Episode #436: Kevin Van Trump – Here’s What’s Going on With Ag Commodities
Guest: Kevin Van Trump is the President and founder of Farm Direction and the Van Trump Report.
Date Recorded: 8/3/2022 | Run-Time: 55:53
Summary: In today’s episode, Kevin walks us through his early career as a trader to now running the Van Trump Report. Then we touch on wild year for the ag commodities and hear Kevin’s thoughts on wheat, soybeans and corn. He touches on the impact of Chinese demand and the shifts he’s seen in the ag markets over his career.
Sponsor: AcreTrader – AcreTrader is an investment platform that makes it simple to own shares of farmland and earn passive income, and you can start investing in just minutes online. If you’re interested in a deeper understanding, and for more information on how to become a farmland investor through their platform, please visit acretrader.com/meb.
Comments or suggestions? Interested in sponsoring an episode? Email us Feedback@TheMebFaberShow.com
Links from the Episode:
- 0:39 – Sponsor: AcreTrader
- 1:38 – Intro
- 2:14 – Welcome to our guest, Kevin Van Trump
- 3:01 – Kevin’s origin as a trader in Chicago
- 5:48 – How long he’s been writing The Van Trump Report
- 11:43 – Characterizing his approach as in investor
- 12:44 – Episode #431: Scott Reynolds Nelson; Kevin’s thoughts on the wheat explosion this past year
- 16:14 – Kevin’s thoughts on the current state of commodities
- 19:25 – China’s impact on commodity markets
- 22:32 – The role of the US dollar on commodity markets
- 28:33 – The changes in technology Kevin has seen in commodities and agriculture
- 34:00 – What Kevin says to investors who are looking for exposure to these sectors
- 44:50 – Lessons from Kevin’s trading in his career
- 47:08 – Kevin’s most memorable investment
- 50:21 – What is FARMCON?
- 52:48 – Learn more about Kevin; vantrumpreport.com; Twitter @kevinvantrump
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Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Sponsor Message: Today’s episode is sponsored by AcreTrader. From the first third of 2022, both stocks and bonds are down. You’ve heard us talk about the importance of diversifying beyond just stocks and bonds alone. And if you’re looking for an asset that can help you diversify your portfolio and provide a potential hedge against inflation and rising food prices, look no further than farmland.
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I personally invested on AcreTrader, can say it was an easy process. If you want to learn more about AcreTrader check out Episode 312 when I spoke with Founder Carter Malloy. And if you’re interested in a deeper understanding on how to become a farmland investor through their platform, please visit acretrader.com/meb. That’s acretrader.com/meb.
Meb: What is up my friends? We got a spectacular show for you today. Our guest is Kevin Van Trump, the founder of Farm Direction and “The Van Trump Report,” which shares proprietary research for farm investors and agricultural professionals.
In today’s episode, Kevin walks us through his early career as a trader to now running the hugely popular Van Trump Report. Then we touch on the wild year for the ag commodities and hear Kevin’s thoughts on wheat, soybean, corn. He touches on the impact of Chinese demand and the shifts he’s seeing in the ag markets over his career. Please enjoy this episode with Kevin Van Trump.
Meb: Kevin, welcome to the show.
Kevin: Hey, thanks for having me. Appreciate it.
Meb: I’m a longtime listener, first-time caller here. For the newbies out there where do we find you today?
Kevin: I’m just south of Kansas City down here. My wife and I grew up in a small rural town south of Kansas City. So yeah, we’re down here just sitting. We got a lake house out this way. And so, got some properties in downtown Kansas City. But pretty much since COVID, we’ve been out here kind of got back to the farm and kind of back to the rural lifestyle.
Meb: Yeah, man when the zombie apocalypse started here in LA when they closed the beaches and the parks, which is the most insane thing if you’re an LA resident to close the beaches. We were like we got to get out of dodge. Anyway, all right. So for the listeners who aren’t familiar with you, let’s get a little origin story background. I know you did some time trading in Chicago. I’m more familiar with everything you’re doing now. But for the newbies who don’t know, Kevin, tell us a little your story.
Kevin: Well, I went to work for the NFL when I first got out of college. Married my high school sweetheart and had a good job doing camps, combines, clinics, it was a fun job. Wasn’t good a job, wasn’t making much money, but I was travelling around doing a bunch of cool stuff. And that was before any of that was really popular, or on TV, or paid much. And had a couple offers one from the Vikings, one from the Dolphins.
I always tell people, tell the kids, the assistant to the assistant pulling guard coach probably. And I remember we look back at some of the letters we kept them. And I think the original offer was like for $11,000 or $12,000 annually, you know. So making no money. My wife kind of lands her dream job in Chicago working on Michigan Avenue. She was in the fashion side of things. So we up and leave, you know, rural America out here.
Our families really didn’t have much money, both our parents were blue-collar workers and just kind of did enough to get by. But, you know, we end up in Chicago and all my friends in the NFL said, “Man, you got to get in the trading business.” And I said, “Hell, I don’t know anything about trading and I’ve worked on farms my whole life.” Sports guy went to college, played sports, you know, whole nine yards.
And they said, “Well go talk to these people.” They gave me a couple names to go talk to. They’re like, “Damn, dude, you’re a big tall guy.” I was about 6’4″ probably about 350 at the time and they’re like “You’re hired, everybody will see you, easy to get orders off. So, you know, a lot of people will see you and it makes it really easy.”
So I start over at the Merc. I start off just trading FX mostly Swiss francs, DeMarks, Japanese yen things like that. Then I started trading live cattle and different things. Moved over to the board, worked for a couple of different firms traded 5-year, 10-year notes, treasuries, and then started trading corn, beans, and wheat.
