The land, the price and a 50 inch deficit - Ben Riensche

Hi everybody, I'm Paul Yeager, this is the MtoM show podcast from Iowa PBS and the Market to Market TV show. Gonna dial up an old friend or guy who's known me for pretty much my whole life, we grew up on the same gravel road just a few miles apart. He just has a couple of years older on me, but Ben Riensche is our guest. Benjamin is what he uses on his login screen for when we're recording this interview. So for for the sake of argument, he's always been Ben to me, we're going to discuss the way things were in his part of the world, versus the way my part of the world was, at least on the two different farms and just how just a small, little narrow strip of land can make a difference in a good crop, an average crop or below average, we're gonna talk about expectations. We're then going to get into finance. Ben's an old banker, been around the world as a banker, we discussed, you know, his view of spreadsheets and what he sees. We are going to get into land, we're going to talk about iron both new and used. We'll discuss many other things that have our inch, I think are of interest to many of you, and I hope you find it as well here. Well, we're also going to talk about an old friend of this program. And that Ben and I both share in Bill Northey. We'll discuss him and we'll just never know what else we're going to come up and we will ask that question. Does this look a lot like a certain decade that starts with an eight and ends in 80s If you have any feedback for me, send me an email at Paul.Yeager@IowaPBS.org. New episodes of this podcast come out each and every Tuesday in both audio and video form. Let's talk farming now in 2023 before and in the future with Benjamin Riensche. If I listen closely, Ben, I'm hearing tractors out there. Is this early March where you're actually running out to the field with something.

[Ben Riensche]  This is the first time ever Paul, I mean to have tractors in the field and we see some anhydrous ammonia going on some limited tillage. Totally unprecedented to have this sort of mild winter.

[Yeager] I had a neighbor of yours over in the Dike area. So I guess the other side of the county, sent me a picture in late February, throwing anhydrous on over there. You ever seen that?

[Riensche] No, no first time ever and you know, it's not exactly just this past little snip of weather. My corner of Northeast Iowa if you draw a line straight west of Chicago and straight south of Minneapolis, you'd be at my farm. And the Iowa State Climatologist said that our area for the past three growing seasons is 50 inches behind on rain for three seasons. Last year we had eight inches of rain from planting till harvest. And unlike the rest of the pack, Paul, I can't say my crops were better than expected mine were worse than expected.

[Yeager]  I follow closely when you post weather reports because as we've discussed before we grew up I grew up on the same road you did just a few miles apart. But mom, mom's homeplace did have some rain that you didn't does that? That's the ultimate farmer frustration, isn't it? When two miles down the road, get something or half a mile down the road? Get something and you're shut out?

[Riensche] Well, we've always felt the acres were on the good side of fortune. But yeah, that happens. As farmer as farms have larger and larger footprints, which they do, you're going to have have different results, but over our whole growing area, over a wide spot, northeast Iowa, we had much reduced crops and I'll I'll challenge what we've seen in the NASS county yields that were were recently distributed. I think that I'm looking forward to the RMA information that comes out in June. And I know a lot of farmers took the EC, SCO sort of crop insurance options and they're looking forward to a very generous payment. I think that'll provide some clarity to what the actual crop size was.

[Yeager]  Do you get the sense that the crop the broad strokes that a government report gives but yet the county report is still too broad? That doesn't do you justice when someone is shut out of rain and only has eight inches over three years?

[Riensche]  Absolutely, Paul, I think that their survey methods are probably time to be updated. I've had almost invariably every year I have one field singled out and the small plot you know, the the NASS USDA survey Of course, those people are making best efforts. But gosh, we have so many new digital tools and we in the crop insurance system has expanded so much that there's a lot of other reliable information, I'm sure they're working to put it in. But, you know, farmers survey, everybody is honest and square on that. And hand, nobody would ever put down the bins are empty or to see the market go up, or a livestock feed or the other way that there's plenty out there. So we can have cheaper feed, which our hog producers have needed for a long time here. But then, you know, this sample was very small areas, you know, like the seven blind men and the elephant is parable. So, you know, you can find whatever you want in the field. It's almost like people selling magic potions for crops, you just go out and pull the plant with big ruts and little Brooks and say one hand the magic potion than the other.

