Engaging, educating and evolving for Scott Irwin

Paul Yeager   Hey everybody. I'm Paul Yeager This is the MToM Show podcast to production of Iowa PBS and the Market to Market TV show. We're back in the studio again before we head out for some fun episodes on the road, but we brought in a guest who is on the road. Traveling from Illinois to Iowa, we were able to get Scott Irwin to come into the studio and Scott to the University of Illinois, mind of like no other when it comes to farm economics, we are going to discuss a whole lot of things about agriculture, his background, and what he likes to do on social media with those of you who might follow him on Twitter or X or whatever it's being called right now, Scott just put together a whole bunch of stories in a new book. So we're going to talk about the book, some of the good stories that are in there. And then we're going to intersperse a whole lot of discussion on topics in general. We think this is one that a lot of you are going to enjoy. I'm one of them. I hope you enjoy it. Now let's get to scatter when I meant when I said a few years ago, the last time you were on this podcast anytime you're in Iowa, I'd love to chat. You're an Iowa guy Bagley. Absolutely. So who's still from the family on the farm?

Scott Irwin   Well, no one actually lives physically on the farm ground. My mom, long retired, but my partner in marketing our crops, lives in Jefferson. And then I have a nephew who farms the land and he actually lives not too far from here and Waukee and then commutes back and forth to farm land.

Paul Yeager   Oh, if you're in a hockey that's that's like, that's just a couple of 40s away. It's Waukee extend so far west. Yeah, exactly. What prompted you to not stay on the farm and chase academics?

Scott Irwin   Great question. My dad, when I was growing up, built a pretty good sized farming operation in west central Iowa, corn, soybeans and hogs. But I always had kind of an academic bent. But and when I went off to I was, I was state, I thought that's probably what I was going to do was to come home to the farm like so many of my friends at Iowa State. But I had several experiences at Iowa State, which I tell about in my book, in particular, one crazy adventure, I am always grateful to his name was Dean Lewis Thompson. He was the Associate Dean for students in the college bag at the time, and literally could have expelled me but instead encouraged me to go to graduate school. And that kind of put me on a different path. And I kind of found myself personally late in my undergraduate days, in terms of loving academics and research. And then I went off to Purdue to graduate school and it did not take me long. Well there to realize that this is really what I think I was made to do. And I've never looked back.

Paul Yeager   When you say Dean, it makes me think you're talking about Dean wormer from Animal House, especially when you say you were almost expelled. I'm sure there's a story there. But you're not that in the third book, you'll talk about no that's in the that how you were almost expelled as in the book.

Scott Irwin   Yes. It's it's it's a chapter entitled towing icebergs. I'll leave it at that. But I am truly forever grateful to Dean Thompson, who was himself a giant in the field of agronomy. And I tell the story in the book, how that actually, was the starting point for two things. One, really starting to think seriously about life and maybe going to graduate school is the first person who ever talked to me about it. And then secondly, it was he planted a seed about building statistical models to forecast crop yields. And it's something that I've done quite a bit of now in my university research. And I also have a small side business called yield cast where we produce real time corn and soybean forecasts for the US and it all traces back to this incredibly stupid incident. I'll call it sophomore IQ because I was a sophomore at Iowa State but it it had a happy end. 

Paul Yeager   You end up at Purdue grad school and what I've heard from academics who are economists at such and such University I'm like, How come you're not in your home state? There's a reasoning right that the home you don't usually work in your home state you have to go to a different state? 

Scott Irwin   Oh, there's there's a lot of different models. There are some people that get educated in their home state and work there. For example, one of my great early mentors at Iowa State was Neil Harl. I don't know if you've ever interviewed Neil. And he's the person that stayed home. I looked at various graduate schools, and it was, I just knew that I fit at Purdue. And that place just really changed my life. That's where I really got serious about my direction in life, and forever grateful for that place. And so that's where I did my graduate training, was able to continue my interest in grain markets, commodities and futures markets. And then I decided I wanted to make a career out of academics. And I got my first job, actually, as a faculty member at Ohio State. It's so long ago, most people don't don't even know about it. But I spent my first 12 years as an ag comp professor at Ohio State. And now the last, I think, 26 or 27 years at Illinois. Yeah.