Kind of got more into my wheelhouse where I kind of knew the lingo and could come back home and talk to folks. And I met a lot of really good people in the industry in Chicago, a lot of really good people that kind of took me under their wing and taught me a lot of things and helped me probably avoid a lot of mistakes. And I got lucky in a few things and made some decent investments. Some things not so lucky, you know. I tell a lot of people the only reason I’m on stage is hell I probably made more mistakes than most folks. So I think that’s important and to try and learn from those things and help pass it along.
So, you know, that’s really kind of the longer the background. I still communicate and talk with a lot of my friends from the board. Then I came back to Kansas City Board of Trade worked for a while and still talk to a lot of different people inside the industry on both coasts, LA, and I’ve been to New York and into the Boston area. And so yeah.
Meb: How long have you been writing and publishing “The Van Trump Report?”
Kevin: Probably about, I would say it’s about 12 or 13 years, maybe a touch longer. You know, I really just started writing it I went through a damn oh, seminar or something and some people were kind of challenging the audience to do more journaling, personal journaling to gather my thoughts and bearings a little bit about…I guess, for my sake, it was more what I was doing investment-wise what I was doing trading-wise.
And then, like you, I had two young kids at the time so it was parenting and trading and, you know, relationship. My wife and I celebrate our 30th wedding anniversary coming up. So there was just a lot of growing. Hell, we had some ups, we had some downs. I had some businesses go broke. We kind of got caught up in the housing fallout we were doing…I was backing some people that were doing some home building and developing.
So I just had a lot of things going on, a lot of balls in the air so I kind of just started journaling putting down my own thoughts. And I started to send it out to some of my buddies because they were like, “What the hell are you doing? You know, what do you got going?” And the next thing it started circulating back to me, and it was coming from guys over at Goldman and Morgan different places, I’m like, “Shit.” I tell my wife I said, “Maybe I can charge for this, and maybe I’ll charge for it, see if anybody wants to read it.” And everyone’s like, “Ah, nobody’s going to want to read about your kids and your theories on life and your…” Hell it kind of took off.
So, you know, it wasn’t intended, I never planned on writing anything. I mean, it has helped me become a better trader and investor because I have to think through my thoughts a lot more clear and a lot more disciplined.
Meb: You touched on a lot of things I’d like to expand on. But part of it, you know, I think letting the personality come out, lets it be a lot more relatable. I mean, most people are not going to want to read like an investment bank deep dive, like it’s a lot more fun. And, you know, humans relate to stories and narratives coming from someone who’s talking about their failures, or their business, or their, you know, kids and all the other dumb stuff we do, is I think a great way to go about it.
But also, like one of the things I like is looking back, you know, almost as like a diary too. You know, we’re like, hey, what were we talking about 5 years ago when XYZ happened or 15 years ago, I remember I said that. Man, that was really brilliant or stupid or whatever it might have been. But you do a very in-depth and thoughtful letter.
Let’s talk about kind of what the world looks like today. We talk a lot about investing on this podcast and have been talking a lot about commodities, real assets, and farmland investing for years partially because of my background, and partially because I think it’s really interesting. But also, many and most of the landscape doesn’t talk about it.
Now that having been said, “Barron’s” cover story this weekend, which may be a signal, was about farmland investing. So I think we’ve come full circle. But talk to me a little bit about the transition, you know, from pit trader to thinking about commodities and kind of what’s your framework? How do you think about them today? And what’s your investment kind of process when it comes to thinking about that world?
Kevin: So mostly, I primarily trade corn, beans, wheat. I trade a lot of different energies, just I’m invested in ethanol, plants, CNG fuelling facilities. So a lot of those things, feedlot. So a lot of the things and the ingredients that go into some of the businesses that we’re invested in from the ag-tech world through the energy space. I was trader and traded pretty heavily, you know, through the years, so I kind of feel like I have somewhat of a maybe of an edge or have made enough mistakes that I can keep myself from getting overly crazily tripped up.
But I start every day with a macro view, the macro perspective, what’s happening globally with the world. You know, we’ve learned in the last 10, 15, 20 years, I mean, the markets have changed dramatically because you have a lot more fund interest and a lot more cross hedging. And with the cross hedging you have a lot more bigger players and bigger money players, you know, trying to find ways to circumvent and get a better risk-reward ratio. So they may be long gold short crude, they may have different various trading strategies.
I remember one year ADM was corn and the wheat market was just racing higher, and nobody could really figure out what the hell was happening because we weren’t really having a traditional supply and demand story. But we were going into a polar vortex and there were a lot of headlines about a polar vortex hitting in the winter. So I was getting a lot of calls from a few of my hedge fund buddies in Boston and out in your way.
And they’re like, “Hey, you know, we were thinking, if this polar vortex hits, that’s probably really going to disrupt first-quarter earnings because it’s going to have, you know, half the East Coast all hunkered down. And, you know, how can we…” because we were just coming off big gains in the market and it’s like, “How can we hedge some of this?” They wanted to get long the wheat market because they figured the wheat market was the most sensitive to a polar vortex, you know, you get a massive…you know, some type of winterkill on the wheat crop, the wheat crop is going to pop and take off to the upside.
So there was a lot of fun money coming in buying the soft red winter wheat contracts to try and cross hedge into an equity portfolio. And it was just crazy, it was baffling some of the bigger players in the space because they had not seen that in the past. And we’re seeing a lot more of that now, whether it’s into natural…whatever market it may be, you’re seeing more cross hedging, more interesting trades, the spreads, that used to be traditional spread type plays aren’t traditional anymore.
