.png)
Practically Ranching
Join Matt Perrier as he visits weekly with interesting, thoughtful, entertaining individuals within the beef community. Conversations will inspire curiosity and creativity while maintaining the independent spirit and practical nature for which ranchers are known.
Practically Ranching
#35 - Gregg Doud, Broaden the Coalition
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
Gregg Doud is Chief Economist for Aimpoint Research. He served for three years as the Chief Ag Negotiator for the U. S. Trade Representative. He has also worked in Ag Policy in our nation's capitol for the National Cattlemen's Beef Association, U.S. Wheat Associates and the Commodity Markets Council.
A native of Mankato, KS, Gregg now lives in Edgewater, MD.
www.aimpointresearch.com
Thanks for joining us for episode 35 of practically ranching. I'm Matt Perrier. So, have you ever fallen asleep during an economics lecture? Yeah. I'm probably guilty as well. And even though this week's guest is an economist, I'm pretty certain that you're not likely going to doze off during this one. Greg Dowd currently works for aim point research, a global strategic intelligence firms, specializing in ag and food production. Prior to that. Greg worked as the chief ag negotiator for the U S trade representatives in the, Trump administration. He has served in. A variety of roles, advising ag policy and trade decisions for the last three decades in and around Washington, DC. Now Greg is from north central Kansas. And like your host is an avid Wildcat fan. As you'll soon. Hear. And like any supportive alumni. We started this conversation talking about last week, sweet 16 basketball game than I prior to recording between K state and Michigan state. Uh, Greg and I have a lot more than just our Alma mater in common. Like you, we're both very proud of the industry that built us. And we want to do whatever is needed to sustain it and sustain our rural communities. And especially the families who drive it. Greg has worked tirelessly for production ag to help educate us on the house and the why's and the who's and the Watts of markets. Of trade and of public policy. And as complex as these geopolitical factors and supply and demand fundamentals, climate and consumer trends can be. It really is nice to have someone like Greg who has made it his life's work to read, to study, to discuss and analyze these many factors that make a market today. Now we may not like everything that he always has to say. But Greg calls it, like he sees it and he does. So based off of a lifetime of research and observation and understanding of the nuanced nature of global food production. So I hope you enjoy this visit as always. Thank you for listening. God bless. And here's Greg Dowd.
gregg-doud_3_03-24-2023_111310It was a fun game to watch It was an instant classic It was one of the best basketball games I've seen in a long time And then and that just uh wasn't because of who was playing I think anybody a fan would've been hugely entertained last night with with what I would argue I I would call this play the de uh when they were faking arguing uh and then hit that uh alley for the behind the head dunk Uh that'll be one of the top 10 s espn plays of the year I predict
Track 1Yeah. It should be. It should be. So I hope this conversation didn't all for not, I hope we do it again on Saturday and, uh, tough Florida Atlantic team or Hot Florida Atlantic team. We'll see. See how that goes. But yeah, they've been fun to watch all season.
gregg-doud_3_03-24-2023_111310they uh they sure have And and uh what a what a great coach we have
Track 1Yep Yeah, he's cool. and and an even finer gentle
gregg-doud_3_03-24-2023_111310of the best young coaches in America right now
Track 1I would agree. I mean, Kleiman and Tang both. Um, it's, I had I think probably a, a friend of yours, Gordon Hibbard on the, um, podcast months ago. In fact, this was back in August or September, and I asked Gordon, you know, living right there in Manhattan and being a Case stater and, and the whole nine yards. I said, how's football season looking? And he said, you know, I think pretty good. But he said, I have to admit, we're basketball fans in this house. And he started talking about this Jerome Tang. Well, you know, Nobody even hardly met him at the time, but I think he'd been to church with him and he said, he's the real deal. He is gonna do something. And we are excited. Well, I thought, well, Gordon's always excited about everything. And then I start seeing the results and seeing how he coaches and seeing, you know, his passion for his players and the program and everything else. And yeah, it's, uh, it's been pretty fun. Well, Greg, I did not have you on to talk about K State basketball, but, uh I know I, I know we could do this for an hour, but I assume there's probably there's probably, other things people want to hear about too. And, and I do as well. The last I talked with you, and I don't even know if you remember this, but I believe it was February of 21. Um,
gregg-doud_3_03-24-2023_111310Oh my gosh
Track 1And you were in a bit of transition. You were here with Tucker Stewarts, uh, on a. Quick tour through Kansas for senator, Marshall's, team. And as he was trying to get you to come to work for Marshall, you chuckled. And I said, well, what are you gonna do now? Um, and you said, well, I've got, I've got something pretty cool lined up, but I can't talk about it yet, but it's gonna be a really exciting project with some ex-military guys and, um, it's really gonna be cool. And that's all you could tell me at the time. So I assume what you were alluding to then is what you are actually doing now. Tell us, tell us what you're up to or, or can you share any of it
gregg-doud_3_03-24-2023_111310No I absolutely
Track 1Okay
gregg-doud_3_03-24-2023_111310and Uh so that was two years ago Time time flies for the past two years Uh you saw me I I now work for a company called Aim Point Research Uh this is a company based in Columbus Ohio founded by military guys in fact the CEO and two of his West Point classmates we have now six or seven people out of 30 in the company When I started with the company two years ago we worked I was the 12th person they hired Today we are at 30 Uh we were a startup when I first started and now we are a real company rocking rolling very very busy And we do four things at Aim Point Research we are a market research company We do excellent market research so it's qualitative and quantitative research uh with our clients We'll uh uh talk to their customers talk to others about all kinds of different issues and in fact Uh we just did a uh project for the state of Kansas in K State on the Kansas dairy industry and the future of the Kansas Kansas dairy industry where we interviewed a bunch of people and put that all in a paper And uh just presented that last week as a matter of fact to uh the Ken Rogers and the House Ag Committee uh there at the state of Kansas in Topeka So uh that's one of the things that we do Uh we're kind of a mini Mackenzie style consulting company so we do a lot of these uh types or a few of these types of projects what we are known for And what two of these West Point guys were were the two most recent colonels in charge of war gaming at the Army War College in Carlisle Pennsylvania The real deal 25 years in the military colonels the West pointers the best in the business