In this episode of Hog Talk, host Phil Plourd and guest Tom Brincks discuss the rise of livestock insurance products and their role in managing market volatility. Tom shares insights on the evolution of risk management in farming, from his personal journey to the rapid adoption of tools like Livestock Risk Protection.

Tune in to learn how these innovations are helping farmers secure long-term profitability in an unpredictable market!

Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].

(Transcript auto-generated)

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Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

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Hello and welcome to HARDtalk. Brought to you by Ever AG Insights. On this podcast, we talk with subject matter experts on news and topics affecting the swine industry and hog markets. I’m your host, Phil Plourde. Just start with a quick market recap. As of yesterday, Monday, November 11th, nearby lean hog futures were at 8178 per 108. That was down 2% from the week prior.

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This week we’re excited to have Tom brings with us. Tom is the vice president of insurance and operations over here ever AG. It helps lead our livestock risk management business. It’s going to be a little inside baseball today. Tom, but I think that our listeners will enjoy a view of the evolution of the risk marketplace for livestock and where we’re going.

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And we can talk a little hogs, if that’s all right with you.

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Sounds good. I’m glad to be here.

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So you’re the head of our livestock risk management business. How did you get here?

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Long story. I’ll try to keep it short. So I became an everyday acquisition pig about three years ago. The founder of that group, Joe Kerns, was an old college friend of mine. Joe and I were complete opposites, but our paths crossed several times in college, and we’ve always stayed in touch jokingly throughout the years. He always kept saying I should come to work for.

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And about three years ago, when the livestock related insurance products started to take off, he called me like, I have a nickname, they call me Cub. He’s like, Cub, I need you. This thing’s going to be big. Yeah, we need to make sure we do it right. And I was at a point in my life where I was ready for a transition, and lo and behold, I came to work for him.

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And I’ve enjoyed every day since Tom.

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I think you have a background in insurance generally. Can you talk about your experience there and the role of insurance products in the evolution of risk management?

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Give me a little background. If you talk to most people who have been an insurance, they always say, everybody has a new church story. And my story was years ago. I was confronted by a group of farmers that asked if I wanted to join a board for the small insurance company in western Iowa. Yeah, I’m joking. Like, no, I don’t have time.

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And they’re like, oh yeah, this is a great deal. It’s six meetings a year and you get paid for each meeting. And we would love to have you on a board of directors. So I after a lot of arm twisting, I finally agreed. And then two days before the annual meeting, they said, oh, by the way, we haven’t told you that we’re going to also elected chairman of the board.

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And that was kind of my introduction to insurance. And I came in mostly with a farmer night background and suddenly became chairman of the board of the small insurance company, Western Iowa. And while I served that role for several years, I kind of transitioned into consulting role and mostly in the crop protection space. And my board convinced me to step down as chairman of the board and accepted the major spot with the insurance company.

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So that was my introduction to insurance, mostly on the PSC side, but we also had an internal agency where we offered crop insurance through that agency.

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So row crop insurance has been popular for years, kind of a mainstay of the grain business, if you will. Some of these livestock products are much newer. Can you talk about what products we’re using these days and how? I mean, I think they’re revolutionary. I’m guessing you agree. Can you talk about that for a second?

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You’re exactly right. I mean, a lot of the we call rural crop insurance products date back over 80 years across the country. But in the early 90s, some of the revenue type products started taking off about the same time. You know the mindset, if this works for real crop, why wouldn’t it work for livestock? So products like livestock risk protection, which basically puts a floor under products, livestock gross margin, you know, put a margin in place or also DRP, they start to take off.

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So the products have been around. But fast forward to basically Covid and we suddenly started instead of paying for the premium upfront, it was put in place where you could pay for the premium on the back end. And then with Covid and partly with the trumpet ministration, the subsidy levels were increased for these products, which suddenly brought a whole new level of attraction to to the products into the industry.

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And so clients of PFG AG and now ever ag lots of futures and options stuff, free insurance and now a pretty heavy adoption rate using some of these insurance products either in exclusively or in concert with some of these other more traditional risk management products.

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Right? Yes, definitely. So we closed out what they call a crop year for livestock, which June 30th, 2024. We closed out the crop year 2020 for the industry was about $1.4 billion. And they’re still forecast for this market could grow to as much as 6 to 8 billion. I don’t know who’s doing the forecast, but we went from a couple hundred thousand to 1.4 billion.

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And for years, I mean, there’s still a lot of potential growth for these products.

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And we’re talking swine and cattle and certainly elsewhere, the ever ag universe. There’s a huge business with the Dairy Revenue Protection, which is part of the same family of products. So it has revolutionized dairy risk management. And it seems like it’s done the same in the livestock side. So going back to the farm itself a little bit, you’ve spent a lifetime in central Iowa.