You can kind of get in trouble when you look back in history and think, wow, this shouldn’t do this, or this should do that. Just lot more high-frequency trading, a lot more algorithmic trading, and that’s changed some of the space a little bit.
Meb: If you were to characterize kind of your approach, is it mostly fundamental and sort of discretionary? Is it you involve technical sort of, you know, inputs?
Kevin: I started off kind of trading fundamentally then I scrapped that when I was young and became a technical guru. And how DeMark was traded at the time DeMark was in place. I was Larry William’s broker for a couple of years, and I put in trades for Larry for a while.
So, I mean, I had become very well versed in the technical side and started trading technically. Hell, I didn’t have great success with that either so it became more of a blend. I would say mostly fundamentally driven with technical analysis certainly being used as a tool for entry exit points, overall trend things of that nature.
So yeah, mostly a blend and really mostly anymore what money flow is doing with the funds? I mean, what’s their appetite? And what’s…you know. You can be as right as the day is long but ultimately, you got to be right to market, you know.
Meb: Yeah. I figured we start with wheat as that’s probably closest to my heart. We did a podcast recently with an author who just put out a book called “Oceans of Grain,” which is kind of about Professor Georgia, kind of how wheat has helped shape civilization and economic growth all around the globe, which is pretty fun.
But, you know, wheat, for many years of this past decade hasn’t been doing a whole lot. And then, you know, what is it starting kind of post-pandemic time started inching up and then just kind of went bananas in the past year. Give us a little perspective, what does it look like now? What was the experience of the past year going on, and your thoughts?
Kevin: Yeah, I mean, we raced higher obviously, off the, you know, Russian invasion of Ukraine, and really kind of added fuel to the fire and took us to some highs we haven’t seen in many, many years. A couple of wheat contracts posted all-time highs. So you really had some big fund interests and some big fund movement.
But in the last few months, you’ve had the funds kind of back off their appetite for commodities, just in essence or, really because they think that we’re going to have fear of a global recession. So some type of, you know, walking back their appetite for commodities has really kind of put the hammer on some of the grain markets, especially wheat. We’re struggling as a country to export our exports…we’ve become what we call in our business, we become the ancillary supplier of wheat.
People want to go to Costco and Walmart first, which in this case is Russia, the Black Sea, and parts of Europe. So they look to get cheap wheat from those sources, and if they can’t get that and they need to absolutely secure delivered, they tend to then come to the U.S. as an ancillary supplier. So we’ve lost a great deal of market share in the world as a wheat exporter.
And the strength of the U.S. dollar has become a headwind as of late and so exports haven’t been all that great. We would like to believe exports are going to improve as we move forward, there’s a lot of unknowns, you know. This humanitarian grain corridor, the so-called humanitarian grain corridor is coming out of Ukraine. How much are they actually going to get exported? We believe it’s not very much.
But the headline traders and the algorithmic computer models, you know, it’s weighing fairly heavily. And a lot of the bulls have exited from the fund side, they’re on the sidelines you got a little bit more short interest in playing out from the funds. And, you know, they’re tending to use it as a cross edge for global…being short as a global recession hedge.
Meb: When you kind of trade at this point in your career to the extent you are is it traditionally through direct futures? Are you trading options? Are you trading underlying equities? Like how do you traditionally go about the expression of a trade?
Kevin: So I just trade straight futures probably 80, 90% of the time. I will trade options on futures, I am long some out of the money … calls, at the moment just they got beaten up pretty severely. I should say in the last few years with Robin Hood and some of these other platforms that have gotten more of the younger kids involved, you know, there are just some extreme swings and options there. There is some definite opportunity with the vol and the volatility that’s out there if you’re paying attention. I mean, some of them really get beaten, you know, they just get overdone to one side or the other. So there are definitely some opportunities for options players.
Meb: What’s the kind of the rest of the ag space that you’re looking at corn, beans, is it kind of a story of more of the same with wheat, are there big differences? Tell us what you’re seeing.
Kevin: You know, you have a little bit more of a demand story if you go to the beans side of things, you know, we raced hired in the last couple of weeks, and then we’ve given most of that back here as of late. But the bean story is the world’s going to…and there’s really no replacement for the higher protein beans. So you grow soybeans, you send that to a processing plant they crush that for meal and bean oil.
Notoriously meal…the years’ past meal was always the leader of a bull run because the oil was kind of thought of as a byproduct, right? So you use the meal to feed the pigs, the poultry, the livestock and there’s really no replacement for the high protein. Corn, when corn prices get super high they’ll start to, you know, substitute wheat in, and wheat will come in. But as far as meal there’s really not a big substitute.
So the world needs the meal to feed the livestock, we’re going to continue to see, we believe, increasing high protein demand from the livestock side. But now all of a sudden, you’re getting a big push for oil from the cooking side and from the biofuel side. So you got a big onslaught of money coming into the U.S. or being moved by investors here in the U.S. to create more crush facilities or more facilities to create more biofuel, aviation fuel, things of that nature.
So we think we’re going to see quite a few more soybean processing facilities open up. We think with that you’re going to see a bigger increase in the number of acres for soybeans are probably going to be converted more planting of soybeans as we move forward. Hopefully, you know, supply, this is always tricky in these commodity markets because hell, you get a big story about demand. Next thing you know you planted too many acres so supply outweighs demand, then you kind of try and rebalance and see how it shakes out.
