Dec 01, 2025
On November 13, The Capitol Forum held a conference call with Patrick Thomas, reporter at The Wall Street Journal, for a conference call with Executive Editor Teddy Downey. The discussion explores insights from Thomas’s recent article, How the Lowly Soybean Got Trapped in the Crossfire of the U.S.-China Trade Wars, examining how U.S. soybean farmers have become entangled in the high-stakes politics of global trade, bailouts, and commodity dominance.
The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Welcome to our discussion on Soybeans, Superpowers, and Trade. I’m Teddy Downey, Executive Editor here at The Capitol Forum. Today’s guest is Patrick Thomas, a Reporter at The Wall Street Journal, who covers U.S agriculture and commodity markets with a focus on how international trade policy affects rural economies, food production, and global supply chains. We’re talking about Patrick’s recent article “How the Lowly Soybean Got Trapped in the Crossfire of the U.S.-China Trade Wars,” which examines how U.S. soybean farmers have become entangled in the high-stakes politics of global trade bailouts and commodity dominance. And Patrick, thank you so much for doing this today.
PATRICK THOMAS: Yeah, thanks so much for having me, appreciate it.
TEDDY DOWNEY: And to our audience, if you have questions, just enter them into the questions feature of the webinar panel, control panel. Or you can email us at editorial@thecapitolforum.com. We’ll try to get to your questions.
For me, this is such an insightful article, and I learned so much. I learned about history of soybean production, soybean buyers, demand, and the supply chain internationally. And I guess I wanted to start off, there’s so much expertise in here. Did you already know all this? How did you think of this article? And how much expertise did you bring to it already? I think it would just be great to hear about that. Because it seemed like you needed a tremendous amount of knowledge in a wide range of areas, not just the industry, but trade policy, the history of all these policies. And it’s just a lot to go through.
PATRICK THOMAS: Yeah. And again, thanks for having me on. And I appreciate it. I think just generally, so I’ve been covering American agriculture for a little over four years. But I think a good chunk of this I’d kind of known just through years of building up sources and talking to folks and talking to farmers and that sort of thing. You kind of learn about, okay, here’s China’s outsized importance, if you will, to U.S. agriculture. And that U.S. farmers are extremely reliant on Beijing and what they need, really to feed their hog population is why they need so many soybeans in the first place is to feed chicken.
They eat a lot of pork in China. I don’t know the stat off the top of my head. But the stat, I think, it’s like they eat three times as much pork per capita or something along those lines. It’s like a crazy stat of how many pounds of pork they eat compared with the U.S. consumer. And our pork consumption has been flat for like 50 years. So, it’s actually a very fascinating number. So, that’s why they need so many soybeans.
And then you also hear about Brazil and American farmers. Even I remember a couple years ago, hearing about the first time, like Brazil is kind of always long been rumored to be this big competitor to U.S. farmers and something that they were ‑‑ I don’t know if feared is the right word, but just something that was one of their latest anxieties.
So, you always kind of hear that in the backdrop. But it was always, even in 2022, I feel like it was kind of dismissed as like, yeah, Brazil. But they’ll never match the quality of a U.S. soybean or the prowess that we have. And more or less that they are here.
I mean, Brazil overtook the U.S. in soybean exports seven years ago. And production wise, I think they’re heading for 175 million metric tons, which is a lot more than the U.S. Maybe in a couple of years, it’s not inconceivable that they would double U.S. production, maybe a decade from now.
So, anyway, long answer to your question. But basically, yes, I do some of this. And I think the joy of reporting is we wanted to take — a lot of this has been incremental news. And I think in this story that you’re specifically you’re referencing, we wanted to take a step back, kind of empty the notebook with some of the things I had bouncing around in my head that I just ramble on to people when they ask about something.
But the other part is talking with ‑‑ the best exercise, I was talking to farmers. I mean, that’s where a lot of the reporting comes from. There’s a lot of farmers in the story, a lot of farmers that didn’t end up in the story. But just spending the days calling farmers and asking what they’re seeing, the prices they’re getting, what’s going on, their economics. Because a lot of this is ‑‑ if you’re going to paint the picture, you better talk to a lot of them. So, not everyone makes it in the story. But that’s where a lot of this reporting comes from.
And then trying to understand D.C., that’s ‑‑ I don’t know as much. Sometimes you’ve got to really ask sources and get some better information on what they’re hearing from the policy side of things.
TEDDY DOWNEY: I want to get to the policy in a second. But one thing that did strike me is you use the term crossfire. You have quotes in there referring to farmers as pawns, farmers talking about themselves feeling like pawns. There’s this idea that policymakers, and to some extent these businesses, don’t really seem to care about the farmers, the workers. And that kind of comes through.
Do you think that’s because you interviewed so many farmers, and that’s just their perspective coming through? Or what else can you talk about in terms of providing that perspective, and them being in the crossfire, they’re being in this tug of war situation, pawns, that type of thing? It gets about the power dynamic, but also kind of a feeling that some of these policies are arbitrarily being yanked around. But we’d love to get your perspective on that.
PATRICK THOMAS: Yeah, I think the way that they feel like pawns is farmers do feel like they’re often thrown around, really by a number of different sides. Farmers kind of always have ‑‑ one of the old adjectives that they always have something ‑‑ and I mean this with the utmost respect, but people always kind of make fun of sometimes – that they always have something to complain about. Which I think they would probably agree with and laugh about. Because there’s something always wrong with the farm country. Whether it’s fertilizer prices, or the price they’re getting for their grain or involved somehow in a geopolitical trade fight. These are just things that they always feel like they end up drawing the short end of the stick, if you will.
