Well, I guess give me a sense of, you know, all the different challenges that are being
faced by soybean farmers right now because they're, obviously there's the usual ones
and then there's the new ones and the global ones and the local ones.
Right.
So, challenges right now for soybean farmers are manifold.
Number one we would probably say is trade.
Trade is our, we export over half of the soybeans we grow in this country, maybe 60% in a normal
year.
So, so when our, when our international trade falls off, we feel it very, very quickly because
it's such a large percentage of our soybean production.
The second area that is challenging but also an opportunity and that is biofuels.
If you've been listening, you know a little bit about what's going on with the 45D tax
credit, sustainable aviation fuel, California Air Resources Board has made some, some, some,
let's just say wrinkles in the water.
But by and large, if we can get our biofuels thing working the way we would like to see
it, that will go a long ways toward giving us new demand and that new demand is really,
really important.
They'll probably mean instead of exporting soybeans in the future, if this can all happen,
it'll be export soybean meal.
Now interestingly on the global stage, Brazil doing the exact same thing.
They're ramping up their soybean processing and they've already got a 15% biofuels mandate
for diesel fuel.
So they will be using a lot of their soybean oil also for, for fuel.
We're a little bit behind them in terms of our, you know, our government is a little
bit slower to set things up and what's most important is that we send a clear signal to
our processors, to the soybean industry, so that they are willing to make the investments.
The investors are not going to invest in a new frontier without some kind of assurances
that it's going to be here, that it's not, you know, this administration and then the
next administration, we're going a different direction.
So we have to be very, very clear in terms of our policy that we send the signals that
are unwavering and consistent in that lack of consistent clarity seems to be the biggest
issue right now, especially with the federal government in terms of what will be the policy
tomorrow or next week or next year.
Really consistency is absolutely essential.
A couple of years ago, you know, there was a pretty good signal that this is the direction
we were going and there were quite a few new plants planned and many of them were built.
And the last administration was very slow to follow through on that.
And this administration hasn't put the fast track on any of it, it's just been painstakingly
slow no matter which side of the aisle you're on.
As farmers, we would like to see this clarity to build certainty in our markets.
If our exports are going to change, if we're going to constantly be at a disadvantage to
our South American producers, which is all indications are they're not going to stop,
then we clearly have to build other markets.
And I think the biofuel thing is a perfect example of that.
Yes, we need international trade.
Yes, we have opportunities in international trade.
I think there's more to come.
Our United Swiping Export Council has worked diligently on the commercial side, working
with our large swiping processors, on the IP in the food grade side, SSGA has done a wonderful
job of finding new markets and building the markets that we already have.
So we can't turn our back on our existing markets.
But we need to build because farmers in this country have a tremendous ability to produce
and we, without markets, that production capacity will drive us as it doesn't all commodities
toward breakeven and below and that doesn't work for any business for very long.
So right now, the biggest thing in the headlines is China saying we're not buying from the
US anymore and that's part of a trade dispute.
Change it to that is also Brazil increasing production and creating new markets for China
to go to.
So they have that opportunity.
Do you think China coming back in is still on the table or at this point should the US
and farmers be talking about new markets and new products entirely and not worrying about
China?
We would welcome China to come back and I mean, the facts are in the marketplace, our beans
are cheaper than Brazil.
So in the absence of tariffs, we're ultra competitive.
In fact, isn't it interesting that just last week we exported two containers or two ships
full of beans to Brazil?
Oh, why did that happen?
Well, it happened because our beans are really competitive.
So yes, this trade dispute is a big deal and we do need to get it fixed.
I can't force it to happen.
No farmer kin.
The economic incentives are there.
We really welcome China back with open arms as a buyer.
We understand that we have to be competitive.
We're more than happy to be competitive.
We're more than happy to do whatever we need to to build markets in a fair and equitable
fashion.
Market access is really important to us.
We need a level playing field.