But, you know, we suspect over the next five years, you’re going to see a pretty good increase in the number of soybean acres. Because of the fact we’re going to build out quite a few of these new crush facilities and these new facilities to produce more things with beans. The bean story is good it’s got a good demand story.
Corn is a little more tricky. Weather-wise, I think corn, you know, right here you’re in a little bit of a weather market. We’re just past pollination period. The corn is a little more difficult to grow. So worldwide wheat is the easiest to grow. So most people start off and grow wheat whether it’s in Ukraine, Russia, the ground facilitates wheat growth. Next is probably you come into rice or beans and things of that nature. And then corn is a little bit more difficult to grow, a little more sensitive, got a little more issues, some things can happen, timing of the weather is pretty important.
So, you know, we’ve got a great story weather is obviously going to impact the corn crop both here and in South America a great deal. And Chinese demand, I guess remains the big question mark on both and the war in Ukraine. You know, Ukraine’s a major exporter of corn, fourth largest in the world behind Brazil and Argentina and ourselves, and how that plays out is going to be a big question. So that and Chinese demand are kind of the driving factor.
Meb: Yeah, you’re one of my favorite follows on Twitter for the ag charts. So, listeners, you can click the show note links and follow Kevin on Twitter because he produces a lot of great charts on the ag world. While we’re here China, you know, has been such a major impact on all things commodity related for the past decade. You know, it’s hard I think for a lot of investors to disentangle kind of what’s going on versus the headlines and what’s really kind of their influence is.
Where do we stand today? Is it something that, you know, the whole COVID experience and the lockdowns has been impacting their kind of insatiable demand for commodities, or what’s the updates there?
Kevin: Well, a few years back probably when President Trump was elected early on, we had gotten some intel or insight from some of our sources in Washington that there were a couple of different papers going around and different things, you know, that China is taking and swinging a little differently and taking a different approach towards the West. When people had landed from the government that regularly they would be taken to certain places in China, you’re kind of taken to see what you’re supposed to see. And, you know, and how things are supposed to look on your tours, and what you can report, what you can’t report.
It was the first time ever that we’d gotten back intel that they’re trying to pivot away from a Western diet. There was a big push a long time, they were becoming more westernized. I’d probably say four or five years ago, we started getting intel, that that’s a big shift from, you know, the highest level of the Chinese government, they want to shift away from Western-type society or Western diets, things of that nature.
That makes us a little concerned, a little worried, you know, have we peaked to some degree the demand side of things? Are they going to walk back some of this protein production that we thought was going to be important. We thought there was going to be a bigger push for cattle, beef, livestock things of that nature. I’m not so sure of that anymore. They may be walking that back to some degree, they seem to have a lot bigger chip on their shoulder about the West. Hell, as we’ve seen this week with the Pelosi landing in Taiwan, and some of the other things.
So Chinese demand is worrisome. We definitely believe they’re trying to do more deals with South America, they want to try and, you know, push their belt road objective. Obviously, they want to try and knock the U.S. dollar out as the world’s global leading currency. I think that Russia and China are both, you know, somewhat in cahoots to try to make that play. It’s understandable why.
I think that’s going to be some major contention moving forward over the next many years is, you know, will they get the dollar out of that position? Will they not? I’m not really sure. But it is worrisome, you know, from our point of view, or from our perspective. So, yeah, there’s a lot of moving parts inside China politically, that have changed over the last four to five years, which make things a lot more interesting.
Meb: As you think about the dollar, you know, certainly the last year…we do a lot of polls on Twitter, and one of them was, you know, asking investors do you invest in real assets at all in any form? So we’re talking commodities, we’re talking real estate, you know, REITs. I said, ignore your house, but just real assets elsewhere, even tips I put in this category. And the vast majority had very little in commodities.
And I often highlight and asterisk this and say my Canadian and Australian friends are probably the exception because they tend to be very natural resource-focused. But the last year, and particularly this year, with stock and bond markets, I feel like has brought that discussion back to the forefront, you know, high inflation. And certainly, for the first four or so months of the year, commodities were just going bananas, most of them, some were not. Precious metals notoriously have lagged.
But how much of a role does kind of the big picture monetary, you know, kind of play in your world? You know, think about inflation, think about the U.S. dollar, which what I think was a surprise to many with the dollar ripping and then commodities also at the same time. Is that something you spend a lot of time thinking about, little bit, factor in, not so much?
Kevin: Sure. You know, I’ve learned many, many times many valuable…don’t fight the Fed, you know, you really want to try and be on the same side as the home team as far as what the government is trying to do, or what the powers that be in the world are trying to do.
So I think you definitely have to start off…that’s what I said. Start off every day trying to get a better understanding of the macro perspective, you know, what do we think of the dollar here? What do we think about rates, interest rates, long term debt? Where are we going to go? And where’s the money going to flow? I mean, you just really have to follow the money, where’s the money going to flow? And where is it trying to move to next? And that’s really the name of the game. So yeah, definitely think about it religiously.
Meb: As you’ve kind of talked to investors and been sending out this email over the years. Give us a sentiment check on kind of the responses and feedback you are getting this year versus years past or just even over the entirety. I mean, I think for me, personally, you know, being involved in sort of the institutional investing world for a while, you kind of see the ebbs and flows of sentiment, you know, commodities in that part of the world got a ton of interest in the early part of the 2000s, you know, post, sort of internet bubble.
And then, you know, all these big institutions were moving in and indexing and allocations of futures as an asset class. And then it kind of seemingly lost interest somewhat over a number of years. And then farmland has kind of, you know, at different periods, as well as timber and all that. What’s been the vibe from your readership and kind of people you interact with over, you know, the past number of years?
