WILLMAR, Minn. — I caught up with John Baize on Jan. 8 at the Linder Farm Radio Ag Outlook event in Willmar. Baize, the day’s keynote speaker, knows much about agricultural markets — particularly soybeans — around the world. He has been a long-time consultant to the U.S. Soybean Export Council. And when I chat with Baize we always take a trip around the world. Plus, the day was a special treat. Baize celebrated his 71st birthday at the Willmar event. So happy birthday, JB, and away we go.
The Land: John, you’re 71 today. You stay very active and healthy. What’s the secret?
Baize: It must be good genetics. My parents deserve the credit. I can guarantee you I don’t do a very good job with exercise and proper eating.
The Land: Have you ever seen agriculture facing so many critical issues as it is today?
Baize: We’ve always had important issues in agriculture. Today, agriculture is so much more capital intensive than it ever has been. Farmers almost need a PhD to learn all the technology of today’s agriculture. But more divisive today is the general political situation in the U.S. We’ve got conflicts with China over trade; conflicts with Russian expansionism into the Ukraine. I remember a few years back at one of these Linder events a farmer asked me ‘Why are you always talking about politics. Politics aren’t part of farming.’ I said, politics are about 90 percent of what happens in agriculture today. Suffice to say it’s a very interesting time in agriculture.
The Land: You hinted that quality of our commodities is a growing question. As we push more technology and higher yields into crop farming, are we in fact sacrificing quality?
Baize: It’s well established that the higher the yield on soybeans, the lower the protein content. And that’s a problem in foreign exports because soybeans are a protein seed, not an oil seed. I recall in my college “Feeds and Feeding” text books, dehulled soybean meal was listed with a 50 percent protein content. Today, the crushers are lucky if they make 47 percent. I think we need to be focused on how to make our soybeans more valuable to the end user in terms of higher protein, key amino acids and better digestibility. Buyers will pay more for these features and hopefully U.S. soybeans will become the preferred product.
The Land: So in view of our incredible research talent at colleges and seed firms, why isn’t this happening?
Baize: Simply because under today’s marketing system, protein and oil content are not a factor in the price grading of soybeans. Until somebody feeding chickens will pay more for higher protein soybean meal, there is no incentive to do anything other than produce more yield. So everybody in the value chain — from seed company to farmer to soybean processor to feed miller to livestock producer — all need a piece of the action to make this work. It can be done. But today there is not the incentive to collectively make it happen.
The Land: In your comments this morning you said Argentine farmers are putting better quality corn into the export market than U.S. farmers — explain.
Baize: Southeast Asia buyers like it better because it is cleaner. It has fewer cracks, less dust and foreign matter. They say U.S. corn is too cracked and dusty. They get mold problems so they don’t buy our corn.
The Land: Is this because U.S. corn goes through more handling processes before finally being loaded into overseas tankers?
Baize: Certainly we do handle our corn more times than they do in Argentina. But I question if corn varieties in America have been more focused on production for the ethanol industry. We have been focused on maximum yield to produce more beef per acre, or more gallons ethanol per acre.
The Land: You are a world traveler. Are American farmers today crabbier than farmers in other countries?
Baize: They’re in a crabby mood, but it’s nothing like that 1982-83 era when farmers were in a crisis mood about losing their farms. Interest rates were 20 percent and more; corn prices were in the tank. But let’s also look at that 2010-2014 era when farmers were making more money than ever before. And many were thinking this is the new era for farmers to feed a growing world population. But farmers always seem to manage a way to out-produce market demand!
The Land: Is the greedy nature of farmers part of this issue?
Baize: I wouldn’t call it greed. American farmers are capitalists. They try to maximize profit. We go through periods when they spend like crazy to achieve more profit. But we’re in a situation today where minimizing risk and minimizing outlays is the key to survival. So that means doing whatever works to minimize costs of production while still producing a yield that makes you more money.