Paul Yeager   I wanted to go back to, Yeah. When did you enter the job market from grad school at Purdue? What years? Are we talking? 84-84? Okay, so 84-85 Huge that you study now. I mean, those are years that you look at you were in the middle of not on the farm, but you knew enough from your trip, your undergrad and your grad training of this is a serious situation right here. And then what is it about living in real time studying academics? And then now living today working today? You've hit that gamut in real time? Has it given you perspective that maybe somebody else doesn't have?

Scott Irwin   I think that it does, for example, one debate that has been ongoing, recently is about inflation, the pattern of the general price level and the consumer price index in the US. And having lived through the burst of inflation in the 70s and early 80s. And then the reaction of the Fed to raising interest rates to a very high level. You've seen that pattern before. And so I thought that it was going to take two team, our current episode, which, you know, a year 18 months ago, people thought that was kind of, you know, somebody that's even 40 will think, Well, that can never happen. Well, it has happened before. So I do think it gives me some hopefully some learned wisdom that I can help on my professional activities. And that, you know, and a big question right now, in corn belt agriculture is, you know, are we in a kind of asset bubble? Like we went through in the late 70s, early 80s? Big Question, big question. And, you know, early in my career, I was a part of that debate and some of the research that tried to disentangle what happened, and in the late 70s, and 80s. And, you know, my analysis right now is not the same. But there are some warning lights that are flashing in my mind that others may not agree with.

Paul Yeager   So you're saying in August of 2023, you are still seeing warning lights? Did you see the same warning lights 18 months ago? Yes. Were they different lights? No. Same lights? Big one. What's the big one?

Scott Irwin   Interest rates? We just have a generation, almost two generations of people in US agriculture, who have known nothing, but historically low low low interest rates,

Paul Yeager   you know, less than double digits for sure.

Scott Irwin   And, you know, you find somebody 35 or under and they think the norm is three or 4% interest rates. And, you know, I, I still, I still think we're working through a big change in a capital intensive sector like agriculture, from a abnormally low level of interest rates, to now something that I think is a new normal, that will be much higher, because, you know, in the long run, it's really not terribly complicated. To the nominal level of interest rates, like the prime interest rates, and if it's, say the prime interest rates, seven or 8%, then you would subtract from that the rate of inflation to get what we call economists call the real rate of interest. And historically, that has had to bend the real rate of interest two to 4%. For you not to have huge dislocations in the economy in terms of the allocation of capital to its most efficient uses. And, you know, we have been had been running for a long time in an environment, not a long time, but a number of years, where the real rate of interest was negative. That is never been a steady state equilibrium historically, but I think some people began to think that that was the new normal. And I think we're going to go back to what it always been, which is that you're going to have to pay to borrow money, in a real sense. And that's a sea tide change for agri businesses. Very large scale, all the way down to the average farmer on operating loans. And that, that that's the big change, in my opinion.

Paul Yeager   Do you think that the interest rate change that you speak of the sea change, that it will trickle into others in the economy outside of agriculture, I look at housing, I look at business expansion, I look at communities borrowing money to bond projects, that all has a price tag to it?

Scott Irwin   Absolutely. I mean, that's one of the most important economic variables in an economy is the level of interest rates. You know, right now, I thought that the very rapid rise in the federal funds rate, which is what the Federal Reserve Bank controls, you know, it was the most rapid increase since 79-80. When I was, incidentally, a senior at Iowa State lived through that real time, and I thought it was going to drive us into a recession. And right now, it looks like we've weathered that, and we're not going into a recession, which is, you know, really good news. But at the same time, that rapid of a change, basically, in the cost of money takes time to filter through an economy, the Fed is seeming to signal that they're going to be resolute in really driving inflation out of the economy. And we've made quite a bit of progress, but to get down to their targets, is going to take this level of interest rates and probably a little bit higher for quite a bit longer. And the full implications of changing the price of money that much, I think is still to be played out.

Paul Yeager   Earlier, you almost wanted me ask are we on that when you're talking about? Well, you just said the recession word, but inflation, are we getting that soft landing that the Fed and the Biden administration talked about and tried to say, when you look at the gentle fall of many things, Consumer Price Index, Producer Price, index, PCE, all are coming down? Look pretty steady, is it?

