How Grain Elevators Actually Make Money: Basis Trading, Margin Calls, and Service

Vance Crowe [00:00:00] Time is gonna go,

Philip Luce [00:00:01] It's gonna go real fast. There's nothing you can do about that and you, it doesn't feel real fast. At 3:00 AM when you're chasing diapers. Here's, here's the deal, and I know you know this, everybody does, but you'll, you'll find out even more. So any individual day can go on forever. But the years, man, the years they go so fast,

Vance Crowe [00:00:20] Absolutely unbelievable how fast and, and the older you get, faster they go.

Philip Luce [00:00:25] I'm Tim Bickett, a grain and cattle risk management advisor from Worthington, Minnesota, and you are listening to the Vans Crow podcast.

Vance Crowe [00:00:36] Welcome back to the podcast. I'm glad you're here. Today we interview Phil Luce of the White Commercial Corporation, which is a grain trading company. And if you're a farmer, you might be thinking, I already know everything I need to know about this. And if you're not in farming, you might be saying, what do I care about grain trading? But trust me, when you hear Phil with his calm demeanor and patient way of explaining things, you'll realize this guy has a view on the world that few other people have. And he has the capacity to explain things about where money actually enters the world of farming in ways that are intriguing and will help you understand the world in a deeper level. We're gonna get to that interview in just a moment, but we wanna talk about something that's changed with Legacy Interviews. We now have the capacity to turn your concierge interview into a full transcript in a leather bound book. So for many, many months we've been asked by our clients, can you get me a transcript? How can we do this? But we didn't want to just enter this world, we wanted to do it right. And so we've contracted with one of the few remaining leather binding book companies in the country and we are now in the process of creating transcripts that can be held in book form, put on your bookshelf as something you will be proud to have in addition to the video that you'll have of your interview. So if you're interested in having me sit down with your loved one to record a legacy interview, then go to Legacy Interviews dot com to find out more. Alright, without further ado, let's head to the interview with Ma man Phil Luce.

Philip Luce [00:02:08] Bill Luce, welcome to the podcast. Thanks. Fun to be here. So you are in town for a grain operators conference? Yeah, the National I Grain Feed Association Country Elevator Conference, which happens once a year. The National Grain Feed Association is an organization that it's all over the country, but it's in Washington DC to represent Nash, represent grained feed dealers. It's your lobbyists. Yeah, somewhat. It's at least among the lobbyists that we have.

Vance Crowe [00:02:35] I think that that's like the

Philip Luce [00:02:37] Craziest thing about DC is you go there and you find out like, wait, like, like even teeter-totter manufacturers have their own lobby crew. Yeah. Yep. Everybody has a lobbyist and the National Grain, NGFA is what we call 'em. They, this particular one was Country Elevator Conference, which is the business I'm in, but they represent agriculture in a pretty wide range of things. They have grain handling, you know, I'm in grain trading, but they, they represent grain handling and, and facilities and export export companies and anything that has to do with grain and feed, we're in a narrow corner of that. But,

Vance Crowe [00:03:11] So Oh, so they're, so you've brought in other groups so that way you can have more like kinda elbow elbows a little heavier at the table then?

Philip Luce [00:03:19] I don't know what that means.

Vance Crowe [00:03:20] Well, like if it was just the grain elevators, there's not that many of you. So like the, the lobbying power you could bring together.

Philip Luce [00:03:27] Yeah, I think so. And the NGFA also also has codified trade rules. They don't make, they're not a legislative body, but they've codified grain trading rules about, about contract disputes and a whole bunch of other things that represents common practice. And they are also an arbitration body. So if you get into a co, if you get into a delivery, I sell you grain and you don't pick it up or I don't deliver it, now we've got a problem, we can go to the courts and the courts will take a while to figure it out. Or we can go to NGFA arbitration and it's people who understand our business and can get right down to it and make a decision. And the, if, if you disagree with the arbitration decision, we can go to court, but most of the time the court's gonna uphold that. So it's really helpful for those kind of dispute resolution things, representation. And this event really is just to get a bunch of people together, great elevators and, and folks who service them, people like us and people who build bins and conveyors and handling equipment and do trucking. And it, it's a typical trade show people get together and, and try to sell their products to

Vance Crowe [00:04:23] Yeah, there's people sitting at booths and other people trying not to make eye contact.

Philip Luce [00:04:27] Yeah. Right. Yep. I'm not good in a booth situation.

Vance Crowe [00:04:31] So for people that don't understand anything at all about, you know, the way that grain moves from it's on the farm to, it's all around the world, what is, where is the grain elevator fit into this whole scheme?

Philip Luce [00:04:44] Yeah, farmers grow grain obviously. And at the other, the far end of that spectrum, you have someone consuming the grain and then in between there you've got people who transport it and people who turn it into something else. So if I hand you a bucket of raw corn, there's not much you can do with it. But once that's been crushed and ground up and turned into animal food, then you can eat the animal or turned into corn meal, you can do something with it or turned into starch or corn syrup. So you've got the producers over here, you've got the consumers way over here, processors here, and the grain elevator is, is in between the producer and the processor. The reason that's true is because harvest takes place over, you know, somewhere between four and eight weeks, let's say. It's, it's probably a little bit, it can vary widely depending on weather, but harvest happens quickly. It's in just one little piece of the year. All of the grain that's grown gets brought to, gets harvested outta the field in a short window, but it gets used 365 days a year. So it's necessary to have some party, the processor doesn't wanna store a bunch of grain and, and hold onto that whole crop. They wanna have a steady supply and just process it and turn it into their product. So the grain elevator collects the grain from the farmer, keeps it in good condition and redistributes it to those end users on a steady basis.

Vance Crowe [00:05:56] When the, when the grain goes into those bins, who owns it?

Philip Luce [00:06:01] It depends. Farmers can rent storage space in a bin, in which case they retain title, but the elevator is collecting some fees to store it. Ideally the elevator wants to own those bushels, they wanna pay the farmer a good price, have control of the bushels, so that rather than just renting out space, they're able to merchandise, which is just the word for, find the users of it and negotiate a price and get it shipped out and have some, have a, you can get a greater return merchandising than you can renting your space out.

Vance Crowe [00:06:27] Why?

Philip Luce [00:06:29] Partially because of competition. You know, there's, you've got a grain bin and I've got a grain bin and I say, okay, I need a nickel, a bushel a month. And you say, I'll do it for four. And then I say, okay, fine, I'll do it for three. And then pretty soon we're both doing it for nothing. And so that, that, that's one reason. The other reason is because of the microeconomic supply and demand, all of that grain coming to market at one time means that's typically the low point of basis, which is how the industry values grain rather than price. All, all of the supply comes to market, the basis is low as, as the supply finds a home and, and is in a bin with the door shut and it's not moving anymore, the processors have to start paying up to get it out of that storage space. So you get this dip in the value of commodities at harvest time and then you get a recovery afterwards. So the elevator's job is to pay the farmer the best price they can, but own that low point of basis. And then as the, as the users need it, they, they can take advantage of that recovery in the basis value.

Vance Crowe [00:07:27] And then at these elevators, you know, the one in my hometown, small town central Illinois is right off an elevator. Are they, or right off of train tracks, right? Like that's, so they truck it in and then it's going out on rail. Is, are all elevators on rail?

Philip Luce [00:07:43] No, it, it depends, probably depends on a lot of factors. But to keep it as simple as possible, there are markets that produce more grain than is used locally. And so they need to get it out of, they need to get it out of town and the rail is a very efficient way to do that. There are markets that consume more than they produce and they bring it in on rail because of that. But there are other markets that the usage and con the production and consumption is pretty well balanced and a lot of that stuff just comes in on a truck and also goes out on a truck. It's not going very far.

Vance Crowe [00:08:11] So yeah, I was at, so I was at your conference last year, the white commercial one and I got to learn a whole bunch about grain elevators and it was surprising to me 'cause I'd never really thought about it, that there are places that like, there's just not much corn grown, but like that also means the infrastructure might not be there to move it around. And so like you're not gonna get as good of a price. Like the fact that there are other farmers around could actually improve the price of your grain depending on the overall circumstances.

Philip Luce [00:08:36] Yeah, the the, I always talk about it's again, oversimplification, which is kind of my thing, but the corn to cow ratio, if you have a lot of cows and not very much corn corn's more valuable, but it's harder to get. So, you know, it's kind of a trade off. The, the, the person growing corn there is going to have probably cost him more to grow it or is gonna produce less of it because the ground's not suitable. So you're getting a higher price per bushel of corn, let's say, but you're not growing as much corn or it costs you a lot 'cause you've gotta water it or something. It it all in, in some big sense, the price of a a commodity corn, soybeans or wheat is nets out to the same wherever you are kind of, it's not really quite that simple, but it's close. The, the places that need a lot of corn prices, higher cost more to get it done, or you produce less the places that the price is lower, you produce a whole whole bunch more bushels. So you're selling a lower price, but selling more of it, you know, in, in a, in the broadest of senses. Same

Vance Crowe [00:09:27] Value. Yeah. So what

Philip Luce [00:09:29] We're trading really is the inefficiencies. It could be locally, it could be from your elevator in your hometown to the ethanol plant right across town, or it could be on a rail car to Georgia. Either way, there are these momentary inefficiencies where it's not worth the same everywhere. And so I can buy it in Illinois and I can pay the cost of shipping it on a rail car to Georgia and they need it bad enough in Georgia right then that the value I can sell overcomes that tremendous cost of freight of getting it there.