Some of it stems from USDA has got stats on the food dollar. So, every dollar that you spend on food, how much of it goes to the retailer, to the middleman, to the farmer, breaks down — I think the farmer gets like the lowest amount of that food dollar. Again, I don’t have to off the top of my head, but it’s an extremely low amount. And I bring it up because that’s kind of where the frustration comes from. When it comes to the food dollar, the farmer always feels like they draw the shortest end of the stick because they have to. They don’t set prices. They’re price takers. They’re always subject to the whims of the market. They can’t price their food higher, for example. So, I think that’s where some of the frustration comes from in terms of ponds.
And the other aspect, especially with a soybean more than maybe even other commodities. Like corn. Over time, we have a lot of uses for corn between ethanol policy, and they want E15. There’s trade policy. There’s a lot of levers corn has for demand. Soybean is just outside reliant on China. It is just such a big market. They import a quarter of all soybeans produced in the United States. It’s just a huge amount of volume that we send them.
And they’re also ‑‑ it’s in the data, the survey data ‑‑ they skew Trump. They’re a huge part of Trump’s base, right? So, if you are China, in a trade fight, you have, hey, we’ve got a big chunk of his supporters that we can use as leverage in this trade war. So, I think that’s why they find themselves as pawns, right? As they’re his supporters and they have a direct way to basically hurt them. So, that makes them a bargaining chip. And I think that’s where that frustration comes from.
TEDDY DOWNEY: I want to stick on this for a second and then get back to that trade fight. You mentioned that percentage of the food dollar, a lot of those middlemen are basically like large monopolies in their markets. So, you mentioned in your article, Cargill and ADM, they’re basically winners. They’re investing in South America. So, they’re winners if South America ends up actually exporting more soybeans. They’re, they’re investing there. That’s a fascinating wrinkle, I think. It kind of adds even another layer.
It’s not just the input prices that are going up. It’s not just that the farmers are getting less and less of the food dollar. Because ostensibly, these other dominant firms are extracting that money. It’s also that some of these players actually can win, even if the farmer goes away, the U.S. farmer. They’re almost against the U.S. farmers’ interests. And they have to do business with these people, which I found like a fascinating wrinkle.
First of all, did you already know that was going on? That seems like a really interesting dynamic. And does that play into, both just on the farmer side, an additional feeling of frustration. Or alternatively, is that playing out also in the trade fights? Like, are these companies weighing in, one way or another? Or are they just kind of winners either way?
PATRICK THOMAS: Yeah. So, it’s a really interesting point. You’ve stumbled into this is a broader theme in American agriculture. So, there’s just a lot of consolidation in all of these markets, from the grain trade. Even just last week, Trump said that the DOJ was going to investigate the meat packers for processing 85 percent of the beef. There’s four companies that do that. Three of them are a little bit larger than the fourth one. But you have a lot of that in ag in general. And a lot of that is because these are very volatile commodity markets. So, they survive by operating at really economies of scale. That’s their argument. And grain is no different.
So, these companies are global. They ship corn, soybeans, wheat, just about every food, different food commodities, really across the world. So, they were big players during the Ukrainian war, for example, when Russia invaded Ukraine, a big grain producer. You have the same players, the Cargills, Bunges, ADMs, trying to ship grain out of the Black Sea to Egypt, and so forth. Like they had a lot of ports in Odessa. Odessa got bombed. I think it was a Cargill – no, it was a Bunge port that got bombed by the Russians and a Cargill ship, I think, got hit by a missile or something along those lines. I have to double check me on that one. But it was like crazy. Just an example of like these are incredibly global companies. Like Cargill has processing facilities that they take the grain from the U.S. They’ll process it in China into livestock feed. Cargill is also the largest private company in the U.S. by sales.
So, these are just massive companies. And grain, there’s the ABCDs, as they’re kind of long called. You have Archer Daniels Midland, ADM, Bunge. There’s Louis Dreyfus, where the D comes from, even though it starts with an L, and Cargill. And these companies, there was a report from the USDA a couple years ago that something like 90 percent of grain is handled by like four firms. They didn’t name the firms, but it’s pretty obvious who they were kind of referring to in this report. You have to dig it up. But there was a USDA report from a couple years ago, about market consolidation, when the Biden folks were studying it more.
But basically, yes, these companies invest all around the world. They would say that they invest still heavily in the American farmer. They’re just not trying to prop up the competitor. But they do make money. And one of the ways making money is going into the biggest growth market, which is Latin America. Brazil has been rapidly expanding.
I think they would also make the point that, yes, they are investing in Brazil. And Cargill’s invested, I think, a billion and a half in Brazil in like the last couple years. Like this is a place that they’re growing. They make money there. They do volume. They want the shipments of exports out of Brazil. They make a lot of money doing that when U.S. exports are down, it’s kind of how they balance their business, right? Like, U.S. exports are down.
Okay, well, we can make money off Latin America and still support the American jobs we have. This is a company based in Minnesota, for example. Bunge operates out of St. Louis. ADM out of Chicago. So, they would make the argument that they’re supporting American jobs out of that. Fair enough.
And they would also make the point that China has been the one investing actually billions of dollars in Brazil’s infrastructure to really build up their prowess in terms of the tens of billions of dollars into the countryside to make them really able to export as many soybeans as they do out of that area. So, I think they would make the point that they’re not like solely responsible for building up America’s biggest competitors on the farm. But all of that is to say, yeah, these are massive companies. The farmer has to deal with them. But it’s been that way for a long time.