Scott Irwin   Yes, I think that we are right now, with the data that we have, particularly with the last quarter's GDP numbers. You could say cautiously, carefully, that a little more optimism about that soft landing scenario, and it's going to take another quarter or to have data for us to know that for sure. But I am personally more optimistic than I was three or six months ago that that we might, might do that.

Paul Yeager   And I just the week we're recording this, I believe it was the I don't think it was it was the stock market talking about 20% 21%. already. We've had a gain this year, and stock values of that. I know they're not the same. I know the stock market's not the same as the economy, but the average consumer thinks it is. And they look at that and that's a pocketbook thought of the economy, not necessarily a much more complex than that. Then you look at your alma mater for grad school, Purdue and their sentiment with farmers. Oh, All of a sudden, it's been pretty negative for a long, long time. Hey, maybe it isn't so bad. Is that because public relations is working as a people telling us? What's changing the economy? Or is it something else?

Scott Irwin   Well, in general in the economy, I think, you know, we're seeing low employment, some wage growth, and that reasonably steady decline in the inflation rate. So, you know, you wouldn't say the economy is roaring. But it is certainly better than a recession. Farmers. I think that sentiment is highly correlated with the price of corn and soybeans. And so, you know, we've been rallying and, you know, I've just been back the last four days, in my home area, visiting folks and was around, you know, the markets are, have taken a real tumble this week, and sentiments not as strong as it was. And I think farmers are actually seem pretty nervous after this price drop about what might be ahead,

Paul Yeager   while they're seeing the market drop. And a lot of the reasoning for at least corn and soybeans and to an extent wheat dropping is because there's rain in the forecast or rain has fallen. But if you look at those rains, strips, they're strips, they're not wide pads of a paintbrush. So you drive from Illinois to Iowa. What do you see? And I mean, it's a mall, there's a lot of corn and soybeans produced and what your drive was between these two spots, would you say?

Scott Irwin   Well, I do look at you know, it's kind of funny, I, I get what I call extensive walking around looking in fields, in my immediate home area, near Champaign, Illinois, so I think I have a pretty good handle on what's going around there. And then, in west central Iowa, I come out here and do it, the rest is a windshield survey. So take that for what it is. as dry as most of Illinois started, I mean, the first 45 days of the growing season in Illinois, and in particular, you know, East Central Illinois, we're miserably dry, near record dry, and we looked terrible, you know, basically going into the first week of July, and we've just now we've gotten enough rain to green things up and things look a lot better. Still, not sure what the impact of that early, really dry period will be. But I've been in the fields and that's surprisingly good. The soybeans, especially as they can have weathered that storm and if they get good rain, we're gonna have very good soybeans in most of Illinois, I think corn I think is very variable and hard. But you know, basically all the way on i 74 through Galesburg, Quad Cities, and that asked for it and you know, the crops are green. And I didn't happen to drive through any of the really, really bad dry areas like you get into Northern Iowa, southern Minnesota, Missouri, so, but the area that I drove through, it looks pretty good. And in particular, you go west, from here, it just gets better and better and better. And in our area of West Central Iowa in Guthrie and Greene County, where our farms are located, I spent two days tromping around there. And I can honestly say, I don't recall at this date on the calendar, the crops ever looking any better. And the soybeans in particular, could be again, they have a whole month and they need some rains to finish out. But, you know, last day of July, I was in our fields and the soybeans are up to my hips, and I'm six foot three. So I went oh, these could be some phenomenal beans. So that's what I've seen.

Paul Yeager   You just need to keep those ever returning to ratios at bay. Oh, man. I mean, that was the problem. 2020 Absolutely.

Scott Irwin   I mean, we just got hit full force with that and are part of the state and, you know, we have had an it could be, you know, the climate change issue. We've had more severe late summer wind storms that I recall growing up. And so everybody kind of holds their breath on that and, and that is reflected in the insurer. As premiums for for wind damage in our area, so but I could tell the way I judge talking to the farmers in our area, what are the real prospects is when the farmers aren't complaining about something about the way things look in their fields, you know? Because and that's okay, I understand why they're so conservative at this point in the year you don't want to get over optimistic. But I didn't find anybody telling me really anything negative except that we could sure use a rain to finish things off. If that's all you've got, you've got really good crops.

