if people really are feeling more positive. That seems like a good thing. But, you know, this wouldn't account for, the radical stock market crash that happened at the beginning of the week. dfaber84 (04:49.175) What is interesting is farmers, tend to be eternally optimistic, right? And in a lot of ways you have to be, you're bred to be, just because you're relying upon weather, you're relying on different market factors. And so when it comes to the price we receive, we tend to be really optimistic. And yet most farmers, when you ask them how their corn crop is, they tend to downplay their corn crop and they thrive on the negative and sharing. photos of flooded out fields and things are always terrible and some of that is they're along the market and hoping everybody gets the bearish news but certainly as far as price goes we tend to be eternal optimists. Vance Crowe (05:23.122) It's funny that you say that because my impression growing up was that farmers always found something to be upset about. You know, if you're having a great crop, was, you know, the weather's going to turn or things aren't right. But anyway, you have to be an eternal optimist because you have to keep planting every year. So I take your point. All right. Moving on to headline number two, the National Federal Milk Marketing Order modernization is up for amendments. Now, I had no idea what the FMMO is. but I got a crash course. In fact, I had a great call with a woman from the farm bureau who told me, who gave me a little crash course on how processors actually pay farmers not for the milk they buy directly, but for how they process that milk. So what I mean by that is if you are producing cheese with the milk that you buy from a farmer, you're going to pay them a different price than if you're giving them just whey solids and or skim milk. And so the American Farm Bureau along with other farmers are saying, hey, something's got to change here. The pricing isn't right. Dwayne, what's up with all this? dfaber84 (06:28.611) So this is incredibly complicated. It's an incredibly complex situation. It actually started from the fact that dairy farmers, you have to sell your milk product every day. If you're a corn or soybean farmer or a hog producer, you can take your product and you can store it in a freezer. You can store it in a grain bin. As far as milk, you've got a one to two day shelf life. So you're completely vulnerable to the whims of the processor. And so very early on, they established a little bit of government controls and regulation to make sure farmers were paid fairly for their milk. and the prices are set both through the CME but also through the processors and the processors are obligated to pay different regions a certain price and depending where the milk is going. Now the make allowance which we're arguing about now is there's a lot of processors that are struggling financially. Anytime you're in a low margin business you're incredibly vulnerable to high interest rates, you're incredibly vulnerable to high equipment costs and also to the workforce. And post COVID we're seeing we're not getting the labor out of people that we did pre -COVID. And so there's many milk processors that are just bleeding red ink everywhere. And they're going to the farmer and saying, we need to increase the amount of money we charge you to process your milk. And of course, most farmers are coming to the table saying, well, we don't want you to take more of our dollars. And nobody's really sure exactly where it's going to change, but it could go from 80 cents to a $1 .50 per hundred weight that is going to be taken from the farmer. and given to the processor to help them cope with some of these higher operating costs. Vance Crowe (08:00.785) to say, Dwayne, you know, I have some good friends in Canada, they talk all the time about the dairy cartel up there. And I used to always laugh at them thinking, we're in the free market that is America. But it turns out, you know, the the American dairy market is heavily regulated, really controlled, you would think it would be much simpler, you'd think that guy comes along and says, Hey, farmer, I'm going to buy that milk from you. And I'm going to do whatever I want with it. What do you think? Like, is this an antiquated system? Should it be, you know, a much freer market or is this sort of control an important thing that is important for whatever reason they put in in the first place? dfaber84 (08:43.607) Yeah, what's interesting in New Zealand is Fonterra is the big processor out there. And basically when you're an owner in Fonterra, Fonterra goes and says to you, this is what our guess is, what we're going to pay you for your milk. And at the end of the year, if we made more money, you get more money. And quite frankly, that's what's happening here locally in Washington state with our local co -op here. They've been trying to build a plant. They've been struggling financially. And then they've gone to the producer and said, we need to take more out of your paycheck in order to pay the bills. And that's only, that is what's happening already, but now that's not the case everywhere. So there are different marked dairy areas where people need to be told what to pay or they're not owners in their co -op. So much of the milk in the U .S., they're owned by the farmers where the co -op is owned by the farmers, but that's not necessarily all the, certainly not the case everywhere. So. Vance Crowe (09:34.851) Well, it's something to watch out