And so uh all in everything we do is in agriculture uh generally speaking about once a month or once every other month we are doing a war game for somebody in agriculture And uh it is an enormous amount of work And to do that uh takes a huge amount of intel Uh and so really the foundation of the company and the the the stool leg on the stool that I helped lead is the intel side of the thing And I've got uh half a dozen really bright young ag economists Uh unfortunately most of 'em are Iowa staters Uh no I'm kidding They're brilliant Uh folks young folks in their twenties uh early thirties one of 'em in their early thirties Um That uh when we do a war game we'll start it with a three hour military style intelligence briefing so we we crank out a lot of stuff and we're doing a lot of things for all of our clients every day on just what's going on And so my side of it is kind of the the global side of it And you know man I've been doing the global ag thing in DC and been in DC for a little over 30 years now So it's uh it's fun to to go back with with what I've learned in my career and and and go back to putting it to use I'm the oldest guy in the company and having a ball uh working with these young ones they're uh they're keeping me on my toes
Track 1I'll bet I would guess that. A fairly difficult transition or maybe it's not that much different than what you were doing before, I guess immediately before AIM point. Um, I think nearly anybody that's listened to this podcast knows, but uh, what were you doing with the Trump administration four years prior to that
gregg-doud_3_03-24-2023_111310So uh
Track 1or three I guess Yeah
gregg-doud_3_03-24-2023_111310the chief agricultural negotiator was my title the office of the US Trade Representative So I was the uh the AG negotiator for the United States And and the way that works is you have Robert Leiser ambassador Robert Leiser who was uh the US Trade representative cabinet level official he has four deputies four ambassadors uh that were deputies One takes one half of the world one takes the other half of the world one is at the WTO O in Geneva and then there's diving board over to this guy That's the agne negotiator And uh so uh on my watch uh while we were there we renegotiated nafta uh did the China deal and uh did what I consider probably one of the great trade deals of all time for agriculture We did the uh the Japan Ag Trade Agreement to uh bring us in line with uh the TPP countries on ag trade with Japan uh when you add those uh Canada Mexico China and Japan together that's over half of US AG exports uh which last year were 196 billion So that was my portfolio Uh and back when I started or back when I left uh ag trade was 150 Two years later It's 196 billion Um really uh What we did and in particular with China and and uh so I a lot of what I do now is uh like 25 last year I traveled around gave 25 speeches around the country on some of that was about and kind of where we're headed with all of this in terms of agriculture and trade and the world around us
Track 1I think a lot of times, uh, when we get out in the country, I know you've heard it, um, there's a certain amount of, uncertainty, ignorance, doubt, whatever it. The case may be on trade, and I hear it all, you've heard it, all that, uh, you know, this protectionist or America first mindset that let's just produce for America and not worry about everything else overseas. it's dangerous. It's, uh, it's risky. And, and I think that mindset is, it really can limit us. If I were to play the devil's advocate and say, we never should have gotten involved in any of these trade deals, nafta, tpp, you name it, um, what do you tell somebody like that and why is it that it's worth that risk? And, and it's such a global marketplace that we have to be involved in, even in ag.
gregg-doud_3_03-24-2023_111310Well what you tell people is the fact that we grow and have the capability in this country in agriculture to grow a heck of a lot more food than we can consume domestically if we're gonna be profitable uh we've gotta be able to sell it to folks around the world And uh we are extremely competitive in doing that And uh we are gonna continue to be competitive in doing that And and the challenge is there are a lot have been historically a lot of countries around the world that know that we are a lot more uh competitive than they are And so they tend to try to keep us out And uh we have resolved almost all of those issues in the world today with a couple of exceptions first exception would be India and that is India's Uh the the challenge is as you today India has more people than China over 1.4 billion Uh but about a half a billion of those farmers as subsistence and India doesn't want them coming to town and so they subsidize the water the electricity the fertilizer the seed fuel everything keep 'em out there And and every one of those farmers farms about two acres and they are completely subsistence and and uh so they they kind of block everything coming in there And it's a real challenge The other part of the world is Europe and you know they we know they've been in pain in in the neck for years but the the honest answer is just about every other country in the world today we have a trade agreement Which brings the tariff down uh to a point where we can um have access into the country The the two best examples would be Korea you know I worked Matt for the National Cattleman's Beef Association in uh from 2003 to 2011 And uh during that and and when I started in 2003 20 years ago our total beef exports were under 5 billion Uh last year our total beef exports were 11.7 billion So we've we've more than doubled beef exports It adds a huge value to uh what we do And and the beauty of all of that is that we don't sell steaks overseas We sell the parts of the critter that we don't eat domestically So I'm talking about the heart the liver tongue et cetera And um in in uh that uh Korea the tariff was 40% through the US Korean free trade agreement uh that I was part of ne uh helping our government negotiate as a cleared advisor when I was at the cattleman that tariff will be reduced to zero in the next couple of years now and I think it is down around 10% When we uh back in those days we sold Korea about seven eight 800 million worth of beef Today we sell 'em about two and a half billion dollars worth of beef It's far more than I ever imagined we could sell them it's because it's cheaper it was uh 20 years ago And uh folks like it and uh we we sell down a huge amount of uh short plate and outside skirt and ribs and things like that that most Americans go what's they don't even most ranchers don't even know where where you could find that cut on the critter and so uh that that's one example By the way when we opened the China beef market finally when we did the China phase one deal I thought that would be a billion dollar market for US beef It's not We sold China and Hong Kong another two and a half billion just
Track 1Hmm
gregg-doud_3_03-24-2023_111310just two years after we opened it Uh once China got going Matt we doubled the price of short plate that we we sell into those markets because of the competition Japan China and Korea for the same cut Um you know another example I I use is is Japan That uh that tongue Here in the United States it's probably worth somewhere around 40 or 50 cents a pound In Japan it's worth $7 a pound
Track 1Wow.
