OK, Boomer: Grain industry exec shares views on competition, China and consumers

SPRINGFIELD, Ill. — Twenty years ago, Greg Beck looked at organic and non-GMO grains and dismissed them as a trend that wouldn’t last. Five years ago, the idea that electric cars, fake meat and organic food would ever catch on and become real consumer demand areas seemed farfetched.

Today?

Today, Beck, the senior vice president of the grain division at Consolidated Grain and Barge, has changed his thinking on those things.

Why? The answer is only as far as the refrigerators in the homes of his grown children.

“When I go to my kids’ homes who are all millennials and their spouses and I open their refrigerators, it’s full of organic food. It drives me crazy,” said Beck, the keynote speaker at the 2021 virtual Grain and Feed Association of Illinois annual convention.

Beck discussed a laundry list of issues that the grain handling industry and farmers themselves need to be thinking about now and into the future.

On Consumer Preference

“The Boomers, myself, really don’t have any influence over this economy anymore. Boomer money is pretty conservative. The millennial population now exceeds the Boomer population and when you include the millennial population and Gen Z, the one just behind, it’s those two generations together are about double the Boomers. So, that’s where the money is coming from, that’s what companies are paying attention to and that’s why you’re seeing these huge drives for food, healthy food. It’s a feeling. It’s a Facebook thing, from social media, from them talking among themselves. It’s like technology, I don’t know what to do with it, but I’m thinking about it. What’s my place in agriculture? What’s my place for CGB and how do I set us up for the next 20 years? I’m not sure, but it’s a big point that we need to consider.”

On China Demand

“China is still China. They are a massive country with tight government controls, and they are going to be doing things in the market that explicitly serve themselves. That’s going to be pull back and not buy grain and use their stocks to try to drive the price down. They are absolutely going to do that. Trade war? If they can go anywhere else in the world to make a point against the United States, they are absolutely going to do that. Also, when we don’t expect it, like we’ve seen these past six months, when they need to buy grain, they are coming and they are going to come with full force. They’ve got the money to do it, so I think it’s going to be very much a long-term growth trend, but it’s going to be very choppy along the road.”

On Automation

“Let’s say we’ve got a million-dollar project to automate a process at an elevator. I can do that cheaper with people at the current wage, so therefore, you’re not seeing a push of any of us in the grain industry to really push for automation because we can do it with people cheaper. I think our question needs to be — in 10 years, can I even find those people? It’s getting harder and harder and harder to find employees, and I’m sure you’re all in the same boat. I think some companies are going to need to start taking some risks, and the risk is not going to be, ‘Can I develop a technology?’ The risk is going to be it doesn’t pay any money and it’s not going to bear returns for the next three years, but in 15 years, it’s going to be absolutely necessary and table stakes, so we’re going to have to have some capital spend with very little return.”

On Climate Change

“Fifteen years ago, we didn’t talk about South Dakota and North Dakota as being corn producers. Now, they are big corn producers and big soybean producers and we are seeing ethanol plants being built in South Dakota. We’re clearly in a warming trend. Clearly it is warmer up in the Dakotas. So, if this same thing happens in Russia, they are going to be able to grow more corn and soybeans. The idea that the United States is exporting less as a percent of total exports, I think, it’s just going to continue, with acreage expansion in Brazil, certainly high-priced beans and corn is going to exacerbate that and the Russians are going to be looking at it, as well.”

On Competition

“We are not the big dog anymore. The United States is the residual market to the world. We’re the leftovers. We’ve got storage. We can hold an entire crop. The economies in Brazil, Ukraine, they are just set up that every year they are going to get empty, they are going to flush their stocks, replenish them at harvest and this is a trend that we don’t see changing.”

On Brazil

“Brazil really does have high quality grain. They really are preferred. If all things are equal, our shareholders in Japan would rather buy soybeans from Brazil because they have more oil and protein and they are turning everything into meal or oil for food. They are cost-competitive.”

On Biden Administration

“Unfortunately, I don’t see a lot of positives. The challenges we’re starting to see real quickly. With COVID, they’ve come out, let’s say with COVID, and talked about (the Occupational Safety and Health Administration) and might have to have an emergency order to make sure industry in general is complying with all the CDC guidelines. I think you are going to see more effort from OSHA to be more compliance driven. I think we’re going to see fines go up, we’re going to see inspections come up. We are worried about (the Food and Drug Administration) with (the Food Safety Modernization Act). FSMA has been around for more than 10 years and there really hasn’t been a lot of infiltration of FDA of difficult inspections. I think that was because the Trump administration said let’s trust that they are going to do things right and let’s not assume they are going to be doing things badly. I think the new administration, the pressure is going to be that the FDA, the (Environmental Protection Agency), OSHA, are going to go back to where we were 10 years ago and assume corporations are wrong, assume corporations are behaving badly and we are going to have a lot more inspections, a lot more oversight.”

On Gulf Growth

“I think what the exporters are seeing is this continued long-term growth curve. They know the United States is the most reliable market, even though other countries, other continents, can outperform us sometimes in terms of price. When push comes to shove, the international market knows they can depend on the U.S. Gulf for their supplies, so I think we are going to continue to see expansion in the Gulf and that area.”

On Consolidation

“What we’ve seen is people not growing just to grow, but it’s more people saying that either our family doesn’t have a taste for the grain business anymore or our bankers don’t have a taste for the risk anymore and it’s people wanting to go out more than it is people wanting to enter the industry.”

On Bulls Versus Bears

“Global demand is still growing, and we don’t see any change to that. The desire for protein, as diets improve and diets change, I don’t think we are going to get away from that. So, the long-term picture for agriculture, in my mind, is very positive, and we are very bullish on this industry.”