So what does it mean now in the very near future, as I've been coming up on harvest
for farmers now, what percentage of the fields are already sold and contracted versus what
percentage is still sitting there not knowing where it's going to go or who's going to buy
it?
Well, I think you have two parts to that question.
One is on the producer side, I would say that very few producers have beans forward
and contracted.
Largely this crop is waiting for a rally, waiting for an upsurge in prices.
When the combines roll and the beans come off, the people in the middle that buy the
beans, they're going to buy the beans.
If they don't have a home form, typically that means they'll widen the basis.
That means they're going to take less risk.
They're going to pass that risk on to the farmer.
Instead of having a 50 cents under or 80 cents under basis, maybe that basis will go to $1.20
under or $1.50 under.
When storage space is at a premium, when there isn't any bin space left, then the basis will
widen even further.
We need the market to take the beans.
Typically in this country, we don't store our soybeans very long.
Typically, we do move them off the field.
The exception might be those that are doing the food grade side because that's a steady
flow through the year.
But certainly on the commercial side, a lot of those beans are bought off the field by
the marketplace.
If we drive around, most of those fields have not been, they're not assigned yet.
They're still waiting to see what it's going to look like.
Those farmers are going to harvest the beans.
They're going to load them in a truck.
If they have a bin, they're going to put them in.
If they don't, they're going to take them to the elevator.
When they get to the elevator, they have a couple of choices.
Take what's offered, or put them in the commercial storage and begin to pay a storage premium,
which is so much a month.
Then as you know, there's also interest values on the value of that soybean.
Storage costs can be somewhere in maybe $0.10 per bushel per month.
To think that you can put them in the bin and they'll be worth $1 more next spring is
sometimes short-sighted because sometimes the storage costs more than eat up the increase
in the price over time.
What are we looking at for the impact, barring some change in the international situation?
Are farmers going to go under, is this going to be just a bad year?
What will the impact be in the short-term?
Well, it's a good thing we have a good yield, doesn't do anything.
A good yield never helps price because it means more supply.
Certainly farmers that are short on working capital or young and don't have a lot of equity,
they're not well financed, they're at risk, they're at significant risk.
Very simply put, if a farmer can't pay his bills, it isn't long that that trickles into
all of the people he does businesses with and they are not able then to get compensated
for the services and the goods that they provide.
And then that has a ripple effect to the next step.
So large agronomy companies, large machinery companies, land owners, if they can't pay
the rent, they can't pay the lease payment on this equipment, he can't buy inputs for
next year, he doesn't have last years paid off yet, it's a snowball effect.
And so to think that it's just a farmer's problem is short-sighted.
Agriculture is still the basis of our economy in so many ways, especially here in Wisconsin.
It's the foundation and without that foundation, those ripples go out across, affect every
one of us.
And there's a lot of small communities that still are centered around that farming community
that, you know, it's the diner, the gas station, the restaurants and like all those will see
those impacts, right?
Yeah, it doesn't hold any favorites, it's pretty universal.
So obviously there's a political aspect to this.
Farmers by and large supported Donald Trump.
Have you seen any change in the mentality of some of the farmers who supported that and
saying, wait a minute, I didn't think this was going to be the result?
Or are they keeping those feelings separate?
Well, certainly there's some pain, certainly there's some uneasiness.
And as farmers, we would much prefer to have the marketplace give us our financial stability
as opposed to the government coming in and saying, okay, we see that there's all this
damage done.
So here's a sandwich for your lunch pail.
We much prefer markets and we always have and we always will.
That being said, I don't know that either administration is totally, gets a free pass
on this, clearly there have been instances in the past where it's been the other side.
By and large, Trump is a free market person, however, he's become a little bit protectionist
with this tariff approach.
And I think we're concerned.
I think we're very concerned because it's affecting our livelihoods.
Can we see past this?
It's pretty cloudy.
We don't know, but we certainly want our markets, we certainly want our markets alive and robust.
