Ep. 15 – James McWard of Viserion Grain, LLC Talks Grain Merchandising and the Mississippi River Market

[00:01] Intro/Outro

Welcome to Relevant Risk from the Fryar Price Risk Management Center of Excellence presenting conversations and Analysis about Risk and Risk Management for food and agriculture, supply chain decision makers from farmers to consumers and everyone in between. This is Relevant Risk.

[00:19] Andy McKenzie

Good morning. This is Andy Mackenzie, associate director of the Fryar Price Risk Center of Excellence. And today I’ve got a very special guest, special because he is a former student who’s gone through the university’s undergrad program in ag business and also did a master’s degree with us. So today, I’d like to welcome James McWard. So James, maybe you’d like to give us some introduction of your background, how you got into grain markets and then maybe say what you’re doing now.

[00:50] James McWard

I can absolutely do that. So I went to the University of Arkansas, got my undergraduate degree in agricultural business. Then immediately after that, got my master’s degree in agricultural economics. I’ve been somewhat involved in the grain markets ever since I was in high school due to my grandpa and me kind of managing bids for our family farms. But then coming under Dr. McKenzie’s wing at the University of Arkansas and excelled. And I pretty much decided that’s the career path I wanted to pursue. And here I am now, a little over a year in with a company called by Viserion Grain LLC. And I absolutely love it. I have gotten to see different regions during harvest and specifically been focused on the commercial side of the operations for the company.

[01:36] Andy McKenzie

Cool. Maybe you could give us a little bit more detail on Viserion and when did they start and where’s their locations and so forth.

[01:46] James McWard

So Viserion started last summer of 2021 and basically, we acquired nine grain elevators all the way from northern Iowa down near the Gulf and Louisiana. And we are a new company, have a lot of experienced management in our upper echelon that’s kind of helping us steer us in the right direction. And it’s a company that is definitely hungry to grow, to be competitive. And I’ve had the great pleasure of seeing it from the very beginning. And there is no reason in my mind, you know, why I would want to work anywhere else. I think we have a great team. I think the management system all the way down to the operations is solid and I’ve had a great time doing it.

[02:32] Andy McKenzie

Awesome. Well, I’ve got to ask you this, James. And, you know, this probably was coming, but obviously we pride ourselves here at the university on our price risk classes. And, you know, we have three sequences of risk management classes at the undergraduate level, which is almost unprecedented, I’d say, in the land grant system here in the U.S. and, you know, focusing especially at the merchandizing level, which is what you’re doing now. Do you feel that you got a good background going into the industry? And I’m asking do you use basis and spreads and all that sort of stuff? Is that in your in your wheelhouse right now?

[03:10] James McWard

Oh, absolutely. And I don’t think I’d be where I am right now without the undergrad classes that I took from you at the university. And I mean, you’re looking at basis on, you know, day to day. It’s pretty much everything that you deal with. You have to keep in mind the other elevators, you know, soybean processors, if you have ethanol plants around you, the whole grain marketing business is a competitive game of basis. And like you have always told me, it’s essentially the demand for grain. And you’re battling with these other companies trying to decide who’s going to demand the grain the most. And then as far as, you know, roll spreads, all of that, that is a big, big part of what we do, keeping on top of contracts, making sure that the farmers are satisfied and that you’re satisfied. I’ve always said that’s the name of the game in this business. If you want to make it, you know, be successful as a company, the farmer has to be as equally as satisfied as you are when you make a contract with them.

[04:08] Andy McKenzie

Yeah. You know, talking about spreads, gosh, we’ve had some interesting spreads in the market over the last year or so. Prices have been really high and in that sort of an environment, you tend to get fairly flat inverted market structures, where nearby contracts are at relatively high levels. Has that been a difficult merchandizing season for you guys to handle or is that something you take in your stride?

[04:32] James McWard

It really hasn’t been too difficult for us because at the end of the day, my job is to give farmers all the information possible that I am digesting every day about the markets. But at the end of the day, it’s completely their call. Right? And all we can do is how you are an advisor to me. You’re kind of an advisor to them and just kind of walking them through, you know, all the risks, all the possible successes that they could have, with each and every marketing choice that they decide to make. And it’s definitely been interesting. I would say last spring was probably the most interesting when we saw that rally starting in January and you had all these farmers that sold nearby during harvest. And so now kind of this year, I mean, you do kind of see it repeat itself. People this year were more hesitant to kind of deliver grain at harvest time because they’re scared of missing out on market rallies like that. So, you just kind of learn the ebb and flow of kind of how they’re thinking. But at the end of the day, all you can do is advise them on everything that you’ve digested, and then the choice is ultimately theirs. And I’ve learned that’s how you keep satisfaction at an all-time high in the grain business.