for. When does this all get straightened out? Is it like the farm bill where it goes on forever or is this got a drop dead date where we'll know what's gonna happen here? dfaber84 (09:46.947) So the FMMO has to come with an agreement to the politicians, the legislatures, and say, this is what we came to an agreement with. So right now there's an argument internally about what that level should be, that commitment level. And we should know more by the end of this year and going into 2025. There is talk that they would slowly implement it because it would be a giant shock to the system if it was implemented immediately. And so there's certainly a little more of a time horizon on it and we'll see where it goes. Vance Crowe (10:16.915) Okay, well, I'll have to have you back to talk about it. Another story that I think is relevant to dairy farmers, and I was glad you brought up, is the America's heifer shortage is preventing expansion, is the big money for beef on dairy a factor? Now, what this means, it's a story that you sent to me from dairyherd .com, but what a lot of people don't know that are outside of the dairy world are that Many of the heifers in order to be able to get cows to be able to produce milk, they keep impregnating them and instead of impregnating them with dairy producing cows, they're often now doing beef crosses. So the cow that gets produced can be sold into the beef market and they're making a lot more money. If you were breeding out a regular newborn Holstein, that's going to get about $414 in this particular market. And if you were doing it for beef cattle, You could get $675. So it seems like there is clearly a financial incentive here. What do you think, Dwayne? Is the US dairy herd herding from too few heifers? Doesn't that keep the price of milk up for you if that herd goes down? dfaber84 (11:26.115) It certainly does, and the farmer is simply responding to the economics. Like you clearly stated, if you want cash flow immediately, you would just go and breed more of your, even your current milking herd into beef cattle, and you'd get larger checks as those baby calves would hit the ground. Now, the price of heifers has been steadily increasing. There's reports of heifers now going for upwards of $3 ,800, whereas two years ago, there was about $1 So that pendulum has swung back the other way again, where now farmers are incentivized to go and start actually using sex semen on their dairy herd to start dropping more female calves because the cost of buying those heifers has gone up so dramatically. And absolutely you're right. When you have a lower heifer population, you have fewer heifers entering the milking herd in the US, you're going to have less milk output. And that's where we're at right now. And so you're always a little bit behind the eight ball. today farmers are starting to go back to breeding more milk cows into dairy cows because they might be a little short on heifers or seeing the price of heifers going up and they're dialing back on that beef that they were breeding the cows to. Vance Crowe (12:35.496) What about you? What are you doing on your dairy? You putting them to dairy cattle or you putting them to beef cattle? dfaber84 (12:42.275) We're doing about, we're raising about what we need. So 50 % of the milking herd will identify the top genetics in the herd and then breed those to sex semen. So you'll get a heifer calf out of that top 50 % genetically in your herd. And then the bottom 50 % we're breeding to actually charlays. And so we're getting charlay cross calves that then we're putting into the beef chain system. Vance Crowe (13:06.32) that's funny, because the only experience I ever have with charlays is that they're show cattle. They're really pretty and they make them all shiny for the showcattles. I didn't realize they were part of the whole beef system. dfaber84 (13:17.591) They are, they're beautiful. Yeah, they're beautiful looking animals. Kind of a grayish, whitish looking animal. And it's also popular to Angus. Angus is super popular. Semintal's popular. Actually, even Wagyu. There's several people that have tapped into and found a Wagyu market breeding Wagyu to dairy cattle. Vance Crowe (13:36.306) Well, I know that in the beef cattle herd, they're talking about like, this is a really serious problem that we're so far down on beef cattle. Do you think it's a serious problem that the dairy herd is down as low as the article was talking about? dfaber84 (13:50.711) What's interesting is the dairy farmers were kind of viewed or vilified because they were sitting there jumping into the beef market. And yet over the last four or five years, we've seen a lot of beef herds that have had to deal with drought, that had to deal with forest fires. And that beef herd has just continually shrunk and is shrinking and shrinking. And even with the dairy industry putting hundreds of thousands of beef animals into the pipeline, we're still not seeing that quick rebound. And prices have still been high for a long time. And quite frankly, like most industries, we don't want things to be too high for too long because then people look for alternatives. People are going out and buying more pork, they're buying more chicken, they're importing beef rather than consuming American beef. so long -term, it's not healthy to have prices this high. And I think they will start settling down here in a little bit, but it's not like you turn a switch and get the beef herd to expand immediately overnight. takes... a