Shownotes
From Lake Tahoe on Zephyr’s Adjusted for Risk Podcast, host Ryan welcomes back Sal Gilbertie, CEO of Teucrium ETFs, to discuss row crop investing and how corn, soybeans, wheat, and sugar can impact portfolios. Gilbertie explains how energy and fertilizer costs—especially amid Middle East conflict and potential LNG disruptions—affect crop economics and planting decisions, and why grains often trade near cost of production with historically limited downside at breakeven levels (corn around $4, trading near $4.40). He outlines the “golden grain cycle” (breakeven, disruption-driven spike, then replanting and normalization), notes steady long-term global demand, and describes grains’ diversification benefits, citing an agricultural index that outperformed the S&P 500 during multiple drawdowns. He also explains sugar’s volatility via Brazil’s ethanol-versus-sugar production economics and shares how advisors can research Teucrium resources to gain exposure via ETFs.
Zephyr can help financial advisors create modern diversified portfolios. Learn more here.
Learn more about Teucrium here.
00:00 Welcome and Sponsor
01:04 Meet Sal Gilbertie
01:39 Teucrium and Grain ETFs
03:03 Macro Forces on Grains
04:05 Fertilizer and Crop Rotation
05:58 Supply Levels and Breakevens
08:47 Portfolio Benefits of Grains
11:51 Golden Grain Cycle Explained
14:35 Wheat Sugar and Global Producers
15:54 Fertilizer Inflation and 2027
18:28 Timing Grain Allocations
19:45 Corn Supply Pile
21:20 Seasonal Price Patterns
22:02 Portfolio Diversifier Case
24:28 Why Grains Get Ignored
27:50 Advisor Allocation Tactics
29:36 Sugar Ethanol Link
33:28 How To Get Exposure
35:28 Closing Thanks
Connect with Ryan Nauman:
Transcripts
Let's go.
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Ryan Nauman Market Strategist Zephyr:
Hello everyone and welcome to
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zephyr's adjusted for Risk Podcast
from the shores of Lake Tahoe.
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I have another great show
lined up for us today.
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I have on the perfect guest to
dig into the essential world.
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Of row crop investing to explore how
staple commodities like corn, soy,
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wheat, can impact investment portfolios
and what the current macro and market
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environment means for these grains.
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But first, today's episode is sponsored
by the award winning Zephyr, which
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helps investment professionals
make more informed investment
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decisions on behalf of their clients.
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All right, enough from me.
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I've already talked enough.
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Let's go ahead and bring
on the star of the show.
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I'd like to give a very warm
welcome to Sal Gilberti.
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Sal is a CEO of two cream ETFs, Sal.
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Thank you so much for
coming on the show again.
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You were on about a year and a half
ago, so it was a great conversation,
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a really fun conversation.
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I'm glad I didn't scare you
away after that first go around.
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So it's an honor to have you back on.
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Can you please tell us a little bit
more about yourself and two Korean
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and maybe how you got started?
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Sal Gilbertie CEO Teucrium:
Sure.
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And thanks for having me, Ryan.
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It's always good to see you.
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Really appreciate it.
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So two is a an ETF issuer.
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I came from commodities my entire life.
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I've traded commodities and and in another
career I had trading for a European bank.
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I found out what ETFs were and couldn't
believe there were no grains etf.
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And so I started two cream.
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Our first fund launched was the Corn
Fund, and it's got a great ticker, CORN.
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We were first to the game, so
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Ryan: I can remember that one.
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Sal Gilbertie CEO Teucrium:
Yeah.
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Yeah, that's an easy one to
remember and it's really good.
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And greens to me, because I'm, I come from
an agricultural family and I came from
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Cargill, obviously that was my first job.
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So I, I'm mystified.
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That people don't think about grains all
the time and put them in their portfolio.
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Now we've got lots of other
ETFs and we actually launch
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ETFs for other people as well.
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But we're in different categories, but
we're known for our grains and this
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is a really good time to be talking
about grains and how they could
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potentially help a portfolio through both
stabilization and potentially return.
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Ryan: Yeah, that's great.
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And as I, my background farming runs deep
in my family's blood, and I was thinking
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about grains and fields when I was
younger also, but it was a whole different
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conversation I was thinking about.
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Where I can go hide with my cousins
to go have a few beers and go
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run around through the fields
drinking, cause causing trouble.
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Wasn't thinking about investing
in grains back then, but now it's
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like you said, it's a fascinating
time and really interesting.
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So let's start by talking about
the current market and macro
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environment right now and how
it's investing how it's impact.
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Investing in agriculture and
grains, there's a lot going on.
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Sell Duran more.
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We've got other things
that are setting up.
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Inflation is still sticky with the
risk of inflation increasing oil
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above a hundred dollars or around.
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How's this all impact agriculture
and investing in grains?
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Sal Gilbertie: High energy prices
obviously impact everything.
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Agriculture in particular, and this is
why this is a good time for this with
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the war in the Middle East going on
right now, and the interruption of energy
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supplies, particularly liquid natural gas.
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Coming out of the Middle East Natural
Gas, the Nobel Peace Prize has been
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won a couple of times for people in
agriculture, studying agriculture.
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And his name is escaping me right now.
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But the guy who invented synthetic
fertilizer realized you could
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make fertilizer from natural gas.
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Has, there are billions of people alive
in the world because of that particular.
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Okay.
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And when you have a problem with your
fertilizer supply, you could potentially
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have a problem with your crops.
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And so it's not an immediate problem.
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I think to go into the basics,
which you probably know.
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Corn needs nitrogen, so you
need to put nitrogen down.
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Corn is grass.
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It's like fertilizing your lawn.
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Soybeans actually, they call it
fixing nitrogen into the soil.
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So before the advent of commercial
fertilizers, you basically, a
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farmer would plant corn one year,
plow that under and plant soybeans.
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The next year, the corn would take
the nitrogen out of the soil, soybeans
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would put the nitrogen back in, and
you would have this natural rotation.
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And once synthetic fertilizers could
be applied, people put corn on.
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Corn on corn.
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Corn and wheat need.
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A good deal of nitrogen soybeans don't.
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And so what happens is
a farmer in the autumn.
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We'll make a decision based upon all
his input costs and hopefully the,
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the price of the grains on the forward
curve to plant something and they
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decide what to put in that field.
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Corn and soybeans share acres.
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So you generally, where most of the
corn and most of the soybeans are grown,
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you can plant either corn or soybeans.
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Your call, you're gonna do that
based upon your input costs.
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So in the autumn.
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You're gonna price your seeds, price your
fertilizer, buy your fertilizer, lay most
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of your fertilizer down in that field.
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So winter's over and in the spring,
you just, you hit the field with
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the tractor and you get planted.
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And so what will happen here now is
most of the corn will be planted, okay?
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There'll be some marginal acres.
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And again we plant, 90 or so
million acres here in the United
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States of each corn and soybeans.
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There'll be a little bit of
switching from corn to soybeans.
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For the farmers who can and didn't
maybe lock in their pricing properly
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or didn't treat their fields in
the autumn, waited till the spring.
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Everybody's a little bit different
how they operate, so there will
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be some marginal switching.
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So you will see some corn acres
convert to soybean acres, so you'll
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see a little bit less corn there.
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And let's understand, let's plenty
of grain in the world right now.
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You've got about a six month
excess supply of wheat.
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You've got about a three month excess
supply of corn and you've got a little
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bit less than that for soybeans.
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And so those are norm.
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Those are absolutely normal
levels and grains trade at or
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near their cost of production.
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That's something people
need to understand.
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Every government in the world subsidizes
their agriculture community because
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they don't want their people to be hung.
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And so farmers get used to
operating really close to
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break even or at break even.
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And it so happens that even with all
that's going on right now, the price of
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corn is about at its new break even level.
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And so if you look at a chart
going back to the renewable fuel
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standard around 2007, when everything
repriced permanently the future's
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equivalent breakeven price for corn.
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And what I mean by that is everyone
can see the future's price of corn.