Kevin: The vibe pretty much as I see overall, I argue this with everyone. I guess it depends what your objective is, you know. My objective wasn’t to do this to make any money. My objective was just to do this to put my own thoughts down and try and figure out what the hell I was doing and try to become a better trader, and like I said, a better parent, a better father, a better, you know, husband all the nine, all those things. So I really wasn’t doing it to ever make money. I really never had any advertisers, didn’t have anyone advertise, didn’t take any advertising money. So, you know, I have a different play.
I think the vibe is doom and gloom sells. I mean, the people that push doom and gloom make a shitload of money and people want to hear it. They want to hear conspiracy theories, they want to hear doom and gloom, they want to hear the world’s ending, dollar is going to go out of place and buy shotguns, canned goods, and gold. And, you know, that sells, it really does sell.
And a lot of my readers I’ll get responses all the time like, you know, “My gosh, why are you so optimistic? Why are you so…?” And they still subscribe and they still take it, but they would rather hear me be doom and gloom. And, you know, like the sky is falling and kind of jump on board the bandwagons of the conspiracy theories. And I just never have. I’ve never been one of those people.
I got off a call yesterday, some friends of mine, a couple of billionaire investors, and they wanted me to be on a call with a guy. I mean, and he was talking the dollar this is down and that’s the dollar is gone, and all the crazy conspiracies that you could think of, you know. It’s entertaining I mean, they definitely get your attention. And I’m not saying that maybe one day, they won’t be right. But I just don’t think we’re going to roll over here in the United States and just play dead and fall to pieces all in one fatal shot here.
So I’m not a big believer, a fan of it. You ask me what the vibe is, I think the vibe is notoriously people want to be bearish, they want to think the sky is falling. I think the more and more social media continues to push and separate all of us, you know, into our own little lanes and channels. I tell everyone, I mean, we didn’t have very many threads or fabrics of threads that kept us all together to begin with. I mean, there’s only, you know, a few threads that keep us together as a nation.
And the algorithms, unfortunately, define us by what we’re against not what we believe in together collectively, you know. Anything you click, the algorithms are going to define you by your clicks, and what you like, or what you hover over how many seconds. And, you know, sadly, we’re all being put into these little boxes about what we’re kind of against so everyone, you know, has these issues now. And I think it’s going to be tricky, but that’s the whole damn marketplace.
Meb: When we see you start to get really negative, then we’re going to start to run for the hills, we’ll know that it’ll be the Armageddon. You know, as someone who has been a longtime observer of kind of commodity and ag markets, talk to me a little bit about the changes you’ve seen. And part of this question to me is, as a more casual observer, is partially the role technology is playing.
And so inflation is not just one thing it’s a lot of different things. Some areas are disinflationary or outright deflationary, some areas are highly inflationary. But to me, always, you know, I’m an optimist like you are, I may not come across that way. But I’m an optimist and technology to me and the relentless human progress. But particularly as applied to ag and commodity space what are you seeing? Is it an area that, you know, is kind of incremental, or all of a sudden it’s like leaps and bounds in your world? Is it something you invest in any way? Give us an overview.
Kevin: Our family, my wife, and our kids were kind of angel investors in a lot of ag-tech startups. We’re kind of founding group with iSelect. iSelect does a lot of ag-tech investing from a startup perspective and we were founding in there and kind of put money on them. And various different ones like I said AcreTrader now AcrePro, and Benson Hill. We have many different ones that we’ve invested in through the year.
I see a bit in the future in ag-tech and in some of the ag-tech startups. It’s probably I would say more incremental. I think you got to start…you know, we start in our investing thesis with the demographics. And I think you look here at demographics if you want to go back to the boomers who were probably the most influential, what they created, you know, whether it was big box stores or the fast foods.
Now you look at the millennials, they don’t want fast foods necessarily they’re more into knowing where their food comes from. Higher end type foods, your Chipotle your different types of thing. Yes, they will pay $8 for Starbucks coffee or $9. They don’t have to have, you know, a 50 cent coffee. And yes, they will pay $10 for a burrito at Chipotle, and they will spend less on something else. Their spending habits are much different. Food is very important to the millennials. So we see this as a big shift in agriculture.
In agriculture for years, it used to be the farmer, the producer grew, whatever the hell they wanted to grow, and you the consumer picked from what they grew. Now, that’s changing dramatically. So now, the consumer is pretty much dictating what’s going to be grown, how it’s going to be grown, what chemicals they want on it, what chemicals they don’t want on it.
We suspect as blockchain becomes more and more prevalent, you’re going to see blockchain come across the farms and you’re going to know exactly what’s in your crop. You’re going to know what chemicals are put in it, where it’s been…the reason they want blockchain is simply this. You can remember back when Chipotle they had the issue and they were getting the breakouts of E.coli.
Well shit, they want to know exactly what farm it came out of, what field, what row, and who was picking it, they want to know doing that. So that’s kind of where that came from. And they want to know it immediately so they can get the problem stopped and solved quickly.
Like Gaylon Lawrence is one of our friends that does a lot of businesses, we do some business with them. Gaylon owns probably more row crop acreage than anyone in the United States. And they put in a new cotton gin. And so like Patagonia, some of the other people that sell the concert tees and things like that, it’s kind of, well, the kids want to know where the cotton came from, and what farm, and, you know, kind of what was on…they like to have a story behind it and we’re seeing that more and more.
So they already are tagging and block chaining a lot of their cotton that goes through the mills. We’re seeing that with rice now. A lot of the rice is kind of getting blockchain. Chipotle only wants to buy a couple of our customers supply the majority of the rice for Chipotle. They only want certain…and understandable they want certain things.