Vance Crowe [00:09:54] And are things that exciting? Like is this a, is this a business where you're like, oh, I found it, I found a chance?

Philip Luce [00:10:00] Yes. It depends somewhat too on where you are. A lot of it depends on geography. There are places where the production and consumption is, is close enough to par that things don't move quite as much. But even in those places then we're, rather than having this happen on a day, we're we're backing off the timeframe and saying the timeframe and saying, you're a farmer today, I can pay you a great price for corn. You're gonna deliver to me in October of 2023 and I'm gonna establish a value of ownership for myself. And if I buy it from you in October, maybe the movement isn't very much, but if I can buy it from you today at a price you really like, I can establish a low enough ownership value that I'm, I'm creating that inefficiency now for the future. So one way or another, it's either happening in real time or we're just putting way more time between the purchase and sale and creating the opportunity that way.

Vance Crowe [00:10:50] Futures is one of those things that's like the, I understand it on an intellectual level, but like, it's such a scary thing because I like, I think, you know, my life particularly right now, I have a five month old at home, right? So life is really on minute by minute scale. But like when you think about like the, so much about the world can change between now and October, 2023. Like how do you, is that, is, are is everybody that's in the futures market, like riding the, riding the electric, you know, the lightning 'cause it's so exciting. Or like

Philip Luce [00:11:24] In a sense, I think in our business especially, we take a lot of the sexiness out of futures because we're trading physical grain. That's what we, we, we wanna trade this basis value. And I, we don't need to get way in the weeds on that, but

Vance Crowe [00:11:36] Well we talked about it on our first we talked together, talked about, right? So

Philip Luce [00:11:38] We, we've done that. We're trading basis and we need futures to create basis that, so that's where we're living the problem for our customers, white commercial customers comes up when, to your point, some, well we saw it this this spring or this winter with the Ukraine invasion. People had wheat hedged in a, a normal course of business. I paid the farmer, I sold futures. I've got this basis locked in and all of a sudden wheat goes up $4, the wheat futures price goes up $4. And the challenge for the person that sold the futures, whether you're a speculator or a hedger, our guys are hedgers and we're not, we're not trying to predict these movements, but this movement happened and the way futures works is you've gotta pony up every day for what you would've lost if you sold futures. So if I sell wheat futures at $5 and then two months later they're $9, if I bought those futures back on that day, I would have a $4 loss. And I have to put that $4 into my futures account. It's segregated funds still in my name, but I have to show that I can do it. And so that created a lot of stress because this is a credit line issue. You know, this is wheat that's gonna be harvested and I can't sell it and get my money back till it's harvested in June or July. I've got a pony up $4 a bushel for this wheat, which is, you know, at least $3 50 cents more than I expected. So it comes into, it turns into a, a cash flow issue. I've got a this money, I'm borrowing it from the bank, it's money I would normally be using for operations or something else. I have to have it just sitting in this futures account as a, just to show that I could absorb this loss if I had to. So that kind of thing creates a lot of,

Vance Crowe [00:13:08] Man, it didn't even really dawn on me when I looked at the, the Ukraine situation for example, and prices going up. You think like, ah, everybody's making bank here in in the us but no, there are people that are getting, that are, that are getting really stretched out. Really stretched.

Philip Luce [00:13:22] Yeah, a a few, a few things can happen. Number one, high prices are generally good for the industry. They're generally very good for farmers. They're pretty good for the rest of the industry, but they're very stressful for everyone. So the the, the things that can happen is you, if you're the farmer that sold wheat to me, you sold me wheat for $5 a bushel, which is a pretty good price for wheat. If you didn't, if you hadn't done that, all of a sudden on March 1st, you could've sold it for $9 a bushel. I'm just making these numbers up, but it's a, all of a sudden your wheat's worth almost double what you sold it for, but you can't participate in that 'cause you already sold it. So that's, you may still be making money, but it's very stressful to say, okay, I could have sold this for twice as much as I did. In the meantime. There's a perception in some cases that the grain elevator has made $4 a bushel, but they haven't because they sold futures on the day that you sold the wheat. So the grain elevator's ponying up $4 and that's disrupting their ability to operate their business. 'cause they've gotta keep going back to the bank, expanding credit lines, not doing other things. 'cause this money's tied up. So that's, it's very stressful in the long run. It prices are good, but they create a lot of stress.

Vance Crowe [00:14:23] Who puts up the, the money? Like, so banks like you go and you have like a running, rolling credit line with the bank and, and so you probably have to have a pretty good relationship with the lending institution if you could get that far, far stretched out. Yeah.

Philip Luce [00:14:38] Th this yes is the short answer. You have to have a very good relationship with the bank who understands your business and also is in constant communication with you to make sure that your position is hedged up. That the discipline is being that you're not out there speculating on futures. That every every position you have is tied to some cash contract or cash bushels. Somewhere in 2008 we had a huge market runup. Normally a market runup happens because we have a short crop or the fear of a short crop. The, the invasion of Ukraine was the fear of, okay, Ukraine provides a whole bunch of wheat to the world. Maybe they're not gonna grow any wheat. Who, who knows? We just don't know. But let's just say if we take all Ukrainian wheat off the table, we got a big shortage, so let's run the price up. And it was just a fear-based thing. Or legitimately you have a drought or some other thing and don't produce wheat. So that, that drives the price up. I had a lot I was gonna say about that. Gimme gimme

Vance Crowe [00:15:27] One. Well, we're both on our f at least I'm on my first cup of coffee. I think this is the first podcast I've ever done where I'm drinking my first cup of coffee. And I was actually thinking before we started, like, this is a little like taking amphetamines for me or something. 'cause like caffeine really, like,

Philip Luce [00:15:42] Like I know I got it. The bank, the, in 2008 we had a runup that was not tied to a crop shortage or a fear of a crop shortage. The futures just took off. I, I think the, the simple explanation was it was, there's a demand not for grain, but for futures. So a lot of money came from Wall Street and bought futures. There was all these things going on that created a runup in the futures market that wasn't tied to a shortage of the crop. And so this is a real problem because what that means is if wheat's worth $5 a bushel and the futures go to nine, if we're in a shortage, the cash price will follow that future. You know, there'll be some correlation. Well, you had the futures price run away and the cash price stayed the same. So now you're looking at not only these margin calls pony up this money, but you're not gonna make any money. You're gonna lose money on the crop that you bought. Long story short, that year, white commercial hired a banker to come and work for us. Taught him, we taught him the grain business. He was a commercial lender and his job for us is liaison between our customers and their lenders to help our customers understand what banks want and need to be comfortable to help banks understand what our customers are doing and why all this works. And then in 2012, we had another big rally that was related to a drought. Prices went up, it got stressful again. But what happened is between 2008, 2012, the banks really started to demand more reporting from grain businesses and look in the before that a lot of these lending relationships were based on the value of farmland property, just, just kind of a collateralized loan. And now it's, it's very much more, there's a borrowing base that they fill out.

Philip Luce [00:17:16] They have to just show once a month is typical. We have to, here are all our positions, here's what would happen if we liquidated everything today. There's just a lot more communication between the banks and the elevators. So we had this big runup this spring with the Ukraine situation and everything else that, all the typical uncertainty of the market in the springtime when planting's happening. And we had some pretty, pretty dramatic things happen with a minimum of banking problems. The banks understand they're in constant communication. They have a steady flow of information back and forth. That's not to say that you still don't run a foul of covenants. You know, you have, you have loan limits and those things have to be expanded and, and you have to do a lot of negotiation and make that work. But it's not a surprise anymore. 2008, 2012, a lot of banks were just surprised, you know, we have a 10 million line of credit and now you need $30 million. How can we do that? You know, and, and if you don't understand what's happening, you can't do it. And the worst case scenario is they say, we can't fund this anymore. And you, you we own the business now.

Vance Crowe [00:18:16] Oh really? That can happen.

Philip Luce [00:18:17] Yeah. I mean it's, a lot of times what happens is they just say, we're not gonna fund your futures account anymore. You have to liquidate your futures positions. Good luck to you. And then, you know, you scramble around and if if you're, if you have enough of a balance sheet, you can absorb that loss and carry on. If not, you end up selling the business or going to receivership.

Vance Crowe [00:18:34] And the banks that, that you're working with, are these community level banks? Are these savings and loans or co-ops? Or are they the big Rabo banks and farm credit?

Philip Luce [00:18:42] Yeah, all of the above. What what has a big, a big change that happened from these rallies I'm talking about several years ago, is our customers on the whole love to do business with the local bank. They're very interested in local community things that they've had this relationship with a banker for years and years and years. So two things that happened first is there was a shift in some cases to larger CoBank and, and Rabobank and Wells Fargo and Chase and all of that. But also these community banks just started participating with the bigger banks in, in a big way. And so they, those relationships are preset up so that when, when the community bank runs out of credit to, to offer, they can participate and get some more credit from a larger institution. And that's, it was painful because you just had to do a lot more reporting. Our, our customers had to do way more reporting than they were used to. And it turned out to be a really good thing. It was, it was a difficult change because it's a little bit of a headache, you know, and it's just extra work you have to do all the time. And sometimes you have to reveal things that you'd rather not, you know, that that's part of the communication. But on the whole, we really saw it this spring, all all of that work that the banks and, and the grain business did to communicate better and understand each other and be prepared. And also it, it puts some discipline in place because you have, you're accountable now every month you have to show what's going on. And so maybe that

Vance Crowe [00:20:00] You may be the first person I've ever heard be like, and that was when the bureaucracy really helped us out.