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Okay.
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Every farm is a different cost, but if
you convert it back to the delivery into
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futures, you get this one jelled price.
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That's the breakeven price for the
last 17 years that's been between
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$3 and 50 cents and $4 a bushel.
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Now to your point, we've got a
lot of inflation that's come.
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You have rising energy prices,
you've got rising fertilizer costs.
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Corn is trading about four 40.
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As we record this that's 10% above the
old cost of production of around $4.
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Is that the new cost of production?
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I don't know.
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I will tell you that in calendar 2025,
the front month futures corn only
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traded under $4 for two business.
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Stays.
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So it looks like the old
price of, production, the old
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cost of production was $4.
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Now it's a lot here, but in the last
17 years, the price of corn has doubled
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three times from that three 50 to $4 area.
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So if someone says to you, I've
got an asset trades at X every
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couple of years, it trades as at
two x, and then it goes back to x.
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and it's happened three
times in the last 17 years.
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You're probably gonna say, let me
know when that thing gets back to X.
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I'll throw something in there.
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And what happens is farmers will
simply plant something else.
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So while there are no guarantees
in life and past performance is
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not indicative future results.
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We all know the terms.
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Okay?
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Corn at its breakeven or any
agricultural commodity at its breakeven,
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you've got pretty limited downside.
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Historically, if you look back at
a chart again, corn doesn't really
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trade below that three 50 to $4.
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Look at a chart.
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Okay.
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So if you put, there's, we have advisors
who say, I'll put 1% of my portfolio
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in corn when it's at that $4 level.
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Okay.
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When it's at that breakeven level,
is the new breakeven four 40?
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Where we are now, I don't know, but
I do know that you've got pretty
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limited downside historically.
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Okay.
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And grains don't correlate very well.
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They still correlate like all
assets on the really bad days.
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They all go down together.
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But grain's correct.
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And in fact, we have something called the
two agricultural index that we compute
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and one of our funds actually follows it.
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It's called the Rim Agricultural
Fund, the tickers TAGS, that
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index since its creation.
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During that time, the s
and p 500 has had seven.
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declines or more meaning
a bear market correction.
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Okay?
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Seven of those seven times that
index has outperformed the s and p
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500 a couple times by double digit
percentages, like really significantly.
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So grains can act as a
portfolio stabilizer.
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they can also provide some positive
alpha, some positive returns
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depending on when you buy them.
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And right now as we speak,
you've got fertilizer disruption.
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lasting, you've got potentially lasting
effects of inflation that has been okay.
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We think the break even price
of corn is somewhere above $4.
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Now, where if it's at four 40
or down at four, I don't know.
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Okay.
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But the markets seem to be
pricing in something a little
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higher than $4 a bushel.
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We're within 10% of that price right now.
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So can do their own math when
there's a supply disruption.
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Prices tend to go up pretty quickly.
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And again, corn has doubled three times
in the last 17 years during perceived
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price disruptions, which all come
from a drought when it stops raining
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in a massive corn reducing area.
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And again, soybeans follow,
they correlate well.
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Wheat follows, it correlates
fairly well to those two, doesn't
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share the exact same makers,
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Right now to look at grains
as a portfolio stabilizer in
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a very uncertain stock market.
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It to look at them as a potential
provider of excess returns because you're
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buying them near their break even cost.
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And at some point there could be a supply
disruption and demand never goes down.
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Okay.
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00:10:43,799 --> 00:10:47,249
The combined use of corn,
soybeans, and wheat since 1960
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00:10:47,519 --> 00:10:49,889
globally either every single year.
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When you do the math is either
record use or the second highest.
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00:10:53,699 --> 00:10:55,289
It never, it just doesn't fall.
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And the human population is growing.
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The demand for these things to be used in
biofuels and other products are growing.
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00:11:01,499 --> 00:11:06,359
You can't, one anywhere on planet
Earth can get away with not using
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00:11:06,359 --> 00:11:08,159
corn indirectly corn's in everything.
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Okay.
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00:11:09,379 --> 00:11:11,869
And so that all said, and
I'll take a breath here.
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It's really important for people to
look at grains as a healthy component
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of a well-balanced portfolio.
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It really is.
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00:11:21,931 --> 00:11:24,301
Ryan: Yeah, that's fantastic sell.
225
00:11:24,301 --> 00:11:25,471
I love that backdrop.
226
00:11:25,471 --> 00:11:28,291
Just the whole overall conversation there.
227
00:11:28,291 --> 00:11:33,421
All the insight too, investing
in grains and also what goes into
228
00:11:33,421 --> 00:11:37,051
grains and growing it, and like you
said, how important fertilizer is.
229
00:11:38,146 --> 00:11:43,156
Which is being impacted greatly
with the conflict in the Middle
230
00:11:43,156 --> 00:11:46,066
East and, so just keep talking.
231
00:11:46,186 --> 00:11:48,316
The less I talk the better.
232
00:11:48,496 --> 00:11:50,686
We can just, here you go.
233
00:11:51,556 --> 00:11:56,196
So you wanna, when you were on year
and a half ago, or the first time we
234
00:11:56,196 --> 00:12:00,221
had this conversation, you mentioned
that it was, a golden grain cycle.
235
00:12:01,171 --> 00:12:03,571
And I'd had to go with, it
happened three, it's happened
236
00:12:03,571 --> 00:12:05,341
three times in the past 17 years.
237
00:12:05,551 --> 00:12:09,751
Are we still in that golden grain cycle
that you referenced about a year ago?
238
00:12:10,081 --> 00:12:12,811
Or are we at the tail end of it, or can.
239
00:12:13,064 --> 00:12:14,054
Sal Gilbertie: We're at the base of it.
240
00:12:14,054 --> 00:12:15,674
We're always in a golden grain cycle.
241
00:12:15,854 --> 00:12:18,344
Okay, so there are three
parts of a golden grain cycle.
242
00:12:18,344 --> 00:12:22,709
One is are trading at or near their break
even costs, which they're doing now.
243
00:12:23,544 --> 00:12:25,824
And that, that can last
for a very long time.
244
00:12:25,974 --> 00:12:26,304
Okay.
245
00:12:26,484 --> 00:12:30,714
Then some disruptor, 99 times out of
a hundred, it's a drought somewhere.
246
00:12:30,954 --> 00:12:31,344
Okay?
247
00:12:31,524 --> 00:12:36,144
Will cause, because demand is always
steady or rising, and you've got supply
248
00:12:36,234 --> 00:12:39,624
you know you're gonna have diminished
supply if it doesn't rain on your crops.
249
00:12:39,704 --> 00:12:41,894
So the first part of the golden
grain cycle, there are three
250
00:12:41,894 --> 00:12:44,684
parts, is you're trading sideways,
near the breakeven level.
251
00:12:44,684 --> 00:12:45,344
It's just sitting there.
252
00:12:45,404 --> 00:12:48,614
It's not doing anything for your
portfolio, it's just hanging out, okay?
253
00:12:49,184 --> 00:12:50,354
Then something happens.
254
00:12:50,654 --> 00:12:56,144
Usage remains stable or grows, supply
somehow gets diminished generally
255
00:12:56,144 --> 00:12:59,624
through rain or a geopolitical
dis lack of rain or a geopolitical
256
00:12:59,624 --> 00:13:02,954
interruption and prices react and go up.
257
00:13:02,984 --> 00:13:05,274
So that's the second part
of the golden grain cycle.
258
00:13:06,329 --> 00:13:09,779
The third part is when prices are
really high, every farmer in the
259
00:13:09,779 --> 00:13:11,549
world will plant as much as you can.
260
00:13:11,549 --> 00:13:13,799
It's not if you don't have
enough copper, it'll take you 10
261
00:13:13,799 --> 00:13:15,269
years to permit and dig a mine.
262
00:13:15,449 --> 00:13:18,189
If you don't have enough oil, it'll
take you a year or two to dig a well
263
00:13:18,569 --> 00:13:21,929
or longer because of permits and
environmental concerns and all that.