So when we were talking on the phone, you were giving me some numbers about the average
yield and the loss that you're potentially seeing.
So can you run some of those by me again and talk about some of the big numbers that some
farmers could be facing?
Sure.
So if we talk about one acre, it's difficult, but let's talk about a thousand acres.
So a typical grain farmer, probably farms a thousand acres.
So if we take a thousand acres of soybeans.
Just for easy math, say that the average yield is 50 bushels per acre.
So we have 50,000 bushels of soybeans, a production on a thousand acres in a given year.
When the market price is $13 compared to the market price of $10, let's just say $10
to $13.
Let's say there's a $3 drop in a value.
That's $150,000 reduction in his gross income.
That didn't change his fertilizer cost.
That didn't change his feed cost or seed cost.
That didn't change his machinery cost.
That didn't change his labor cost.
That didn't change his trucking cost.
That didn't change any of his cost structure.
It just took $150,000 off the top of a thousand acres of beans.
That's a lot.
I mean, can farmers absorb that?
I mean, most people don't know the economies of scale that exist in a farming operation
or a farmer of that size.
Is that something that they can absorb?
The average farmer or is that something that puts them out?
Versus tolerate.
If you're financially stable and you have working capital, if you have equity and you
have a good relationship with your lender, your lender will probably loan you the money
to keep you in business.
If you're young and you don't have a lot of equity or if you're already highly leveraged,
the answer is no.
The bricks start to crumble and when they start to crumble, it seems like it only gets worse
with time.
So, the question is, can you take one bad year?
Can you take two?
I would argue that a farmer that doesn't have any debt certainly has lots of ability to
tolerate some adversity.
He may be able to afford to put the beans in the bin and wait for better days.
There's probably a fair amount of that.
I have two years of wheat in the bin right now.
I have some corn left from last year in the bin right now because I haven't been happy
about the pricing.
Perhaps in wheat, it's more of a quality issue.
So, we have all these adversity things and we always will, but marketing is still the
reason people survive or people fail and this year is no exception.
So, when it's out of our control, it's especially frustrating.
So one of the other things that's happening in Wisconsin, and we kind of touched on this,
there's the Crusher facility down by Evansville trying to create a new place for the beans
to go, a new market.
How key are for things like that to come on, whether that is for food grade or if that's
for fuel grade or for any other purpose, like having some place local instead of having
to barge it down the river?
So Wisconsin is unique in that we are one of the few soybean states that does not have
a soybean processing facility.
That means that all of the beans that are produced here in Wisconsin have to travel to
someplace else out of state.
In this part of Wisconsin, it's usually Minnesota to a processor that makes soybean meal and
an oil or it goes to the river at Winona or St. Paul and it's loaded on a barge and goes
for export.
Or perhaps it's loaded in a container and sent by rail to the PNW or LA Long Beach or
Norfolk, Virginia, where it can find itself on a container ship with beans bound for export.
Those are our only choices.
Even the beans that are fed here locally, by and large, go to a processing plant where
they're separated, they'll oil the meal.
The meal comes back, now the farmers here then pay freight both ways.
It's freight take the beans, it's freight to bring the meal back.
That's a double tax for livestock producer here in Wisconsin for the feed part of it.
So yes, those things are critical, those are crucial.
Now it's a long ways to Evansville.
It's probably still less miles to go to Mankato.
So will that affect us up here directly?
No, but indirectly, you've heard it said that a rising tide floats all boats.
So indirectly as that demand would come on and that plant is not being built yet, as
you know, it's kind of in limbo waiting for clarity again from policy makers and they're
actively engaged, they're working on these things, but sometimes the speed that these
things happen are painfully, they really languish sometimes.
So you were telling me before that you also grow some food grade soybeans.
What's the difference in terms of the market and the situation, is that change in your
big world picture, like for having those different varieties?
Well, from a diversity standpoint, it hasn't changed.
But food grade beans typically have associated with them a premium.