gregg-doud_3_03-24-2023_111310So you do the math that's four pounds every tongue You do the math on what that is uh what four pounds $7 $28 If you look long term in the last 20 or 30 years of the average profitability in the feed lot in Kansas mat what is it
Track 1about $30 bucks.
gregg-doud_3_03-24-2023_111310which means that the value of that tongue to Japan is your profit After it's all said and done
Track 1Yeah. About all, all we have to think about is how much liver, tripe, tongue, brain, heart do we want to eat, uh, be and other That's right That's right That's that's done That's right
gregg-doud_3_03-24-2023_111310you can't get your hands on that anymore That all goes into render or not even rendering that goes into uh that goes into the landfill or wherever you're gonna burn it for fuel or whatever you're gonna do
Track 1Yep.
gregg-doud_3_03-24-2023_111310but uh
Track 1the rest of it
gregg-doud_3_03-24-2023_111310stuff has enormous value And uh is you know we the old in the day we I don't know what it is today but back in the day we used to sell Rectums to China for a dollar a pound And you know we we sell everything but the Moo
Track 1Yep
gregg-doud_3_03-24-2023_111310the old adage
Track 1Yep
gregg-doud_3_03-24-2023_111310And uh that's what that is What makes this uh whole thing tick and go around and and uh uh so you know I uh my first week with the cattleman 20 years ago I was at convention Mad And then I had uh older uh rancher She came up and put her arm around me and she said uh know it's okay that you're gonna work on this trade stuff but just know that it's never gonna be anything but a niche business
Track 1Hmm.
gregg-doud_3_03-24-2023_111310And and I gotta tell you that I don't think 11 billion is a niche business And I don't think 250 to $300 of the value of the carcass is a niche business anymore
Track 1Yep. Yep. Good point. As we look at this global outlook for, and let's just, let's just say the beef industry and I guess all of agriculture cuz it is pretty, pretty intertwined. Um, if you're in that war game with one of your clients, what are the threats that you're most concerned with today? Um, I mean, we can go down the list of countries. Uh, this morning. Uh, we got to add Syria and Iran to it. Uh, you probably had it on your list a long time, but Russia, Ukraine, China, you name it. What are the biggest threats that we have out there?
gregg-doud_3_03-24-2023_111310Well interestingly enough the war game that we did in November of last year and we have an industry war game where we bring in and we kind of have to turn away people We kind of max it out at 70 people because you get more than that and it gets a little unwieldy we uh we run everybody through an industry war game and and back on the first week of November of last year that industry war game was in the context of something that I call the brick cartel So you know what the brick countries are man It's Brazil Russia India China And the the the concept was imagine a world in agriculture where these four countries are colluding and talking and forming a cartel with each other to the exclusion of the rest of the world And what most people don't realize when you look at wheat and soybeans and corn uh those four countries have uh majority of the production trade and stocks in the world You know uh in February U S D A announced and it was something that we could see coming And I never in my 30 years of doing this would ever expected this to be true But this year for the first time in history we see the distinct possibility U S D A is pro uh predicting it that Brazil will export 50 million tons of corn and the United States will export 49 million tons of corn So Brazil already exports a lot more soybeans than we do has for the last many years but now they're exporting more corn than we are And and imagine a situation where the Chinese and the Brazilians are colluding on price and and uh the Brazilians are willing to to pay the Chinese and and Chinese yuan and not traded in dollars And and you saw where she was over at Putin And if you look at what's going on that's exactly what's going on right now with Russia is uh the uh the Russians and the Chinese are are totally in bed on the oil and energy side of the equation and on the ag and food side of the equation The key one though uh is fertilizer Uh you know when uh Putin invaded Ukraine uh president Bolsonaro Brazil the first thing he did was getting on an airplane and go see Putin Why Cuz he wanted to make sure that he could get his urea to plant that corn crop in Brazil uh last uh fall So uh that uh the these things are going on in the world Uh these are the kinds of things that I watch and and try to understand and wrap my head around on a daily basis And I will tell you it is fascinating to have these conversations with some of the best military minds uh in our country And these uh guys that are now my colleagues uh the the West Point guys Um it's uh this this is the new world that we're uh we're looking at and uh it's gonna be a really big challenge for us
Track 1Yeah. I mean, especially as you talk about the collusion between those, that brick cartel, I just heard this morning on the Commodity Traders podcast that was talking about Russia announcing that they were gonna halt all exports of wheat, whether they do it or not. Um, but what, 48 hours after Putin and she have their, two day interaction and all of a sudden now Russia's not gonna sell any corn to anybody else. I mean, it, there's some dots here You have to start connecting Oh Wheat wheat Uh
gregg-doud_3_03-24-2023_111310is the biggest wheat exporter in the world and most people don't realize that Ukraine was actually exporting more wheat than the United States know my my first stint Out of uh grad school You know I'm a bachelor's in animal science preve master's nag econ from K State My first stint was with Wheated Associates in Portland and then they moved me to DC a year later in 92 But I spent the the nineties working for the weed industry and traveled all around the world for them And so I you know I understand the wheated business perfectly and it has changed dramatically in the last 30 years with the the evolution of uh what's going on the euros and the soils around the Black Sea And it's not that surprising because if you go back to prior to World War I more a hundred years ago that was the bread basket of the world before uh Stalin and the Communists took over and and uh did what they did in that part of the world which was which was uh you know horrendous Uh but it's you know a hundred years later it's back to uh it's glory
Track 1Yep. You probably don't have to be an army colonel within your company if in fact Russia is saving their wheat and it directly to China, China's getting ready for something pretty big, I would guess,