[Yeager]  So by design,

[Riensche]  right, yeah, I can find anything you want on my yield mod map that or someplace the monitor said it was 300 bushel in some places, it said it was 100. Let's just go with the field average when we're done.

[Yeager]  As a guy with a penchant for numbers. I mean, you're an old banker, you know how statistics not I guess banking is not statistics. But numbers. We always talk about numbers will tell you anything you want will justify anything you want. So when you look at the price on the board of trade today, as we speak, and you know what you have or don't have? How do you mark it around something like that, and especially when a narrative gets told on certain programs over and over that the crop is this and the price is this, but I'm down here?

[Riensche]  Paul, you could sell a little every week and probably get the average price for the year. So if you found yourself in the bottom half, who do you have to blame? It brings up a good point that I've observed in the crop markets and that so many trades are now put on with machine learning. You know, a human isn't even involved. I think I've heard statistics, over nine out of 10 trades on the Chicago Mercantile Exchange are put on by artificial ignorance, I mean, intelligence. And, you know, computers have been around for decades now. And cheap computing is made going through old tapes of prices and, and finding trading rules that work like buy on early in the week sell later in the week, and you make a consistent profit. But now the software has it so that you can make that better and change the rules. You know, it's not, it's not fixed. And you don't just trade the rule until it's gone. It updates every day how to make the rules better. And I've heard more than one market analysts say and I might buy into this that markets get accentuated up and down too far because of momentum trading in the markets. So what would be my advice, find someone who understands this. And I always I always have a few advisors that I subscribe to, to keep me from getting entrenched in my thinking, find someone who has dealt with this and in seek the other opinions. Personally, I feel that we've probably overdone it to the bottom side. But then I'm sitting in an extremely dry area of the country. We've already talked about statistical yields from USDA, NASS, and I feel that they're probably a bit overstated at this moment. There'll be future corrections for my area. And, gosh, the markets been going down for ages. Last summer. So I'm the worst guy to talk to about, you know, whether people can all get on the wrong side of the boat.

[Yeager]  We talked about the boat, I bring that question up of you know, because John Roach always says it, you know, they've everybody's on one side of the boat, maybe you need to get to the other side. Now, two weeks ago, Naomi Blohm said, We're quietly starting to see some movement in what I think was weed is what she was referring to, and slowly trying to move. Maybe the computer doesn't pick that up. When you say the percentage of these trades with AI, how do you as a human, I mean, yes, you talk about multi different advisors and thinking but it's hard for the average producer who has the product to be smarter than the computer, right?

[Riensche]  Yes, and you can certainly position yourself so you have to pay a lot of margin calls or option premium on a crop you haven't produced yet. That is enormously unpopular with your banker. I can tell you that from experience having the margin a crop you haven't grown yet. Cool. I don't have any answers yet. But I like to spread out. I still like to spread out marketing and I like to spread out the advisors I listen to and, and not to be patronizing but you bring some good ones the table on your show.

[Yeager]  Well, I got into it on Twitter here a couple of days ago about, you know, well, you should have these people on and I'm like, I have a, I think we have a roster of 12 to 13. Right now that rotate through. And yeah, not all are sunshine, there are a few bears. And I think that it's irresponsible if we just always blow sunshine. And I'm not here. We're not we're not trying to say, but there's realistic discussions. And again, every operation is different. The Riensche Farm is different than the Yeager farm, but we're only four to six miles apart. And that's hard for a large market to comprehend. I think on a on a on a day to day basis.

[Riensche]  Absolutely, absolutely.

[Yeager]  I just need an A man. That's all I need, then just an amen.

[Riensche]  You're preaching to the choir. Okay.

[Yeager]  All right. Let's talk about preaching with your banker. Conversations. What are you hearing from bankers? I mean, you absolutely have insight on that. We just had a land sale last week in northwest Iowa go for nearly $30,000 an acre. Now, that's a little different than where you're at, in the sense. That's a lot of land that needs somewhere newer to go. It's not quite the same for you. Are the land sales around you still going for primo pricing?