Philip Luce [00:20:06] That's not, that's not the way I'd like to say it. It, it's true. It's, it, I, I suppose in some way it's bureaucracy, but what it really is, is communication. That's really, that's really what all of this, the borrowing base, all this monthly reporting, it's not a huge amount of reporting and it goes to someone who needs to see it. You know, it's not a, it's not a formality. It's, it's truly saying, here's the situation and 30 days later, here it is again. Everybody knows what's happening. So it's very difficult now to have a surprise, very difficult for something just to blow up and no one was ready for it. So, yeah.

Vance Crowe [00:20:38] And if there's one thing I know about banking, like the last thing you wanna do is surprise your banker. Like it's, it's like the, if your banker is ever like, I didn't know this, or you hears something from another banker and then has to come ask you about it, that's when they come in being like, Hey, we're gonna really look at our exact agreement and we're gonna start pointing at specific lines in there. Whereas if you've kept him in the loop and then that guy can go to his boss and be like, this is what's going on. Way better.

Philip Luce [00:21:04] That's exactly right. Bankers hate surprises. That's exactly that. And our Jeff Rudin, who's the banker that we hired, who's really become a tremendous resource to the industry. That's his whole, that's his mantra. Bankers hate surprises. And so one of the things he does that's really helped a lot is do what ifs ahead of time. So here's the plan and it's really simple. We say, here's the, here's how the grain will flow into and out of our facility. And so if it's coming all in in the fall, and we're gonna get rid of it gradually throughout the year, we can, we can do some projections on what's it, what's it gonna cost. If we've got a million bushels of corn in here and corn's $5, then we have, it's gonna cost $5 million, you know, in October to buy all this corn. And then as we sell it off, we're gonna get that money back. But then you can run what ifs, what if we buy all this corn at $5 and the market goes to 10, well then we're gonna have to pony up five. What does that look like? What does that look like to the credit line? And you can put all this in front of the lender and say, here's the worst case scenario we can think of. Here's the best case scenario we can think of. Here's kind of in the middle. And just get all those surprises out of the way because it, I think it really is helpful. I'm not sure why it doesn't materially help to have said, here's what could happen. And then it happens if it, if you need twice as much money, you need twice as much money. But the fact that we talked about it before it happened makes you more

Vance Crowe [00:22:13] Comfortable. Oh, I mean that's human nature, right? Like there's so much you learn about human nature, at least for I am as, as a new dad, right? Like where you're like, if I tell my daughter that we might get somewhere and it might not work out like, you know, he might not be there, you know, we might go knock on the door and, and Mrs. Brandle might not answer, right? Like, that's way, way better. And then you, you know, you, you cycle that out into the rest of your life and you think like, oh actually that doesn't change just 'cause there're two. That's, that's actually who everybody is.

Philip Luce [00:22:41] Yeah, that's exactly right. Banker, state surprises, everything we can do to, to communicate to them what could happen good and bad is, has really helped tremendously.

Vance Crowe [00:22:49] W so you know, you're living in a world where the value of the dollar is not purchasing as much as what it did the month before, certainly the year before. How does this show up in the world of grain trading?

Philip Luce [00:23:06] Well, practically speaking, everything costs more labor costs, more insurance costs, more repairs costs, more parts are harder to get, which is kind of a subset of all that. So practically speaking, it's just more expensive to run a business for our customers, just like it is for everyone else. The dollar, even though it doesn't purchase as much is strong. And so that puts us on a little bit of tough footing export wise. A strong dollar makes our grain more expensive to other countries, which puts us at a disadvantage to South America or somebody else. It's export. Explain

Vance Crowe [00:23:35] That that's something that is intuitive to people that know it, but but like the, yeah,

Philip Luce [00:23:40] A a strong dollar

Vance Crowe [00:23:42] Means if you wanted to buy dollars, you have to po pony up way more pesos or way more euros in order to get dollars. So like that's right. A dollar a a one US dollar might cost a dollar 25 of the euro. We'll just say for example,

Philip Luce [00:23:56] Right? So if the, if, if corn is $4 a bushel, I'm, I'm throwing these prices around to make math easy for me. If, if corn is $4 a bushel and the exchange rate's a dollar 25, it's gonna cost me $5 a bushel 25% more. Versus if I can also look at South America, Brazil, or Argentina and buy corn or soybeans from them and their, their currency is less strong compared to mine, then it's cheaper. You know, might only cost me $4 50 cents equivalent to buy it from there. So a strong dollar relative to other economies makes our products more expensive. And it's, it is easy to get confused about how that works.

Vance Crowe [00:24:36] And then as inflation occurs, you can be saying like, oh, okay, well locally, like where it's more expensive to buy these things and yet the other guys that are living somewhere else, their things are getting a lot more expensive 'cause their inflation is happening faster. And so the, the, the ocean stays level, but it every, everybody just rises with it.

Philip Luce [00:24:56] Yeah. So the inflation, what our customers are talking about right now is the, the price of grain is higher, which just means the amount of money you have to borrow to buy it is more interest rates are higher. So the amount of interest I'm paying and the money I borrowed is higher. At the same time all my costs have gone up. So the margin I need to generate has, has gone up just to stay even. I, I need to make whatever, 15 cents more a bushel, let's say, just to get back to where I was. All I'm doing is covering extra costs with this extra margin. So the challenge for our customers in this environment is they need to make more gross margin just to, just to stay level. And I, I think every business is, is is in that situation more or less. The good news for us is grain prices are higher, which means farmers are more willing to sell. And so if I've got the basis again is that difference between the futures price and the cash price. If the futures are $3 a bushel and my basis is 20 under, that's $2 80 cents to you. Well we're gonna have a lot of conversation about that. 'cause $2 80 cents is not a very high price for a bushel of corn. If the futures are $7 and I'm 50 under, I'm taking 30 cent more differential in my bid, but I'm paying you $6 and 50 cents a bushel. So it's a little easier to build in extra margin when the price is high. So that's a, that's helpful. And I think also the industry just realize businesses are competitive with each other in the grain business. There's a a big fear that if I don't, I need to take every bushel I possibly can. Like I, I want, I don't wanna see a corn truck go past my driveway to go to Vance Crowe elevator.

Philip Luce [00:26:31] I want 'em all to come to fill elevator. And so we get into this bidding, you know, we're, we're pushing up our bid all the time, paying more and more for stuff. And that puts you in a bind because if you, if you overpay right at the beginning of the cycle, it's really hard to trade your way out of that. If I just pay too much, there's very little I can do to fix that later. And I think the industry over the last several years has realized we, we can't, this is not a success strategy. We have to stop beating each other up on prices. We have to pay as fair as we can, but let's, let's quit competing each other into the place where we're all gonna lose. So this year we kind of had the haves and the have nots on production. The western half of the ni United States was pretty poor. The eastern half was pretty good, but for the first time in a long time we saw grain businesses not beating each other's brains out on trying to pay up for grain. Let's keep, let's pay a fair price, but let's don't hamper our ability to make money.

Vance Crowe [00:27:23] And that's because they were trying to cooperate, or

Philip Luce [00:27:26] No, it was just, I think self-interest. It was just we, we realized finally we're gonna have, it's gonna, we're gonna have to be okay. You can't handle every bushel, you know, if you're willing to pay way more than I am, I'm gonna have to say, as much as I don't like to see that truck full of corn going by to your place, I'm gonna have to let some of those go. Because if I run out there and stop that guy and say, what do I need to pay you to turn in here? I'm gonna put myself in a position. I can't make any money. So everyone came to that realization together is how it seemed to me. And and

Vance Crowe [00:27:53] If nobody fires the first shot, then you don't, then you don't get into that. That's interesting. So

Philip Luce [00:27:57] No, it wasn't, it wasn't a planned strategy. It wasn't, everybody didn't get together. You know, it wasn't collusion, it was just business. They just, they just realized, that's right, nobody fires the first shot. Nobody one needs to go out there and be the hero and post this high price. Let's post a fair price. This is a survival issue. It

Vance Crowe [00:28:13] Never dawned on me until you were describing earlier about what happens if futures contracts go way up, that you have to go to the bank and ask for money as a grain handler. But then if interest rates are going up that like that compounds really quickly. Really

Philip Luce [00:28:28] Quickly. Yeah. Yeah. Money's been almost free. Not really, but it feels like it relatively for several years. Well, not free, let's just say if you had good credit, you're paying 3% for money. And now if you have good credit, you're paying 6% for money.

Vance Crowe [00:28:40] I mean, I, we were paying less on interest than what the inflation rate was. Right? So if, if inflation all the, if interest starts catching up with the price of inflation, now all of a sudden there's realities that people weren't facing before. You could take out so much more money, you could do things you, you wouldn't be able to do in an environment where you were paying for some value. It was just really, really cheap to borrow money.