[05:43] Andy McKenzie

That that makes sense James. And you know, I was thinking you already alluded to it, but I mean, what are you actually doing on a daily basis? What does your job look like?

[05:51] James McWard

So, on a daily basis, usually in the mornings I’ll go in and I’ll essentially absorb as much about the markets that I can every day, any market letters that I get sent, I usually run through them. I take notes on them clearly. Look at the futures market in the morning and kind of see how it opens, see if there’s anything, any big reports coming up. The wires, the reports are big, and these stocks and acreage reports are big. And you just got to kind of stay in the loop and see what could possibly come into your realm and impact the markets. And the more aware you are of those kind of situations, I find the more success you have in grain merchandizing. And after I do that in the mornings you typically get, I mean it is not abnormal to get, 40 to 50 phone calls a day from farmers, whether it’s about questions they have about the markets, if they have concerns about their own farm, if they’re asking about the elevator, asking about the river, which has been a really big factor this harvest undoubtably and just kind of mediating, you know, getting a lay of the land. I really do like calling the LSU AG Extension offices down in Louisiana. I chat with them all the time. I find they have a really good plethora of knowledge that you can’t really see in different regions of the state and just kind of staying in the loop logistically where the grains going, what weather looks like in different parts of the state. And then you kind of get an all-around understanding of, okay, this is what’s going on and it really is. You know, the market changes every day, the weather changes every day. So, every day is just a new battle. That’s one thing I’ve learned is this business never gets boring.

[07:27] Andy McKenzie

I was going to say that is a nice thing about the job. You’re never going to get bored. Right? And you know, I was thinking as well, you mentioned the river market. I’ve got to ask you something more about that, because we’ve been talking a lot about the low levels on the Mississippi, what the market impacts are of that. You’ve got boots on the ground there. You’re based out the Gulf, right? So what are you seeing in terms of barge shipments? I mean, are things even anywhere close to ever getting back to normal or is this going to be a continuing issue? What are the challenges that arise out of that for you as a company and for farmers, I guess, in your area?

[08:05] James McWard

So that definitely has had the biggest impact on, you know, my experience in Louisiana, in the South, but it really is nationwide right now. Right? I’ve heard, you know, up north there’s nowhere in the country right now, I was reading a report this morning that 82% of the mainland, the United States mainland, is in drought like conditions right now, that’s not So every single river system is affected. Right? So all the way from the far north regions down to the Deep South, you know, the Gulf, you’re seeing, I mean, catastrophically low river levels. And that’s going to affect you a number of ways. One, from a grain elevator standpoint, anywhere, for any company, if you’re not going to be able to load as high as drafts, so you’re not putting as much grain on the barges, which is hurting you. And then on top of that, you’re having, you know, tows when they’re towing these barges, they’re bottoming out in the river. And if that happens too many times, they’re going to shut down, you know, mile markers. And then you’ve got barges that are stuck. And I mean, it really has just been a nightmare and especially, I’d say, from Memphis all the way down to Vicksburg, Mississippi. They have seen the worst of it. I mean, just barges upon barges that can’t pass. And so you have all these boats that are tied up, which is kind of why the freight is spiking because nothing can move, how it should be. There’s not as much grain on the barge as you can potentially put on. And then people are hoarding empty barges right. Because when you’re seeing these levels spike like this, people aren’t going to want to sell their empties because they’re scared that they’re going to have to buy them back at a higher level and on top of that, when it really kind of hit us hard, I would say, especially in the South, September to early October was a rough, rough stretch, no rain for almost a month and a half. And so you had these barges, and this is everywhere, that were loaded and had grain on them. But now you’re having to pull them back in and unload grain off of them because they’re loaded too heavy, because when you loaded them, it was fine. But then the river levels kept dropping. So now you’re having to offload barges just so you can move them through the river. So it really just turns into a supply chain crisis. And that’s a lot of what we’ve seen this year. And, you know, you throw in there, especially from Memphis southward, there is a lot of damaged beans which everybody kind of saw flowing into the Gulf. And the south is the first to get into soybean harvest. And when you have that happen and you don’t have a lot of blending stock in the Gulf, then you’re kind of sitting there because you have all these damaged beans. Nobody wants to unload them because they can’t blend them with anything. And then the river level starts dropping. So, I mean, it quite possibly was the perfect storm.