[Riensche]  Yes, right now. Land is at a price that shouldn't be supported with the interest rate rises that we've had, with the prices of commodities. There's probably some as Alan Greenspan would say irrational exuberance in the land market, and there's probably something to come out of it. If we're what what what I can comment on on this Paul is the the bankers and financiers I work with and keep in correspondence with said that there's been a startling drop in working capital on the farmers balance sheet in the past year, we put in a very expensive crop last year, crop or equipment prices have doubled in five years. Not always accompanied with productivity increases that would cover those price increases. And things have just, you know, we've taken the crop markets of 2021 and 2022, and extrapolated them well into the future like they were going to stay with wide margins like that fertilizer prices just 12 and 24 months ago, we're we're back to all time highs, and we put in a very expensive crop and it hasn't been worth a lot of money and I'm sure you can find a lot of people said they got it all sold before it went down. And that's just a bald faced lie. And, and that, you know, when farmer liquidity dries up, everything else follows and I think you're already seeing it in the used equipment market and the late model used equipment market, you're seeing you know, that we've gone from kind of, if you want a new tractor or new combine or sprayer you can get on the waitlist and you might see it in the year and a half and we won't fix the price to a panic call that dealers have moved to many US buyers to new buyers. They've got a substantial number of people to trade most of the fleet every year is a way to manage repair costs. They're getting these late model trades in my farm particularly uses a lot of the year old equipment and runs it a few seasons. And the prices on those things have come down. And another thing that's affected that is the auction market. You know the digitization of everything has that a lot of used equipment sells on the digital platforms now. And it makes some sense. The US market the person who buys your used equipment isn't necessarily the vendor that sells you the new machine. And you might want to trade colors you know you might want to get a different color machine and you'd sell the the the the dealer for the new machine may not be the best for your use trade in and you're watching these things get sold and prices are off 25 30% from a year ago on one year old sort of farm equipment.

[Yeager]  Do you find that people are willing to go farther to find that used equipment because of the digitalization?

[Riensche]  Oh, absolutely. We're replacing a combine and we will have bidders on it from across the United States and that we've shipped equipment to Mexico, we've shipped equipment. We shipped equipment halfway across the country and you know look how people you know the old days of going to a farm sale and having nice made right sound sandwich made by the local church ladies and having your social they are kind of gone, you're kind of gonna, you know, fire up the iPad and put your best bid out there and see if you got it. And click here for financing, click here, click here for shipping, and we go there to look for a better values unused equipment. And that's how we dispose a lot of our used equipment now.

[Yeager]  Do you do it in the used market? I wouldn't say easier, not easier. That's the digitalization of it. But is it more prevalent than it has been in the last five years?

[Riensche]  Oh, it's exponentially grown. I, you know, 3x 5x 10x? Yeah, somewhere in there.

[Yeager]  So let's go back then. 10 years, let's go back to the Great Recession, or even the 80s I mean, used equipment, are we seeing as much traffic and used to iron as we did, then? Anecdotally.

[Riensche] I'm gonna start singing Rain on the Scarecrow, you know, blood on the plow here, Paul, those were different times. But yeah, the digital platform is kind of the new farm sale.

[Yeager]  So we're still moving equipment, and people are still buying it. I mean, when you're saying that these dealers were pushing people to new, have some of those that went new who can afford it to stay in that game have gone back to used? 

[Riensche]  Yes it has. And we experienced that. You know, we all try our best shot. For my frontline farm equipment, I want to keep that pretty crisp and fresh. We have an articulated four wheel drive tractor 4000 hours on it by no means more out, you can run them a lot longer than that, but they're probably going to take some repairs. And this is something that has to run so our planners can run right behind it. So we wanted something, you know, a little more frontline. We bought a one year old tractor for less than $100,000 less than dealer asking and we turned around and I felt we got full value out of our $4,000 tractor. So you know, that's the way we're, we're, we're, you know, putting a spin on the ball this year. 