gregg-doud_3_03-24-2023_111310Um you know In in 2019 I spent a year of my life 33 negotiating sessions hundreds of hours going at it arguing with the Chinese over the the ag component of the the China's phase one negotiations which if you look at the document actually agriculture in terms of pages is the biggest of it Uh so we fixed it was 33 negotiating sessions and over the course of that we fixed some 57 different things weren't working or were flat broken like you know we couldn't sell China any beef Uh we got all those things fixed I would say today 52 3 4 5 of those things are fixed and done put to bed There's a couple still hanging out there Uh we'll we'll always be arguing with China over biotechnology and and that's because they're trying to catch up with us because of how convoluted it is over there But one of the things that I learned Matt was that when it comes to ag trade and commodities and food does not want to be exposed to the vagaries of supply and demand in the marketplace They want to control They're they know that they need more food than anybody else in the world they know Think about this the world we live in Matt we export the US exports 196 billion of ag to the entire world China imported last year from the world little over 200 billion in food from everybody in the world So we live in a world today where total US AG exports to the world the same as China's total agricultural imports from the world And I travel around giving a lot of speeches talking about this and I spend mo a third of the whole conversation about China for this very reason You have to understand how they're going to do things because they have half the hogs on the planet and because of African swine fever and swapping out of not SW feeding pigs anymore And ha historically half the hogs on the planet half the hogs in China were sw fed Uh we had these conversations with the Chinese about what was going to happen here It was the vice premiere of China So in China you have President Xi the president of China you have the premiere of China you have five vice premieres of China These are the top people in the whole country 1.4 billion people the vice premier Leo Huff in charge of the negotiations And um uh we had very frank conversations uh in you know 10 of them 10 of us about things like African swine fever and what it means for them what they're gonna do about it et cetera conversations Did you you could get a feel and understand that you know they want to maintain and control and and not have volatility in these markets uh for them in terms of food prices because of how many people that have to be fed in China And and what you clearly see today is they are not doing a very good job of that The volatility in the hog market the hog feed market uh the which backs into the uh crushing margins and and the price of soybean meal in China has been all over the board for the last six to nine months It's driving I can just tell you it's driving them crazy and they hate it And and as they they just are not well equipped with this top down kind of uh you know dictatorial management style that they have Every decision has to be made at the top They're just not nimble enough to deal with it
Track 1they wanna participate in global trade and ie. Capitalism, but not be exposed to the risks of capitalism.
gregg-doud_3_03-24-2023_111310Right And so that's why their their default setting is well let's lock up a deal with the Brazilians Let's lock up a deal with the Russians Uh so we you know we don't have to worry about all of this You know they they appreciate the and they've told us this that you know we look we know the US has the safest food supply in the world We're not worried about buying food from the United States What we don't like about it is when we come in and buy a million tons of corn or a million tons of soybeans the price goes up that's what they don't like
Track 1Where's, where's flinch ball when you need him just in and draw. Draw supply and demand curve. And
gregg-doud_3_03-24-2023_111310exactly That that is uh that's the part of it That's the reason they don't like doing business with us
Track 1huh? So you think that it may be as much a safety and risk management move as it is preparation for World War iii
gregg-doud_3_03-24-2023_111310it's I I will tell you I do not believe that geopolitics enters into these conversations when they buy beef uh pork soybeans or corn from the United States It is Kafka that does this These guys these Kafka guys are great traders They understand what they're doing and it is strictly a function of price And and what we have to understand in the United States is that we have a window for exporting soybeans to China and it is in this off season from Brazil you have to understand that the Brazilians can't store their soybeans when they come They've gotta go to market And the Chinese know that they've got the Brazilians right where they want 'em on price and the Brazilians know it And the Brazilians are saying we're just gonna do it on volume
Track 1Hmm
gregg-doud_3_03-24-2023_111310we're gonna crank it out And when the Brazilians are rocking and rolling we are nowhere near price uh the the Brazilians have a freight advantage against us into China Uh they have a little better quality Now what what's interesting about that on soybeans Matt that most people don't realize is was when those Brazilian beans go to China they have to be used You can't storm because they came from a tropical climate US soybeans that go to China where do they go They go into their reserve they go into storage because we can't they can store us soybeans And and so it's it's a different conversation It it the the market operates differently and and how China does that And and these are things that are evolving and and changing a little bit over time but it it's it's things that us farmers have to understand and the guys helping manage risk On this side the guys in Chicago uh we have a lot of conversations about you know th this is how this is working on the beef side of the equation it's a little different Um and and this is this is something that's very important Matt There are 1.4 billion people in China but there are only about 300 million of them my estimation or about the same population in the United States that are buying US beef And what I mean by that is there's only about 300 million people in China that can afford Those those 300 million are middle class consumers by a global And in fact a bunch of 'em are as wealthy as anybody in the United States You have about a half a billion people in China that are subsistence just like those farmers in India Uh China has about a half a billion of those as well that generate no economic activity and the rest the balance of what 600 million or whatever that in are in China there's probably somewhere halfway in we even though the Chinese population this big thing well it's shrinking I don't really care about that I care about what's gonna happen with this 300 million And I think over time the 300 million is gonna slowly grow And if you look if you talk to Brett Stewart and you know who's the Cattle Facts international guy Uh dear friend of mine we talk all the time Who are those 300 million people in China buying U USB for The fascinating answer is it is young single men taking girls out on dates
Track 1Hmm.