The Land: So are farmers in Brazil, Argentina, even Germany also being squeezed on break-even farming?
Baize: Yes, Brazilian farmers are being squeezed too; but their advantage is cheap land. And also a big assist with China dumping huge amounts of money into Brazil to build more rail lines and barge lines and better roads and export terminals. Plus they have a currency that has been devalued so it looks like their prices are good — though in real world, their prices have gone down in dollars. But if they start seeing a stronger currency that might really squeeze Brazilian farmers. It might be happening already because they barely increased their soybean plantings this season.
The Land: Are we kidding ourselves that new trade talk with China will be a new opportunity for U.S. agriculture?
Baize: China came to the table kicking and screaming. They had to because their economy is hurting because of U.S. tariffs. They know virtually every country around the world says China has been violating the rules of WTO (World Trade Organization). The U.S. was the only country with the guts to take them on. China is going to be brought under control one way or another because other countries will start doing what we’re doing … cut them off from their markets just as we have been doing in America. The reality is that U.S. and China are huge competitors on speaking terms; but I think a long-term challenge between these two super powers will continue.
The Land: Is the Canadian/Mexican/U.S. trade agreement significant?
Baize: Yes, this is very significant. It much improves the situation between the three countries. It must not be bad because all three countries like the deal. And it looks like we may get it approved within the U.S. senate next week. Then it’s on to our President for his signature. Mexico and Canada have already signed on.
The Land: You heard from an earlier speaker this morning that weather for the rest of this winter and early spring is not encouraging for agriculture. How can U.S. farmers respond to this continued economic crunch?
Baize: A huge weather problem in South America would certainly help. Bad weather in the Ukraine, Western Europe, even China would help also. The reality is a significant weather crises is the only logical way. China with African swine fever essentially depleting their entire hog industry doesn’t suggest a big uptick in either corn or soybean meal to China. We’ve had 21 crops grown over the last seven years in Argentina, Brazil and the United States and only two of those seven years have been bad: 2018 in Argentina; 2019 in the U.S. We’ve never seen that much continued good weather around the world. Unless that changes, we’re not going to get out of this problem!
The Land: Can the industrialization of hemp in the latest U.S. farm bill offer a new alternative to American agriculture?
Baize: I know very little about this product. But it looks to me like you can very quickly overproduce this crop. I think there is a lot of risk at these initial stages. CBD oils seem to have ignited, but I don’t see evidence these products are approved for human consumption. Sounds risky to me. I’m hearing upwards of $10,000 an acre to grow it. If I were a farmer, I’d sit around and watch this one for a while.
The Land: When you retire, if you ever do, will you return to your treasured homeland of Texas or will you quietly just accept the social life of the D.C. Swamp? (Baize’s firm, John C. Baize and Associates, is based in Washington, D.C.)
Baize: Ask my wife. We might go down to the Carolinas or Florida, but not back to Texas. I’m cheap. I prefer retiring where we don’t have to pay state income taxes! My wife does enjoy living in the D.C. area.
The Land: So John, this closer: What country or area looks most encouraging for increasing exports of U.S. soybeans?
Baize: I think ultimately it’s got to be India — huge population of 1.3 billion people. Their economy is growing at 7 percent per year. They can’t produce any more soybeans. Their population keeps growing. They have a growing demand for chicken meat and farm-raised fish. So I think India is a huge opportunity down the road. Pakistan is another growing market. So is Bangladesh. India is the world’s largest democracy; Pakistan is sort of a democracy. So too is Bangladesh. But they all are protectionists. They have so many farmers; they’re doing everything they can to protect their farmers.
India needs to become a major manufacturing country and build big industrial basins near its ports. That would require moving people from the countryside into these new manufacturing centers. Doing so and leave the farmland remaining so farm size could also grow. But this will only happen through industrialization. They will always have to import food, however, because the quality of their diet is going up. Their financial means are improving so their people want to eat better. v