[Yeager]  Are you finding that like, the anecdotes I hear on this land and why it's so high is because there's still farmers able to pay cash or they're still farmers able to pay cash on machinery too? Or is it all financing?

[Riensche]  I disagree. I think that there's financing somewhere. It may not be that piece of equipment is financed, but for the person who bought my tractor used tractor for $225,000. I'm gonna guess that their line of credits got extra balance on it this year.

[Yeager]  We're paying more attention to what the banker says we're having our conversations. Land is high interest and equipment is high. You mentioned John Cougar Mellencamp song from the 80s. Dare I ask it? Does this remind you of any time in history?

[Riensche]  The whole system is more transparent now we fix our problems earlier and sooner. And those people that have survived properly. I got my cash flow done weeks and weeks earlier than usual this year because I didn't want an uncomfortable moment with my finances. And I thought this may create opportunity. But I I like to play offense on my farm. We're growing, expanding farm and I have young people I've got a son and son in law that farm and so we're always planning to try and do more. So that there's a spot for those young men and their families. And so it reminds me of the 80s it's not gonna you know, history, eyes writings, never never repeats itself. What we had in the 80s, you had a foreign policy that hadn't a whole extra crop in the bin by 1985, 1986 and $1. Corn. We have much less surplus than that now we actually had government farm programs that paid us to continue to produce them. We have farm programs that paid us to store it and tuck that away which kept any rally we potentially ever had because you just go to the bank and get a load out and reward the rally and the rally was gone. We do not have the extreme interest rates. But I would factor that capital assets have gone up equipment and land so much that rather than just experiencing it in the finance costs the actual product Trim costs has gone up so much that that maybe it's a little bit closer and look, the you know, in those days, livestock manure was a bigger percentage of the fertilizer. We didn't use as much chemistry or it wasn't as effective. And you know, useful as it is today replaces, you know, look at all the Ag chemistry - herbicides that replace tillage and and, you know, cultivation during the year. You need a lot of cash to grow today's crop and the way we micromanage it with precision applying fertilizer and prescriptive, prescriptive nutrients. It just takes a lot more capital, it takes a lot more inputs. It's a different kind of agriculture today, Paul, but it rhymes, it rhymes.

[Yeager]  Do you think that the renewable side of this equation has helped stabilize some of these discussions because it's another outlet for income and for a market. 

[Riensche] That's an interesting discussion, especially as I don't think every farmer has it on the front of their radar of this 45Z tax credits that come in the inflation Reduction Act. But the fact that the renewable fuels business could pay farmers more for sustainably raised crops, and this is all subject to definition. It has real power for rural America and food security and Rural Development. I mean, if we're going to have a safe and ample food supply, you need a thriving rural America. And the tax credits could provide us a lot of you know, if they get to the farmers gate. If the greedy grain merchandisers don't all keep it for themselves.

[Yeager]  I had to say, that's good, like that nice and subtle. Yeah.

[Riensche]  Well, honestly, the grain trade, looks at the credits and says, gee, how do I buy the grain? And if I don't have the data, enriched bushels that it will take to qualify for the 45Z money? How do I discount the other grain that doesn't have it? Well, the farmers position is how do I get part of the premium? And you know, there's estimates up to above $1 A bushel on corn that you could bank? So we're working this all out and farmers need to be part of the discussion. I don't have all the answers on how to do that. But the more farmers in the discussion, someone a lot more clever than I will come up with the answer.

[Yeager]  And they're working on answers to, you know, a 15 year round. And I had a discussion with someone a couple of weeks ago, kind of wanting a little explanation about ethanol. And I said, Well, you know, the ethanol has been good, but it's still DDG. You talked about the livestock manure and how we fed that. Now we don't feed the manure, but we feed the DDGs to the livestock. I mean, all these things have kind of had different inputs and outputs. And so it's not chemistry, I guess it's more of a math equation than it is science right now. But I would like to think that renewables have been beneficial for rural America. Is that fair to say? That's true?