Benson Hill is another great example. So Benson Hill started…they were going to be like the Amazon World Services but for the seed industry. They have a bunch of scientists that they’ve taken out of…and gotten from other companies that are some of the best scientists, and they use CRISPR technology to create their own seeds.
Now, Impossible, Beyond those people contract with Benson to create a specific seed, that is the right variety for their food, right calories, right taste, the right palette texture. And so then Benson is able to use their team and they use CRISPR technology create the right bean. Then we find the grower…and help them find growers that can grow that bean specifically for that end user.
It never used to be that way. I mean, farmer would just grow whatever, and the end users kind of left to pick what they want. Now you’re seeing the actual end user, the producer, really kind of tell you what they want and how they want it. And they’re contracting with farmers to produce greenhouses, vertical farms in the cities, you know, in some of these vertical areas. And that’s become very, very interesting. So we think there’s going to be a big evolutionary shift and change.
Meb: So, you know, as you talk to investors, let’s say not farmers who’ve been in this world, but people who say, look, I got a U.S. 60/40 portfolio, I’m interested in getting exposure to your world. I imagine you’re getting more of those inquiries now than maybe a few years ago. But what do you kind of say to these people? Is there a typical response, or advice, or how to kind of think and approach this entire ecosystem of commodities farming, investing, ag-tech, all this stuff? Is it just read my letter every day and get up to speed or how do you talk to them?
Kevin: Our family we just kind of pivoted and opened up our own…we opened Van Trump Farm & Land because we have seen more and more interest like you said. We partnered with Carter over at AcreTrader. And so yeah, so we partnered up with Carter, I think the press release will come out in a month or two or something.
My wife and I, we’ve been in the real estate business our whole lives the majority of our adult life, I should say building, developing, and buying and selling real estate through our own family funds and trust. But we decided, I wanted to pivot and get more specific into the farmland side because we are seeing a lot of inquiries questions from a lot of people from LA, a lot of people from other parts of the country.
We kind of break it down into three groups. I say people are interested in what I call legacy land, that’s where they want to take their money, put it into an investment in land, and keep it in maybe a perpetual trust that never leaves the family.
I had a friend one time he was a lawyer and this was a cool idea. He had a client that they had about 500 acres, and him and his wife would go out and plant about 40, 50 acres a year in black walnuts. And this was the family’s inheritance and the kids inherited like 500 acres of black walnut. I mean, it’s worth millions of dollars. And they would give, you know, each…I think they were two daughters and a brother. And each one of them got a certain section, you know.
You know, if you go cut down the tree, or you can harvest the walnuts each year and sell the black walnuts. You could cut down the tree and sell the walnut wood for quite a substantial amount of money. The rule in the trust was replant the trees and you’re doing good thing. So we call those legacy-type plays.
And we have friends, wealthier friends that like to buy farms or working….or farm to bring the family back. Either the family comes back at harvest once a year, they come back at planting. It kind of just brings the family back together as the kids go off and they have grandkids and kids. So we’d look at things as a legacy type of play. We have others that are interested in working farms.
So we’ve had several investor friends that really just want to own working farms that are growing to corn, beans, wheat. Some of the farms have turned into solar farms they’re getting big lease money for solar, wind, energy, things of that nature. So some are just looking to diversify into working farms.
And then we have others the third category that we call is a type of an ag business. We’ve had some people come in and turn a farm into a whiskey farm. And so now they’re growing corn to produce whiskey. And they’re growing all kinds of different varieties of corn from around the world, they got these cool copper vats. It’s about an hour outside of Chicago the one that we’re friends with. And buses show up out there and they’re making more off selling swag and merch and tours of the farm and tours of the whiskey operation, it is pretty cool.
We’ve got others that have turned some farms into tulip farms or places to take the kids and, you know, bed and breakfast type plays or things. But yeah, so those are kind of the three things that we’re looking at. So those are alternative ways that people can get actually physically invested in the ag world. The others would be on the board through investment-type plays, through ETFs, through futures options, things of that nature.
Meb: You know, one of the things that the “Barron’s” article highlighted, which we’ve talked about for a long time, is that as a percentage of the global public portfolio, so if you want to go out and buy all the public assets, stocks, bonds, etc. One of the biggest missing pieces has always been farmland. It’s really hard to get exposure through public securities the way that you would through individual or group farmland, actual properties, or funds because it’s owned so much by individuals and groups. But I think that’s changing, you know, more recently. But, you know, people are seeing it’s really a great asset class that often doesn’t correlate, you know, much to anything else in the world.
Kevin: Yeah, a lot of the funds that…so we advise a lot of funds that call want to buy farm ground and the play is just simply this the look is, you know, 30 years from now is the ground going to be worth more than it is today? Probably. And along the lines of that 30 years, you’re going to clip some coupons, occasionally on years you have highly profitable yields, you know, some years you might not clip your coupons some years, you may, you know. But over the course of time the longevity of it yeah, safe probably longer-term investment.
Meb: The challenge listeners on the operational side, you know, do not ignore the pain in the ass aspect, especially going in, you know, with no experience. It’s not like a turn-key. There’s a lot of romance when it comes to farming I think and being on this idyllic get back to the land, particularly during the pandemic, I think a lot of people have, and then you realize the actual day-to-day is a little more work than most. A little more bugs maybe for some, a little more critters, but very rewarding. I love it as well.