Philip Luce [00:29:03] Yeah. Well, what came up at the conference yesterday, just of things that are on grain dealers minds for January of 2023, is there's this idea of deferred money. Farmers, farmers will come in and sell in the fall, but don't take the money till the new tax year. So there's, you, you really don't spend very much money in the fall, even though you own the grain. But you've got, well, three or four weeks from now, January 3rd is kind of the date when when grain dealers write checks, you're gonna pay, you're gonna write checks for a much higher price than you have the last few years just because the price is up and right away you're gonna be paying twice as much per month in interest costs as you,

Vance Crowe [00:29:41] Oh. 'cause that money's coming outta your deposit account. And so now you've gotta borrow.

Philip Luce [00:29:44] Yep, yep.

Vance Crowe [00:29:45] Oh, that's interesting.

Philip Luce [00:29:47] And not only is it more dollars than it's been in a long time, but the cost of those dollars over time is way up. So it's, it's a pretty significant change and the potential to be stressful, what's, what's happening is people are gonna, number one, they paid less in basis terms this fall. That's the first thing they did to mitigate this. The second thing is, they're already out there getting this stuff sold. You know, they're not, it's not sit around and wait for things to get better. I'm gonna go find a value somewhere and get it sold because the market's saying you can't afford to sit on this stuff like you normally do. So it's, you know, it's not the first time we had, when I got in the business, I think money was, you know, six to 8%. Now prices were much lower. This was the mid nineties. But even back in the seventies, we had 18% interest, 20% interest. Or the eighties, I guess the early eighties. We've been here before. It's just been a while. We've, we've gotten used to having very, very, very cheap money. You may have to put, you may have to borrow a lot of dollars, but you're not paying very much to get 'em paid back. Well now we're in a new environment.

Vance Crowe [00:30:45] My intuitive sense is the people that have been in business for a while think like, hey, we're heading into a zone we haven't been in, in a while, but we've, we've been here before. And people like me that haven't been, but look at the world from a different vantage point, say, no, I don't think this is like last time. I think this is a lot worse than last time. Like, where, how do you, I mean, clearly you won't know the answer until it plays out, but like, you think this is transitory maybe painful, but n not, not, not anything unprecedented.

Philip Luce [00:31:22] I it's a little bit of both. E every, every one of these changes is its own thing. You can't say this, this high interest rate of the

Vance Crowe [00:31:29] Eighties. Eighties wasn't like the seventies. No,

Philip Luce [00:31:31] They're, they're all their own thing. But I do think over the span of years, and especially if you, if you talk to someone who's been in my particular industry since the seventies, I remember talking to a guy, this is probably in 2012, so 10 years, 10 or 13 or 10 or 12 years ago now. And at the time we were in a very stressful environment. Prices were up, it was just a lot of things were going on that were stressful margin, everything we've talked about. And this was the first one of those for me at that time, well, I talked to this guy who was in the grain business in the seventies with the Russian embargo and all that stuff. And he said, yeah, you know, we did this in the seventies, price of grain doubled. We thought the world was coming to an end. It was really stressful. And, and then, and you know, then we got through it. Now we're, we're just doing that kind of again, it's different this time, but it's, we've done this before. So that was formative for me to hear that man say not every time is the same, but we, this is not a brand new thing that's happened. But interestingly enough, I, I think we do because of the baby boomer generation starting to age out, retire, sell business, so on. We do have a lot of people in our industry who have only been around for six or seven years, let's say. And they're good traders and they, but this is absolutely brand new. You know, if you're, if you're 30 years old and you're in this business, this is for sure the first time you're seeing this and you have no frame of reference. You could talk to somebody, you know, I qualify as an old guy, now you can talk to me and I can say, yeah, we've been, you know, we've, we have these things. They come and go. They're stressful while they're happening in the big picture, everything's transitory.

Vance Crowe [00:32:59] Yeah, that's true. That's what I think. That's there.

Philip Luce [00:33:01] But, but if you're 30 years old and you've been in the grain business for six years, this is absolutely big and stressful. And, and it's, if you've been in the business for 40 years, it's also stressful now. But I believe that frame of reference lets you say it's, this is new, but it's not, it's not brand new in a sense. We've, we've been through other stressful things before and you know, it, it's important to be disciplined. It's important to understand the stresses that you're under. So again, like I said, if if everything costs more, then I have to make more money, which is a gross oversimplification, but it's also true. So what do I have to do? You can cut costs kind of, you can't really cut, you don't make money in a business by cutting costs, make money in business by making more money. And so the yeah,

Vance Crowe [00:33:43] And particularly the commodity world is just such an interesting one, right? Like, because as anybody that offers like a service, they're always like, whatever you do, don't let your service become a commodity because then the commodity will get beaten down in price. So you don't wanna be in a place where you cannot differentiate between your stuff, but you do live in that world where, where there is not differentiation between corn or, you know, one truck or another.

Philip Luce [00:34:09] That's, that is the ultimate challenge of the grain business and always has been is the commodity is, is not differentiate. You can't differentiate between a corn and another, you know, this truckload of corn that truckload, it's all corn. You know, it's just like we, when you, when a farmer comes and dumps a load of corn at the grain bin, he can't go get that load of corn out again. He just gets other corn if he wants to come and get it. Now

Vance Crowe [00:34:28] There is gring, so like we, if we're talking to an, a part of the audience that listens, no connection with farming. So there is like, hey, you get the better graded corn, you, hey, you brought in corn that was dried down too much, or oh, we had to spend a bunch of money or you had mold or something in here. Yeah,

Philip Luce [00:34:43] There are discounts for quality. There aren't, there aren't typically, there are premiums in certain cases for quality, but, but typically there are discounts for poor quality. So everything's trying to get to what they call number two yellow corn or number two yellow soybeans, which is a certain test weight per bushel. How many pounds does it take to make a bushel? And as you said, does it have bugs in it? Is it, are the kernels broken? All that kind of stuff. But in general, corn's a commodity and all, all those discounts do is just adjust everything to, you know, the what one of the things the elevator can do to make money is you discount for these poor quality stuff. And if you can blend it into good quality stuff, it's all good quality at the end. So that, that's part of what happens. But in general, corn is corn, soybeans or soybeans. Wheat is wheat. You don't, you don't differentiate that way unless you're in some kind of a premium, you know, tortilla chip business or something. But you, you nailed it. They are grain elevators are a service business. They exist because like I said, farmers grow it all and need to go somewhere with it at harvest time. At har it's like it's gotta go at harvest time. It's gotta get outta the field and go somewhere. These guys want 12 truckloads a day, 365 days a year. They don't want all of the crop. So this service entity is providing service to these people and these people. I'm, I'm providing the, the steady supply and quality to these guys. I'm supplying a place to come and get either storage space or sell your grain one or the other. And you have to, you have to be better at service. That, that's the, that's really the key. Again, oversimplification, but the world, I think everyone shouldn't just embrace radical simplicity. What has to happen, what has to happen is I need to make more money. How do I make more money?

Philip Luce [00:36:15] There are a few things I can do, but one of the things I need to do is buy cheaper basis than I'm buying right now. Well, I have to be worth that somehow. I can't, if you're bid, if you're bidding X for corn and I bid 30 cents less than you and I'm right next door, I better have some reason I'm worth 30 cents less.

Vance Crowe [00:36:32] And things that would be, when you're talking about service for an elevator, you're saying like, so if you don't, if you're not real familiar with how farming works, if you're a farmer, you are running that combine and you've got semis that come up and the the combine dumps into that semi and then that semi's gotta go drop it off at an elevator. But if he goes and gets into line of 300 other trucks, he's just wasting time. And that farmer doesn't have that many semis or the more money he's put into semis. So if you can provide him a way to drop that corn off quickly would be one example of service. But what other, what are the things you

Philip Luce [00:37:04] Do? Yeah, speed and space are the baseline. That's right. If I can get you in and out, that's worth something. If you have to wait, then I can bid less than the other guy. If you don't have to wait with me. That, that's obvious. A few other things are how fast do you pay? You know, there are some big companies that pay every two weeks or something. So can I get you a check the next day? Can I get you one check per load or however you want? If you want to add everything up and get paid at the end there, there are a bunch of things a lot of these farm companies are owned by, you know, we gotta split this ticket 16 ways. 'cause my aunt owns some of this farm and we got an LLC with my brother, so I'm selling you a thousand bushels of corn, but I need 16 checks. Well, some people are are very happy to do that because that's the jet worth service business. That's what we need to do. Some people are not happy and they make it a make it hard or they make mistakes, they don't get it right. So it's really just, it's as simple as this. What what do you need? If you're a farmer delivering me grain, what do you need? Do you need a ticket split a bunch of ways. Do you need to, do you need me to be open late? Do you need to be open early? Do you need me to send my truck to the field to pick up from your combine? Whatever it is, it's, it can be a bunch of different things, but ultimately if, if you don't provide service, you don't get to make money. That's, that's it. We're a service business

Vance Crowe [00:38:20] And that's what's so difficult if you run a business as a person that runs a service business, right? You wanna offer this person anything you want, but you also realize if I offer you too much, then all of a sudden the cost to provide this thing go like exceeds whatever it is that I'm gaining off of this thing. And so it's a tenuous balance here. That's right.