Paul Yeager   One of the old phrases we use on market was as we sit here tonight, as we sit here, right now, Scott, you have what I call a, I don't know if I should call it Twitter or x celebrity status of sorts. You know, you've been known to take to the keyboard and educate all of us who follow you on a lot of topics. One of them's been renewable fuels, ethanol. Economics is another a lot of data that you have the farm Doc is full of all sorts of good stuff. What's your favorite thing to talk about on the internet, on on that site of 140 characters, or whatever it is up to now?

Scott Irwin   Probably my personal favorite is, you know, corn and soybean yield prospects. That's what I guess I guess that's I've never fully left the farm, that that I feel that way.

Paul Yeager   So prospects, we just covered a little bit on what you were covered. What's the one that gets the most attention when you tweet about it?

Scott Irwin   Oh, that's easy. Biofuels, you move. That's, that's a minefield. As an economist, I enjoy my analysis, and jousting on social media, in the biofuels area the most because it's just such an interesting space, and markets and policy mix, to try to disentangle and understand what's going on. And as you know, it's politically highly controversial. It's a topic, everybody seems to have strong opinions are gets kind of emotional. So I probably enjoy that that's I guess, my combative debating, part of my personally comes out, I really like to do that. And I think I've, I've, I tried to do analysis and work that helps everybody out in the, in that sector, to sort through some really hard economic and policy questions,

Paul Yeager   which to me, I mean, a book allows you to cover topics in depth, but I will see a tweet series from you, Scott of eight 910 thought the forum doesn't quite seem to fit what an academic would like,

Scott Irwin   well, it is unique. And I, I don't have really have any other colleagues in the profession, who seem to enjoy. You know, the, the Twitter arena, I don't know what it says about my personality. But I have loved Twitter from the first day I got on it.

Paul Yeager   Oh, you calling an accent sorry,

Scott Irwin   I that is gonna probably be impossible for an old dog like me to make that switch, because I've been at it so long. But, you know, it's really important to me, especially at this stage of my career. I view myself as a public servant, you know, my salaries paid for by the citizens of the state of Illinois. And, you know, the thing that I enjoy most about my career at this stage is engaging with the broad public, especially the agricultural community. And Twitter is, I think, used properly, the best channel for having an immediate impact on what I call the conversation, what people are thinking about, and what are they wanting to understand or maybe make a decision today? And I really personally, like being part of that conversation.

Paul Yeager   Who do you find is engaging in debate with you?

Scott Irwin   It It's kind of an ever changing cast of people. Depends on the topic. But a lot of farmers, and that's great. That's who I've always wanted to be my core audience. And then it's commodity traders, commodity analyst. And sometimes its investors, it's surprising where it will come from, and, you know, people in Washington DC, in kind of the policy community embolic biofuels, so it's it's a, it's a large number of people.

Paul Yeager   At what point in what you're asked in a question, or a direct message or a mention? Do you take someone's statement, or thought on a topic that might be different than yours? And turn that into something for a book, a paper, a column, you've been writing more columns again? At what point does that serve as inspiration and a chance for you to give, pause and reflect and maybe change?

Scott Irwin   That actually happens all the time, I would say today. Really, last five years, I've gotten most of my good ideas have been sparked by seeing something on Twitter, or the engagement with something that I have tweeted out. And many of the articles that I write on farm doc daily, really have their origin. In somebody will say something, I'll go, oh, I never thought of it quite like that. I think I could do X to address that question. And so I love that's why I love so much being part of the conversation in such a real time way. Because I feel like it gives me a real early look at the most important questions, and I can respond quickly. And you know, I like to do that. So that's, that's how that happens. And I also has provided some really funny stories that have ended up in my book.

Paul Yeager   But doesn't that make you a flip flopper? If you're changing your viewpoint on things. I mean, it happens in the political arena all the time, you can't change your opinion on things. I didn't think academics or scientists, I mean, you could go back to the COVID, when that was the big scream of how can you think about something different?

Scott Irwin   Well, that's a challenge. But I have the advantage of a lot of experience I've been at, if you like this game, almost 40 years. And so I'm pretty confident in anything I put out there in public, I'm certainly not an I know, I'm not always right. And I tried to listen to and I've learned to listen to good faith criticism, I've learned to listen to it, because that's often where I get my best ideas. And so, and if it causes me to, I won't change my opinion, or a conclusion, unless I've got solid analysis, and evidence either my own or someone else's. That's I like to think I'm very data driven. And if the data leads me to a different position or conclusion, I'll change your mind on the least bit apologetic about that. Because I believe as an economist, and a researcher and a scientist, that's what we're supposed to do. That doesn't bother me at all.