[Riensche]  Well, tomorrow, I'm going to be in the Mississippi Delta, I have some business down there. And I think about what happened in cotton country, when everything mechanized 80 years ago, and, you know, there's, there's a significant incidence of poverty down there, and they've never quite had the redevelopment that they'd like to have down there. And it's because rural agriculture, you know, rural American agriculture had a huge change in what they could offer to the people that lived in the region, not that picking cotton by hand was good business. But it did keep a lot of people fed and, you know, kept a lot of small, rural America, vibrant and prosperous. And you wonder about that with renewable fuels. Having ethanol plants nearby, keeps livestock in the area, keeps people busy, keeps kneelers running with trucks and tractors and, you know, keeps people active in their schools and rural institutions, churches, it's wonderful. So don't overlook the value of renewable energy on keeping rural America vibrant, which is something I think most of people who watch this podcast would agree it'd be positive.

[Yeager]  And it goes beyond just what's at the gas pump. I mean, there's so much more to it, but sometimes it gets too simplified for a group of people that it's just about, oh, you can buy that at the pump. It's a whole bigger deal than that tax benefits that you were kind of dancing around there a little bit, right.

[Riensche] Yeah, I mean, you need to keep your tax base up. That’s what keeps our roads and schools and the traditional infrastructure? prosperous? Advancing? Yes.

[Yeager]  Let's get to carbon for a minute if I could, because that's another promise being made to some areas where a pipeline might go through and areas that would benefit because of those pipelines. What's the carbon discussion like in the world of Benjamin Riensche, right now?

[Riensche]  It would be great to have a revenue source that rewarded you for something other than yield, right now, we still sell bulk commodities off most of our farms or livestock that just has its normal value in the production chain. Carbon allows farmers to get rewarded for the way they do it. And so I'm, I'm very pro, you know, the establishment of a carbon market. It's a very challenging subject to have the education out there about how we raise our crops. All you have to do is watch all the late night ambulance chasing lawyers talked about, you know, pesticides and enter or injury, judgments and things like that. But we need tools in our toolbox to raise our crops effectively. Yeah, you know, it'd be great if we could raise all our crops without herbicide. But that's just not the reality. Until we figure out the next system, we need tools in our toolbox. And we need Washington to support us on that. And I think you know, where I'm leading on this, things like the Endangered Species Act, are not presently helping us. There's been a great resignation in Washington, during the pandemic in places like the EPA need more people. And you're not going to believe a farmer saying this, but they actually need some money to attract people into jobs, they might need to go to more of a hub and spoke model, because it's easy to get weed scientists at land grant university, but it's tougher to get them to move to Washington, DC. And so maybe some of the things we've learned, we can get great scientific talent, keep tools in the farmers toolbox like herbicides, fungicides, pesticides, there's a whole layer of things being debated in Washington pesticide use licensing areas, and like I said, the Endangered Species Act and, and they shortcut to get us keep these tools in our toolbox. They rule out counties that have lesser use or areas that might not use them. And heaven forbid, the worst thing that can happen is we start legislating county by county by county. Without the scientific background, and, and don't make the best judgments for farmers to say prosperous, and keep the food supply ample and keep us with minimal chances of food insecurity.

[Yeager]  It almost sounds like the beginning of our conversation when we talked about weather being too broad of a brush that Black Hawk County was terrible or was great. When in reality, your neighborhood of Black Hawk County was not so great. Funny how those all go back together, right?

[Riensche]  Yeah, yeah. All politics is local.

[Yeager]  So no, I can't answer that one. Right now. I'll get myself in trouble. Land sales. I asked you about historic. I've asked you about you know, you've talked about some tax credits. One last thing I want to close with here is that your work with the farm foundation is twofold. You had a meeting recently. And it was with a mutual friend of ours who was a good friend to a lot in agriculture. And Bill Northey. You What was your first interaction with Bill?

