TEPAP – Day 2 Jim Nolen

For anyone that has attended TEPAP, the days get long and conversations run late into the evening so I’m a few days behind on my posts.

The first speaker on Monday was Jim Nolen from the University of Texas. One of the key points he made is public companies get feedback from the market. For private companies, the only place to get financial feedback is from their accounting systems and managerial accounting is critical to provide that.

He also made a good distinction between accounting and finance. Finance is generally focused on managing the balance sheet while accounting focusses on the P&L. He emphasized the need to understand the relationship between the balance sheet and desired growth rate. Growing too fast can kill a business when sales grow faster than the balance sheet can support that growth. For many operations, this will probably be their downfall in the next couple of years.

We also had a discussion on relationships with your banker, especially during tough times. As someone who has served on bank boards, he gave us some good advice on working with your lender during times when margins are tight.

I had a chance to get his comments after his discussion and you can listen to those here.

Jim Nolen Inteview

The second speaker was Peter Zeihan who gave us an overview of world geopolitics. His big message was that the United States is positioned to be the world leader for several decades.  The two driving factors behind that are people and energy.   Demographic trends throughout the world are working against most countries as their populations are aging and their won’t be young people coming into the work force to support social programs or spur economic activity.

The second factor is energy.  The United States is in the process of disengaging from the rest of the world because we are functionally energy independent and no longer dependent on the middle east.   The rest of the world due to debt levels and shortage of energy in the future will be in a much weaker position than America.  

For agriculture specifically, he was bullish on American agriculture in the medium to long term because we will have access to capital and resources which won’t be guaranteed for the many agriculture producing regions.  If you would like to read more, you can get his book entitled THE ACCIDENTAL SUPERPOWER

Check Grain Buyers Approved Variety List

Last week I received a letter from one our farm’s grain buyers stating there are certain GMO traited varieties at certain locations will not be accepted and that we should contact those locations to know what those varieties are. They were protecting themselves from contaminating supplies of corn and soybeans that will end up in the export market.

On Tuesday, Reuters had a great article on how we are losing corn export business even though our corn is lower priced on the world markets. Highlights included the following:

  • U.S. suppliers have changed terms of their contracts putting the cost of rejected loads on Chinese corn buyers.
  • U.S. corn is $13, a ton cheaper than Ukraine corn.
  • Ukraine passed the U.S. in terms of corn exports to China in January.
  • Buyers are afraid Beijing will turn away corn that contains Syngenta’s Agrisure Duracade trait which is not approved.
  • China has cleared the import of Syngenta’s MIR 162 (Viptra) event which caused the rejected exports in the past

For producers, managing our risk includes knowing which elevators will take our products and which won’t. In reference to the Durcade trait, Syngenta can provide a list of those locations. In February, they claimed a list of 1,652 locations out of approximately 8,700 nationwide that will accept the Duracade trait.

Before planting this year, you may want to check with your primary grain buyers to insure they will accept all the grain varieties you are going to grow this year, whether those are Syngenta, Monsanto, DuPont or other varieties.

Additional Resources:

More U.S. grain elevators accept GMO Syngenta corn banned by China

Syngenta Right to Grow Program/Information

Example: Posted policy by a grain buyer not accepting the Duracade trait.