Last week, CRMER student fellows Lacey Ward and Mario Ortez had the opportunity to attend the 2015 Van Trump Winter Conference at the Madrid Theater in Kansas City, MO. The conference covered a variety of topics including the overall direction of agricultural markets, an energy outlook, transportation systems, big data in agriculture, and weather. This blog encompasses some of the main thoughts presented by the speakers.
The conference was opened by Kevin Van Trump, CEO and founder of Farm Direction and the Van Trump Report—entities both focused on improving farmer’s knowledge about the markets and marketing strategies. Kevin covered a host of topics that are influencing the markets’ directions these days, both domestically and globally. Among the most pressing topics was the decrease in oil prices, which is believed to increase consumer spending in other goods, but could instead increase savings which might not boost the economy as it is conceived. The Fed’s actions regarding the interest rates are most definitely a topic of discussion this year as it is believed that Ms. Janet Yellen, the Yale-educated economist that is leading the Fed, is going to place the economic outlook at the center of policy making in this regard.
The European Union situation is uncertain. Greece’s elections are coming this year with the socialist candidate proposal of re-negotiating their bailout terms and there is increasing discontent among Germans regarding German’s support not only to Greece, but other weakening economies among the European Unions. Different scenarios have been discussed among the media; some of them speculate that Germany won’t let Greece fail because this would hurt the EU’s economy by decreasing confidence among consumers and for other reasons. But, what is going to happen is not yet known.
The political environment in Russia is raising concerns in the wheat market with Russia being the 4th largest exporter and producer of wheat in the world, according to the USDA (2014). Other major globally-important economic issues include the strengthening U.S dollar, change in demographics, changes in government actions towards social issues, and the decrease in the speed of growth in China’s economy.
Tom Williamson, President of Transportation Consultants Company, shared his perspectives on the U.S infrastructure situation. He emphasized that there is a big need to invest in infrastructure, especially bridges. Ocean freight costs are potentially decreasing in the future due to big investments in the expansion of the Panama Canal and the just-started construction of the Nicaragua Interoceanic Grand Canal, which is expected to allow bigger ships to sail from the Caribbean Sea to the Pacific Ocean.
Joe Jennings, Managing Partner of Jordan River Advisors, shared his knowledge regarding the changes in commodity trading since the beginning of his career when the majority of trading was related to supply and demand. New players have come into the markets, so now commercial hedgers trade with portfolio managers, proprietary trading firms, hedge funds, and market makers. The effects of these new players in the market is widely believed to be beneficial for the markets, given their role in increasing liquidity (get in and out of a position easily), but since 2005 there has been an increase in the demand for speed and a new series of traders that use algorithms has come into play. The presence of noncommercial traders in the markets is believed to have introduced non-fundamental factors that affect movements in prices. We believe that this assessment is debatable, ill-informed trading can come not only from non-commercial trading but from commercial trading too and for every player in the market is on their best interest to have their best assessment of supply and demand to be effective. As a final general advice Mr. Jennings suggested that players understand clearly the time frame of their actions, and not only understand the risk of the exposure, but quantify it.
Following Joe Jennings’ talk, Bill Krueger of Lansing Trade Group, Andy Daniels of Daniels Trading, and Kevin Van Trump joined as an expert panel for conference attendees to ask any questions they had to get the expert’s take on what was going on in the markets. The first topic of interest was whether they would recommend planting more corn or soybean acres. Kevin Van Trump made an interesting analogy for farmers saying that they have all their chips on the table when their grain isn’t priced, and when they have the chance to pull back those chips at a profitable level they should. Other topics that were touched on were frac sand and the impact of lower gas prices on the ethanol industry. Conference attendees inquired about the feeder cattle industry as well as the future prospects of the European Union. This part of the conference was interesting because attendees could get an expert opinion on any question they might have involving the agriculture and energy markets.
After an amazing KC-style barbeque lunch, Drew Lerner, President of World Weather, gave a weather outlook for the major commodity-producing parts of the world. Major points of interest was the size of South America’s crop as well as El Nino (ENSO). Another interesting point he mentioned is how the weather is determined by the ocean water temperature 300 meters below the surface. Later in the presentation, Mr. Lerner discussed the upcoming weather conditions for the upcoming planting season in the United States.
Steve Cubbage, President of Prime Meridian and Record Harvest, then took the stage for his presentation entitled “Big Data and What You Need to Know.” He emphasized the need to make sure that one is getting good data out of his/her yield monitors. Bad data only yields bad recommendations, and producers can find lost bushels by looking at big data. Mr. Cubbage emphasized that yield data is a producer’s report card, and you can’t get better unless you measure what you are doing.
The next presentation was by Jeff Dema, President of Grower Services at Farm Link. Farm Link has collected data from many combines across the United States, and now uses that data to estimate a field’s yield potential based on soil topography, weather conditions, etc. Producer fields are divided into 150 square feet micro fields, and then the micro fields are benchmarked against the fields where data has been collected. Subscribers are presented a “gap” map that shows the gap between the actual yield and the yield potential for each of the micro fields. This presentation showed how important technology is in agriculture today. Mr. Dema concluded with saying, “Farmers don’t have to adopt new technology. They just have to compete with those farmers that do.”
At the end of the afternoon, keynote speaker, James Olson, came to the stage. Mr. Olsen is a former CIA Chief of Counterintelligence. He and his wife Meredith, worked a dangerous career as spies for the CIA. Mr. Olson fascinated the audience with a recall of what life was like as a spy on overseas operations. Later in his presentation, he took the crowd on a “mission” to Russia that left the audience with a feeling of patriotism and gratitude for his service to our country.
Overall, the 2015 Van Trump Winter Conference was an excellent opportunity full of network working and industry insight. Thank you to Farm Direction for hosting this great event and allowing us to be a part of it and thanks to the Department of Ag Economics here at K-State for their support in making the trip possible. Companies like these allow students to gain valuable real-life experience while they are still in the classroom.