Grain. The commodity markets in grain are so volatile. I mean, it’s one reason why Cargill loves to stay private. Because you do see like ADM and Bunge stock fluctuate when they report earnings. Their profits can vary widely from their ag trading businesses. Because they can make a lot of money when grain prices soar. Like when Russia invaded Ukraine, they made a lot of money. It’s kind of counter cyclical. It’s interesting because you have a war and they make money. That’s because you have volatility in the grain markets. But then when prices come down, they struggle a lot more.
So, all that is to say, it’s a very complicated business. It’s why they get big, as you see in a lot of these commodity markets. So, it’s not uncommon, and they’ve been as large as they are for some time. And the farmers do have to deal with them. But they’ve always been kind of these silent middlemen who ship grain and deal with the farmer and are kind of key players behind the scenes and advising governments.
Cargill was photographed in China back in March. So, they have influence in all these different countries. The same with ADM and Bunge. They have really good views on American agriculture. So, governments rely on them. Traders rely on them. Farmers rely on their information as well.
TEDDY DOWNEY: I thought it was really interesting. You made a couple of points there.
PATRICK THOMAS: Yeah, if I start rambling, cut me off.
TEDDY DOWNEY: Yeah. DOJ started investigating the meat packers, but here you have Cargill and ADM. China intentionally wants to create — I mean, I learned this from your story. So, correct me if I’m mischaracterizing it — intentionally realized that they relied on U.S. farmers and did not want to do that anymore. And so, diversified their buying by investing in Brazil, intentionally diversifying their supply chain, right? And then Cargill and ADM are perfectly happy to piggyback on that ride.
And then here’s Trump, comes along, wants to get that exact same type of investment going in the U.S., to the point where he will threaten punitive action in exchange for those types of pledged investments, right? It just strikes me as a big fat red bullseye on Cargill and ADM in this particular instance, particularly in Brazil, maybe to a less extent in Argentina where Trump is more ‑‑ obviously, they rescued Argentina financially or have been trying to. We’ll see how that plays out.
And Trump’s a little bit more in a pickle in terms of trying to punish Argentina, the Argentina markets that are trying to export agriculture products, but not so Brazil. And so, here you are, Cargill. You just mentioned they’re in China, spotted in China. I mean, it strikes me as pretty dangerous during a Trump administration to be doing all that. Or just being caught. Not caught, but, you know.
PATRICK THOMAS: Yeah, I mean, the thing is they’ve been an incredibly global company for a long time. I mean, all of these companies operate around the world. They operated in ‑‑ not Bunge, actually, I think they pulled out. But they operated in Russia too when they invaded Ukraine. They’re just all literally everywhere, which makes them such a fascinating company. I mean, they’re all over the world, to your point.
So, to your point you started up with, yes. So, to take a step back. Especially after the first Trump trade war in his first term, the trade war in his first term. China wanted to build this competitor to the U.S. and spent a lot of money in Brazil. They really wanted to have an alternative to U.S. soybeans. So, they could do exactly just what happened. And they spent years doing that and prepared for this moment.
And then you have kind of a separate situation where Argentina lowered their export tax for a day and China bought billions of dollars’ worth of ag products, including most soybeans. And Cargill and ADM are the ones fairing the soybeans out because they have a sizable presence in Argentina too.
But from the company perspective, I think their argument in this case is like they are just doing what good American businesses do, and that’s make money. I mean, they’re making money for the shareholders. They are serving their company. They’re just doing their job and they are investing in growth markets in Latin America. And the U.S. had bailed out Argentina shortly before that, which [dragged? – 20:05] the Iowa farmers. So, I don’t think that was going to draw any criticism from the Trump folks.
But these things are based all around the world. So, I don’t know if I’d say that puts a target on their back. I mean, still because they’re also investing in ‑‑ they’re still like such a key player in the U.S. farm economy, and they just are. They’re an American link for kind of the global supply chain. So, I can’t speak to like how the Trump folks view that.
TEDDY DOWNEY: It strikes me as vulnerable because they’re a U.S. company, ostensibly helping our rivals, right? And specifically trade rivals. Just from Trump’s perspective, Brazil and China are trade rivals. And if Trump is perfectly happy whacking meatpackers, right?
PATRICK THOMAS: Yeah.
TEDDY DOWNEY: Which, again, a lot of that meat coming from Brazil. You would think that, hey, he’s going to be leaning on these U.S. companies to try to punish China or otherwise threaten them potentially in exchange for some kind of favors in that rivalry. I mean, who knows? Who knows what Trump will do?
PATRICK THOMAS: Yeah, the hard part is I can’t get into his mind of like what he would be thinking.
TEDDY DOWNEY: You’re not alone. You’re not alone. I don’t think anyone can.
PATRICK THOMAS: And not to delve into the meat question too much, but I think when there’s an argument that stems more of a frustration of trying to lower the price of beef when you really can’t because of the market forces take two years to lower the prices because there’s a biological clock on the animal of rebuilding a cattle herd, which takes a long time to do. So, you can’t just kind of throw your weight around and demand that prices of these commodities, that take a long time for these cycles to play out — you can’t just force it down overnight.
So, I think that’s where that frustration comes from. And in this case, it’s more of trying to strike a trade deal rather than lowering a commodity price where it’s easier just to kind of use the bully pulpit of the presidency and tweet a company or something like that. You know what I mean?
TEDDY DOWNEY: Well, I think there’s a couple of things. I mean, that’s an assumption that these very, very powerful companies have no control over the price and supply of these goods. Obviously, the farmers don’t because the farmers are not highly consolidated. But all these other companies, they’re constantly being sued for price fixing. I mean, every single one of these companies has private litigation and price fixing allegations for the most part or has in the time that they’ve been very consolidated. So, there’s that overhang, right? Which is that it’s not a fair game or that the prices are being manipulated by these dominant firms.