So if the Chicago Board of Trade price used $10 again as a benchmark, if our premium
for food grade beans is $2 above Chicago, then that means that the price we receive
would be $12.
And the local market would say that non-food grade beans, or what we call commercial
soybeans, if they're going to crush or to export and the local buyers are probably currently
bidding somewhere around $80 under, that would mean that they're paying $9.20 for that
same bean that Chicago says is worth $10.
So you can look at it a little bit like that, $2 premium is our basis, that's what we can
come to expect.
And typically those are all contracted, they're contracted in terms of that's what the premium
is going to be, but that doesn't mean the price is set.
So we can elect the price when the board says, oh, this is a good time to sell.
If it's $10, then we'll lock in our $10 plus $2.12.
If we wait, then they drop to $9, then we'd lock in $9 plus $2 is 11.
So the market still treats us the same.
It's just that that premium for food grade means that we're going to experience.
Food grade beans are largely non-GMO, most of the buyers want non-GMO for food production,
tofu, miso, soy milk, tempeh, natto.
So there's a lot of, and most of them are Asian markets.
We love to have those markets and we've had them for a long time.
Our relationships with those buyers are solid and strong, but typically what we sell to China
has not been in the food sector.
We've had Korean people come in and take tours to try and expand that market, right?
That's where some of those markets exist, Korea or Japan?
Korea, Japan, Indonesia, Vietnam, Philippines, Thailand, really the whole Asian sector is
where the food sector is the most robust.
So in terms of the storage...
I didn't mention Taiwan.
Taiwan's another really good.
And we have a good trade relationship with Taiwan, and we have an agreement with Taiwan.
As long as they still remain Taiwan, right?
We have an interest that they would.
In terms of your ability to store, you said you're one of the few that actually still
like can store your own soybeans.
Would you expect with the uncertainty that exists from maybe more people that have the
ability of the capital to build facilities to start thinking, maybe this is what I need
to do to try and even out some of the uncertainty over instead of one season, maybe over two
or three seasons if I can store some?
Well, again, we talked a little bit earlier about the fact that defer pricing or waiting
to price later is not always a good thing.
If the bean is worth $10 and the interest rate is for a typical farmer who's operating
loan is probably going to be 7 to 8 percent.
So in a year's time, a $10 bean is going to incur 80 cents cost just in the interest.
A couple of that with the fact that it does cost something for electricity and to service
the structure and to pay the insurance on it and all the rest of your typical costs are
probably instead of being 8 cents per, or 80 cents per bushel.
It might be closer to $1.20, $1.30 even.
So it's not free to store those beans.
The tradeoff is, is the upside potential enough to take the risk on not pricing?
How long does a car maker last if they don't sell any vehicles and they just fill all their
their lots full of vehicles?
It becomes a real top heavy burden to carry the inventory.
At some point in time, the automaker will get sales going.
They'll start to slash the prices.
Farm machinery manufacturers are the same way.
If John Deere starts sitting on too much machinery, the prices will come down and that that will
have to move because if it doesn't, all of that burden of that inventory just becomes
unbearable and so we're the same way.
We produce more every year.
We have to stay current with our markets.
Typically, you can't afford to build a storage facility that it would take to ride out these
dips in the market.
So you, you, we've been using the kind of the numbers of 13 and 10.
What would the, in that scenario, what would the input cost for next year be in that scenario?
Is it above 10 or below 10 or can you, will farmers be able to get the money to actually
put crops in the ground next year?
Wow.
That's going to depend.
That's going to depend on each individual farmer.
At $10, every advisor that I've read says we're below the cost of production.
A cost of production is dependent on achieving an average yield.
So if your average yield is 50 bushels, you can't produce 50 bushels of the beans for
$10, maybe your cost is $10.50, maybe it's 11, but it's something above 10.
If suddenly you produce 60 bushels, then you get closer, maybe you even get to break even.
But certainly if you drop to 40 bushels, now you really start to bleed.
So the answer is it depends.