[10:58] Andy McKenzie

Wow. What an introduction for you. It’s like a baptism of fire, right? Absolutely. But on the other hand, you get to learn a lot really quickly on how to deal with these sorts of issues I’m guessing? So, I mean, I’m thinking about this. I’m thinking, okay, what are the market impacts directly from this? You’ve already alluded to the fact that barge freight rates are spiking, and from a farmer’s point of view, does this mean that they’re getting lower prices at the elevator and is the whole harvest, in a sense, sort of shifting, you know, through time to where the incentive is maybe for farmers to store now if they can’t sell to their elevator a decent price, hold on to for a while and maybe in the later window? I’m thinking maybe Jan, Feb, try to sell, then maybe prices are better. Is that what the market’s telling us right now, do you think?

[11:47] James McWard

That is absolutely what the market is telling us. And I have my catch phrase, I guess you could say this year has been, is if you have storage bins, you’ve got it made, you have a foot on the competition. Absolutely. But the problem is a lot of these southern farmers don’t own storage bins, and farmer storage  isn’t as frequent as up north. It’s very, very common to not have storage for your farm down south. It’s got so a lot of them, you know, did really get affected by this river level situation. And I know very few farmers that are watching tariff rates are watching CIF values, so they don’t really see it from that perspective, but where they feel it is in their basis, because when you have these rallies, and really high tariff rates, CIF is firm, but not as firm as it needs to be. Then the cost of transportation is going through the roof for all these elevators. And so what happens is you’re going to drop your basis. And I mean, they really felt that this year, we’ve seen basis levels that I personally haven’t seen in a long time and that stretches all the way from Louisiana up north for everyone. And you can’t say there’s any way you could have potentially prepared for this kind of situation. And then you throw in, you know, the damage that the southern region of the United States saw in the situation, and then your basis is going to tank even more. So they really, really felt it on basis. And I’ve always said the people that are going to fare out best on a year like this are the people that have storage bins and can deliver that Jan, Feb, March kind of delivery period. Because we’ve already seen with the river, we’re starting to see slight patterns of rain here and there. But from kind of my perspective, I think this is a problem that could linger easily into next year because, it is I mean, the ground down south is so dry, it’s going to take consistent, heavy rains to first, I mean, give the moisture needed to the soil, so then the water can actually run off into the river. Because that ground, especially in the south, where they saw a month and a half straight of, you know, borderline no rain, the ground is going to absorb a lot of that moisture because it needs it. And not until it’s absorbed enough to where it’s saturated, then it will runoff into the river. So I really do see this being a lingering problem.

[14:10] Andy McKenzie

Right. And, you know, I’m thinking and, you know, correct me if you think I’m wrong, but from a risk management standpoint, if, say, a farmer does have storage bins and he can store, I would be advising them still to lock in the price say for Jan, February delivery on forward contracts. Don’t just wait and hope that you know the higher price is going to be there. I mean, I think you have to lock it when you see it. And I know there’s good basis improvement through to that period and farmers could get good returns on storage, but if they don’t lock it, you never know what’s going to happen down the road. What do you think, James?