year or two of cattle guys just holding on to those mama cows and breeding them back and holding on to the young heifers breeding them back. And so you're not going to see that. And it actually creates even more of a drawdown because those cows aren't going to butcher. They're staying on the cattle ranches and being bred back for the next year. Vance Crowe (15:08.624) Yeah, and I mean, it's funny to think about the US cattle herd or the dairy herd, but the reality is like you need a huge amount of numbers. You mentioned it maybe takes a couple of years. I've heard the Ring brothers say it's, four to six years in order to be able to bring back real size to a dairy herd. So it's one of those things that I'm sure you can delay paying attention to for a long time. And everyone is making individual decisions that stack up to the larger herd. All right, let's move on to the final story we're gonna talk about today, which is that Starlink has been talking about how they believe they can provide everyone in rural and semi -rural US with high speed broadband internet. Yesterday, I believe the CEO of SpaceX, Starlink service was doing a fireside chat where she pointed out, look, right now, if you wanted to get internet to the city, you wouldn't want to use Starlink because Starlink can send down a beam that's about eight square miles large and it can offer about a couple hundred people service. So you don't want to do that, you want to do that with fiber optic cable. But the dreams that the US government had been talking about, let's get real broadband accidents by running miles and miles of fiber optic cable, just isn't going to work because It's cost 10 to $30 ,000 per mile. And Starlink doesn't have to do much at all to reach those people. So that small number that are reached through the Starlink, that eight square mile beam, is actually reaching people in rural America. What do you think, Dwayne? Is the internet out where you're at? Is this broadband? Is it the fiber optic cable, or are you using Starlink? dfaber84 (16:58.499) So I still have access to it. However, I live down a long driveway. And so I'm actually using a, what is it, internet or a mobile connection. And I would love to switch to Starlink. And I'm actually representative of a lot of different people. And the cost for me to put fiber optic down my long driveway is cost prohibitive. Now you take that and you go to the middle of nowhere, whether it's the Midwest or even down in Oregon where I have a farm. there's parts of those areas where cell phone towers just don't reach and we're not having access to the internet. And it's kind of crazy that we still have spots in America where you don't have access to the internet. And what Elon Musk is doing is just absolutely revolutionizing the whole world. And for us, it was just a minor inconvenience, but he's going and bringing internet to regions and countries for millions of people that have never had access. And it will be exciting to see the results of these people being now plugged into the the pipeline of humanity and seeing what the effect is for those types of countries. Vance Crowe (18:00.961) it's a huge deal. remember about three years ago, I was invited down to the Arkansas Farm Bureau, Steve Eddington said, Hey, while you're giving this talk, why don't you talk about the edge of what's going on with technology, what you think is going to happen in the future. And I remember standing up on stage and saying, Hey, this real broadband access issue, because they had been talking about it earlier, where they were saying it makes it so kids have to actually drive 30 minutes to go to the library to get their homework done, or, you know, we want to be able to order things online. We're having to do it with our phones because we just don't have high speed internet. I said maybe five, 10 years from now, you'll be able to use Starlink. I never imagined that three years later they would be doing so much coverage and getting so much access out there. To me, it's chalk one up for the private markets and capitalists going out and solving problems a lot faster than the government's going to. dfaber84 (18:54.371) 100%. We'll see where it all goes. It'll be exciting. So Mrs. Faber's now able to order her Amazon boxes without due regard. There's nothing stopping her now. Vance Crowe (19:01.984) Blazing speeds. All right. Well, that wraps up the news portion of the Ag Tribes report. If you have news you think we should cover, you can always hit me up with a DM on X or you can send it to Vance at VanceCrow .com. I'm always looking for stories. My good friends get my phone call on Tuesday or Wednesday and they say, you want to know what I think is going on in the news today, don't you? So Make sure if you're listening to this and you wanna get a story on here, send it to me on Tuesday or Wednesday. Moving on to the Peter Thiel paradox. This is where I invite a guest to share something that they believe that almost nobody in their ag tribe agrees with them on. So, Dwayne, are you ready? Can you give me an idea that you believe that almost no one you know agrees with you on? dfaber84 (19:51.523) Well, I went back and forth on who we wanted to offend and the paradox is that if you give something out there that people agree with, you've done it wrong. And so I'm gonna put out a very controversial headline and then we'll caveat it and we'll parse it a little bit. So as agriculture people, we pride ourselves on being free market capitalists. And yet for