So, I mean, to my mind, you would get two cracks at the apple. One, you please the farmers by cracking down on some of these monopolies. And also, maybe you do end up getting more price discovery. And when there’s more price discovery, that means the price could go down. I know you mentioned there are big swings. But over the long period, longer time horizons, I think these companies do pretty well overall.
PATRICK THOMAS: Well, right now they’re losing a lot of money. Again, not to delve too much into the beef thing. But these companies are losing billions of dollars right now in their beef businesses because of the way the cycle is like. They’re not exactly making off with anything.
So, it’s a lot of what the industry points to of what’s driving ‑‑ and this is what the industry is pointing to — is we have a shortage of cattle. That is shortage of supply. Demand has been good. That’s driven up prices. So, anyway, that’s kind of where things stand in terms of why prices are high is the cattle industry is extremely complex.
And ranchers have shrunk their herds for years and years. And we have shortage of supply and high demand that has just made a huge run up of these prices. And that squeezed the packers who process them is they have to pay a lot more for the livestock right now. And they’re not doing well. Tyson just reported a huge loss in their beef business. They’re actually making it up in chicken right now because chicken’s priced pretty well and pretty cheap. And it’s a lot more profitable to feed chickens off cheaper soybeans. And soybeans have been cheap because we haven’t shipped a lot of them to China. So, that made prices down. So, there’s a whole supply chain tie‑in to how that works.
TEDDY DOWNEY: So, I’m curious. So, Tyson’s saying that they can’t pass along the higher prices to the retailers?
PATRICK THOMAS: No, they do — I mean, they do pass it along in the form of — I mean, they don’t pass this — they can’t pass it ‑‑ the way it’s priced in terms of boxed beef prices are the wholesale metric that they price what is sent from the meatpacker to the retailer. It’s basically for boxed beef is frozen, giant frozen cuts of beef, basically, from the carcass. So, big old primal cuts. They have to pay what’s called live cattle prices to the feedlots that they buy the cattle from. And live cattle and feeder cattle prices are outpacing the boxed beef prices.
So, they do not perfectly offset. And also, the retailer is the one who sets the retail price. So, your Kroger’s, your Whole Foods, et cetera, et cetera. They also have to be willing to pay that as well. So, can they pass it all off? Not necessarily. But they still have to pay to get the cattle because they need to run their plants. Because these are expensive plants to run. You have two shifts. You’ve got to pay all the labor. They’re paying higher wages these days because it is extremely hard to keep people in these jobs in a meatpacking plant. So, it’s higher wages. There’s also fewer people to do these jobs due to immigration policies. So, you have to make sure you keep them in your plant.
It’s extremely costly to run the plant, which means you want to make sure that you’re always running them, which means you have to have the cattle for it. You’re paying a lot more for the cattle. So, your costs are going way up. And you can’t perfectly offset all of that because you only have so much that you can pass along to the retailer before it becomes — you can’t ‑‑ nobody’s going to buy $20 ground beef. So, it’s just, that’s kind of — they’re in a…
TEDDY DOWNEY: I mean, eventually they can — they’ll pass that on, as long as the contracts — I mean, that’s really just a temporary dynamic between the retailer contract and the Tyson’s, right? I mean, at some point.
PATRICK THOMAS: I don’t know if I could speak to that. I don’t know their contracts. Yeah, I mean, I don’t know what that would look like.
TEDDY DOWNEY: Yeah, I’ve never really known them to have for the retailers — well, retailers are massively consolidated as well. So, hard to see who has more market power in that fight.
PATRICK THOMAS: Well, we do have a Kroger-Albertson’s merger from last year, if we really want to throw back.
TEDDY DOWNEY: Yeah. Well, they’re big enough already. I mean, what you just said is probably a pretty good argument that you didn’t need to be any more consolidated if you can tell Tyson what the price of beef is going to be.
But if we can get back just to the trade stuff and what the farmers — you spent a lot of time talking to these farmers. The picture that emerges from the story is one of China being years and years ahead strategically in crafting their supply chain and options and negotiating position with the U.S. And the U.S. strategy maybe comes off as more impetuous. Maybe that’s not all in your story, but just watching this trade fight. What did the farmers think? Are they just super reactionary and like, hey, just turn this spigot back on? We need China. That’s our buyer. Like you can’t put us in this position and then take it away from us willy nilly.
Or are there farmers who are more strategic? Which are like, hey, why don’t we just have some intentional long‑term agriculture policy in the U.S. where we establish more demand for these products or what have you, a better demand environment or some kind of system to not be reliant on Chinese demand? Are they not saying that? I mean, I’m curious about the short-term thinking versus longer-term strategic thinking of these farmers and what their feedback is when it comes to trade.
PATRICK THOMAS: Yeah, it’s a really good question. I mean, farmers aren’t always a monolith. So, you’ll get a couple other ‑‑ you’ll get some ‑‑ you’ll get varying answers from what their feeling is toward this trade policy. But I think one thing that comes through in these conversations is they don’t like being over-reliant on China in the first place. They were happy to be reliant on China over the last 20 years because they were making money and that helped support kind of the soybean industrial complex, if you will. That helped support them for years and years. But I think there was always an unease of being over-reliant on one market because that just puts you on shaky ground. And we’ve talked a lot about the leverage and stuff through this conversation. So, I think they realize that.