[14:46] James McWard

I think you’re completely right. And what we’ve seen a lot of people do is lock in some of those forward contracts with a certain percentage of the crop that they have on hand. But then a lot of them are still kind of wanting to play this gamble because historically, you know, seasonally basis and futures prices are lowest around harvest time. So they know they’re typically going to get a better Feb, March bid. But I think people are wary that they don’t want to miss out on a possible rally like what we saw last spring, which had several different macroeconomic effects going into that that I personally don’t see happening again. But the thing is, when you miss out on something once and I mean, you know how volatile the futures market is, you have a very, very narrow window to lock in your target price. I think it has definitely made farmers more wary. And I mean, a lot of guys are just, if they have storage, they’re completely holding off because they see these prices right now. I mean, there’s nothing they want from it. They’re seeing nothing good in the long term being projected. The futures market is more or less stagnant right now, kind of at a lot lower levels than it was in the spring, but lower levels than people at least in my region would kind of like. And then you’ve got this basis that has been absolutely hit by these high tariff rates, the CIF being firm, but not as firm as it needs to be. And then all these damaged beans we saw through the kind of the first half of harvest and especially in the south, it’s been kind of a weird year. Right? I learned that over the summer they had drought like conditions, and then kind of early fall they got torrential rain, and then right back to drought like conditions. And that I mean, that is an absolute disaster for soybeans. And that’s kind of what we saw, and up north kind of fared out a little bit better. But they’re still feeling the backlash from that because as you know, I mean, as far as the Mississippi River stretches right now, we’re seeing tariff rates in some regions that we’ve never seen before. I know on October 24, as I was reading the Memphis River Gauge, it finally surpassed its 1988 levels. And it’s at the lowest levels it’s ever been. So, I mean, we’re chartering into water that we’ve never chartered into. So  it does make it difficult from a merchandizing perspective. You kind of have to know how you facilitate and manage your clients well and feed them information, because at the same time you’re in new territory. I mean, this is stuff that nobody’s ever seen before. So you definitely need to tread lightly. And that’s why going back to your forward contract comment, a lot of them are doing that, but there’s a lot of uncertainty. So people are trying to break up their production and kind of shovel it off in increments just so they can, like you said, manage risk.

[17:36] Andy McKenzie

Now, that makes a lot of sense. And I’m just thinking, you know, from an even more macro perspective, for the U.S. as a whole, the US grain industry, I mean, we’re not getting exports out right now, right? I mean, we’re not able to meet the demand, I guess, for export markets. I mean, what is the impact on that? I mean, is everything just delayed again or are we losing competition to other countries on the export side, do you think? I mean, I guess this reiterates as well the importance of the whole river system to the marketing system as a whole. And when things go wrong on that, there is some major fallout. Right?

[18:11] James McWard

And you’re absolutely right. And what we’ve seen this year is probably the most brutal competition that I’ve witnessed between Brazil, Argentina and the United States, kind of pushing soybeans to China. And I mean exports this year, they’re below last year by a significant value. And that’s something that is absolutely impacting, especially the Chicago Board of Trade, because when you don’t have that outgoing demand there and, you know, domestically, you can only absorb so much of that crop. I mean, it’s going to hurt you because without demand, there’s not going to be a good bid for it. And I mean, it’s been a battle and I’m very curious to see how this kind of Jan, Feb, March goes as we kind of get into, you know, their early corn crop and kind of see how that comes out. Because really those months, it’s kind of at like last year. It really is watching Brazil, watching Argentina, kind of seeing like, okay, how’s their planning going? Like, how’s everything coming up out of the ground? And that does dictate, absolutely dictates, the Chicago Board of Trade Futures price.

[19:18] Andy McKenzie

I was thinking on the bean market itself. I mean, we know the river market is at really low basis levels right now. Do you have a feel at all for what, you know, basis is doing in beans, in more interior market locations away from the river? Is it better or is everything sort of going down too?

[19:36] James McWard

The only people that are absolutely killing it on basis right now, I would say, are soybean processors. And that’s because January crush, last time I checked, it was around $2.60 a bushel, which is, I mean, astronomically high. They’re going to absorb as much of that soybean crop as they can until literally soybean oil prices drop to where the crushes aren’t profitable. So it’s been hard kind of dealing with them. And then, you know, when crude oil was shooting up a lot last year and then you have this ethanol production, ethanol can definitely be a major factor. But as far as the interior, all your land side elevators, if you’re not sending it to soybean processing plants or ethanol plants, it has to come to the river. And then when you’re dealing with the, you know, river catastrophe, that is really low harvest basis levels, you have to make sure you can still make a profit moving that grain to the river. So typically, your basis levels are going to be even lower than what the Riverside Elevators have. And so, I mean, it’s s interesting to look at and see how one river system, even though all are affected, just focusing on the Mississippi here, upper Miss and lower Miss, it spreads like wildfire all throughout the country. And everybody’s feeling it right now. And I’ve personally never seen something of this magnitude, I would say extend across the country how it has.