Philip Luce [00:38:39] Absolutely right. It's absolutely right. There are things that you can't afford to do and still make money, but there are a bunch of things you can do. It, it's

Vance Crowe [00:38:47] Just a

Philip Luce [00:38:48] One thing that's, that's true. And this is not a moral problem, but the, the larger a company gets, the less they're able to provide the service that customers want. Especially in a business like ours. It's very personal, very relationship driven. It's, they're not, they're not evil. They're just too big. So one of the things we, we specialize in dealing with small and mid-sized grain companies, a lot of family businesses and so on. And the person that's, that's at the window dumping your load of grain into the dump pit is also the person who owns the business. You know, and they can, they know who you are or they, or if you're a truck driver, they, they see the name on the truck and they know what farm this belongs to. They, they knew your dad, they know how many different tickets you need. You know, there's, there's a, there's an element that being small, it creates its own problems. You don't have as big a pocket book and everything, but being small lets you really hone in on personal service. And that's, and my observation, being able to provide exactly what people need, speed, space, and all these other intangible things is how you earn the right to, to bid a price that lets you make money.

Vance Crowe [00:39:50] So I was on my drive in, I, I was talking to my buddy Keaton Kruger who listens to your podcast, which we should talk about your podcast. He was like, you know, one of the things that was just on Phil's latest episode was the guy was essentially making the case that even if you're a big farmer, like the intuitive sense of these large corporations is that big farmers wanna work with the big businesses. And he is like, no, no, no, no. E even if you're a big farmer, you realize if you go work with somebody that's small enough to know your name and care about your business, then you're gonna get way better service. And like that to me makes total sense, right? Like bureaucracies don't really, I mean, you become, bureaucracies become commodity services as well, right?

Philip Luce [00:40:27] Yeah, absolutely. There's people are individuals and so one size doesn't fit all. But that's there, there's, there's an, there is a, an idea in the grain business that if the farmer's huge, and I'm small, he doesn't wanna deal with me, but yeah know, like Rob Cogno said on my podcast, it's just not true. If, if you could find a way to provide obvious value to those people, they do wanna deal with you because they don't want to be treated like a commodity somewhere else. Or in, in his case, he said everyone's trying to get in their pocket. So, you know, you're a big successful farmer, you've obviously got a lot of money. Let's figure out ways to extract that money from you.

Vance Crowe [00:41:00] And as somebody that has worked in large corporations, right? The thing a large corporation can do when they see a large farmer is to say, all right, let's put like 15 people on this account to figure out how can we extract as much money as possible from this thing so that they can get their ROI not, there's nothing wrong with it.

Philip Luce [00:41:16] No, that's right.

Vance Crowe [00:41:16] It's just saying like,

Philip Luce [00:41:17] Different approach.

Vance Crowe [00:41:17] Different approach. So let's talk about your podcast, man.

Philip Luce [00:41:21] Okay.

Vance Crowe [00:41:21] You started that earlier this year. You sent me the pilot episode. Yeah,

Philip Luce [00:41:25] It's something I thought about for a long time. Like I said to you earlier, I'm one of the, one of the things that prevented me for a while is I'm a perfectionist and I don't wanna put it out if it's not really high quality, but I, I decided that that was not a productive way to proceed. So I'm good enough, I'm going for good enough quality, but what's happened, I've just met so many incredible people in this, in this line of work, and they're in small towns, they're running small businesses and you know, from the outside looking in, it's, it's easy to say that's a country person. They're whatever, you know, they're uneducated. I, I don't know if that's prevalent or not, but it's, it's easy to, here's a person that's, that's running this dusty business in this little town and, and that's what they do. Well, that's just not the case. You know, these people are highly educated and influential and even if they're not highly educated, they're very good at what they do. They have these incredible backstories. And so I've spent 27 years hearing these stories and getting to know these people and it just seemed like a good idea for, for other people to have the chance to hear these stories. And there's, you know, there's all kinds of them in, in the first I've done four episodes, and so we've had an Olympic archer or Olympic hopeful. We've had a PhD. We've had a lady who became, I think fair to say the queen of grain trading of Northeastern Iowa, who's just the, the most humble person that you'd ever meet and has no aspirations to be a big shot, but just, just got good at what she does. Give her name. Yeah. What's, yeah, Marilyn Sullivan, Marilyn Sullivan's her name. She, she runs a grain business with six siblings. She's one of, she and five siblings run this grain business that their dad started in 1974.

Philip Luce [00:43:00] And from 1974 to about 2006 never showed a profit. They mean they made payroll and everything, but the business never showed a profit. And we met her and her family. We were able to teach them some of the skills that we like to teach. And I, I don't take a lot of credit for this. The way, the way our relationship with our customers work is we have some skills that we like to teach and, and we just collect them. You know, we, we have all these relationships, we collect best practices and then just redistribute them to the grain industry. We showed this family these skills, and they went from a business that just kind of was there existing. They were all coming into work and making a salary to a, a genuinely profitable, very profitable powerhouse of a grain business. And the, the amazing story was, she told me one time we used to call a DM and Cedar Rapids big corn processor, a huge multinational company. And I would tell 'em, okay, we need to sell you a truckload of corn. And they would have to ask me how to spell my name. It's just no idea who I, I'm just a, I'm just a commodity to them. And she built skills to understand grain values and, and trade the basis. And I, I don't remember the year exactly, but it was probably sometime in let's 2015, let's just say to throw a number. I, I don't remember for sure. She called me one day and said, Hey, the president of this, not a DM but another processing company in Cedar Rapid, as the president of this company, called me and wanted my opinion on what he's going to have to pay for corn this summer because I've sold him corn for all these years. And every, you know, I'm, I'm asking him for a value that's above what he's paying right now.

Philip Luce [00:44:36] And then he sees that I'm right, like, guys, you're paying even and I need you to pay 10 over. And he pays me 10 over. And then he ends up paying 10 over all summer long. And he realizes that I, I know where it's going before he does. And so the dynamic has shifted. Now it's still the same company, still the same six siblings. It's, but they're, they're just, they're just controlling acres. They're, they're making the processors better off they're making the farmers better off. They're a profitable company. And, and now instead of talking about survival, they're talking about how do we pass this on to our kids? You know, there's just, we've just taken money from the market and brought it into this little town of Edgewood, Iowa. It's, it is, this couldn't be more fun. And, and besides all that, she's a great person. You know, she, she's got, she's a, a mother obviously and a grandmother. She's, she teaches a faith formation, I think it's called the Catholic Church on Wednesday nights. She, her, her daughter was kind of a stud softball player, and she traveled all around. She came down to Florida a couple times for these softball tournaments. And it's just because of my level of social skills, which is not high. I, I tend, I tend to, it's a fact, you know, you, you say, okay, this is Maryland. She works at this business, that that's what she does. But you find out, of course, that's not true. Marilyn's this whole person, you know, she's just not this lady that runs the screen business. She's this whole person with a lot of interesting stories and, and there's a million of those. There's just, well, there's at least a few hundred people that I know that have a lot of cool things that people need to know about 'em.

Vance Crowe [00:46:07] Yeah. One of the best adages I heard long time ago when I was a kid, I'm not sure if my dad told me, but I just remember very vividly, if you're ever in a boring conversation, chances are you're the boring one, right? Like, it's, it's that you haven't figured out how to ask this person a question that gets them to open up. Because just by living on this earth, you are experiencing things. And if, if you meet somebody that has built anything that has been a part of a family business for any length of time, like they all have something to say, right? And, and that goes, it's, you know, it's easy to strike up a conversation with an Uber driver because you know, they do that conversation. How'd you get into this a thousand times? But when you can start doing it with the person that's selling you shoes and the, you know, the, any, anybody, that's when you realize like, every single person here has a story they're making money for, to provide for somebody or something. It's always interesting. It,

Philip Luce [00:47:03] It's, yes. It took me a long time to figure that out, or at least

Vance Crowe [00:47:07] I don't believe that at all. You, like, ever since I met you, you've always been, you

Philip Luce [00:47:11] Speak,

Vance Crowe [00:47:11] I mean, you're talking today way, way, way, way more than you ever would if you and I were talking on the phone or you and I were doing whatever, like this is Yeah. This is unnatural, Phil. Yes, it

Philip Luce [00:47:21] Is. That's true. I'm getting better at it. What, what I, I've had a couple friend, I think you're one of them. There's, there's a friend of of mine, Vince Giordano, that's, that's been in sales for a long time. And I met him through Jiujitsu, which is how I meet a lot of interesting people. We've got people on our team at white commercial that are, they're just very interested in people. And I, I'm not uninterested in people, but I, I just have, you know, some self-confidence issues and other things that

Vance Crowe [00:47:46] I'm just

Philip Luce [00:47:47] Not, I'm just not the person I'd rather put in my headphones and sit over there than, than strike up a conversation with a stranger. But by watching people who are good at that and who are genuinely interested, oh, there's a person, I don't know, I want to go learn a lot about that person. That's, that's been formative for me. I, I don't think it'll ever be my best skill, but it's, it's, it looks so rewarding from the outside looking in. The, the benefit of the, the podcast that I'm doing is, these are people that I've worked with for a long time, 20 plus years in some cases. And so I, I've just had the chance naturally to talk to 'em so long that you just learn things. And, and so from a selfish standpoint, I'm hoping this podcast helps me learn how to do that better. But also I just think people need to hear these stories. There's just, there's just a lot of really cool people in the world that are working in a small business in a small town. And, and maybe no one will hear these stories if I don't help 'em get out there. So