264
00:13:22,649 --> 00:13:24,929
The next growing season, a
farmer's gonna plant that seed
265
00:13:24,929 --> 00:13:25,889
that makes 'em the most money.
266
00:13:26,159 --> 00:13:26,489
Okay?
267
00:13:26,639 --> 00:13:30,089
So crops get replaced pretty quickly
and that's why there are these cycles.
268
00:13:30,089 --> 00:13:32,099
That's why we called it
the golden grain cycle.
269
00:13:32,339 --> 00:13:33,359
When they're at break even.
270
00:13:33,914 --> 00:13:35,294
They're gonna be there for a while.
271
00:13:35,474 --> 00:13:39,854
But history shows us when there's
a disruptor of the supply,
272
00:13:39,854 --> 00:13:41,924
the demand never disrupts.
273
00:13:42,134 --> 00:13:42,494
Okay?
274
00:13:42,494 --> 00:13:43,634
It just, it's just steady.
275
00:13:44,114 --> 00:13:46,724
You basically see this
instant price reaction.
276
00:13:46,814 --> 00:13:47,054
Okay?
277
00:13:47,054 --> 00:13:47,894
So the price goes up.
278
00:13:47,894 --> 00:13:48,704
That's the second part.
279
00:13:48,854 --> 00:13:51,824
Third part is when every farmer
plants next year, the year after,
280
00:13:51,974 --> 00:13:56,114
to replenish those stocks that were
likely drawn down because you had a
281
00:13:56,114 --> 00:13:57,374
little bit of a diminished supply.
282
00:13:57,854 --> 00:13:59,984
Now you head back down
towards that cause to break.
283
00:14:00,089 --> 00:14:01,439
Even so there are three parts.
284
00:14:01,439 --> 00:14:04,919
You're at break even, you're
rising up to some peak and then
285
00:14:04,919 --> 00:14:06,239
you're falling back to break even.
286
00:14:06,449 --> 00:14:10,659
And right now we're at or very close
to that break even price again.
287
00:14:10,909 --> 00:14:16,459
In 2025, spot Corn Futures only
traded for two calendar days under $4.
288
00:14:16,789 --> 00:14:20,624
So we know that the future's equivalent
breakeven cost of corn is around
289
00:14:20,624 --> 00:14:23,264
$4 and you're at four 40 right now.
290
00:14:23,264 --> 00:14:26,754
So you're within, you're probably
within 10% and maybe right at
291
00:14:26,814 --> 00:14:29,644
who knows what the actual costs
are when everything shake out.
292
00:14:29,744 --> 00:14:33,104
You're really close and it's not just
corn again, beans go the same way.
293
00:14:33,284 --> 00:14:34,964
Wheat follows very well.
294
00:14:35,084 --> 00:14:36,434
Sugar plays to its own tune.
295
00:14:36,434 --> 00:14:37,274
It's a big ag.
296
00:14:37,634 --> 00:14:39,674
But because it's a different hemispheric.
297
00:14:40,094 --> 00:14:44,054
Considerations in terms of growing
seasons, and you've only got a few
298
00:14:44,054 --> 00:14:46,004
exporters of sugar that matter.
299
00:14:46,454 --> 00:14:52,274
Okay, so just as a point of
information, sugar, Brazil, Thailand,
300
00:14:53,504 --> 00:14:56,834
to some extent, India, these people
really matter in terms of exports.
301
00:14:56,834 --> 00:15:00,054
Brazil and Thailand matter for exports,
India's production matters 'cause if
302
00:15:00,054 --> 00:15:03,594
they become a marginal importer or
exporter, that actually does swing the
303
00:15:03,594 --> 00:15:05,634
price of sugar a little bit for corn.
304
00:15:06,244 --> 00:15:07,084
A lot of people.
305
00:15:07,744 --> 00:15:08,734
Can export corn.
306
00:15:08,734 --> 00:15:09,004
Okay.
307
00:15:09,004 --> 00:15:12,214
The largest exporters are
the United States and Brazil.
308
00:15:12,544 --> 00:15:14,014
Alright, but you've got like Ukraine.
309
00:15:14,204 --> 00:15:14,354
What?
310
00:15:14,774 --> 00:15:16,974
Always a top five exporter of corn.
311
00:15:16,974 --> 00:15:18,204
I don't know if they still are now.
312
00:15:18,564 --> 00:15:20,004
Wheat different.
313
00:15:20,379 --> 00:15:22,089
Everybody in the world grows wheat.
314
00:15:22,159 --> 00:15:26,029
It is the one crop that's consumed
more by humans than any other crop.
315
00:15:26,029 --> 00:15:30,629
Corn is used in everything from biofuels
to paper, to plastics, to, to whatever.
316
00:15:30,899 --> 00:15:33,389
But, and soybeans are used in Yes.
317
00:15:33,389 --> 00:15:34,769
Cooking oil, right?
318
00:15:34,769 --> 00:15:39,869
But they mostly feed animals and produce
biofuels, Wheat is consumed by humans.
319
00:15:40,229 --> 00:15:43,409
You can put poor quality wheat in an
ethanol plant and make ethanol out of it.
320
00:15:43,414 --> 00:15:43,924
It's been done.
321
00:15:43,924 --> 00:15:44,464
You can do it.
322
00:15:44,674 --> 00:15:47,404
But bottom line, wheat gets
consumed by humans and animals.
323
00:15:47,404 --> 00:15:47,914
That's it.
324
00:15:48,154 --> 00:15:50,224
And so wheat's grown everywhere.
325
00:15:50,504 --> 00:15:52,664
Again, it's a type of grass, essentially.
326
00:15:52,664 --> 00:15:53,954
It needs nitrogen.
327
00:15:54,044 --> 00:15:58,824
And so the any disruption in the
availability of fertilizer globally,
328
00:15:59,154 --> 00:16:03,954
or more significantly the price rise
that we've seen, if that's sticky.
329
00:16:05,304 --> 00:16:06,354
you've got two things.
330
00:16:06,354 --> 00:16:09,734
In the autumn, in the northern
hemisphere, farmers will make decisions
331
00:16:09,734 --> 00:16:12,974
of whether to plant corn or wheat or
something else based upon the price
332
00:16:12,974 --> 00:16:14,494
of their nitrogen based fertilizer.
333
00:16:14,734 --> 00:16:18,694
But the rest of the world, because
wheat's grown in so many other countries,
334
00:16:18,994 --> 00:16:24,664
there are a lot of marginal in terms
of how strong their economies are.
335
00:16:25,249 --> 00:16:25,519
right.
336
00:16:25,519 --> 00:16:29,779
If you got major wheat producers
like the us, Argentina, France
337
00:16:29,879 --> 00:16:33,809
Russia, Ukraine, Australia,
they're not gonna have a problem.
338
00:16:34,049 --> 00:16:34,349
Okay?
339
00:16:34,349 --> 00:16:37,379
Their costs will go up, but generally
their economies are strong enough where
340
00:16:37,379 --> 00:16:39,899
their farmers can pay and get it done.
341
00:16:39,929 --> 00:16:40,289
Okay?
342
00:16:40,349 --> 00:16:42,059
It will make the break even price go up.
343
00:16:42,449 --> 00:16:46,559
But you've got a lot of countries that
grow wheat that they may not be able
344
00:16:46,559 --> 00:16:48,209
to afford a higher price of fertilizer.
345
00:16:48,479 --> 00:16:51,869
That over time is going to affect.
346
00:16:52,349 --> 00:16:55,679
Global production of primarily wheat.
347
00:16:55,709 --> 00:16:58,979
It will affect corn as well, but
it primarily wheat over time.
348
00:16:59,249 --> 00:17:01,919
This is not really a 2026 problem.
349
00:17:02,159 --> 00:17:06,519
I think that the price rise in fertilizer
from the war, depending on how long
350
00:17:06,519 --> 00:17:11,743
it lasts, could very significantly
become a 2027 problem again, because
351
00:17:11,763 --> 00:17:12,983
the northern hemisphere of farmers.