[21:09] Andy McKenzie

Yeah, no, no, that makes sense. Well, let me change track a little bit here for a minute, and I want to sort of think a little bit more about, you know, you and your career so far. I mean, obviously, I can tell just talking to you, you’re enjoying things even with all these issues that you have to deal with. And, you know, we have hopefully some students out there who maybe listening. And, you know, I’m just thinking for those guys, what would you say they need to do to try to put themselves in a place where they could try to get into the grain industry and have a successful career in that industry?

[21:45] James McWard

I think what separates kind of our company apart, and why I’ve enjoyed working with them so much, is that everybody’s so personable with each other. And I feel that’s a big part of the grain industry, right? You have to be able to communicate with farmers, make them feel comfortable. But not only are we doing that with our farmers, our company is doing that with us. And there’s a lot of networking events we do that are very, very big. On sending young people like myself to several different locations. You get to meet everybody in the company and there is no divide between the elevator side and the corporate side, right? We always mingle. I could call anybody at the corporate office right now. They would pick up, and just having that relationship, it almost gives you confidence that anything, you know, you have to tackle, which I personally have had to tackle quite a bit, getting sent from the far north to the Deep South, kind of getting thrown into different regions of harvest. And that confidence is essential, absolutely essential to success. And I feel, you know, that’s why Viserion Grain is a great company because you never feel alone, and you know that everybody that you work with has your back. And that has been extremely big for me, especially, you know, I worked at three different facilities now during harvest and I’ve never, never doubted myself once because I know I have that team behind me.

[23:11] Andy McKenzie

Well, that’s I mean, that’s hugely important. I mean, I see relationships as a key thing in the industry right, and never burn you bridges on those relationships. I would say that is a good thing to think on, but yeah you know so this makes a lot of sense, and you know for students, one thing I always tell them is to try to get some experience while you’re at university by doing an internship. I mean, I don’t know how you feel James, but I mean, I know companies look at GPA, but I think practical experience and an internship is probably worth its weight in gold, don’t you think?

[23:43] James McWard

Absolutely. I always say, you know, a degree is great, GPA is great, but nothing beats experience. Nothing beats experience. Actually, going into a company regardless of, you know, if it’s agricultural or not and just sitting down and getting an industry experience somewhere, and it’s hopefully an industry you want to work in, and it helps you a lot. I mean, you gauge out kind of before you graduate, you’re getting a head start and seeing, is this really for me? Is this something I kind of want to do? And, you know, I think on top of that, connecting with the professors at your university, specifically the ones that kind of deal with the area you want to go in and stay in close with them. And because they will give you plenty of opportunities to kind of test the waters and see what you want to do. And that’s exactly how I got into this. I mean, taking all those, you know, grain marketing classes and speaking with you, and speaking with other connections I had in the industry, and then trying it out. And that’s I mean, 100%, there’s no other way to go about it. I would say internships, if you can get one, are the best tool you could use in college before you start your professional career.

[24:55] Andy McKenzie

Now, I think that’s very important to highlight for anybody looking to get into this sort of career. Well, James, I think that we’ve come to a good stopping point here, but I would definitely like to keep conversations going with you in the future and maybe have you come back again and talk about other issues as they appear, whatever those issues might be. But I really would like to thank you so much for coming. James, it’s always a pleasure to talk to you. Thank you.

[25:23] James McWard

Absolutely. And I’ve had a blast and I appreciate you all having me.

[25:26] Andy McKenzie

Well, with that, I’m going to sign off for today. So this is again Andy Mackenzie, associate director of the Fryar Price Risk Center of Excellence. And thanks again to James Mark Ward of Viserion. Make sure I get that pronunciation right.

[25:41] Intro/Outro

Thanks for listening to the Relevant Risk Podcast, a production of the Fryar Price Risk Management Center of Excellence in the Department of Agricultural Economics and Agribusiness within the University of Arkansas System. The Fryar Price Risk Management Center of Excellence carries out teaching activities through the Dale Bumpers College of Agricultural, Food and Life Sciences at the University of Arkansas in Fayetteville and research and extension activities through the University of Arkansas System Division of Agriculture. Visit fryar-risk-center.uada.edu for more information. Thanks for listening.