much of agriculture, We're subsidized heavily and those subsidies are essentially a make work program for rural America. Now, that's not incredibly popular because obviously we want to pride ourselves on offering a product to the market at a fair price. And if we go down the rabbit hole and we go and we say, well, what happens if we take all government subsidies away? What's going to happen is Blackstone, BlackRock and Bill Gates are going to come in, they're going to buy all the farmland, they're going to have autonomous robots driving across the farmland, they're going to suck a lot of dollars and resources out of these small and rural communities and towns, and yet we as taxpayers have said we don't want that. As taxpayers we've said we value small family farms and we want to incentivize them to stay in business. It's a little bit of a paradox because we like to think that we are free market capitalists. And yet if we were, we would be getting our milk from Chile. We would be getting our Brussels sprouts from probably Mexico. And we'd be getting our corn and soybeans all from Brazil. And yet there is a national security interest in this conversation as well, because we don't want to be relying on these other countries to produce our food. And it's something that we've recognized as a country that, in some respects, we have to subsidize our agriculture to make sure that we have a viable agriculture in our country. And what's interesting is China is doing that here recently themselves, where they're heavily subsidizing the dairy markets. And we're struggling now to import milk powder into China because the government has so heavily subsidized dairying and the dairy herd has exploded in China. And so it's not uncommon and yet. dfaber84 (22:07.812) We like to view ourselves as red blooded Americans and free market system participants, but that's actually not really what we are either. Vance Crowe (22:16.896) man, you have burned the doors down on this one. Most people go play it a lot safer. So I think you've done a very good job of putting that forward. And I think that there's two things going on here at the same time, while it is you're right, taxpayers are being asked to subsidize a program to keep small farms on there. And simultaneously, the more money that the government puts into the system through printing through low interest rates, then that gives these groups like black Black Rock hedge funds that are out there all the incentive in the world to take that money that they're getting that they know is being devalued and buying as much land as they possibly can so the government is creating tremendous pressure on farm families because yes your balance sheet might look like it's going up but the reality is if you're gonna try and liquidate that so that your mom and dad can get out with a retirement that means the son or daughter has to buy it from them. And the prices of land are going up so high that it's making it really hard for the next generation to get in, even if mom and dad want them to have it. So you've got this tension here that I think most people are not really willing to talk about. dfaber84 (23:29.731) And that's also some of the shift that we're seeing into the corporate America because if you inherit a five, six million dollar farm and you need that six million dollar assets to return you $150 ,000 in corn and soybean revenue, you're better off just selling it and going and investing those proceeds into something else. And that's actually been more of a destruction of the farm than has been anything else because the returns typically are poor in agriculture and in farming specifically. So there go your Peter Teal paradox. Bitcoin will solve it all. I want to hear that. Vance Crowe (24:06.365) well, mean, it's I was gonna yours was so good. I wasn't gonna throw mine out there. But mine right now has been that I believe that the answer to being able to keep farms local and keep the hedge funds out of it is to make it so when Bitcoin is more ubiquitous, because it's not like these hedge funds want to manage farms, they don't want to be buying this land, land has all kinds of risk to it. It's got problems, you got to actually continue to produce on it. All they're trying to do is to park their money somewhere where it can hold value. And as Bitcoin becomes a more strong and resilient network, these hedge funds are going to be able to use that as a form of synthetic property that because there's only ever going to be 21 million of them, it acts like land in the fact that God's not making any more land while Satoshi's not making any more Bitcoin. And so I think you're going to watch money instead of being flooding into land prices is going to flood into Bitcoin and that will make it so the people that are working the land can afford to buy the land and that would be a tremendous amount of freedom from the onerous things that happen when the government prints money. That's my Peter Thiel paradox. dfaber84 (25:16.983) Yeah, anything you can do to divorce or realign the returns of land with the product that it makes. And that's certainly the discrepancy currently where land is viewed as gold with a dividend. And so if those dollars can go out and back into something that they view as finite and land sells for what it can return as far as the crops that it grows. that's healthy for all people involved in agriculture and everybody that's on the farm. Vance Crowe (25:50.025) Well, I am going to give you a nine one for your Peter