352
00:17:13,854 --> 00:17:17,544
The price and availability of
that synthetic nitrogen fertilizer
353
00:17:17,544 --> 00:17:21,773
in the autumn of this year is
gonna matter for 2027 production.
354
00:17:21,983 --> 00:17:25,884
And over time as the marginal producers
of wheat, which when you add 'em all up,
355
00:17:25,884 --> 00:17:27,624
it's pretty significant globally, okay.
356
00:17:27,894 --> 00:17:31,674
Are affected by the price of fertilizer
and switch to other crops or just cut
357
00:17:31,674 --> 00:17:36,384
back on what they're playing that's
going to gonna tighten things up in 2027.
358
00:17:36,384 --> 00:17:37,974
So it actually is pretty important.
359
00:17:38,404 --> 00:17:42,634
What happens in, in this war and with
the availability of supplies and how
360
00:17:42,634 --> 00:17:48,414
long this inflation that we've seen
or this rise in prices that we've seen
361
00:17:48,864 --> 00:17:51,514
is sticks alright with fertilizer?
362
00:17:51,514 --> 00:17:54,694
It's a very, potentially a very big deal.
363
00:17:54,694 --> 00:17:57,574
Again, right now I think the advantage
investors have is there's plenty of
364
00:17:57,574 --> 00:18:00,574
crops, plenty of grains by any metric.
365
00:18:00,634 --> 00:18:02,284
And so prices really aren't.
366
00:18:02,709 --> 00:18:05,139
Aren't rallying that much,
they're just sitting there.
367
00:18:05,409 --> 00:18:09,039
Again, it's something to look at
for portfolio stabilization, and it
368
00:18:09,039 --> 00:18:12,939
just happens to be an opportune time
historically, on the price charts where
369
00:18:12,939 --> 00:18:16,569
you're, you are above the historic
cost of production, but we don't know.
370
00:18:16,959 --> 00:18:19,509
We might actually be at the current
cost of production right now.
371
00:18:19,509 --> 00:18:22,489
We, no one knows, and so this
could be an opportune time for
372
00:18:22,489 --> 00:18:26,019
people to at least consider
looking at ads in their portfolio.
373
00:18:26,019 --> 00:18:27,279
And of course, ETFs make that easy.
374
00:18:27,316 --> 00:18:27,556
Ryan: Yeah.
375
00:18:28,066 --> 00:18:32,386
So s and we're gonna get into that
shortly and let's talk about investing,
376
00:18:32,386 --> 00:18:33,946
as a port investment portfolio.
377
00:18:33,946 --> 00:18:38,126
You've done a great job so far talking
about, it's a stabilizer, investment
378
00:18:38,126 --> 00:18:39,836
portfolio and can be a hedge.
379
00:18:40,496 --> 00:18:45,876
So 2027, is more where you're
focusing on potentially if this
380
00:18:45,876 --> 00:18:50,586
conflict goes longer and longer, 2020.
381
00:18:50,586 --> 00:18:56,106
Se like what role does that play
as if investors want to think about
382
00:18:56,106 --> 00:18:58,776
investing in row crops or grains?
383
00:18:58,981 --> 00:19:03,486
Is that 2027 potentially, if
this conflict goes on longer?
384
00:19:04,116 --> 00:19:04,656
Does that.
385
00:19:04,931 --> 00:19:10,301
Increase the price potentially of
corn obviously probably increases the
386
00:19:10,301 --> 00:19:12,551
price of, or that breakeven price.
387
00:19:12,731 --> 00:19:15,871
As fertilizer gets more expensive.
388
00:19:16,231 --> 00:19:17,626
Is that how they would play this?
389
00:19:18,746 --> 00:19:18,866
I.
390
00:19:19,734 --> 00:19:20,664
Sal Gilbertie: That's a good question.
391
00:19:20,664 --> 00:19:25,374
It's also a complicated question in that
if you look back at when grains have their
392
00:19:25,374 --> 00:19:26,934
rally, they rally explosively and quickly.
393
00:19:26,934 --> 00:19:28,849
So if you're not in them.
394
00:19:29,679 --> 00:19:31,679
you're a trend trader you miss it.
395
00:19:31,769 --> 00:19:32,039
Okay?
396
00:19:32,039 --> 00:19:35,249
If you're an asset allocator looking
to do the right thing for your client's
397
00:19:35,249 --> 00:19:38,549
long-term portfolio, you're gonna
miss that trade if you're not in it.
398
00:19:38,699 --> 00:19:41,759
And traditionally when we don't have
wars, we don't have supply disruptions.
399
00:19:41,759 --> 00:19:44,129
All else being equal and
all else is rarely equal.
400
00:19:44,129 --> 00:19:44,639
I get it.
401
00:19:44,699 --> 00:19:45,059
Okay.
402
00:19:45,269 --> 00:19:47,429
But when everything's
balanced, like the supply.
403
00:19:47,714 --> 00:19:49,214
Picture right now is balanced.
404
00:19:49,214 --> 00:19:52,364
And that's why grain prices
haven't really rocketed higher.
405
00:19:52,364 --> 00:19:52,604
Okay?
406
00:19:52,604 --> 00:19:55,574
There's fears that things might
happen, actually happen, and
407
00:19:55,574 --> 00:19:57,104
there's plenty of grain, alright?
408
00:19:57,374 --> 00:20:01,904
But traditionally people look at
layering grains into their portfolio in
409
00:20:01,904 --> 00:20:04,914
the autumn and think of it, it's easy.
410
00:20:05,064 --> 00:20:08,544
Most of the corn in the world, and
it's grown in both hemispheres.
411
00:20:08,544 --> 00:20:08,784
All right?
412
00:20:08,784 --> 00:20:11,304
But most of the corn in the
world gets harvested from the
413
00:20:11,304 --> 00:20:12,954
northern hemisphere, okay?
414
00:20:13,314 --> 00:20:14,934
And way more than half.
415
00:20:15,024 --> 00:20:15,354
Alright?
416
00:20:15,594 --> 00:20:16,464
A significant portion.
417
00:20:17,844 --> 00:20:18,654
Look at it this way.
418
00:20:18,864 --> 00:20:22,964
You harvest your corn all in
a, call it a two month period
419
00:20:22,964 --> 00:20:23,954
in the Northern Hemisphere.
420
00:20:24,164 --> 00:20:26,534
It's in a big pile on the
ground, if you can imagine that.
421
00:20:26,594 --> 00:20:28,514
And the world comes to
take corn every day.
422
00:20:28,694 --> 00:20:31,784
Everybody comes and they take a
piece of that pile every single day.
423
00:20:32,054 --> 00:20:34,574
They do it for the rest
of the autumn, it all.
424
00:20:34,574 --> 00:20:37,634
Winter piles getting smaller,
nothing's planted, okay.
425
00:20:37,904 --> 00:20:40,034
In the spring, everybody's all excited.
426
00:20:40,034 --> 00:20:41,204
I wanna plant that.
427
00:20:41,234 --> 00:20:44,144
Pile's not getting any bigger, it's
getting smaller 'cause you're not adding
428
00:20:44,144 --> 00:20:46,274
to the pile until the following harvest.
429
00:20:46,964 --> 00:20:47,414
Okay.
430
00:20:47,474 --> 00:20:50,324
And so you've gotta go the
spring planting, you've gotta
431
00:20:50,324 --> 00:20:52,904
go the summer to see if it rains
enough and the crop comes out.
432
00:20:53,054 --> 00:20:54,914
And then you've gotta go
through the autumn harvest.
433
00:20:54,914 --> 00:20:57,914
So there's a year where that
pile's getting smaller and smaller.
434
00:20:57,914 --> 00:21:01,094
And again, as I referenced earlier, at
the end of that year, right when you
435
00:21:01,094 --> 00:21:04,364
start harvest to make the pile bigger
again, right now there's about six
436
00:21:04,364 --> 00:21:06,434
months left over of wheat globally, okay?