And again, this is a big voting block for the president. And a lot of these farmers still ‑‑ I think that their mindset is they still support the President. They’re angry about these trade policies because it hurts them in the short run and it’s not great for them this year.
I think some have said ‑‑ well, not think, but some have told me they still view this as maybe something that has to be done in trying to reorder global trade and trying to poke China and see if we can find other export markets. How can we wean ourselves off of China? Does this promote the conversation of can we export more soybeans to Thailand, Cambodia, Bangladesh, places like that, big aquaculture places that feed fish, trying to build up their fishing industry. They farm fish. They use soybean meal to feed the fish. So, can we export more to these countries who maybe imported more from Brazil in the past? Can we take that market? I think farmers are happy to see that long-term maybe we can come to some agreements and think that the President is doing something in their best interest.
Now, in the short term, this is a bad year for farmers outside of trade. There’s kind of this whole thing of this is going on with a backdrop of it’s a bad environment to do this in, to lose your biggest customer, when we already have a glut of corn and soybeans right now. We’ve had some big bumper crops. We’ve already needed more demand outputs for these crops. So, what does that do? That puts farmers in kind of a double whammy, right? You’re losing your biggest customer at a time when we already had an oversupply.
And then you have fertilizer prices and pesticides, equipment costs, just generally, I mean, general inflation. These guys still have to make a living. They still have to live at home. Besides the repairs on the farm, they’ve got to have enough income to support them, their family, putting the kid through college, that sort of thing. Just everything that has gone up in price, right? Like you still have to have that money left over from your farm. You can’t just break even. You’ve got to make a ‑‑ this is their livelihood. It’s their salary. You’ve still got to take that.
So, I think all of that is to say it’s part of the problem of they have been losing money. And then this on top of it has made it a very stressful time of, gee, did we have to do it this year? Couldn’t we have done this three years ago when grain prices were doing well? Then we could really stick it to China, because we were in probably a much better position to do this. But that’s not the case.
So, there’s some of that frustration of this was a really bad time to be in this position. But agreeing with the general sentiment that maybe we should find other partners besides China. Now, can you find other fine partners besides China? That’s pretty difficult to do. It’s more difficult than it sounds. Because China is a reliable, timely buyer during the harvest season. Because it’s before Brazil harvests their crop, right?
So, historically, you would have this little window until about February, where you’d have China reliably buying big shipments of soybeans and such every week from U.S. farmers until about February. You’d reliably bring it to the elevator. The elevator ships it out to the PNW, Pacific Northwest. It goes to the ports there, ships off to China. Great. It’s a very methodical system.
Now, when you’re trying to scramble to ship things to Cambodia or fish farms in Thailand, it’s more scattered. It’s harder to predict buying. It’s not as structured. And it leads to a little bit more volatility in the markets than just the stableness of China buying X volume every week to support their industry until the Brazilian harvest. It kind of ruins the perfect flow of how you had things going.
So, that’s not ideal. And the U.S. is trying to figure out more domestic demand for soybeans. Because we only have so much livestock in this country. And I just mentioned there is a cattle shortage per our last conversation. So, you already don’t have enough animals to feed, basically, with what we have.
So, soybean oil, which, when you crush a soybean, 80 percent of it goes into what’s called soybean meal, which is used for the livestock feed, and 20 percent goes into this oil. It can be cooking oil. They also put it into diesel. It goes into biofuels. The U.S. has been trying to up their production of biodiesels. So, basically, we’re trying to give soybeans what the ethanol market was to corn, and trying to figure out can we just take all of these extra crops we make and put them into fuel, and lessen our dependence on certain fossil fuels, and use more crops for this, and helps onshore our fuel production, so to speak.
So, that’s another avenue that they’ve been trying to do. But again, you still have the soybean meal byproduct, and you’ve got to feed animals with it. So, easier said than done.
There’s also a lot of wonky government policy that goes into what’s called the RVO, and fuel standards. And it’s just kind of you’re waiting on the government to basically say how much soybeans is going to be blended into our oil. And it’s a really, again, you’re still then relying on the government, again, to kind of dictate this domestic production policy for soybean byproduct. Again, very in the weeds, very wonky. And it’s all why some of the domestic production of finding other uses besides China for the soybean are very complicated, other than just shipping to China, which is the simplest solution in all of this. Does that make sense?
TEDDY DOWNEY: Yeah, and it’s complicated just because it involves like a much more complex supply chain to get it to all those other places, as opposed to just shipping it to China?
PATRICK THOMAS: And it’s just much more complicated. It’s just more difficult. It’s just easier to just ship it to China.
TEDDY DOWNEY: More volatile if they stop buying it, but easier logistically, for sure. And what about farmers just saying, hey, diversifying their crops? Does that come up at all in terms of growing something else? So, there isn’t too much soybean. I mean, that strikes me as certainly one option, right? If you’re looking long term at this situation, the volatility, you don’t want to be relying on China. Your demand domestically is kind of unclear because you’re waiting on Washington to intervene.
Certainly, I didn’t get the sense from your article that these farmers are confident that this trade fight will just end now that there’s this détente currently. Does that come up as an option? Or is it really like these farmers are just super committed to soybeans? And like they’re trying to figure it out? They want a solution on the trade front?
PATRICK THOMAS: Yeah, I mean, this is a great question. Because I think this is kind of the natural reaction of like, well, why don’t they just grow something else? Why the hell do we have so many soybeans in the first place?