But on average, our cost of production is higher than $10 a bushel.
So you're on some of the, the state boards looking at soybeans.
Is there anything at a state level that can be done besides trying to help create these
markets and create these relationships or is most of this in a broader network that exists
outside of that?
Well, yes, I serve on the Wisconsin Swobean Marketing Board and that board has the charge
of using the check-off dollars.
There's an assessment on every bushel of soybeans that goes into research and market development,
promotion, education, these kinds of things to help build markets or to help farmers be
more productive or more efficient in growing soybeans.
So our charge is very simply take a small amount of the money from the soybean and give
the farmer whose money it is, a return on that investment by building markets or improving
his productivity, to improve the financial well-being, the profits, if you will, for
those farmers.
Certainly what we're trying to do by encouraging a plant to be built in Evansville is an example
of that.
We have supported that.
We have done some things with the check-off money to help that happen.
It hasn't happened yet.
We can't force it to happen.
We invest regularly into overseas exports and one of the boards that I serve on is called
the Soy Transportation Coalition, which is made up of farmers that are concerned with
all things transportation related within the soybean industry.
So that's whether that's rail traffic, whether that's containerized traffic, whether
that's truck traffic, whether that's rural bridges, whether that's our ports, whether
that's overseas, anything that takes to move soybeans is what we're focused on.
And so certainly there are things that we can do there to identify opportunities and
identify bottlenecks and encourage and help and facilitate improvements in the infrastructure
that make those things possible.
Anything else you want to add along these lines that we've talked about?
No, I guess I remain optimistic.
I remain highly concerned about our trade and the impediments to that trade.
I hope that we can reach some kind of a solution sooner rather than later.
We're running out of time.
Brazil's planting their beans.
They'll be ready for harvest next winter.
When they start making a new crop, if we don't have ours marketed, guess what?
We're going to have a lot of beans.
And so whether it's biofuels or whether it's exports or whether it's both or some combination,
we need to see these things happen.
Can you give me some details on how many acres you have here and what percent of corn versus
soybeans?
So my total farm operation is about 3,800, 3,800.
That's broken down into, you might as well say about 40% corn and 40% soybeans.
There's also about 20% into wheat.
So I practice typically a corn bean rotation, but we put wheat in whenever we start to struggle
with weeds.
When we get wheat in the rotation, we can really put a hammer on the wheat.
So the wheat is kind of as needed, but typically there's 5-600 acres of wheat to eat.
You'd treat the wheat more as a cover crop, or you said you stored some wheat.
It's a crop.
We also do cover crops behind every acre if we can.
So typically after the soybeans, if it's not going to winter wheat, because it'll be
winter wheat, it would be seeded to either cereal rye or winter camelina.
So I'm fooling around with some other crops a little bit to try to see if I can find something
else to diversify.
Is there any consideration that you've heard of people putting in less soybeans next year?
Simply because soybeans aren't doing as well, or is it too much to mess with the rotation
and try to do it that way?
Typically the penalty for not sticking with a rotation is bigger than the market penalty.
Our corn prices are soft as well.
It's not just soybeans, it's just that most farmers understand the agronomic benefits
of a rotation.
And you may be able to influence a small percentage of that market shift, but you will not drastically
change it.
I think a classic example of what we saw last year.
Corn acres were up, bean acres were down, why is that?
Market signals.
So farmers might increase or decrease three or four percent from their normal, but they're
not going to change 30 or 40 percent.
Can I get you to say and spell your name and give your title?
Is that correct?
Yep.
Andy Benson, B-E-N-S-E-N-D.
I'm on the Marketing Board for the Wisconsin Soybean Marketing Board.
I also serve on the Soybean Transportation Coalition Board, which is part of the American
Soybean Association.
And does your farm have your name on it?
So we go by A.B. Farms.
Okay.
My custom harvest business goes by A.B. Ag Services, but it's one company, but it's
separated legally, it's separated.
Yep.
Okay.
Great.