gregg-doud_3_03-24-2023_111310and they take 'em to restaurants And when they go to restaurants what do they like like that Korean and Mongolian style barbecue They like that short rib just like the Korean consumer likes that short rib
Track 1Interesting
gregg-doud_3_03-24-2023_111310and literally it translates is we want the beef with the white fat we are the place on planet Earth that makes that stuff better than anybody else And those folks love it They love it and in fact after African swine fever and they had problems getting their hands on uh pork over there for a little while Tain preferences changed in China and last year China bought from the world Australia Argentina and just completely clean Brazil out of beef to a point where China imported 18 billion in beef from the world Last We only sold two and a half billion of that 18
Track 1So there's lots of upward, uh, potential there
gregg-doud_3_03-24-2023_111310Well that's that's the point is is if you and this is where I really yell at US agriculture if you looked 10 years out the road and this is the aim point business model well our our mantra is food security is national security We're working with boards and CEOs of companies all across the US industry to look 5 10 20 years out and and make sure that you're preparing for the changes that are coming in terms of technology et cetera and how things are going to evolve This is our business model This is what we do and we are incredibly busy doing it but it's hard work to understand all of this technology But what you see 10 years out Brett Stewart and I talk about this all the time is the supply of animal protein in the world The supply of dairy in the world comes nowhere near meeting the demand And if you look around the world Matt where in the world on planet earth are we gonna make more of this stuff You're not gonna make more of it in China You're not gonna make more of it in Southeast Asia You're sure not gonna be making more of it in Europe It's shrinking in Europe You might make some more of it in in South America here and there and everywhere but the only place on planet earth you make it can make more animal protein is North America and particularly the us And to me the center and the heart of that is the central and southern plains between the Texas plant handled in the Dakotas It's the only place on earth that you've got the water the grain the infrastructure uh to do it And you know I'm I'm gonna pound the table here and say our backsides and gear here Let's go this is what it all is You then what you see when you you work on the dairy side of the equation with case aid in in Western Kansas is these we are you know Dodge City just built this huge new dairy processing facility out there There's a big reason for that infrastructure Why are the California guys leaving and the dairy industry out there It isn't because of the environmental problems or the uh labor problems or whatever else which are significant but it's because they can't get commodities in by rail the cows or feed the chickens If you look at what happened out there last fall you had a big poultry farm out there that had to have an emergency order of the surface transportation board to force a railroad to bring them corn Their chickens we're gonna die can't take this stuff for granted Matt this this is where the the challenges are This is where the opportunity is What we spend a huge amount of time every day trying to help folks understand is this new thing called renewable diesel We're gonna make a whole lot more diesel fuel out of vegetable oil soybean oil canola oil going forward It's this is the the this year this will grow by an enormous here in the United States we are going to be using soybeans for the oil make renewable diesel in the future not for the meal And what we anticipate is we are gonna have a mountain of soybean meal Uh and and there's gonna be great challenges for what we do with it And you say well exporting soybean meal is really pretty hard It's difficult It's is not an easy thing to transport So thi this is the punchline Matt I have I grew up on a hog farm in north central Kansas Hogs cattle and every crop in between pigs and chickens are not pigs and chickens Matt they are little walking piles of corn and soybean meal They are
Track 1Yep
gregg-doud_3_03-24-2023_111310and so the opportunity is right there in front of us Let's go
Track 1So from a beef industry standpoint, um, there have been a lot of us saying, let's go for a while in terms of growing a cow herd and obviously the drought and. The limited forage and limited everything else. let's just talk about the ruminant side of things. Are we going to see, and, and I've got all kinds of different questions in terms of price of beef and where, how we get competitive on the global market and yet still have the high quality white fat beef that we've been known for. But let's just look at cow numbers. How do we grow this cow herd in the midst of the challenges that we've seen, both from a climate standpoint, drought, but also from a cost standpoint? Um, the signals still clearly aren't there yet to grow this cow herd.
gregg-doud_3_03-24-2023_111310Well it's very simple You can't grow a cow herd without hay And when you have hay at $450 a ton in California three 50 in Idaho and over 200 in Nebraska and northern Kansas et cetera uh who's gonna retain that heifer
Track 1Exactly Yep
gregg-doud_3_03-24-2023_111310ha the the heifer's going into the feed yard once it starts raining and and El Nino or the Nia is officially dead as of here a week or so ago Uh and that's why you see all this rain in California And I I am a firm believer that eventually Kansas is we're one day closer to Rain Man Western Kansas Get some
Track 1been saying that a while,
gregg-doud_3_03-24-2023_111310Oh you've gotta have rain to make hay And and once we get this hay price back down we can we can crank and go And when that happens think about what changes is that cow no longer goes to slaughter She stays out there
Track 1Yep.
gregg-doud_3_03-24-2023_111310heifer if you retain her
Track 1doesn't go into feed yard
gregg-doud_3_03-24-2023_111310in the feed lot and all of a sudden your beef supply shrinks rather dramatically I I'm I'm probably gonna say something here that'll get me in trouble but the entity that I would not want to be right now is Wendy's because that fresh and not frozen ground beef is gonna get really expensive in my opinion once it starts raining and we start seeing this thing turn and uh that's where you're gonna get the price on on the the beef side of the equation Uh but in order to do that you've gotta have hay and and that means it's got a rain And that's just the the the challenge is I should say the upside is look how long does it take once the day that rancher makes that decision to retain that heifer in the herd and not put her in the feed lot How long does it take before the offspring from that heifer ends up on the retail meat case
Track 1three plus
gregg-doud_3_03-24-2023_111310the answer is plus or minus three years
Track 1Yep.
gregg-doud_3_03-24-2023_111310So what I'm telling you is the fact that we know today un we've got three years of high prices coming at us even if it does start raining you've got no inventory You've swung the pendulum farther this time than maybe we've seen it in decades Now the question is and the challenge is your competition or it isn't about access to international markets international competitiveness uh you you're not racing against imported beef You're racing against domestic pork and poultry And the challenge is is these chicken guys can on in six weeks it takes you three years It takes them six weeks Who's gonna win the race
Track 1Yep. They're a lot more nimble
gregg-doud_3_03-24-2023_111310the great challenge for us But I I will tell you I I like our odds on the beef side of the equation because we've got the best product in the world what's interesting about the Chinese mat is the Chinese really don't like poultry Three years ago four years ago when we were having these conversations they told us that I had great visits with them and the fact that they only eat the dark meat lot of breast meat in China gets cooked and brought over here and put in dog food
Track 1Wow
gregg-doud_3_03-24-2023_111310eat it By the way We send China about almost a billion dollars worth of poultry You know what About 600 million of that stuff is Matt
Track 1is it the Gizzards?
gregg-doud_3_03-24-2023_111310Nope it's the pause
Track 1Oh my. I knew that. Oh, I forgot that. Yeah.