On the institutional side, you know, we see the headlines over the past year we see hey, Bill Gates is big into farmland, it seems to kind of go in cycles. Is this an area that you think is kind of…is it increasing interest from the big dudes as well, is it kind of across the board? And feel free to answer this as part of this, like, how much of this is outside of our borders? You know, I mean, it’s obviously a global market, but farmland investing, you can probably buy ground a lot cheaper in Argentina, or, you know, other places than in Illinois. How are the institutions thinking about this? And are people looking abroad as well with the dollar up so much?
Kevin: Yeah, probably. You know, we own farms in South America through partners with some groups, our friends I should say in farms in Brazil, and a little bit in Argentina and different things of that nature. But massive learning curves, massive. Looked great on paper, looked wonderful in theory, and in practice, not so wonderful. And I tell everyone, that’s the case with probably lots of things I say, you know, whether it’s golf, sports, or investing or farming. We go into it at the beginning, thinking it’s mostly science, you know, but there’s a lot of art involved on the farms.
So we formed a group of farmers that we went in and bought some ground in Brazil, for example. We were about two hours out of Teresina and up by the mouth of the Amazon. There you are getting about 70 inches of rainfall annually where hell, out in Kansas in the parts you’re getting 12, 13 inches of annual rainfall.
So the play was we bought the land, originally, we were going to grow eucalyptus trees on the land. You know, the eucalyptus tree will grow about the 50, 60 feet in the air and you do it 7 different times 7 different cycles.
Well, we start to look more from a farming side because of all the rainfall like man, this is going to be great. We’ll start off we’ll grow rice, we’ll grow wheat, and beans get the soil right, clear the fields. Hell, you know, great in theory, but in practice, it was just not great. We had supposed engineers come in, had to put in…it was like pioneering. Had to put in roads, well, we get back there a month or two after they put the roads in, we’re like “Shit, this isn’t going to work.” And the engineer “What do you mean?” It’s like there was no peak to the roads.
Things that we take for granted here, they did not have the roads crowned at all. The roads were just super flat, and no ditches. So it’s like the water is just going to pool up in the road. It’s like no, no, this cannot be possible. Things we take like rolling up fence line or pulling up fence line from where they had. I mean, it would take these people weeks and weeks where it would take our boys here like days to do it.
So, you know, I think things we take for granted, we thought two plus two is four, and it was going to be easy, and there was going to be a science to it. We forget the art side of it just like you mentioned. There’s a whole lot of art that goes into making things successful. So we’ve had no luck. I’ve never been on the winning side of farms in other countries. And very few of my friends have either whether it was in parts of Ukraine because there were some crazy stories with the Russians over there. South America, it’s tough, you know.
So, yeah, I’m hesitant to put any more money outside the U.S., when it comes to farming and agriculture, just because there’s so much more art involved in this equation than many people want to give it credit. So do I see more big money coming into the space? Yeah, definitely. I think big money, sees the writing on the wall. You see fragmentation, it’s a highly fragmented area or pool no different than say Sam Walton back in the day with five-and-dimes, you know.
So wherever you have fragmentation and high fragmentation, and high-profit margins at times, there is opportunity. And, you know, private equity and institutional money sniffs that out and really, you probably don’t have any greater fragmentation than you do in the ag world at this time. I mean, owned by lots of mom and pops, you know, a lot of mom and pops. You got a big wave of technology coming on, a lot of mom and pops that aren’t real open to changing or learning new technology and new ways, it might blowout.
You know, there’s a lot of roll-ups taking place, there’s a lot of consolidation taking place and bigger money is coming in to make that play. I know rural America is kind of bucking at that a little bit. I should say maybe a lot in some places. But it’s kind of the nature of every business, you know, every business industry we’ve ever seen, it kind of takes the same evolution. And at the end, you start to get this big consolidation period. So I suspect Gates, you know, I think he’s correct in some of his thinking.
Meb: What have you learned or changed your mind about or, you know, as you talk to investors getting into this space kind of common mistakes, you know. The one that I always talk about when it comes to angel investing, or really any sort of investing is people, I always say, you know, hey, baby steps, right? Like you don’t have to cannonball into the pool with all your money on day one and put all your chips on a single bet. But particularly when it comes to your world, are there some mistakes that you think are easily avoided or that are common for new entrants?
Kevin: Yeah, you know, I think it’s similar to like, Kevin O’Leary puts it. I love his analogy when we talked at a couple different conferences. You know, you got to ask yourself, first and foremost, how quickly do I need these troops to come back home? If your dollars are troops I mean, how quickly…how many am I going to send out in this battle? And how quickly are they going to come back home? And are they going to come back home missing arms and legs? And, you know, is it going to just be a horrific story?
So, you know, for me, I think that’s kind of the big magic question when it comes to the farming side or investing in farmland. You know, if you’re doing it for a family, your family purposes and to keep your family together long, long, long term, and to keep the farmland itself in a type of perpetual trust, you know, really you’re not that worried about that you’re doing it more for other things.
Now, if you’re trying to really show consistent annualized returns on a quicker timescale, you know, that’s probably going to be a lot more difficult in the farm space because there’s so many unknowns that can happen year in, year out. You’re out in California and you go buy an almond farm and the next thing you’re battling fires that are all over and all around your farm. And you’re going to have some issues, you’re going to have different things happen. You buy a farm in Kansas or Nebraska, where you can’t drill for water anymore, and you get a massive drought sweeps through, you’re going to have some issues.
There’s just a pretty substantial and sizable learning curve to a real working farm. If you’re trying to get in there, make money the next year, two years, three years, you know, I think that’s probably a fallacy to some degree.