437
00:21:06,434 --> 00:21:09,464
It's three or four months of corn
and soybeans leftover globally,
438
00:21:09,464 --> 00:21:10,544
a little less than soybeans.
439
00:21:10,754 --> 00:21:11,384
Alright?
440
00:21:11,444 --> 00:21:13,934
If anything happens to.
441
00:21:14,309 --> 00:21:18,779
Diminish the size of the new pile
that you're gonna make prices already
442
00:21:18,779 --> 00:21:20,439
anticipate that and go higher.
443
00:21:20,439 --> 00:21:24,099
If you look at most of the big
price rallies in green, they happen
444
00:21:24,099 --> 00:21:26,979
during the summer in the Northern
Hemisphere because of a drought
445
00:21:26,979 --> 00:21:29,129
generally in, in North America.
446
00:21:29,549 --> 00:21:29,969
Okay.
447
00:21:30,239 --> 00:21:34,589
And they have a vast majority of their
move happens between July and December.
448
00:21:35,069 --> 00:21:35,399
Okay.
449
00:21:35,489 --> 00:21:41,549
And then seasonally, you generally see
prices rally December through March, may.
450
00:21:42,359 --> 00:21:45,899
period, and then you start seeing selling
because people start getting confident
451
00:21:45,899 --> 00:21:49,889
in the crop and you have that cyclical
low once in August when you start the
452
00:21:49,889 --> 00:21:54,419
early harvest, and once again around
October 1st, which is traditionally corns.
453
00:21:54,569 --> 00:21:59,009
If you do seasonal smooth averages, corns
clear, seasonal low happens October 1st.
454
00:21:59,384 --> 00:21:59,774
Okay,
455
00:21:59,871 --> 00:22:01,281
now that's all else being equal.
456
00:22:01,281 --> 00:22:02,511
We're not equal right now.
457
00:22:02,781 --> 00:22:07,071
And so I think people need to look at
what's my downside risk Historically,
458
00:22:07,401 --> 00:22:12,101
and again you're probably within 10%
of corn's break even corn at four
459
00:22:12,101 --> 00:22:16,856
40 right now, and it only traded
below $4, for two days last year.
460
00:22:17,776 --> 00:22:19,126
You can do the math and there it is.
461
00:22:19,126 --> 00:22:25,006
So if somebody puts 1% of their portfolio
into corn and it drops 10%, that's a 10th
462
00:22:25,006 --> 00:22:26,656
of a percent effect on your portfolio.
463
00:22:26,866 --> 00:22:28,156
Other than that, it's
pretty stable, right?
464
00:22:28,156 --> 00:22:31,076
If stocks have a, an issue
and they collapse 10% or more,
465
00:22:31,286 --> 00:22:35,626
traditionally, grains are an excellent
diversifier in hedge statistically.
466
00:22:35,986 --> 00:22:40,346
Get that drought or that disruption
of it, fertilizer, it's not just the
467
00:22:40,346 --> 00:22:43,706
disruption now of the straits being
closed, the damage done to the liquid
468
00:22:43,706 --> 00:22:47,126
natural gas plants that some people are
saying could take three to five years
469
00:22:47,426 --> 00:22:52,286
to fully get back online, that's gonna
affect the price of fertilizer, not for
470
00:22:52,286 --> 00:22:55,016
three to five years, because other areas
of the world will make up for that.
471
00:22:55,076 --> 00:22:55,436
Okay.
472
00:22:55,586 --> 00:22:56,906
But for a couple of years.
473
00:22:57,116 --> 00:23:00,146
So again, if you're an asset allocator
looking at, wait a minute, I'm pretty
474
00:23:00,146 --> 00:23:01,466
close to the cost of production.
475
00:23:02,111 --> 00:23:04,181
I got 10% downside, maybe a little more.
476
00:23:04,181 --> 00:23:08,291
If I throw 1% in my portfolio and
there's a stabilizer when my client
477
00:23:08,291 --> 00:23:09,431
comes in, what am I gonna say?
478
00:23:09,731 --> 00:23:11,561
You, they, you use 'em no matter what.
479
00:23:11,561 --> 00:23:14,201
Doesn't matter what the latest
iPhone is, what the stock market's
480
00:23:14,201 --> 00:23:15,931
doing or anything like that, right?
481
00:23:16,381 --> 00:23:21,451
And you've got stable demand, and if
there's a drought or some other supply
482
00:23:21,451 --> 00:23:23,901
disruption you get that quick move.
483
00:23:23,901 --> 00:23:26,121
So that 1% could become 2%.
484
00:23:26,121 --> 00:23:29,601
Historically, it's happened in corn
again three times in the last 17 years.
485
00:23:29,841 --> 00:23:34,311
Now your nine or 10% target
portfolio becomes 10 or 11%
486
00:23:34,461 --> 00:23:35,611
portfolio, and you're pretty happy.
487
00:23:35,611 --> 00:23:40,841
Ag should be looked at as a crucial
portfolio diversifying component.
488
00:23:40,891 --> 00:23:42,641
And again I'm not talking to the traders.
489
00:23:42,641 --> 00:23:43,631
People are trend followers.
490
00:23:43,631 --> 00:23:44,621
They can watch the charts and do
491
00:23:44,633 --> 00:23:44,923
Ryan: Yeah,
492
00:23:45,311 --> 00:23:49,061
Sal Gilbertie: for people who wanna
park some money somewhere that, that
493
00:23:49,061 --> 00:23:52,271
hopefully will stabilize their portfolio
and maybe even give some gains.
494
00:23:52,631 --> 00:23:53,811
Grains are a place people should.
495
00:23:54,123 --> 00:23:54,343
Ryan: you.
496
00:23:54,478 --> 00:23:54,748
Yeah.
497
00:23:55,198 --> 00:23:56,398
That's awesome.
498
00:23:56,398 --> 00:23:56,878
Sell.
499
00:23:57,568 --> 00:23:59,088
And I'm glad you're brought up.
500
00:23:59,118 --> 00:24:04,008
The role that plays is a stabilizer
and it's a long term play, right?
501
00:24:04,008 --> 00:24:06,918
For our listeners, financial
advisors and their clients.
502
00:24:06,918 --> 00:24:09,558
It's not something, like you
said, you should probably, I'm
503
00:24:09,558 --> 00:24:11,898
not a big fan of market timing.
504
00:24:12,228 --> 00:24:16,188
I think it's a loser's game,
but especially here, right?
505
00:24:16,188 --> 00:24:17,478
It's a long term play.
506
00:24:18,588 --> 00:24:21,738
Long term, you just put it
in there and let it sit.
507
00:24:21,738 --> 00:24:23,808
But why you talked about the advantages.
508
00:24:23,808 --> 00:24:28,998
It's a stabilizer, low correlation helps
increase diversification of a portfolio.
509
00:24:28,998 --> 00:24:31,848
Why do you think it's grains?
510
00:24:31,848 --> 00:24:35,328
Investing in grains is an afterthought,
and more people don't think about it.
511
00:24:36,471 --> 00:24:36,931
Sal Gilbertie: It is boring.
512
00:24:37,313 --> 00:24:41,233
We talk about it and it sounds interesting
and you sound, A lot of people say to me,
513
00:24:41,233 --> 00:24:44,083
I had really good cocktail conversation
after listening to you talk about it.
514
00:24:44,243 --> 00:24:45,323
That's nice, but it's boring.
515
00:24:45,323 --> 00:24:47,723
You put it in your portfolio,
there's no yield on it.
516
00:24:48,023 --> 00:24:48,983
It just sits there.
517
00:24:49,373 --> 00:24:53,793
And right now everybody wants to see
some sort of yield or since we've had
518
00:24:53,793 --> 00:24:59,433
the new monetary policy or the, I call
it new, but we're going on 15, 20 years
519
00:24:59,433 --> 00:25:01,653
with this price, stocks don't go down.
520
00:25:02,538 --> 00:25:02,748
Yeah.
521
00:25:02,748 --> 00:25:04,728
They have a 10% correction
here and there by the dip.