gregg-doud_3_03-24-2023_111310600 million in chicken feet from the US Go to China
Track 1Wowza.
gregg-doud_3_03-24-2023_111310It's insane
Track 1I guess they've got to uh
gregg-doud_3_03-24-2023_111310it's a they they kind of deep fat fry you know it's a delicacy
Track 1yeah, I, I, I, they eat before or after the tongue, huh? The beef tongue All right
gregg-doud_3_03-24-2023_111310mean that's it's so that's what makes this whole thing kind of fun I love meat trade because it's just uh the the way you do it is is not you You really once you kind of learn it it makes it a lot of fun to see where the trade flows are and what goes and and and the point is the uh what we do domestically and consume domestically is or works so well with what we export And that's where the US Media Export Federation over the years has done such an incredible job is finding markets for the stuff that we don't eat domestically or develop help develop those markets whether it's chicken feet or whether it's livers or tongues or whatever it is It just it works in simpatico so well
Track 1and I think that's what gets lost sometimes on, on a lot of farmers and ranchers out here that, uh, see local demand for steaks and. ground beef and roasts and say, you know, with prices like this, why would we wanna send it across? And, and it's right there. It's because they're taking the stuff that we won't consume at any price.
gregg-doud_3_03-24-2023_111310that that is e Exactly right And and so you know let let's I want to get through I have several talking points I wanna get through it
Track 1Okay Yep Yep him
gregg-doud_3_03-24-2023_111310I you know I've been doing this 20 some years One of the fascinating business models to me is Whole Foods and the non-hormone treated cattle So we have non-hormone treated cattle European cattle and that that thing still drives me crazy with the Europeans And and I don't want to go into all why that is and that why we you know we wanted a WTO case 30 years ago We still can't get it in there But here's the point We sell the stakes from those cattle to Whole Foods We sell the and the rounds to Europe it works We we figured out a business model Tyson Foods has figured how to business model to get into that European market and make all that work So we still sell the Europeans today about a quarter of a billion dollars where they're non-hormone treated trucks and rounds Uh but the reason that is is you got a place to sell them for a premium and the stakes in the domestic um on the on the cool and the trade side of the equation this has always driven me crazy because the whole cool thing is predicated on the notion of of the way to succeed in the cattle businesses by shrinking the size of the industry Now uh help me understand Matt any other or any other thing in this world in this economy in the US where you get ahead by shrinking and I have yet to have anybody ever find an industry where that's the So that's that's point number one on this But point number two is is the thing that I learned a long time ago That is fascinating Half of the beef that we import from Canada is not beef And again this gets into the trade flows and the parts are parts It is 50 50 trim It is you know we have about 90 pounds of that carcass is 50 50 trim Canadian 50 50 trim 80% of the cattle are in Canada are up in Alberta That 50 50 trim goes into big grinders out in California to make fast food hamburger import cool cows and bowls from Australia New Zealand We import 50 50 trim from our plants and from those Canada plants And those grinders out in California make that McDonald's hamburger That's what it is Now we also sell about 800 million worth of US beef to Canada Why And the answer is because all of the people in Canada live in Toronto in the east So here's the requisite question Who is closer to Toronto Calgary Alberta or that J J B S plant in Grand Island Nebraska Matt who's closer
Track 1Grand Island, Nebraska,
gregg-doud_3_03-24-2023_111310by how much
Track 1uh, I'm gonna say 500 miles,
gregg-doud_3_03-24-2023_111310almost exactly 1000 miles
Track 1Wow.
gregg-doud_3_03-24-2023_111310diesel fuel
Track 1Yep
gregg-doud_3_03-24-2023_111310we import an export between Unbe between the US and Canada The answer is diesel fuel
Track 1And that's a bigger deal today even than it was when we were talking about M years ago.
gregg-doud_3_03-24-2023_111310So if you didn't and then the point is we yeah we export what close to a million head of cattle from Mexico a year They're 400 pounders It's all US genetics it's all ranchers that now live in El Paso or Um I know a huge number of them from my cattleman days all of those cattle are are right up against the US Mexico border The vast vast majority of 'em it's US genetics They're good cattle They go into those Texas feed lots The the point is you know at at some point you have somewhere between 25 and 50% of Texas uh feedlots are full of those Mexican cattle what's the point If we didn't have those much would our industry shrink in Texas And then when you swung the pendulum to the other side when we try to expand this thing again you can't do it because you don't have the slaughter capacity
Track 1Yep
gregg-doud_3_03-24-2023_111310so this this machine this this living thing of cattle and and beef trade between us Mexico and Canada like an accordion The the ca it is a reflection of the cattle cycle here It shrinks and expands Uh based upon what we're doing here and and uh thank goodness we have that flex or we wouldn't be able to expand our industry when we get on the other side of the cycle
Track 1Yeah, that was the challenging part. As I heard some of the same folks who 20 years ago were adamantly opposed to imported live cattle from Mexico. Um, saw eight or nine plants close over the last decade or so, and not that m cool had much to do, but quite possibly some to do with fewer imports of calves and, and then closed plant here or there because of the drought of 12, 13, 14, and, and, you know, the cattle cycle and everything else. Now all of a sudden we're hearing from those same folks about the need for more slaughter capacity uh it, it's. you know
gregg-doud_3_03-24-2023_111310by the way now is exactly the wrong time to be building a slaughter plant on the pee side of the equation
Track 1I um yeah it's
gregg-doud_3_03-24-2023_111310am a huge fan of of the smaller plants that you know are are doing you know somewhere you know a few hundred head or a hundred head or two 300 head a week I love to see that And I and I love to see the the innovation in marketing that comes from that Uh I just worry you know I grew up Mankato Kansas Matt hometown of Dubuque packing company
Track 1Yep