So, in farming, it’s important to have a crop rotation, which may or may not, depending on like the ‑‑ I don’t know if everybody gets educated on crop rotations, and the importance of putting nitrogen back into the soil. Because corn is an incredibly nitrogen‑dense crop to grow. Growing soybeans helps put that back into the soil and lessens dependence on heavy, heavy fertilizer use, which all that stuff that gets thrown around in the soil. So, good for soil health, good for farm health, increases yields to rotate your crops between corn and something like soybeans, which is a legume.
So, there’s always kind of a floor of soybean production due to soil health and rotating your crops. And again, we still do have some demand for soybeans. So, you always want to have kind of a base amount. So, that’s one reason why there’s always going to be a hefty amount of soybeans, just by the sheer fact of agronomy. It’s good for soil health.
TEDDY DOWNEY: And you mentioned corn. Is that tied into basically, obviously, we have a lot of different ways that we subsidize corn.
PATRICK THOMAS: Yes.
TEDDY DOWNEY: And support corn demand.
PATRICK THOMAS: Yes.
TEDDY DOWNEY: So, this is connected to that.
PATRICK THOMAS: Yes. I mean this helps rotate the corn economy, if you will. I mean, we grow a ton of corn in this country. Why? Well, it’s the most profitable crop to grow. There’s a lot of subsidies, as you mentioned, and a lot of safety net programs for grain farmers. So, it makes it the most profitable to, over the decades really, to keep growing.
So, it supports that economy. And the soybeans kind of follow that, if you will, in terms of like in that train. Like, our system, the way the farm bill is structured, has incentivized corn production for decades. And the soybean has kind of come in tow with that, if you will. And the other part of that is like, well, why can’t you just change it? Why can’t I decide to like grow sweet potatoes or something afterwards?
Again, part of the profitability of these crops, besides just subsidies, does have to do with the export markets, domestic production. There is a finite amount of — you can’t just start growing more sweet potatoes. We just don’t need enough sweet potatoes to make that a profitable crop. If we had mass ‑‑ I don’t know why I’m picking on the sweet potato. So, I apologize to the sweet potatoes of the world. But if you just started, if you took a county in Iowa, for example, because they’re a massive agriculture producing state. They have the best soil in the world, the blackest, black dirt, or black gold, I think it’s called. But Iowa is just a master class in ag production. If you just took one county of Iowa and corn and decided to turn it into sweet potato production, you would have such a huge glut, it would drive the price down. And it would not be ‑‑ you would make no money growing it at all. And these farmers would then go bankrupt, and then you’d bankrupt that county. That’s one example. So, that’s one reason why it’s just harder to switch.
And the other really is the infrastructure of the ag economy is built around these crops. I mean, there’s been a ton of investment over the last 20 years, rail line production, ports, crush plants. Crush means crushing soybeans, crush plants. The whole export infrastructure of soybeans and corn has just been built up around this. It’s just not easy to switch to something more intense or a different crop. It just takes a lot of work to switch the infrastructure around. I mean, billions of dollars of capital projects that have gone into this over the years. Agriculture is a huge industry. Soybeans are a big industry.
So, it’s not as easy to just pick up and switch it. And as well as for a farmer individually, machinery costs, you have a ton of debt into the loans you took out for seed and pesticides and the equipment that goes into harvesting these. Some of this equipment is millions of dollars. I mean, a combine is massive, sprayers, planters, the grain bins, your on-farm storage. It’s just so much infrastructure has been built up around this stuff that you can’t just flip a switch overnight and switch crops. It’s just not feasible. And I don’t think we’ll ever get to that place. Maybe you’ll have some small examples in certain places, some programs to incentivize production of certain things. But it’s not really a viable solution for farmers.
And quite frankly, it’s really hard unless you subsidized and had massive new safety net programs for produce farms or other sorts of crops, then I think it’s really hard to get to that place. You would have to pay to get farmers to switch to new and different types of things I think. I think that’s what you would have to do.
TEDDY DOWNEY: Kind of like what China did with Brazil.
PATRICK THOMAS: Yeah, yes.
TEDDY DOWNEY: We’d have to do something similar to what our main rival is doing.
PATRICK THOMAS: You’d have to Strawberry Belt and Road it in Wyoming or something like that. I don’t know. But you get the gist of what I’m saying. It’s hard to do and it requires a lot of money.
TEDDY DOWNEY: Last questions here on my end. I don’t see any coming through in the function. We focus on labor a lot, labor policy in the U.S. One thing that’s been coming up, you see a lot of interest in weakening labor laws so children can work and other labor restrictions removed. To your point earlier, it’s hard to get labor now in a lot of these ag industries. What are you seeing on that front?
I’m curious because whenever I think, oh, well, children working, that seems horrifying on one level. I get some of the employers might want children to work, but that seems like not something that your community would support. I’m curious, you talk to a lot of farmers. What are their views about weakening labor standards? Or otherwise, what’s the solution to this labor shortage from their perspective? Or are they happy that, look, people are getting paid more? That’s the whole point here. Wages being higher is actually a good thing. Obviously, there are different perspectives, depending on who owns what. But I’m curious when you talk to the farmers, and also other people in the industry, what’s the feedback you get about worker standards and things like that?
PATRICK THOMAS: Yeah, I’m not so sure about the children. Is that the Florida law? I could be botching it. I’m trying to remember. Where did they do that again? I’m not familiar with that one.
TEDDY DOWNEY: I mean, across the country, there have been a number of efforts to weaken – you know, to allow for more child labor in certain circumstances, particularly when it comes to agriculture. It’s interesting if that’s not coming up. Like you’re not hearing people —
PATRICK THOMAS: No, I haven’t actually heard that come up a ton. So, that’s fascinating, but something I’ll have to kind of probe around on. I honestly haven’t heard it come up much. But I think the bigger thing, top of mind, right now is immigration policies because there is a concern. It hasn’t manifested itself as much as you might think.