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How has agriculture changed over time in Iowa and elsewhere, in your opinion? What are some of the things that are the same and what are the things that are different that you see today?

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Technology and just the size and scale of operations continues to evolve. I’m old enough to where if you had 160 acres and a few thousand a few cows, you had a viable farming operation. I mean, nowadays the scale of the operations is just mass. So that’s been probably, I would say, the biggest change. Yeah. Just, you know, going from small to large on the same side, I would say egg is still a people, but it’s always been a people business and and still people most I mean, people work with people they like.

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Yeah. You have to have that relationship to be successful.

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It’s a lot of boots on the ground, right? I mean, that hasn’t changed.

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Belly to belly, whatever term you want to use, it’s the people with no.

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Farmer attitudes towards risk management in general and profitability. And I mean, I know we talk all the time about we are here to protect risk, not to take risks, right? To manage risk, not to take on additional risk. And the mindset around margin management and sustainable profitability. Has that changed? Have you seen an evolution in that direction psychologically and mentally over the years with our farmer clients?

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I would say for sure, you know, we talked about, you know, the transition from one generation to the next. And I think as you continue to make that transition, risk management becomes more acceptable. But this is an extremely volatile business. I mean, one day you’re filthy rich and the next day you’re wondering, how are you going to survive?

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And when you have that kind of volatility and egg risk management just helps you sleep better at night. And that’s a key thing to survival.

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Right? We always talk about, hey, look you may miss the highs but you’re going to survive the lows right. Keep out of the ditch and when you see abundant profitability, lock it in to the extent possible. I mean, you know, there’s always considerations of how and how far, how much. But we try not to sleep on profitability. Is that then that’s a fair assessment.

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Very fair.

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And in the hog markets we’ve had extended periods of where you could be underwater and deep underwater. And that hasn’t changed. Right.

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And it’s probably not going to change. It’s always going to be for business.

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Looking at that swine marketplace, what are some of the things that you follow and find interesting in the Ever AG Group’s day to day coverage? I’m going to pause and say that the AG Livestock team, the swine team is an incredible collection of people with all kinds of different backgrounds, and it’s a really incredible think tank. If you will know more about hogs than I did a year ago.

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For darn sure. I love listening to the group because there’s just so much smart conversation going on every day. What are the things that you find fascinating as you contemplate the wide markets and cattle markets day to day?

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So keep in mind that I do not come from a risk management background. I’ve been in this role for about three years, so it’s kind of been drinking from a fire hose. I have always been a news junkie with facts and figures and statistics and percentages have always intrigued me. But what’s really neat about, especially now that we joined everything, is I don’t have that many subscriptions to the different papers.

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I mean, we have a constant flow of information from 630 in the morning till, you know, sometimes well into 2:00 at night. And I just always intrigued by the depth at which this team looks at everything. And we might not necessarily analyze it. Right. But it’s rare that we get surprised by something we didn’t see. Come. When you get a report and you can look at it, the day to day comparison or week over week or month over month.

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I mean, we look at it, but every different direction. You can look at it in depth. The knowledge is just fascinates me. It keeps this job so interesting because I didn’t realize people looked at markets to that depth.

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And for the just general news junkie or sort of marketplace junkies. I mean, we talk about China, right? What’s the hog price in China day to day? And the dairy side, we care because of impacts. We prices, believe it or not, we look at I’m sure this is elementary for the long time swine market you know adherence. But I think it’s fun and interesting to hear like well hey look, the bellies came out high today that drove the cutout up.

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And therefore, you know, the indexes should move this way. And we expect that to do this to the lean hog market. I mean, that’s a day to day drama, right?

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It is. I mean, there is a wealth of information. And there’s an old adage that says, you know, knowledge is power. The more information you have, hopefully the better decisions you can make.

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And just from a client service perspective, how are we sharing that knowledge with our clients? I mean, we do a lot of publications. How else do we interact with our clients in that arena?

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We try to define that my client, what their needs are, but everybody has access to the publication. Some people we do weekly calls, we have some we do daily calls. But when we’re we’re always available and it’s not uncommon to have team members on the phone at 5 a.m. one morning and again, this latest 10:00 at night, everybody’s needs are different.

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You just kind of have to put together a plan that works for what their needs are, and make sure you address with that for.

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Who knows, maybe this podcast someday will factor prominently into that mix. Tom, thank you so much for joining us on Hog Talk this week. I enjoy working with you and the swine livestock team and we’ll be back in a couple weeks with another edition of Hog Talk. If you enjoyed listening to Hog Talk, be sure to tell a friend or two and subscribe to us wherever you listen to your podcast.

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And thank you to the Insights Crew for their work on today’s show.

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