gregg-doud_3_03-24-2023_111310plant that closed when I was a senior in high school in 1985 because they refused to uh convert it from swinging sides to the box beef So I know the industry you know grew up with but uh the uh that was a thousand that plant was a thousand head a week and when it was running and and they had a hard time keeping it going because of labor and and other issues But uh that the problem with that facility is it just can't compete with Grand island that you know in those days was 3000 and today is over 5,000 head a day And and that's that's the fundamental challenge here And and this is this is the point The folks that advocate for all of this change and and we've gotta have this and gotta have that and and and the supply chain and cattle isn't working right Okay I I I I hear what you're saying but here's the counter-argument you're ad advocating for enhance or raise or increase the cost of processing make the processing side of this less efficient So when you do that you decrease producer gets the consumer has to pay more So that the beauty of of what we have in terms of processing today is that we minimize processing cost of converting that animal uh from having the hide on it to taking the hide off and making a mistake out of And the the more you compress that margin in the middle the more the producer gets and the less the consumer pays And that's the way you have to think about this is and and the requisite study on all of this was done 20 years ago by U S D A and and research triangle folks uh down there in in the Carolinas And what it demonstrated and I was in the meetings with the Department of Justice economists back in those days uh early Obama days 2009 2010 And those economists at DOJ looked at all of this and said this this is an incredibly efficient industry This is not market power This is this is not a lack of uh buyers this is just efficiency and and what you see from that study and and nothing has really changed Matt is uh where those plants are processing plants are located and their size is incredibly efficient
Track 1and yet we are really frustrated in those times that line up so perfectly as they did just pre and through the pandemic and, and that processing segment. and its efficiency and its, time this cattle cycle, um, was extremely profitable and so much so that it, it raised all kinds of red flags and that's coming back into line now and I think, um, you know, if we get to 27, 20 8 million cows here for this foreseeable future, um, yeah, those, I hope they stashed a lot of those profits away cuz they may they may need 'em
gregg-doud_3_03-24-2023_111310they're gunning that that's exactly right And in fact you already see them You know from my perspective in the industry today the number one issue the number two issue and the number three issue in US agriculture is labor Labor and labor a huge challenge for us going forward but I want I want one more point
Track 1Okay
gregg-doud_3_03-24-2023_111310I want to have on all of this and this is something I explained to my National Economic Council colleagues in the White House during Covid and when all this was going on I said let let me explain to you this works When we have a supply chain interruption like we had during Covid and the meat industry I said in the poultry side of the equation can bring the supply and demand of broiler Into balance in six weeks very simply by breaking eggs
Track 1Mm-hmm
gregg-doud_3_03-24-2023_111310the pork industry is a conveyor belt that does not shut off the way I the analogy that I always use Matt it's the old uh uh Lucy Lucille Ball skit of the Luci
Track 1The chocolates. Yeah.
gregg-doud_3_03-24-2023_111310You remember that old skit where that conveyor belt you know things all of a sudden she starts to not pay attention and all of a sudden chocolate's on the floor and you got a huge wreck That's the hog When when you have this happen you are gonna wreck things bad on the front end of this you're the market's gonna do you know it's gonna do bad things People are gonna lose money but then eventually it gets itself sorted out The cattle business is very different than any of those things The answer is on cattle You can back that inventory all the way up through the chain and you never really have a wreck at the front end ever And we didn't challenge is it'll take you a year to work through that inventory
Track 1Yep
gregg-doud_3_03-24-2023_111310you'd never the so for the next year everybody's like well this thing just isn't acting right We keep kind of wadding the the weed up in the in the uh feeder chain here We never can really quite get to current and that is exactly what we saw
Track 1So here's a question for you, in your opinion. is it because of the 283 day gestation interval and 16, 18 months to harvest that it takes so long? Or is it because of the cattleman's mentality as compared to hog producers and poultry producers and their response to data and to stuff like that? Are we, is it just because we're so stinking stuck in our ways?
gregg-doud_3_03-24-2023_111310it's it's the how long it takes
Track 1Okay I
gregg-doud_3_03-24-2023_111310put that when you expose that cow to that bowl and when you put that steak uh in your uh uh grocery cart that's the challenge The the beauty of it though on the beef side Matt is that there are so many different business models that can be successful pork or poultry There are a lot of different ways hundreds of different ways of getting from A to Z But I I will tell you is a kid from North central Kansas that lived it that is still owner of a and a partner in a cow calf operation I've been in cattle the majority of my life I've own cattle that is the art to making money in the cattle business between 800 or excuse me between 508 or 900 pounds That's is as the rancher If you can retain that critter and get him to eight or 900 pounds uh that's the piece of it where you're gonna make the money And and the challenge is the guy that sells that guy that calf off the weening mama cow balling you're just leaving money on the table here In my humble opinion
Track 1and back to my statement about tradition. What percentage of our industry participants in the Cal calf segment sell those critters? in that five to 600 pound area. I mean, the 80, the Pareto principle of 80 20 may not even touch it. I'm not sure. Uh, there's just that few retained ownership cattle all the way through
gregg-doud_3_03-24-2023_111310Now when you know I'm a firm believer when you get 'em and and that's what we do And that when when I was a kid I five gallon bucket fed calves ground milo after school and whatever you know between uh September and the you know we usually sold our calves at the sale barn either last week in December or first week in January every year And the goal was try to get some of 'em to 800 pounds And and you were you were probably averaging seven to seven 50 These creators are a whole lot bigger today We're doing that today Uh we're we're selling 'em as as one year olds for 900 pounds today that is uh you you can cut a pretty good lick doing that today in in uh what we're doing That's good money But I will tell you what my opinion is This is just me Matt Once you get 'em a 900 uh you turn the rest of that over to a professional who can take that risk
Track 1Hmm Yep Well that's um, that model has worked for, for a lot of people, for a lot of years. For sure. So you talked about the brick cartel, you talked about a lot of these, um, different threats in your, in your war game. You said you spend three hours in that intel briefing. Um, where do you go from there and what are you, are you sending at folks in those war games if you can?