I think there was a big scare over the summer — as you saw a lot of raids, especially in dairies. That is a really labor-intensive part of our ag system — about having enough people. You do a raid and then people don’t want to come to work. Even your legal workers, they don’t want to come to work. Then you have shortages. I think that there was a lot more nerves around that over the summer when you did have more workplace raids, especially in ag. That has subsided a little bit. So, things have been better.
The meatpacking companies have so far not had a ton of labor issues. I know a lot of them have focused on ‑‑ wages are $35 an hour at these places now, which I mentioned about their high costs, which is helping them, I think, keep the pipeline steady so far. The nerve is like the EAD. For example, the administration, I think at the end of October, had the lack of EAD automatic renewals.
There’s a concern that, come next year, you could have a lot of issues in the pipeline of people just drying up because of no refugee programs. You’re not having as many people come into the United States. Just over time, over the next four years of the administration, eventually, that labor pipeline will dry up. I think that’s a big concern. Especially the dairy guys are still concerned over that.
You don’t have a ton of labor in row crop farming. It’s kind of a misconception actually. I always use this as an example. There’s a great story by my predecessor, Jacob Bunge, in 2015, I think, about corn farmers watching Netflix on their combines during the harvest because of the mechanization of this industry. I was talking to a farmer, 73, and does 1,000 acres himself, more or less. The machinery that is so expensive is also pretty good where you don’t have to pay for labor as much. Most of this stuff is done in a combine. You’re harvesting, maybe you’ve got a son or a neighbor or somebody that helps out too, or a family member, or your wife or the husband helps out, et cetera., et cetera. It’s just not as labor intensive.
Stuff like row crop farming ‑‑ to your point about why we do it ‑‑ it’s not picking produce on the West Coast. It’s just a lot less labor intensive and one farmer can do it as opposed to picking strawberries in the St. Joaquin Valley in California. That’s a much more labor intense process, for example.
All of that is to say ‑‑ in those select areas of agriculture, produce, dairy, meatpacking, the concern, and so far, they’ve been able to weather things ‑‑ the concern is long term. Will some of the pipeline of people who are maybe through refugee programs and even legal avenues just dry up a little bit? Could there be more acute labor shortages that remind us of COVID when you just had a really hard time finding people?
Because Americans, at least from our evidence, historical studies, anecdotal things I’ve heard from the industry, just through reporting, Americans are not likely to do these jobs. So, that’s part of the problem. And if that has something to do with lowering certain standards ages, I don’t know if that means trying to put teenagers, instead of bagging groceries, into picking strawberries or meat plants, I don’t know. I don’t know much about it.
But I will say it’s just historically trying to get Americans to do these jobs is hard. So, I think the big concern is over what the immigration rules will look like a year from now. Because it’s a lot of the people who come in, they don’t speak English. It’s a good first job for them. And that’s how they view it. It’s like this isn’t a steppingstone into America for some people. So, if you don’t have people coming in, that presents a lot of problems.
TEDDY DOWNEY: And we did a conference call recently with someone talking about the housing market. And they said that, look, when there’s consolidation, the access to labor is higher, the more consolidated the company is. Do you see that? Is there any disconnect? Like, are you hearing potentially more complaints about labor from smaller companies? But I guess you don’t really talk to that many small companies, I’d imagine, other than the farmers.
PATRICK THOMAS: No, that’s not true. No, there’s some small companies. I like to keep in touch. The smaller guys. Trust me. There’s plenty of this. There’s some around the edges.
TEDDY DOWNEY: Have they complained about labor? I’m curious if it’s disproportionate. Because if you’re a big company, maybe you have more access to labor than the smaller firms. I mean, it might be unique to housing, but I’m curious.
PATRICK THOMAS: No, no, no, I think you’ve struck a good point. I think that’s probably right. I do hear that, at least in some anecdotal circumstances, that yeah, it can be, depending on your region, it’s harder to find ‑‑ you have less resources to offer higher wages, housing, those sorts of things, the perks. What’s the other one? Childcare services, things like that. It’s harder to do that. If you’re a small meatpacker, it’s infinitely harder to offer some of the benefits compared to the larger guys, right?
But I will say one benefit they have, though, is also not being one of the big conglomerates. Like, for example, the new meatpacking plant North Platte, Nebraska, it’s much smaller, 1,500 head a day compared to like a 6,001 that the big guys would operate. It’s a new plant. So, you can offer more space. One shift, maybe a better, which offers just a — they say it’s a better working condition because it’s fewer people and they’re more personable and that sort of thing. It’s like working for a smaller employer, right? Like more personable, if you’re people, you’re less cogs in the machine, so to speak.
So, there’s a little bit of selling points that they can offer. It is still hard because they just don’t have the same perks that a big guy has, right? So, I think that does make it more of a challenge. And I think I’ve heard more anecdotally, like labor issues in some of the smaller, like chicken companies, for example. Chicken is less consolidated than other areas of ag, which it still gets thrown around in a lot of these conversations. But there’s a lot more of these smaller family-owned private companies and I’ve heard that there’s just a little bit more — it’s just you’re going to have to pay up to keep your labor. So, it’s a little bit more costly for them.
TEDDY DOWNEY: It’s interesting you said housing and childcare services. I’m guessing that these small businesses in Nebraska and other places aren’t asking the state to provide those to level the playing field?
PATRICK THOMAS: [Laughs]
TEDDY DOWNEY: No, no, you don’t get that, I imagine. That doesn’t come up? Someone else paying for it?