[Riensche]  Oh, my first very first bill was first reading for I was secretary of agriculture and I went to a fundraiser for and I thought this is a guy who's a leader for agriculture. He advocated well, and once I, you know, and that kind of resonated with me. Then I was on laboratory. I was at Corteva in the morning. And they had brought invited me in with other farmers as a client to see their facilities and things like that. And they invited bill in. And this was during the first round of bird flu of avian flu. And it struck me. Bill came in and I was expecting him to just talk about the farmers viewpoint. Bill came in and he talked about how this affected the consumer. And that was the moment that was the epiphany I had that this guy is looking out for me and was a real leader and did a wonderful job. And it is a tremendous it's a traumatic loss. At last bill because he was such an advocate for us, he loved the Iowa farmer. He loved the American farmer. And he worked as hard as possible to make sure i i gotta tell you this. When you have semi trucks on a farm, you can reduce your cost of licensing by just having a farm special plate that says that you will just truck for your farm trucks got bigger, tri axial semis or seven axle trucks we call them had not made it into the provisions of this. I was invited I was at in Washington DC. I brought it up with Bill. You know, here he is Undersecretary of agriculture. But no bill calls back to Iowa and does the groundwork to get seven axle trucks with farm special plates and save every farmer a couple of $1,000 a year. That's the kind of guy he was, he was always worried about us. Always looking out for agriculture.

[Yeager]  No, it actually reiterates what I was going to ask. It enforces it. His time we had my last Congress extended last conversation with him was after his time in DC. And he did both enhance his view of the Iowa farmer but also learned other other ways to skin the cat I guess, if you will from other parts of the country, and just how agriculture is different across the United States, and not just necessarily in Iowa. But he kind of wanted to make both better. And that's what always struck me is again, agriculture was first for him, it didn't quite matter if it was his home state, or maybe another state was just making everybody better. That was my take of it.

[Riensche]  So mid January at the Farm Foundation meeting, we were the farm foundation that always visits agricultural interests, and we visited a macadamia nut farm. And in mid January, I was snacking on macadamia nuts with Bill and telling a few jokes and introducing him around I introduced him to an entrepreneur who's got an exciting new technology in soybean genetics. And he was excited about how this could be used. And then I went to the Iowa power farming show in Des Moines ran into Bill. And just by the escalators and HyVee Hall by happenstance ran into Bill and he pulled me aside and he said, save your son Hans is going to go on a Nuffield Scholarship, and he's going to go tour farms all over the world for most of the year. And I'm like, How do you know this bill? But he's like, this is wonderful. He's going to find out about agriculture everywhere and bring it back here and share what agriculture is all about. Anyway, that's just a signature Bill. Thinking about how to make farming better.

[Yeager]  Do you think you're gonna have a better year? How are you going to have a better year in 2024 on your farm? 

[Riensche]  buying more crop insurance because it hasn't started raining?

[Yeager]  What do you mean, I saw the radar Monday go right through your place.

[Riensche]  Yeah, that seven hundreds of an inch was a drought. It almost done between me and my office in my house. But boy, things change faster. It's going to be rinse and repeat this year. And you know, you think back what was it like? You know, you've asked me some questions and interview about what it was like in the 80s. And I think what was it like in the 30s? You know, you hear Dust Bowl days, tales 36, 37, 38 year about huge blizzards. But then it didn't rain all summer and it got hot endlessly. And you just wonder if we're in one of these apocalyptic near biblical sort of times that we're just got a three year bump spot in northeast Iowa. I think that's probably the case.

[Yeager]  We're gonna find out. There's not much we can do. 

[Riensche]  We're not gonna spend as much money on equipment, that's for sure. The banker said none of that.

[Yeager]  That could be the first domino we'll see. Whether it's been made maybe whether it's the first the bankers the second, we'll see what the third is and we'll discuss it from there. Ben Riensche. Good to see you. Thank you so much for the time.

[Riensche]  Pleasure talking to you, Paul. Take care.

[Yeager]  If you have feedback for the general program of Market to Market, send it in an email to MarkettoMarket@IowaPBS.ORG like, subscribe, follow do whatever you want to with this podcast. We really like it when you share. Thank you for watching, and we'll see you next time. Bye bye.

Contact: Paul.Yeager@IowaPBS.org