Meb: As you look back on your career trading, there have been a lot of trades I imagine. We always end with this question. What’s been your most memorable investment good, bad, in between, but just the one that sticks out in your brain?
Kevin: I tried to discard…you know, I really try not to sear them into my brain too much. I think I was reading…we were talking to a psychologist, a trading psychologist they were interviewing, and did a study on a bunch of the top traders. And they said, “Man, it’s weird that the top traders usually like to play golf or poker.” And they said they’re thinking it’s because the best golfers forget about the last hole, you know.
If you play golf and worry about that last hole, where you just made an eight or something then the rest of the round starts to unwind. Same way type in poker, you got to forget about the last one. You know, we try to forget about the last trade and I try not to think about the good ones, and try not to think about the really bad ones and just learn from the experience.
But, you know, we were early in Tesla for the right reasons. Wasn’t super early in Bitcoin, but we were fairly early in Bitcoin kind of just on the momentum play. And it’s been good, it was good, you know, the more recent ones I guess that stick certainly, have been wrong. You know, I hate more than anything turning…when you got a nice winning trade and you allow it to turn back into a loser that’s frustrating as hell. I was on a call last night talking about that just, you know, that’s one that really stuck. It eats away on you psychologically.
And in trading, it’s all…I mean, trading is just a psychological game. I mean, if everyone was doing the exact same thing, or if there was a technical system that worked, or if everyone was lined on the same side, it’s really not. We always said…so we would hire prop traders in Chicago, and, you know, prop traders, just, everybody had a different philosophy and different theory and some of the best of the best. We had some kids that didn’t even graduate high school just had GEDs, and they printed money for years. And they were just super good.
From a psychological standpoint, once you put the position on, it’s like we say you can pick any market put the position on, it’s how you manage it from there. I mean, any dummy can manage a winning hand, it’s how you manage the loser’s that’s really going to ultimately decide your fate as an investor.
Meb: I think your comment about the losing trades. My favorite quote the last few years was via Mark Yusko. And I can’t remember who the originator was, but it’s “Every trade makes you richer or wiser, but never both.” And so thinking about those losing trades and how they impact your learning curve, I think is useful in that way.
I recently had an angel investment that had done really well. It was a former podcast alum was the founder of the company and it was like a 15x outcome when they were acquired, which is awesome. But the problem was, of course, of the last year everyone can relate like the acquiring company was a public one and their stock went down a bunch. So by the time the lockup expired, it was still like a three or four-bagger, which is amazing, but it wasn’t a 15-bagger anymore.
So the mental accounting, the anchoring, right, is like, if you told me ahead of time, would you be happy with tripling, quadrupling, I might be like, oh, my god absolutely, like, amazing outcome. But relative to where it was it’s like you actually see how much you lost. So funny, just the way to think about it. But a couple more real quick ones before we go, what’s FARMCON?
Kevin: FARMCON, is our annual event. So we started off about 15 years ago, group of traders myself, few old friends just came to Kansas City to shoot shit. Really, was the reason just to get together and drink some beers with small buddies and we tell each other our favorite trades, favorite investments for the upcoming year, what we’re most heavily invested in.
So then some guys started saying, “Hey, can I invite this friend? Can I invite this friend and this friend?” And next thing we started to develop a lot bigger group. My wife was putting it on for us kind of, you know, throwing in handling the catering and the different things and shit about four years ago, I think it turned into over 1200 people or something were showing up. People coming from all different parts. We had people from, you know, different countries showing up and different things like that.
So it’s an event. We called it…then we changed the name to FARMCON, just kind of spin on Comic Con or something of that nature. But mostly, it’s really just there’s everyone there from…there’s several billionaires in the room to there’s some guys there who’ve been there with bib overalls before that just own huge plots of ground.
And so we kind of just talk and have brainstorming sessions about, you know, what we see coming up, where we’re going to go with things. We had some crypto guys there last year a lot of younger kids that were in the crypto space kind of briefing us old men. We like to call it now old bears and young bulls, right?
So when we were in our 20s and 30s oh, man, we were all fired up and we were bullish everything. You remember the dot-com. Now my older friends, all of us that are 50 and older, we’re bearish and so we think the whole world is coming to an end and all these crazy investments we’re all bearish on. You know, but it’s just because we don’t know, we don’t understand a lot of the things, we don’t understand the lingo, we don’t know a lot.
So that’s at FARMCON, we use that as a gathering. We have guest speakers come in we’ve had some great speakers in the past. People will try and challenge our thoughts and perspectives and, you know, help keep us on our toes a little bit.
Meb: So it looks like it’s January 4th, 5th. More importantly, listeners, the Broncos are playing the Chiefs, I believe on New Year’s Day which for the past five years, I would have said is a meaningless game for the Broncos at that point after they have I don’t know 8 to 10 losses. However, I’m optimistic so if they’re in the hunt, maybe we can get Broncos to FARMCON trip going. Kevin, this has been a blast. What’s the best website place to go to find out what you’re writing and get people to subscribe what you’re up to, hear your thoughts?
Kevin: It’s the vantrumpreport.com. Just vantrumpreport.com. Sign up 30-day free trial. We don’t ask for any credit cards anything like that. If you like it, you want it keep on getting it and if not, you know hey, I understand and I appreciate the opportunity for the time.
Meb: Awesome. Kevin, thanks so much for joining us today.
Kevin: I appreciate it. Thank you for having me. You have a good one.
Meb: Podcast listeners we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at themebfabershow.com. We love to read the reviews, please review us on iTunes and subscribe the show anywhere good podcasts are found. Thanks for listening friends, and good investing.