Vance Crowe [00:48:39] Selfishly, I'm glad you have it out there, because I find, so a fair amount of young people will come to me and say like, Hey, I'm thinking about going to work at this large corporation or this ag thing. Like I've gotten involved in FFA in some unusual ways. So I get like a few phone calls or somebody to be like, Hey, will you talk with my son or my daughter? And my answer to them is like, unless you have like a clear vision of exactly what it is that you want to do, which is likely wrong, but like, if you know where you want to go, like, I'll help you go get into that corporation, but chances are that the reason you're going there is because it's the only light you can see, right? You're just, you don't, it's, it's the only thing you can walk towards. But I always say like, Hey, you know, what you really should do is talk to these guys at white commercial, like they have this program and they'll, they'll teach you how to do this basis trading. And not only that, if you don't like doing exactly what they're doing, they know a huge percentage of the really cool grain operators all around the country. And like, this is the intersection between farming and business, right? Like, that's exactly where that, that transition takes place. And I've always said that ever since I worked in a corporation, right? If you want to be in a place where you can make a difference, get to where as close you can to where money's coming in the door. And that to me is, is the grain grain elevators. So for me, you having a podcast means I don't have to be like, Hey, call this this dude that I know. I can now be like, Hey, there's a podcast, listen to it. And if you find what they're talking about, interesting.

Vance Crowe [00:50:11] Now give them a call.

Philip Luce [00:50:12] I'm a, I'm a huge proponent of young people getting into small businesses in general. I mean, I, I'm biased toward the grand industry. It's the industry I work in. And I've never worked for a big corporation other than when I was a teenager, you know, menial jobs. But I've, I've worked for white commercials since I was 19 years old. I'm 47, so I have a very limited, very limited exposure to large corporations. But what I've seen over and over, and I would include myself on this list, if, if you can find a way to be useful in a small company, you can be in a position of real responsibility, you

Vance Crowe [00:50:45] Know, real

Philip Luce [00:50:46] Fast May maybe not the boss or that the boss thing is kind of irrelevant, but you can be in a position of real responsibility really fast.

Vance Crowe [00:50:52] I, I give the example when I, the first real job I had at, I mean, I was a deckhand. I did a bunch of things, but like the first real job I had was working at this community public radio station. And it was awesome because they couldn't pay me. There were barely anybody around, but there was so much to do that they were like, oh, will you do that? Oh, you'll, you'll accept that responsibility. Before you know it, I'm running pledge drive and getting to go on the air and doing all these things that if I had gone and worked at the big shiny, you know, radio station that was, you know, everybody knew about you would still be a cog in the bottom of that wheel competing with everybody else trying to get to the top. And that's why the advice is always like, go to a place that needs you, not go to a place that can afford you. Right? The, the place that needs you will eventually figure out a way to afford you if you deliver value to them,

Philip Luce [00:51:41] That that's it, that, and you can do it so quickly. You could be a year out of college and ru essential, just like you with the radio station, you can essentially be running a business at least in a, in a bunch of ways, or

Vance Crowe [00:51:54] You're part of it. And, and like even if you're not in charge, right? All of a sudden, you know what it's like to be responsible for something that like people are depending on you. And that is a thing that when you're in a corporation, nobody depends on you, you are completely replaceable until you get way, way, way up to the upper echelons. And even then be clear, yeah. You know, like the senior middle management, those people are all on SSRIs and, and anti-anxiety medications and all kinds of things. It happens. I I'm mostly

Philip Luce [00:52:23] Familiar of course with grain industry, but these large grain companies, let's say mid, mid tier, but large by any, any reasonable corporate standard, even at the C-suite level, it's not at all uncommon every four or five years that that whole thing clears out. The board just comes in and says, okay, all of the C-E-O-C-O-O-C-F-O see everything, it's gone. We gotta put a whole new team in here and a whole bunch of, I don't, I don't know if that's bad or good. I get, I'm heavily biased towards small business. It's what I know. But that doesn't happen typically in a small business. You're gonna have the same leadership forever along the lines of leadership. And I think you're, you're, you said this, I just wanna underscore it. I, I don't, the desire to be the boss is not a useful desire. The desire for responsibility is incredibly useful and a lot of times it ends up with you being the, the boss, so to speak with. But that's not, that's not a good driver. The driver to have responsibility is really, really useful and, and puts you in a position where you're making real decisions that have real impact. And you probably do end up in leadership of some kind. But I sort of feel like if you, if you really want leadership real bad in the, in the sense of being the, you know, the top of the pole on you probably shouldn't have it.

Vance Crowe [00:53:32] It's not really understanding what leadership is about, right? Like, because you can pay people to do work, right? And they'll do whatever the work is, and then you get like a series of check boxes, but a leader figures out like, how can I put this person in a position where they want to do the work where they are like excited about the thing that is going on there and certainly like motivate them through the points when things kinda suck or getting things done that don't, don't need to be done or that that need to be done. But nobody wants to do. The leader is the one that inspires people to, to do that. And if you can't do that, and you're only dictatorial,

Philip Luce [00:54:07] Yeah. And leadership happens, can happen from anywhere in an organizational chart. Being a leader and being the boss are not synonymous with each other. You, you can absolutely be a leader on the bottom of whatever the, whatever the totem pole is for your business, because that's all the things you said. You don't have to be in charge if you don't have to have a title to do them. Motivate people, help people figure out where they should be. Take responsibility. That's how you do it. This, I, I'm nervous about people who want to be the boss. I just don't think that's, maybe it works out, maybe it doesn't, but that's not a useful driver. But leadership is, is is incredibly useful. And a small company, if you have, if you're interested in taking responsibility for things, being a leader in the sense of leading that has nothing to do with, with where you are. You can, you'll end up being the boss, because that's just how, that's just how small businesses work. If you're, if you have a lot, if you have high utility, you just keep, you just keep taking on responsibility. And, and then eventually you're,

Vance Crowe [00:55:05] You are

Philip Luce [00:55:05] The, the leader both in title and in and in.

Vance Crowe [00:55:09] You know, and in this, like some of it becomes kind of a cliche, right, when you think about it, because people that have been in the world, they know what we're talking about. But I heard something the other day that like really kind of clicked in my mind. It was Peter Thiel talking about, I am suspect when a young person comes and tells me they wanna be an entrepreneur. Because that's actually the code word for like, I want to be rich. When, when the real, when the reality is you, you may want one, one of two things. You either want to not you, you wanna be in control of your own destiny. You wanna be like, you know, steering your own ship. Or two people that start businesses do it because they found some problem that they can uniquely solve or that the market hasn't solved. And so people that are just like somebody saying, I want to be the boss. Somebody saying I want to be an entrepreneur. It's, it's such a one dimensional view of how things work. And like, that got me 'cause that like stung a little bit. 'cause like for a long time I did think like that, right? Where I was starting a business and I didn't know, and ultimately I found a problem to solve, right? I, I found these Legacy Interviews and it like really was a place for me to do it. But like, I was very much in the camp of I just don't want to have a boss. What, what do I have to do to not have a boss?

Philip Luce [00:56:21] Well, that, that's not a, that's not a horrible motive because it, it does, it does mean you're taking responsibility for something. I, I wanna be an entrepreneur is kind of a strange thing to say because you either are or aren't one, I guess wanting to be one is either gonna be one or not, I suppose. But I, I, I like the idea and I, I think it's because I've been surrounded by a lot of independent business owners who either started a business or even inherited either way. But I like the idea of, of wanting to be well responsibility. That's what it, I, I want to be responsible for my destiny. That's the, that's a beautiful thing. And you, there's a lot of ways to do it. You can absolutely do that. Working for someone else. I think I did. You can absolutely do it by your, it's, you can absolutely do it by starting something. And most entrepreneurs that I know of, or most people, let's just don't use that word. Most people who started businesses seem like they do exactly what you're talking about. I'm just gonna start doing stuff and probably five or 10 years from now, what I'm doing looks nothing like what I started doing because I realized that whatever that was wasn't the problem. I found some new problem. And now, now I'm doing, I don't know if you listened to the, how I built this podcast

Vance Crowe [00:57:26] I have. Yeah, there's a

Philip Luce [00:57:27] Lot of those stories are like that. I started doing this and then it turned into this completely other thing. I, I think if, if I remember right, I may have this wrong, but I feel like the, I feel like it was the guy who started five guys, but I, I might be wrong. Anyway, this guy was selling t-shirts door to door in college and then ended up starting one of these famous companies. He thought he was a t-shirt salesman. And along those lines, as he was just going through life, selling t-shirts, door to door in the college dorm, and he figured out, oh, here's this, somehow stumbled on this other problem. I don't think it was five guys. Well,

Vance Crowe [00:57:57] So I'll tell you, like, we had this revelation just very recently in our, in our business, like we're doing these Legacy Interviews, people want a recording of their families, but for some reason, I had ignored the feedback that people had been giving me over and over and over again. I don't know why people would be like, you know, we really like a transcript of this, right? And so we were like, oh yeah, well we would, but that's really complicated. It's kind of expensive and da da da. And then somebody called us up and was like, no, really, like, give me a price. I will pay whatever it takes. And then we, we did it and all of a sudden we were like, wait a second. Number one, that wasn't that hard. And number two, when we told other people about it, they were all like, yeah, oh my gosh, can you get me a transcript of my thing? And we realized we were not in the business of making a video. A video is the only like the, the side of it, right? You get that and you wanna watch it, but people want to have that physical thing. And for whatever reason, we've been doing this business for a year and a half, two years now. Like, it just never dawned on us that actually what we're selling is a book, not a video.