Paul Yeager   Universities, academic institutions, research have come under fire because they're biased this way. They're influenced this way. Make a case defend all of academia, and why it needs to continue, or has its time come and it's not needed anymore.

Scott Irwin   I'm not really going to comment on other parts of the university. What I do know, in my part of the university, which is traditional college of agriculture, that I still believe that the colleges and play a hugely important role in basically on one side of the spectrum, supporting the r&d for the sector. And then what I do heavily is analysis and and communication to the broad agricultural community, help them think through complicated economic and policy questions and get to a more informed position. I am as convinced of the value to our society of doing that as I was 40 years ago. And you can make a reasonable argument, given the complexity of that some of the questions like climate change and carbon markets and things like that, that it's even more important than it was 40 years ago. So I think we have a very, very important role to play in the university. But there's one condition on that, you have to have a robust engagement of that institution, as a return to the public on their investment. And, and so I try to do and my small part in making sure that the universities really reaching out to the broad public as a return on the investment,

Paul Yeager   which is what you're saying, Is Twitter, for exactly. That's your engagement. Or it could be you go and speak to the Bureau County, corn growers. Exactly. You get questions from them. 

Scott Irwin   And I still continue to do all of the above. But in today's world, it is really still to me, kind of, I'm shocked at the power and pervasiveness of social media, even with an agriculture. So, you know, I went back to where my mom lives in Jefferson. And first day, we're there, we went up to a sandwich shop on the square. And turns out there were a couple farmers up there that I'd known about my age. And, you know, they followed me on Twitter, and said, Don't put anything out on how good the crops are too much, because you'll drive the market down. And I thought, what a changed world, that that would be my conversation in a sandwich shop in Jefferson, Iowa. And I understand it, but I think I was fortunate that I saw the power of social media for this engaging with the public, early, and it's it's proved its worth.

Paul Yeager   And now the book, you mentioned, columns. And it's not just a collection of columns. But what is it about academics and books? I mean, is this what you're going to lecture on? I mean, that's always the joke with academics that you make this as your class book. And that's the way you make a little bit money. Why is the printed word in a world of 12 second videos, before I scroll to the next one? How does this fit into the context in the debate back and forth with with people,

Scott Irwin   there's still a true book means you have a book length treatment of a subject, which means in one way, shape, or form, it's in depth, its extensive, its comprehensive, in a way that short videos, tweets, a LinkedIn post, Facebook post cannot be. And so to be, there's obviously still a place for that, because millions of books are still sold every year 10s of millions. So that's, that's the value.

Paul Yeager   Do you find they're easy to do?

Scott Irwin   It was one of the hardest things I've ever done. This particular book was my first one. And it took my co author and I over five years to finish

Paul Yeager   in five years. Granted, this probably went to print in say January, February. Yeah, since we're in August, a lot have changed from January of 2023. Even the rewind five years. So did you find that as things as a global pandemic and the response to it did you have to rip up and delete a lot of things,

Scott Irwin   not too much. It was more adding some material in the final section of the book. Basically, this book is very unique. And so I'm proud of that. I decided in the latter part of my career, I wanted to do something very different. I wanted to teach people what I have been studying my entire professional career. rare commodity markets. But I did not want to write another boring textbook, because I know very only students who are forced to buy it read those, I wanted to write something that the general readership and average person could pick up and read and enjoy. And in the process, kind of slip in and teach them what I've been studying my whole adult life. And so that's what I tried to produce. And I think we're reasonably successful. It's a very unusual book and in a style, in order to make it entertaining, and that carry people along so that they're not bored by the more, if you will, academic, technical material. Every chapter begins with some kind of wild and crazy story, in particular, from why growing up in the 60s and 70s, on an Iowa farm and pretty wild country boys and their wild stories. And, but they're all there for a purpose. A friend of mine describe them as market parables, these these wild, wild things that happened to me, I use in every chapter, and it was way to motivate, you know, the subject of the book of that chapter in the book,

Paul Yeager   and maybe how you got nearly expelled from a university.