522
00:25:04,918 --> 00:25:06,178
That's what everybody does.
523
00:25:06,418 --> 00:25:08,578
This 60 40 portfolio e.
524
00:25:09,193 --> 00:25:13,183
Is going away because of those
couple years we've seen where both
525
00:25:13,183 --> 00:25:15,913
stocks and bonds go down at the
same time and people just panic.
526
00:25:16,103 --> 00:25:20,913
Commodities alternative investments,
grains in particular can really help
527
00:25:20,913 --> 00:25:24,713
you with that if you look back and
enter properly and weight it properly.
528
00:25:24,713 --> 00:25:27,293
And that's everybody's
individual decisions.
529
00:25:27,293 --> 00:25:29,123
I'm not making any
recommendations on that.
530
00:25:29,453 --> 00:25:32,363
But boring and they don't produce a yield.
531
00:25:32,615 --> 00:25:32,885
Ryan: Yeah.
532
00:25:32,933 --> 00:25:33,263
Sal Gilbertie: Okay.
533
00:25:33,383 --> 00:25:34,313
And it's like gold.
534
00:25:34,558 --> 00:25:37,438
Gold is boring and doesn't
produce a yield, so you can either
535
00:25:37,438 --> 00:25:40,708
buy the gold miners alright,
which has been a great play.
536
00:25:41,008 --> 00:25:41,908
Or you can buy gold.
537
00:25:41,938 --> 00:25:44,368
Most people do both and they
should look at commodities.
538
00:25:44,368 --> 00:25:48,448
The same way buying the commodities
companies is can be really
539
00:25:48,448 --> 00:25:51,028
lucrative and you want to own
stocks that are commodities related.
540
00:25:51,238 --> 00:25:52,168
Fantastic.
541
00:25:52,168 --> 00:25:52,678
It works.
542
00:25:52,678 --> 00:25:53,518
It's a great play.
543
00:25:53,728 --> 00:25:54,088
Alright?
544
00:25:54,358 --> 00:25:56,673
But you sometimes you also
want to be in those command.
545
00:25:57,145 --> 00:26:01,155
Some people buy grains as a hedge if
they have a giant position in, a feeder
546
00:26:01,155 --> 00:26:04,845
operation or Tyson or something where
a huge part of the corporate costs
547
00:26:04,845 --> 00:26:06,735
are feed costs for their animals.
548
00:26:07,005 --> 00:26:07,515
Alright?
549
00:26:07,605 --> 00:26:13,545
Some people will buy both the, a
grain ETF or whatever and they'll
550
00:26:13,545 --> 00:26:16,515
buy Tyson and they can do their
own math instead of that hedge.
551
00:26:16,745 --> 00:26:18,215
And or if it's even
worth the effort or not.
552
00:26:18,215 --> 00:26:20,105
There's been so much easy
money in the stock market.
553
00:26:20,105 --> 00:26:22,140
I honestly think that's why
people don't pay attention.
554
00:26:22,440 --> 00:26:22,830
Stuff.
555
00:26:22,882 --> 00:26:27,052
Ryan: Yeah, that's a really good point
Sal, and I've talked a lot about when,
556
00:26:27,212 --> 00:26:31,292
for the past three years, markets
have been a double digits, right?
557
00:26:31,292 --> 00:26:34,742
It's hard to be like, all right,
let's move away from that.
558
00:26:34,742 --> 00:26:39,872
When equity markets have been
resilient, regardless of the
559
00:26:39,872 --> 00:26:44,222
headwinds, the challenges out there,
they just keep on ripping higher.
560
00:26:44,552 --> 00:26:45,722
I could see it on that.
561
00:26:46,147 --> 00:26:50,437
Emotional side, psychological side
of things where they're like, why?
562
00:26:50,617 --> 00:26:51,877
Why do anything else?
563
00:26:52,147 --> 00:26:56,587
Why go outside of the stock market
when we can get 20% returns?
564
00:26:57,535 --> 00:26:57,925
Sal Gilbertie: Yeah.
565
00:26:57,925 --> 00:27:01,555
Individual investors and people managing
their own money really like these
566
00:27:01,555 --> 00:27:03,045
funds, and I think that they use them.
567
00:27:03,045 --> 00:27:05,295
It's about 50 50 when we do the analysis.
568
00:27:05,625 --> 00:27:08,385
The registered investment
advisors, honestly, these people
569
00:27:08,385 --> 00:27:09,945
are so busy courting new money.
570
00:27:10,720 --> 00:27:13,540
And dealing with the headline of the
day and their phone ringing off the
571
00:27:13,540 --> 00:27:17,500
hook with clients who are nervous,
they don't have time to do the extra
572
00:27:17,500 --> 00:27:19,810
work to actually go very far beyond a
573
00:27:20,132 --> 00:27:20,422
Ryan: Yeah.
574
00:27:20,440 --> 00:27:21,040
Sal Gilbertie: portfolio.
575
00:27:21,040 --> 00:27:24,510
And I, I can understand that,
but it, there's a growing number.
576
00:27:25,065 --> 00:27:29,085
Of advisors who want
alternatives, they want liquidity.
577
00:27:29,385 --> 00:27:32,325
When these are immensely liquid,
you don't have any problem.
578
00:27:32,375 --> 00:27:35,585
People drop 50 million tickets in and
outta these ETFs, like it's nothing.
579
00:27:35,815 --> 00:27:40,035
They go in and out without any problems
and they want a portfolio stabilizer.
580
00:27:40,035 --> 00:27:42,945
And I'll tell you what, on the days
the stock market's down and you look
581
00:27:42,945 --> 00:27:46,155
at commodities and grains and they're
green and the stock market's red.
582
00:27:46,155 --> 00:27:47,865
We do get calls, people saying, thank you,
583
00:27:47,972 --> 00:27:48,152
Ryan: Yeah.
584
00:27:48,195 --> 00:27:48,525
Sal Gilbertie: get it.
585
00:27:48,915 --> 00:27:49,125
I see.
586
00:27:49,562 --> 00:27:50,042
Ryan: Love it.
587
00:27:50,702 --> 00:27:53,672
You mentioned that 1%
allocation in couple 10.
588
00:27:53,912 --> 00:27:59,072
Is that kind of just like a baseline you
think, in terms of portfolio construction?
589
00:27:59,072 --> 00:27:59,372
I know.
590
00:28:00,157 --> 00:28:04,807
Obviously it always comes back to
the investor's risk, objective and
591
00:28:04,807 --> 00:28:07,297
investment objective risk targets.
592
00:28:07,297 --> 00:28:13,987
But is that a good place to start for a
financial advisor is like a 1% allocation
593
00:28:13,987 --> 00:28:19,287
into, an ETF instead of trying to go in
and buy the actual physical commodity?
594
00:28:20,615 --> 00:28:22,585
Sal Gilbertie: Yeah, I one,
it's easier to buy an ETF than a
595
00:28:22,697 --> 00:28:23,117
Ryan: Yeah.
596
00:28:23,305 --> 00:28:23,965
Sal Gilbertie: Absolutely
597
00:28:24,112 --> 00:28:24,552
Ryan: store it?
598
00:28:25,465 --> 00:28:29,165
Sal Gilbertie: Yeah, we're not given
advice and one percent's easy math, right?
599
00:28:29,165 --> 00:28:32,195
When you say to put somebody, you
put 1% in, you go 10% down, you
600
00:28:32,195 --> 00:28:33,275
only lose a 10th of a percent.
601
00:28:33,275 --> 00:28:33,935
That's easy math.
602
00:28:34,205 --> 00:28:37,335
We have advisors that have called,
in fact, I think you and I had the
603
00:28:37,335 --> 00:28:40,565
conversation a while ago where we
had one advisor and he said, look,
604
00:28:40,715 --> 00:28:45,495
I see corn, flat lighting, and I put
1% of my portfolio in and I waited.
605
00:28:45,765 --> 00:28:47,985
So he said I waited W-E-I-G-H-T.