Philip Luce [00:59:00] Yeah. I think that I, I've seen that work in our industry both ways. You know, you start, I'm gonna buy grain, okay? I have to differentiate, so I'm gonna, I'm gonna buy grain and turn it into tortilla chips or night and buy a certain quality of grain. So we've seen it go more and more specialized or just doing something slightly different or very, very different than I thought. We've also seen it go the other way is I'm gonna, all I'm gonna do is buy and sell grain, but I'm gonna do it. I'm gonna figure out exactly what I have to do to make this work. And I'm only gonna do that. Now, this kind of goes back to your point about giving away services and you know, kind of getting too far into the weeds of, I'm gonna do everything everybody wants. I'm gonna identify only the things that work, and I'm gonna figure out a way to only do those things. And people look at you like you're insane when you do that, but I know people who, who've done it. You're over here with this giant shiny grain facility and you're paying 30 cents less than everybody else in the neighborhood and you're still filling up. How is that? Well, I just, I just figured out I only wanna work with people who understand my value. So I'm not gonna, if you think I'm not bringing my grand, you pay 30 cents less. That's crazy. Oh fine. Go somewhere else. I'm, I'm only, I'm gonna figure out exactly what works and I'm only gonna do the stuff that works, which is just a, instead of veering off, it's just narrowing in. Like my plan was right all along, but I'm gonna get narrower and narrower and narrower on exactly how that business model can work. And I'm gonna refuse to do anything that's outside the scope of what makes it work.

Vance Crowe [01:00:22] And it's just such a tight line. And, and when you do it, you have to decide, I'm going all the way, right? Like, you, you, you can't, you can't get halfway into the stream. And then

Philip Luce [01:00:31] You have to have unshakeable belief that what you're doing is useful and right.

Vance Crowe [01:00:38] So that actually makes me think of parenting. And you are in a unique position because you're one of the only friends that's around my age that already has a child that's like up and up and out the door, right? There's,

Philip Luce [01:00:49] There'll be 22 at the end of this month. So

Vance Crowe [01:00:53] I was really enjoying being a dad, really embracing it. And then I had a friend mention to me one time about how sad he was that he missed the childhood, right? And so this started a sort of paranoia in me. I spend a lot of time with my daughters. I, I, I give up a lot. It's really, I do my business and I'm with my family and that's about it. But I don't wanna do it because I'm paranoid. But I have become paranoid that I'm going to like look back on the 2-year-old time or the five month old time and just long for that to be back. You've been there, do you, do you miss it? Do you, do you wish it was back?

Philip Luce [01:01:33] That's a big question. I I don't know any parents who don't wish that on some level. But I, parenting is not for sissies in a whole bunch of ways. And I've told my daughter many times on, on one level, parenting is just exchanging one terror for another over the course of time. You know, when you're an infant, I'm terrified that you're gonna smother in your sleep or fall off a whatever, you know, whatever

Vance Crowe [01:01:59] Things' there right now know.

Philip Luce [01:02:01] And, and then you, then, then you're a, you know, then you're a preteen. And I'm terrified about, are the kids at school being nice to you or what? Just anything. Now you're off of college, you know, you're, you're a young lady driving around in a big town by yourself, and I'm worried about all, so always just terrified of things. But I realized pretty early on that I can't be motivated by that. So I'm gonna, I'm gonna enjoy what's happening now the most I can though that that's, that's the terror about her safety and all that stuff. But yes, to answer your question, are there days that I wish that she was two years old again, or I could go back somehow of Yes, of course. It's great. It's, it's really good. I mean, up, up until, I don't know, maybe eight or nine, you're the, you're the best thing in the world. You know, you are the center of the universe. You, you and your wife, the center of the universe. You're the absolute, she, your kids don't want anything more than you.

Vance Crowe [01:02:54] Yeah, that's true. You come home and I you experience like your children when you come home and they want to run into your arms, there will ne there is no one else on the planet that wants to see me that bad.

Philip Luce [01:03:07] No. So that's, it's hard not to miss that when it's gone because it does, it does go away. My daughter and I have an excellent relationship. She has an excellent relationship with her mom. And it change. It has to change, you know, it does, it has to change. But what I, what I decided pretty early on in her life was, whatever is happening right now is the thing, I'm going to enjoy the best I can and do the best job I can. And I did the same as you. I, there were, there were lines I wouldn't cross, you know, there, there white commercial things are happening and if she has a play at school, I'm, I'm not gonna be where that, I'm gonna be here at this play. I'm gonna get someone else, see if I can find someone else to do that thing. I went, I've been over backwards to not miss anything. Actually, interestingly enough, she's an only child and as she's grown up, I don't

Vance Crowe [01:03:56] Resentment's too strong

Philip Luce [01:03:57] Of a word, but she got to a point where she said, okay, you gu you guys, you've been so supportive for, so you've been at everything. You've been right there with me all the time. Just,

Vance Crowe [01:04:08] Just

Philip Luce [01:04:08] Back up a little bit, you know, and that's, I would've liked to have heard some something else, but, but I understood it. It's, it's the right thing.

Vance Crowe [01:04:19] That's good. I mean, I think a lot of people, you know, I do these Legacy Interviews and I hear people describe, like, you know, I'll ask the question, what do you hope your children remember about their childhood? And everyone says, I want them to be happy. But you also hear about how the parent reflected back that they loved their children. And almost everyone says, and we went to every soccer game, and then we realized maybe that might have been a bit much right? Like, not, not all of them. Everybody has different experience, but oh,

Philip Luce [01:04:51] We, we did it. College is when we figured out she, she's, she's not one to rock the boat, but college is when, you know, we moved her into college and we went up there and my mom was with us and my wife's mom was, you know, it was this whole like this whole crowd of people helping her move in. And you see her looking around at some of the other K kids, they're maybe with one parent or maybe by themselves and, you know, we wanted to do it again sophomore year. Let's, let's go, let's take this. She's like, ah, let's, let's don't, how about we don't do that. I'm off track here now on your original question.

Vance Crowe [01:05:19] Well, this is exactly right. Like, I mean, so I grew up as the middle child of seven. So like, my parents dropped my stuff off different on the lawn of college campus, and they were like,

Philip Luce [01:05:28] You know, be

Vance Crowe [01:05:29] Good Vance. And as they left, I lit up my first college cigarette and was so excited and like, like independence was me, me, me. But I don't know, you know, like, I don't know what the right balance is, but my, my friend instilled a sort of paranoia that I don't wanna live by, right? Like, I, I, you know, my daughter took my face in her hands today and said, I want a hippopotamus for Christmas, right? And you're like, that's the cutest thing in the entire world. I want to embrace that, but I don't want to embrace it because I'm afraid it won't be

Philip Luce [01:06:00] There. Don't do that. Yeah. Yeah. That's, that's my exact advice to you is enjoy that and don't think time is gonna go, it's gonna go real fast and there's nothing you can do about that. And you, you'll

Vance Crowe [01:06:12] Wish it doesn't feel real fast at 3:00 AM when you're changing diapers

Philip Luce [01:06:15] Here, here's, here's the deal. I know you know this, everybody does, but you'll, you'll find out even more. So any individual day can go on forever. But the years, man, the years they go so fast, it is absolutely unbelievable how fast they, and, and the older you get, the faster they go. The older your children get, the faster they go. It is crazy still. Even now, I'm the father of an adult. Any individual day can go on forever. But the years are just, I mean, she's gonna graduate from college in May. We just moved her in with my mom and my mother-in-law. I

Vance Crowe [01:06:48] I think I remember when you were doing that.