PATRICK THOMAS: I don’t know off the top of my head. So, I don’t want to misspeak on that one.
TEDDY DOWNEY: I mean, I’d be surprised if they did. I’d be surprised if they did. I wouldn’t typically associate that with the Nebraska style idea.
THOMAS PATRICK: You never know.
TEDDY DOWNEY: You never know. Well, I mean, this is an incredible — oh, we do have one question here. This seems like we’ve already covered this, but I’m going to ask it anyway because it’s our only question.
Did the trade war have a negative impact for U.S. soybean producers? If so, how do you recover trust in U.S. trade policy? Is that feasible? I think we’ve covered this, but maybe there’s an aspect of it that we didn’t.
PATRICK THOMAS: I will say the negative impact, yes, certainly. Because we didn’t get into the cash prices versus future prices, for example. In North Dakota, Minnesota, areas that really send all of their soybeans to China, for example, the cash prices. So, if I’m a farmer, I harvest my soybeans. I put them in a truck. I drive them to the grain elevator. They give me a price for the soybean based on what their cash price is there. And the spread between a future and a cash is called the basis. We don’t need to define everything. But the cash price at these places was a lot lower than the grain elevators in Central Illinois that ship to the chicken companies in the southeast.
So, if you typically, exported your product to China, it did directly hurt the farmers during the start of the harvest season and still kind of hurting. Prices have gone up generally since the trade deal. China isn’t ‑‑ that’s a whole thing we haven’t really talked about yet. China hasn’t really been buying yet. So, we actually don’t know if this deal is going to hold. This is all still early days. So, we don’t actually ‑‑ I’m kind of reserving some of the judgment.
TEDDY DOWNEY: Yeah, I always wonder about that. Because China’s like, we’re going to buy it. And then I’m like, are they really? I don’t know. I mean, is that written down somewhere? Have they been like this is exactly how we’re going to do it? I’m always asking where’s the piece of paper that says when they’re going to buy it and then how much? It’s just like Besant or Trump being like, yeah, they’re going to buy some soybeans. It’s like very New York. I’m kind of like, okay. Well, what are the details there? Yeah.
PATRICK THOMAS: But that’s, again, you’ve hit the nail on the head with that one. We’re kind of ‑‑ I think it was ADM’s earnings call like a week ago where they said, hey. We haven’t seen a joint document or we haven’t seen this in the writing. And we’re kind of waiting to see exactly what the terms will be because we don’t really know when they’re going to make these purchases.
So, prices have gotten a bump from the deal, which is helpful for farmers. In places like North Dakota, the cash price is still hovering around $10. That is not break-even price. It’s not break-even. So, that’s been tough for these guys. So, farmers are in those areas struggling more than if you were in Iowa or Illinois, Minnesota. Dakotas are kind of ground zero for places.
So, that’s tough. And then we haven’t seen a ton of buying. We don’t really know when that’ll come. So, that’s another added layer of uncertainty. If it does come, hey, maybe that will help. But if you sold your crop before the trade deal, you’re going to be hurting more than someone who kind of waited on it.
So, a lot of farmers are trying to store their crop right now and hoping, holding out for better prices basically. That’s how they play the market. It’s kind of a gamble. You can keep your crop in storage. You can sell it now and hope for the best price and think it’ll come down. Or you can hope it’ll go up and hold. So, it’s part of the game these guys have to play and guessing when prices will go up or down or not. Or you can just kind of space it out and just the prices will be what they are. So, some guys choose that approach.
TEDDY DOWNEY: That’s really interesting. So, the price actually depends a little bit on what market you’re selling to. So, if you have like a domestic market here, the price didn’t quite go down necessarily as much as if you are competing with people to ship it off to China.
PATRICK THOMAS: Yeah. For example, the prices have been better in parts of Illinois. Or if you’re on the Mississippi River and can ship it down South and either export it to Mexico or go into poultry feed for the Tyson’s Produce, Pilgrim’s Pride of the world that, well, chicken demand’s really good. They need to buy a lot of soybeans right now.
So, you are probably getting a better price for feeding chickens with your soybeans than sending them to China. Historically, you probably were getting a better price, depending on the year, shipping into China than you were feeding chickens. But now chickens is more profitable than shipping to China.
So, it’s just kind of a weird – it depends on what the export market is. And these farmers, remember, don’t always know where their stuff goes. It’s just kind of dependent on that elevator you’re selling it to or that sort of thing. Or maybe they’ll drive out of the way to go ship to a different elevator that’s got a different price.
I talked to a guy who would drive like 70 miles near St. Louis to go fetch a better price than he would have at his other, more local elevator because he wanted to ship it down to the Mississippi River. So, to a different export market, maybe Europe, maybe Mexico, maybe somewhere else.
TEDDY DOWNEY: I mean, I’m definitely going to remember that the next time there’s a merger and they’re trying to tell me that soybean prices are global. This conversation will come in handy. B
THOMAS PATRICK: There’s a lot of nuance.
TEDDY DOWNEY: Yeah. This was amazing. I mean, your expertise, I mean, I’m so impressed. When the news industry is not doing well, it’s good to know that people like you are doing hard work and providing a lot of expertise at the Wall Street Journal and I look forward to reading your stuff. And thank you so much for doing this. This was incredible.
PATRICK THOMAS: Absolutely. Thanks for having me on. Always happy to help out and appreciate the work you guys do as well. So, stay in touch on it, but got to run too.
TEDDY DOWNEY: All right. Thank you. And thanks everyone for joining the call today. This concludes the call. Bye.
PATRICK THOMAS: Thank you.
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