606
00:28:48,675 --> 00:28:50,595
I wait until there's a
drought and then I get out.
607
00:28:50,715 --> 00:28:51,815
So I was like, wait a minute wait.
608
00:28:51,815 --> 00:28:52,235
Drought out.
609
00:28:52,235 --> 00:28:52,985
That's pretty cool.
610
00:28:53,195 --> 00:28:57,155
And it's a pretty easy concept where you
put something in at 1% and you look down
611
00:28:57,155 --> 00:28:59,345
and all of a sudden it's 2% you get out.
612
00:28:59,445 --> 00:29:03,385
And so I think that we use it
just because we have had advisors
613
00:29:03,385 --> 00:29:05,005
give us real world examples.
614
00:29:05,395 --> 00:29:10,765
We, you're strategic allocators,
people who do allocate, they
615
00:29:10,765 --> 00:29:12,375
don't, set it and forget it.
616
00:29:12,375 --> 00:29:14,445
They are paying attention
at least quarterly.
617
00:29:16,005 --> 00:29:18,765
those people tend to
wait a little bit more.
618
00:29:18,765 --> 00:29:21,435
And I think it's, if you're
talking 1% waitings, you got
619
00:29:21,435 --> 00:29:22,635
a lot of work to do, right?
620
00:29:22,635 --> 00:29:26,235
So a lot of people just say, I'm gonna
do higher than 1% because I don't want
621
00:29:26,235 --> 00:29:27,735
a hundred holdings in my portfolio.
622
00:29:27,735 --> 00:29:29,295
I want 50 or I want 20, or whatever.
623
00:29:29,300 --> 00:29:32,980
It's it's not a specific re
recommendation, it's one easy math.
624
00:29:32,980 --> 00:29:35,395
And two, we have had advisors
give us that specific example.
625
00:29:35,725 --> 00:29:36,115
Before,
626
00:29:36,367 --> 00:29:36,757
Ryan: Love it.
627
00:29:36,757 --> 00:29:37,867
You mentioned sugar.
628
00:29:38,017 --> 00:29:39,667
Let's talk about sugar real quickly.
629
00:29:39,667 --> 00:29:42,157
Finish conversation here with sugar.
630
00:29:42,787 --> 00:29:46,957
What's driving the recent fall in
sugar or volatility in sugar prices?
631
00:29:46,957 --> 00:29:48,577
Is it that run conflict?
632
00:29:48,577 --> 00:29:53,467
Because like you said, there's only a few
pla, a few exports, exporters of sugar.
633
00:29:53,737 --> 00:29:54,967
What's driving that?
634
00:29:55,027 --> 00:29:56,557
The recent volatility there.
635
00:29:57,590 --> 00:29:57,920
Sal Gilbertie: Sure.
636
00:29:57,920 --> 00:30:02,540
Sugar tends to have its own natural
volatility because the global sugar
637
00:30:02,540 --> 00:30:06,020
picture goes in or out of balance,
meaning supply and demand balanced
638
00:30:06,350 --> 00:30:11,870
by one to say 8 million metric
tons of sugar, which isn't much.
639
00:30:11,870 --> 00:30:11,900
Okay.
640
00:30:12,730 --> 00:30:16,210
But if sugar, and they, a lot of analysts
predicted ahead of time and they can see
641
00:30:16,210 --> 00:30:17,860
what's going on in the growing regions.
642
00:30:18,200 --> 00:30:22,130
If you go into a global imbalance on
the supply side where you're gonna
643
00:30:22,130 --> 00:30:26,140
produce, one to 10 million metric
tons more sugar goes into a bear
644
00:30:26,140 --> 00:30:29,230
mark, and then they wait for their
results to see if everybody was right.
645
00:30:30,115 --> 00:30:30,685
the opposite.
646
00:30:31,015 --> 00:30:34,335
As soon as somebody stops pre
predicting it's surplus in this global
647
00:30:34,335 --> 00:30:38,605
sugar market and they predict the
deficit sugar prices start to rise.
648
00:30:38,605 --> 00:30:44,665
Now the big variable is Brazil world's
number one exporter of sugar, okay?
649
00:30:44,995 --> 00:30:47,005
And they use sugar's.
650
00:30:47,125 --> 00:30:50,215
So when you make ethanol, everybody
relates corn to ethanol here
651
00:30:50,215 --> 00:30:51,235
in the United States, right?
652
00:30:51,715 --> 00:30:52,405
Sugar.
653
00:30:52,705 --> 00:30:54,055
It's a two step process.
654
00:30:54,385 --> 00:30:58,885
When you're in the United States, you take
corn, you strip out the starch, you turn
655
00:30:58,885 --> 00:31:00,535
that into sugars and you make ethanol.
656
00:31:00,745 --> 00:31:01,135
Okay?
657
00:31:01,195 --> 00:31:02,775
Sugar, you don't you miss a step.
658
00:31:02,775 --> 00:31:05,115
So it's cheaper to produce
ethanol outta sugar.
659
00:31:05,445 --> 00:31:05,835
Alright?
660
00:31:06,075 --> 00:31:10,215
And Brazil uses in its fuel supply
a lot more ethanol than we do.
661
00:31:10,395 --> 00:31:14,955
They have the flex fuel vehicles down
there and a sugar mill just looks at the
662
00:31:14,955 --> 00:31:18,585
economics of, do I direct my sugar cane?
663
00:31:18,990 --> 00:31:23,220
Okay, am I gonna turn it into sugar
or am I gonna turn it into ethanol?
664
00:31:24,030 --> 00:31:25,860
do that calculation constantly.
665
00:31:26,250 --> 00:31:26,700
Alright.
666
00:31:26,760 --> 00:31:31,110
So when energy prices go up, the value
of ethanol goes up because it's a
667
00:31:31,110 --> 00:31:35,490
component of gasoline and it's a motor
fuel in and of by itself down in Brazil
668
00:31:35,490 --> 00:31:37,440
when you're using a flex fuel car, okay.
669
00:31:38,310 --> 00:31:43,680
Obviously the cane producer, the cane
crusher is gonna turn that into ethanol,
670
00:31:43,800 --> 00:31:45,090
so you're gonna have less sugar.
671
00:31:45,240 --> 00:31:48,070
So when you see an energy shock
like we're having right now.
672
00:31:48,910 --> 00:31:50,860
because of the Middle East War a lot.
673
00:31:50,920 --> 00:31:52,690
That's why you've seen the
volatility in sugar, right?
674
00:31:52,780 --> 00:31:55,820
Sugar was going up because you had
a little bit of a supply imbalance.
675
00:31:55,820 --> 00:31:57,840
You had more demand than production.
676
00:31:58,020 --> 00:32:02,220
It balanced out, sugar started going
down, then we had the war, okay?
677
00:32:02,280 --> 00:32:03,840
And all of a sudden
Brazil says wait a minute.
678
00:32:04,200 --> 00:32:06,510
Our economics are such that
we're gonna make more ethanol.
679
00:32:06,510 --> 00:32:08,610
We're gonna have less sugar,
which means less sugar for
680
00:32:08,610 --> 00:32:10,140
export onto the global market.
681
00:32:10,320 --> 00:32:11,460
So the price went back up again.
682
00:32:11,460 --> 00:32:13,110
That's where the volatility's coming from.
683
00:32:13,320 --> 00:32:14,550
Sugar really is.
684
00:32:14,860 --> 00:32:14,920
It.
685
00:32:15,610 --> 00:32:20,470
It's really cool because all commodities,
and this is why I got into it, based
686
00:32:20,470 --> 00:32:25,030
on their own supply and demand, The
stock market going up or down is
687
00:32:25,030 --> 00:32:28,300
way less significant to commodities
than their own supply and demand.
688
00:32:28,870 --> 00:32:31,350
So that was just a little
synopsis with sugar.
689
00:32:31,680 --> 00:32:32,790
Is there enough or not?
690
00:32:32,820 --> 00:32:34,590
Is there a deficit or not?
691
00:32:34,590 --> 00:32:38,610
In the global sugar supply, sugar will
be going up or down based on that.