Philip Luce [01:06:50] It's insane. So you, you're on the right track. Don't be motivated by paranoia. Don't just enjoy every moment. And it's gonna change as your kids get older. There's gonna be different ways to enjoy it. It's all great. I mean, I'm, I'm the father of an adult and it's great. It's different. It's not, she doesn't, you know, she doesn't take my face in her hand. She doesn't run into my arms that she loves me. We have a great relationship. It's not like it was when she was two and it shouldn't be, it'd be weird if it, you know, she needs to grow up, she needs to grow up. But there's so much to enjoy at every stage and you have to just, you know, have to do anything. But my suggestion is that you just enjoy every stage the most you can and all this other stuff's gonna happen, and it doesn't get any better by worrying about it. If you worry about it, it's gonna happen anyway. So now you've got the paranoia and it's happening. That's two things. You can, you can cut it to one. Yeah, I just don't, there's, and, and it, you feel like you need to get everything perfect. That's the goal. That's that's what I wanted to, I wanted to do everything right. And I had all these ideas about how I would be as a disciplinarian and how I would be, what our relationship would be like. And you know what really powerful and difficult lesson for me and my wife was that especially as she gets older, she is a, an individual human being. She's not a project of ours. She's not, she's not doing exactly nothing wrong, but you know, you have this vision, here's my child and he's gonna move through life in this way. And then you find out, oh, that's a human being

Vance Crowe [01:08:19] That's like, this is not,

Philip Luce [01:08:20] This is not something I'm working on. You know, this is not a sculpture. This is a human being. She's got her own ideas about things. She's got her own interests, she's got her own level of confidence in this and that she's got skills that we didn't know about. She doesn't like things that we thought she would like. And that's great. It's hard in some ways because you have expectations and, and unmet expectations are challenging. Again, not in a bad, it's not failing at anything. She's just her own person. And that, that really happens pretty, this happens earlier than you think. You know, when, when you're, when your kids are 10 years old, they're gonna start turning into a person and they're gonna be their own. They're gonna be their own people. And nothing you can do about that. And it's not bad there. There'll be things that you, oh man, that's, that's, I was hoping that she'd be this kind of person. Well, she's this other kind of person. Well, that's, that's, well, and you,

Vance Crowe [01:09:08] That's what happens to people when they don't individuate from their parents. Oh yeah, right. Like that, that's, that's a far worse prison that you end up living in because yes, that child is still reflecting to you, what do you want me to do? What do you want me to be? But there's no chance of them being satisfied with life if the, if what is required is your approval. But like, it's that, that's, that's gotta be really, you know, I, nobody's

Philip Luce [01:09:32] Satisfied with that. The parent or the child. No one, no one gets to be happy in that environment.

Vance Crowe [01:09:38] I grew up in a family where my dad didn't tell you at all. I mean, you knew like he had certain expectations, but like literally, you know, you'd be like, Hey, I think I'm gonna go a mechanic, or I'm gonna go become a person that works at a shoe store or something. Like, okay. You know? And like for a long time I resented the fact that I couldn't get any feedback. And what I didn't realize was like my dad was doing me a great favor in the sense that I, I had to break free. I had to figure out what was gonna make me happy. And I don't know what life would be like if I had had a parent that had held onto that, right, that had, that had gripped onto that and, and used their approval to, to continue to get you to do what you wanna do. Like that'd be awful. But, but it was bad. It was, you know, it takes, I, I tell a story sometimes about, I was with my friend court sitting on a park bench one time when I was living out in California. And I was like, you know, I just really wish my dad would tell me what he wants me to be. And, and, and if he would just tell me, then I could just go be that. But I realized like I could become president of the United States and my dad still wouldn't, wouldn't care, you know? And, and my, and my buddy was like, why don't you, why don't you call him up and tell him? And I was like, I'd rather put a gun in my mouth than tell my dad that like this. And he is like, okay, well here's my phone and you should make that call. It was the best phone call I ever made. Not because my dad had anything profound to say, but because he was like, no, I literally, I don't care what what you become.

Vance Crowe [01:11:08] And that, that was like the beginning of me individuating and becoming my own person.

Philip Luce [01:11:14] Finding out, finding out who my daughter is, is another great unexpected joy at this stage of parenthood. It, it's been going, it's not just brand new now, but in, in her time through college especially, because she's got to get away from us geographically and, and no big surprises. But you're just insta when, when you're, when she's at home, I'm thinking about how can I help her do the best she can do? And there's certain amount of me putting stuff on her there, and now she's away and she's turning into who she is. Or maybe she's doing it the whole time, but I could see it better now. And it's, it's great fun to find out who she is. 'cause who she is is, is great.

Vance Crowe [01:11:53] I love it.

Philip Luce [01:11:53] She, you know, she's somebody who has fears and overcomes them and sets goals and reaches them. And she's, she's doing things that are outside her comfort zone, or I thought they were, and she's just, she's a great person. I'm glad to know her. And it, it's a, it was challenging to go, to shift my focus from in some, in some sense, father to friend. Still, I'm still her father, you know, that, that that's not gonna go away. But there's this, there's this, I'm the, I'm the standing over protecting that kind of thing to, I'm, I'm stepping back and watching her turn into a great person. And that's, it's all great, all of it. The 2-year-old stuff is great. The 10-year-old stuff is great. It's all great,

Vance Crowe [01:12:36] Man. I knew you were the right person to ask about this. This is, and I like the idea of being excited

Philip Luce [01:12:42] To, to

Vance Crowe [01:12:43] Watch or learn or get to know this person like that. That's an, that is a, that's an excellent way to think of it.

Philip Luce [01:12:50] You do have input on that. Of course, what you do is gonna help determine what that is. I think it was important for me to understand that I'm not, you're not forcing that, you know, you're being the best dad. You can, your wife's being the best mom she can. And at some, some time, all of that, that part in, I heard a great quote. I was listening to a podcast, I'm pretty sure it was Jordan Peterson on the Lex Friedman podcast. And I'm gonna, I'm gonna butcher this quote, but he was quoting a philosopher, an ancient philosopher, and I just don't remember who it was, it doesn't matter that much, but he, he said the, the greatest expression of motherhood is failing at motherhood. Something like that. And what he meant was, as a mother, especially, you're, you wanna protect, you know, you wanna keep all the harm away. You wanna, you wanna just keep anything bad from happening that can happen. But eventually you have to stop doing, you know, that's, you, you stop doing that and you say, okay, you have to, you have to be exposed to the possibility of bad things so that you can grow up. And you know, that doesn't happen at two, obviously there's a lot of protection going on at too, but it was, that quote was about mothers, but it, it, it sunk, it hit me hard. It, I

Vance Crowe [01:14:01] Had a guest on the podcast that pointed out that the story of the Garden of Eden is actually a metaphor for childhood, where that had never crossed my mind. Where he is, like, of course, right? It's, you've got your children, they don't understand good and evil, they don't know anything about that. You get to name all the animals, you're learning about the world, but then one day you have to take that bite of the apple that then exposes you to, oh, not everything is good. Not everything is perfect, and then you have to leave the garden and you can't come back to the garden of childhood. And like that really helped me because what that did was orient me around, like right now my time is tending the Garden of Eden. But there, the whole point of tending the garden is to prepare her to leave the garden. Because to not leave the garden would mean either she died early or you didn't prepare her and she

Philip Luce [01:14:54] Child leave. Yeah. Yeah. Don't want that Anyway, don't

Vance Crowe [01:14:58] Worry.

Philip Luce [01:14:58] All that future stuff's gonna happen. So just, and the nostalgia's gonna happen. Just, just live right now. That's the way to do it. Just get the most you can outta right now and all that other stuff's gonna happen whether you worry about it or not. So don't worry about it.

Vance Crowe [01:15:11] Well, my man, Phil, this was great. I I'm so glad you told me you were coming in town for the conference and then we're like, yeah, I'll do a podcast. So if people wanted to hear your podcast, what do, what's it called and where do they find it? Yeah,

Philip Luce [01:15:23] It's called the Sample Bucket podcast. And, and it's a grain business reference. The sample bucket is every time a, every time a truck comes across the scales, you stick a probe down in it and pull out a sample of the grain and test it from all the stuff you talked about. And then you, you just dump it in a five gallon bucket and that's, it just has all the, all the stuff that was in that grain. So that was my idea, is we're gonna pull all these things outta these people. So it's called the Sample Bucket Podcast. It's on Spotify and Apple Podcasts and whatever the other, those are the two big ones. But it, it's, it's wherever you can search Sample Bucket podcast on podcast hosts and you'll find it. And

Vance Crowe [01:15:57] Not to open up too much of a thread, but you guys do have a really cool training program for, for young people through like white commercial in your foundation.

Philip Luce [01:16:06] Yeah, it, it's a, it's a separate thing really. Don White was our founder and he, when he died, he put a lot of money into this foundation that's called the Agricultural Scholarship Center for Basis Trading Education. And it, it's it's own, it's not a white commercial thing. We're very closely tied to it. I'm on the board of it and everything, but it, it has a program that we give scholarships away for people who are studying agriculture, just normal college scholarships. But we also have this merchandising skill building program, which is, it's open to college students or people already in the industry or people that think they might wanna be in the industry. And it's a six month program that involves some online training, some in-person training, some visits to grain facilities. It's just really a, a, an extensive long-term hands-on course that is fully funded, the travel's paid for and everything by the foundation. And it's, it's led by a man who used to work for white commercial and has worked for a bunch of grain companies. He's a phenomenal teacher and understands a lot about the business and he brings in other people from the industry to teach it. It, it's just a, it's just a practical introduction to the grain business.

Vance Crowe [01:17:07] To me.

Philip Luce [01:17:07] It's like a great

Vance Crowe [01:17:08] Way to get away from the, the light of the large corporations and have a new place. But the other thing it is, is you could come in with having very little understanding of agriculture at all. And it's a way to deal new people into the industry, people that have not been a part of farming. So I, I really applaud you guys for being a part of that and for Don White who clearly had an impact on people like you and I meeting. 'cause, 'cause without him, our lives would be very different.

Philip Luce [01:17:34] Don White said, he said a lot of things. He was a formative figure in my huge, huge figure in my life. But the thing he said to me many times was, if you help enough other people get what they want, you'll get what you want. And that's a pretty good way to approach business and life and everything.