Thiel paradox. It was a powerful thing you went out there and I think it'll start the kind of conversations that we're looking to start on the Ag Tribes Report, which is just to disagree, think about things from a different angle. Now, speaking of that, we're gonna move to the worthy adversary section of the podcast. This is where we spotlight individuals that challenge our perspectives and keep us out of algorithmic echo chambers. So this is really looking for somebody that you either follow or monitor or read what they put out there. You don't necessarily agree with them, but you gotta give them respect because they're putting things out there that you're reading. Dwayne, who is your worthy adversary? dfaber84 (26:34.179) So I've been following Peter Zyhan for quite a while. I've enjoyed a lot of what Peter has both written, what he puts out there on YouTube. I find myself disagreeing with Peter more and more. And it's interesting when you first find somebody or somebody is new onto the scene as far as being a visionary or a thought leader, they tend to... take shots at everyone and have a shotgun approach where they just make you think about lots of different things. And the more time that they spend in the spotlight, the more cohesive their thoughts become. And then they become a little more uniform. And in some respects, Peter has, in my mind, gone off the rails. And there's a lot of what he says where everything is viewed through the prism of America is the best. Russia and China and every other country out there is is not doing well. They're all going to collapse and then also I find he's gotten really political and even in response on his YouTube channel to Donald Trump being shot was we can't trust the poll numbers that we're seeing now and polls are polls are not an accurate reflection of where sentiment really is And, it's a little disappointing because you'd like to think of the people that you view as thought leaders as being independent in their thinking and not caring which side of the aisle. They're just coming to you and saying, this is what's going on in the world, rather than going and saying, this is how you should see the world and always taking the one side. And so I still listen to what he has to say, but I find that I'm disagreeing with him more and more. Vance Crowe (28:23.46) Yeah, I mean, he is an incredibly compelling speaker. In fact, we've spoken at the same conferences before. And one of the things that you notice about him is he's able to turn a very complicated situation into storytelling. And this storytelling wraps you up. And he's got, he has some really interesting, good ideas. He was talking about the high seas and policing them long before anybody else was. He talked about trade, but the more you listen to him, the more you figure out like, Hey, a lot of the things that you're saying that you know, with such confidence, You couldn't know, you couldn't know what Vladimir Putin is getting from messages or Xi Jinping. you wouldn't, it's not possible for you to know what's going on in his inner circle, but you're putting forward this story as though you have special information. And I have noticed that out in the world, he's being known as the inverse Jim Cramer. So Jim Cramer is famously known for anything he says about the stock market. You basically can go bet on the opposite and you'll make money. I think with Peter Zeehan in a lot of ways, all of his predictions turned out to be just like inverse Jim Cramer. You should just do the opposite or believe the opposite. dfaber84 (29:34.391) Yeah, my dark theory is he's now controlled by the CIA and he goes and says whatever they think is good and that's what he's espousing now. Vance Crowe (29:43.49) Well, I gotta give him credit. He's out there putting ideas in and he I listened to a lot of his YouTube stuff, even though I don't agree with it at all. So I think that was an excellent worthy adversary. Man, you burned it up today. I had tried to get Derek Josie on, he couldn't do it. So I went with the third best dairyman in the Pacific Northwest. And I have to say you didn't disappoint. You did at least a third place job. And I really am grateful you were willing to come on. That's gonna do it for the Ag Tribes Report. Before we go, I wanna talk about just a little bit, if you are interested in sponsoring the Ag Tribes Report, go ahead and write me an email, vance at vancecro .com. This week was sponsored obviously by Legacy Interviews where we record individuals and couples telling their life stories so that future generations have a chance to know their family history. We just got done doing an interview with an amazing couple. and I know their grandkids are gonna get to hear stories about war and making it through hard times that they're going to deeply appreciate. Our other sponsor this week is Farmtest .ag. Farmtest allows you to test out products and seeds on your field using scientifically verifiable tests. And this allows you to be free from the marketers and salesmen that are telling you that their products are gonna perform in your fields. You get to test that out. You can learn more by going to farmtest .ag. Dwayne, thank you so much for coming on. If people wanted to follow you out in the wild world, where would they go to catch you? dfaber84 (31:18.935) Defavor84 on Twitter. Vance Crowe (31:21.984) Well, I appreciate it and I'm so glad that you joined us for this week's Ag Tribes Report. So we're signing off. As always, feel free to disagree.