692
00:32:38,610 --> 00:32:43,640
But then layer in energy prices and sugar
gets diverted, sugar cane gets diverted
693
00:32:43,640 --> 00:32:46,670
to producing ethanol versus sugar itself.
694
00:32:46,910 --> 00:32:50,240
Now sugar's gonna go up again because
there's gonna be less sugar on the market.
695
00:32:50,240 --> 00:32:53,240
They're gonna be using more cane for
ethanol and there'll be less sugar on
696
00:32:53,240 --> 00:32:56,390
the market because they made ethanol
instead of sugar for process sugar.
697
00:32:57,830 --> 00:32:59,750
commodities are really
cool and they're simple.
698
00:32:59,960 --> 00:33:02,780
There's, for a guy like me,
I can't do stock analysis
699
00:33:02,780 --> 00:33:04,130
too hard, too many variables.
700
00:33:04,227 --> 00:33:06,387
So commodities, supply,
demand, is there enough or not?
701
00:33:06,387 --> 00:33:06,747
I get it.
702
00:33:07,017 --> 00:33:07,167
Yeah.
703
00:33:07,574 --> 00:33:08,594
Ryan: I love it Sal.
704
00:33:08,594 --> 00:33:10,754
I love the passion you have for grains.
705
00:33:10,754 --> 00:33:12,554
You can hear it, see it.
706
00:33:12,554 --> 00:33:13,634
It's a lot of fun.
707
00:33:13,694 --> 00:33:14,534
A lot of fun.
708
00:33:14,534 --> 00:33:18,634
Listening to you talk about
grains and just all the insight
709
00:33:18,724 --> 00:33:20,554
that you have regarding it.
710
00:33:20,794 --> 00:33:22,774
I dunno, some people
might think equities are.
711
00:33:23,719 --> 00:33:25,339
Easier than grains.
712
00:33:25,399 --> 00:33:28,549
But that's why there's ETFs
too, to make it easier.
713
00:33:28,549 --> 00:33:33,949
So that leads me to my last question
here, Sal, is close it all up.
714
00:33:34,519 --> 00:33:39,289
How can financial advisors and
investors gain exposure to grains?
715
00:33:39,419 --> 00:33:43,409
Like corns, soybeans, wheat,
and their import and how
716
00:33:43,409 --> 00:33:45,539
should they just consider it?
717
00:33:45,589 --> 00:33:48,319
Like just to stabilize in the portfolio.
718
00:33:48,319 --> 00:33:50,839
Just let it do its magic.
719
00:33:52,174 --> 00:33:53,814
Tie it all up real quickly.
720
00:33:54,507 --> 00:33:58,287
Sal Gilbertie: Sure, and basically all
of which I just said and more is jelled
721
00:33:58,287 --> 00:34:00,297
into simple things on our website.
722
00:34:00,297 --> 00:34:01,527
You can go to two cream.com
723
00:34:01,527 --> 00:34:06,077
or follow us on two cream ETFs
on x, and we publish things.
724
00:34:06,077 --> 00:34:10,487
You can sign up for our newsletter
and we'll publish things a week,
725
00:34:10,516 --> 00:34:12,587
sometimes once every two weeks.
726
00:34:12,587 --> 00:34:14,327
We don't blast your inbox.
727
00:34:14,327 --> 00:34:14,476
We don't.
728
00:34:15,027 --> 00:34:16,347
Call you up and bother you.
729
00:34:16,527 --> 00:34:19,317
There's no commitment to
sign up for our mailing list.
730
00:34:19,547 --> 00:34:21,766
And people could follow our
substack, I was just told.
731
00:34:21,766 --> 00:34:24,987
We have tens of thousands of people
following our substack and we'll
732
00:34:24,987 --> 00:34:29,367
publish things about the grains, but
you can go to our website or call us
733
00:34:29,427 --> 00:34:31,976
and you can see where grains fit in a p.
734
00:34:32,442 --> 00:34:33,431
O Okay.
735
00:34:33,431 --> 00:34:34,871
And it, it will have all the studies.
736
00:34:34,871 --> 00:34:38,922
It will show you what, you know when
grains have zigged, when the stock
737
00:34:38,922 --> 00:34:41,172
market zags as our head analyst says.
738
00:34:41,232 --> 00:34:42,272
And so it.
739
00:34:43,022 --> 00:34:45,722
The resources are [email protected]
740
00:34:45,722 --> 00:34:49,772
and at two cream ETFs and on our
substack and or just call us.
741
00:34:49,802 --> 00:34:50,851
If you have any questions, call us.
742
00:34:50,851 --> 00:34:54,121
But I think an advisor should look
at, do I want some stabilization?
743
00:34:54,601 --> 00:34:57,262
Where's the price of grains
Now, some people just buy, they
744
00:34:57,262 --> 00:34:58,252
don't care where the price is.
745
00:34:58,252 --> 00:35:00,532
They're just an asset allocator,
and they just want that.
746
00:35:00,952 --> 00:35:01,927
I'm not one of those guys.
747
00:35:01,927 --> 00:35:05,712
I'm more a strategic allocator where
I'd much rather buy grains when
748
00:35:05,712 --> 00:35:08,052
they're closer to their cost of
production than when they're not.
749
00:35:08,352 --> 00:35:10,272
They're gonna diversify
your portfolio either way.
750
00:35:10,632 --> 00:35:14,082
Okay, but can you get diversification
in maybe some positive alpha?
751
00:35:14,532 --> 00:35:16,932
I'd rather buy closer to cost of
production, but that's just me.
752
00:35:17,142 --> 00:35:17,382
Okay.
753
00:35:17,382 --> 00:35:18,492
So everybody's different.
754
00:35:19,392 --> 00:35:20,802
at greens, do some research.
755
00:35:20,802 --> 00:35:21,822
We're happy to help.
756
00:35:21,822 --> 00:35:23,022
There's no commitment.
757
00:35:23,072 --> 00:35:24,422
We won't try to sell you anything.
758
00:35:24,842 --> 00:35:27,842
People can find our ETFs and
everything on our website.
759
00:35:28,054 --> 00:35:28,324
Easy.
760
00:35:28,981 --> 00:35:29,821
Ryan: Awesome Sal.
761
00:35:29,821 --> 00:35:33,871
And I know a lot of people may
disagree with this, but I do a
762
00:35:33,871 --> 00:35:37,301
little bit of research before
jumping on these interviews.
763
00:35:37,301 --> 00:35:41,261
And you guys do have a bunch of
great resources on your website.
764
00:35:41,261 --> 00:35:43,091
I cannot recommend it enough.
765
00:35:43,401 --> 00:35:45,021
A lot of great stuff there for.
766
00:35:45,356 --> 00:35:47,696
Basic stuff to more, complex stuff.
767
00:35:47,696 --> 00:35:51,366
A lot of great thought
leadership, so thank you.
768
00:35:52,534 --> 00:35:53,074
Sal Gilbertie: Appreciate it,
769
00:35:53,331 --> 00:35:56,091
Ryan: And thank you so much,
Sal, for coming on the show
770
00:35:56,091 --> 00:35:58,011
again, you did not disappoint.
771
00:35:58,011 --> 00:36:00,021
Just like that first conversation.
772
00:36:00,021 --> 00:36:02,421
Lot of fun, great insights.
773
00:36:02,771 --> 00:36:04,001
Thank you for coming on.
774
00:36:04,001 --> 00:36:08,141
It's been an honor and thank you
everyone for listening to this episode
775
00:36:08,141 --> 00:36:10,421
of zephyr's Adjusted for Risk Podcast.
776
00:36:10,421 --> 00:36:13,731
You can watch all of our other
episodes on the Zephyr YouTube
777
00:36:13,731 --> 00:36:15,921
channel as well as Spotify.
778
00:36:16,186 --> 00:36:20,506
And all the other locations
that you catch your podcasts on.
779
00:36:20,836 --> 00:36:23,296
Thank you very much and have
a great rest of your week.