gregg-doud_3_03-24-2023_111310Two things The way forward in US agriculture is the use of technology and and what we on every day is trying to wrap our ahead around how much of it and what it is coming uh whether it's robotics whether it's biologics in terms of fertilizer whether it's uh food is medicine these are all things that uh we we folks understand When I say food is medicine I'm talking about individualized nutrition the gut biome understanding the relationship between enzymes and the soil enzymes and your ruminant Animal and enzymes in your own personal gut uh the technology uh that is coming the research that is coming in all of these areas is mind bending to me It's really cool Um it it takes everything that from my case state pre-vet days to wrap my head and understand how all this is working It is is uh number one The other side of it from a policy standpoint is we have to help agriculture understand is that you've got to broaden the coalition on these labor issues You have got to begin to build a coalition with the Hispanic community And the challenge is with these ag groups and I'll be honest with you man I'm not a big fan of some they're set in their ways and they've been around a long time and I understand that and appreciate that But the problem is and I've talked to 'em about is is that Hispanic community may not have that association or that group You may have to go out and help them build that first before you build that coalition But agriculture has got to broaden its coalition with regard to the politics and the economy in the United States if it has any hope to be successful cuz you have a whole bunch of people that wanna blame agriculture for things that it shouldn't be blamed for and you've gotta figure out how to cope and deal with that
Track 1So when we broaden that coalition, are, are you talking about building an association of associations within ag or are you talking about stepping clear outside of production ag and joining forces with the local steel workers number, whatever? what what are those Okay
gregg-doud_3_03-24-2023_111310and and and and it has to take several shapes and forms And so let me let me kind of close here by explaining you why I went to work for Endpoint Research is because I saw my the ceo my boss now Brett Scott I'll give a presentation that he's given literally probably a thousand times in the last several years to US Agricultural Groups And it is called Farmer of the Future It is what a US farmer looks like in 20 years and it is a psychographic segment of the mindset of farmers regardless of their age regardless of their size is whether these folks are entrepreneurials whether they're just set in their ways or whether they're just you know belt buckle guys that uh don't understand how to run a pencil And and the answer is what my boss harps and and really helps uh the uh the bankers and the retailers and the everybody understand is if you're the co-ops is if your business model is geared towards the squeaky wheel you're gonna go broke with the squeaky wheel you are not geared towards understanding what the best and brightest entrepreneurs and agriculture are gonna need and the answer is in 20 years they're not gonna be buying uh fuel and fertilizer from the local co-op They're not gonna be borrowing money from the local bank They're gonna be borrowing money from Wall Street If you can't figure out how to be relevant and provide services to these guys you're not gonna be around So figure out what it takes to be relevant and get after it And uh I will tell you uh it's resonating and uh we we have to help everybody realize that you've got to go forward with this mindset and in particular with the use of technology if you're gonna be successful
Track 1that's, um, that's a great way to bring it all together. It's a scary way for a lot of folks, um, who feel like one big powerful part of being that production agriculturalists farmers, ranchers, either one, is the independence, is that ability to just do business with somebody you can shake hands with. see on Main Street on Monday morning. Um, and that's a tough paradigm for a lot of folks to, to shift. But as you talk about cartels overseas, as you talk about, broadening coalitions, there's not a lot of other choice. So I guess the question in this may be for podcast number two, if I ever get you back on here, is how do we do what you're talking about doing and still maintain Main Street, Mankato, Kansas, Eureka, Kansas wherever it is
gregg-doud_3_03-24-2023_111310that's where you get into the you know the the the local processing that that farmer direct marketing to the consumer with with uh our ability to to do direct to consumer marketing and sales today with products that's going on all over the place Look at what the wine in wine industry is doing You know there's a lot of this going on in meat love that stuff To me that is that is you know there there and that's the point There are all kinds of business models like that that will work that will be successful but you're you can't just say that uh you know I'm gonna do it this way You're gonna have to reach out to some people and partner with some people and and and and build something that's bigger than yourself to do that You can't just do that on your own You're you're gonna have You're gonna have to work at it and and the folks that are gonna do that are gonna be successful No question about it
Track 1Yep. Well, that's good stuff, and we always talk about having an eye to the future, but, uh, I'm not sure I've ever heard it put into your boss's title and one that you may have just, uh, nominated for your podcast title, the Farmer of the Future, because that's what we all have to strive to be if we're going to be here for generations to come. Well, I have the bat, you've got, and then the, The listeners can't see it, but tell me it all is on your wall, um, above the power CATT flag there. Uh, because there's some pretty cool history
gregg-doud_3_03-24-2023_111310Well first of all I've got the power Cat flag Uh the uh purple wood that's actually made by Chris Brock Manhattan Kansas These are made I went I grew up with him He his dad was the banker in Mankato We we went all the way till about a sophomore junior in high school from from grade school together So Chris is a dear friend of mine and uh this is uh this is the things that he makes and you've seen him a lot around Manhattan there And and everybody ought to get themselves one of these and have Chris make one cuz I it's right where it is I I've got that right behind me and every everything that I do and and I've got some case aid up stuff up there I've got a picture of me in the Oval Office uh with the President Ivanka and my boss and and and got the up here uh or one of the pictures with the Senator Roberts I worked uh for him on the Senate Ag Committee And uh I've, I've been in DC 30 years now, which means I'm no longer of any value to anyone in the outside world, Matt. But, uh, I, I, my politics is I'm a Pat Roberts Republican.
Track 1Well, uh, your resume is impressive, but when you see things like that, on your backdrop, it makes it even more so. So we're glad that you could be here with us, uh, today and share that insight. So thanks again, Greg.
gregg-doud_3_03-24-2023_111310You bet Good to talk to you Matt
MattThanks for joining us for practically ranching brought to you by Dale banks, Angus. We just opened our private treaty bull offering this spring. So if you're in the market for practical, profitable, genetics to fit your needs, we'd love to visit with you. Contact Matt today, 6 2 0 5 8 3. 43 0 5 or email us at Matt Perrier. At Dale banks.com. God bless. We'll see again in two weeks here on practically ranching.