Scott Irwin   Well, that's in there. But for example, I do. I have this dear, dear, lifelong friend, who I just saw yesterday afternoon. He still lives in yellow Iowa. His name if you want, why not name is Jack Hunter. And he was my partner in crime growing up and a fearless human being is how I describe it. So in the third chapter of my book, I wanted to introduce people to the idea of a excuse me, in the second chapter of the book, I introduced the idea of what does a speculator do in commodity markets? And so, Jack is my stand in for a speculator and you know, our wild and crazy behavior, particularly in cars. And then the next chapter, I introduce our later chapter, I introduce hedgers and what are hedgers? And I use my dad as a stand in for understanding what what a hedger does in the markets. And so that's kind of the theme of the book. 

Paul Yeager   Do you hope that it's somebody on the farm that reads it grew up on the farm is no longer there, or someone in a town that has no idea where their food comes from?

Scott Irwin   All of the above? I think that it's a at a comprehensive enough treatment of the subject of commodity markets, broadly speaking, that you're the most advanced farmer, marketer can learn some things out of it all the way to the person that maybe never lived on farm. No connection agriculture, but maybe they're thinking I'd like to speculate in the commodity markets, they can learn something. The book is basically divided into thirds. The first third is the basics covering. What's a commodity? What's a speculator in the commodity futures markets? What's a hedger and how does trade work? And then the middle third is relaying telling the story of the great speculation, controversy that erupted in globally in 2007 2008. And then the last third of the book is what I call the future futures we get, you know, electronic markets talk about cryptocurrency. We talked about what happened in crude oil when crude oil futures prices went negative in the early stages of the pandemic. And so looking forward to where these markets may be headed.

Paul Yeager   Okay, if I asked you this question if it steals the thunder of the end, but what is the future of futures? 

Scott Irwin   I think it's very bright. Because we've had a quantum change in the cost and it's made it so much cheaper and easier to have access. So, in that sense, you know, Electronic trading has made it cheap, electronic, digital world, it's made it access easy. So that's the really positive part. The challenge for that industry as it becomes more and more vertically integrated and industrialized, like the livestock futures markets are now struggling to survive, because there's not as much open, lean negotiated, traded, of that particular commodity. But the history is that that industry is hyper competitive, and it innovates. And it, I think it will continue to innovate. I mean, it's just phenomenal. The sophistication and the directions that it's going in places like energy trading, I think that as we develop carbon trading RINs in the biofuels area, are, I think, an early experience with kind of environmental policy, natural resource markets, I think those are could be a big new frontier and what we a tradition called commodity futures markets.

Paul Yeager   Can't decide if I want to do this, here we go. In, I won't put a I won't put a time period on this, will we be trading carbon futures? Like we trade ethanol or corn or beans today? Because ethanol wasn't something we traded until recently. Do you think carbon and all its political illness that's tied to it now? Because at first it wasn't. Now it's become heavily that way in states trying to build these pipelines or which is all tied to the issue in general.

Scott Irwin   I believe that we will. But it will probably take more time than kind of this current early wave enthusiasm. We have to deal with climate change. We're still struggling exactly how our societies want to do that. But I think slowly, but surely, policies and changes are going to be made to do figure out how to deal with it. And it's just hard for me not to imagine that one part of that response will be open trading of carbon. And you know, the biggest example of that right now is the California low carbon fuel standard and their trading of carbon credits in California. I really think that that's going to spread eventually, across the country.

Paul Yeager   I could dive into that there's a whole nother thought I have on that. But maybe we'll save that for the next time you come home and we can discuss it but the name of the book is back to the futures crashing dirt bikes chasing cows, it's Scott, or when do I have it? Right? Do you do All right, thank you so much for coming in. Good to see you in person. And we didn't have to exchange a lot of tweets back and forth. I'll go easy on us on Twitter.

Scott Irwin   Well, I could say that back atcha.

Paul Yeager   My thanks to Scott back to the futures Here we go. We're back to the present next week. New Tuesday or New episodes come out each and every Tuesday. We hope you enjoy like, subscribe, share, tell a friend that really means a lot. Thank you for listening, watching or reading. We'll see you next time. Bye bye.