0:06

Money, mergers and cage free eggs.

0:08

We're talking about the investment climate of money pouring into agriculture.

0:11

In this episode of The Business of Agriculture.

0:14

Hey, Damian Mason here with a question

0:16

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0:19

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1:27

Hey there. Welcome to another fantastic episode of The Business of Agriculture.

1:30

We got a great one for you today because after all, it is the business of agriculture.

1:34

And business means money. I've got somebody on

1:36

here is going to talk about the money that's coming into agriculture.

1:39

What's it looking for? What mergers? What acquisitions are being sought out?

1:44

Is there the kind of money there was a couple of years ago?

1:46

Cage free eggs. What we're going to see as one of our examples

1:48

about how legislation creates new opportunities,

1:52

what we're going to talk about, what the entire climate looks like for investment

1:55

pouring into your industry. I got Max Bremer. He's with Saul Ewing.

1:58

A national, shall we say

2:01

business transaction, group of attorneys,

2:03

law firm with offices all over the country.

2:06

And his PR person, put this out to me, and I'm like, you know what?

2:10

Cage free eggs, is the demand really increasing?

2:12

And I question that. And I read through some of the topics

2:14

that he wanted to cover and said, I absolutely, really want this guy on my podcast.

2:18

and maybe we'll get around to all of that. But the main thing is

2:21

give us give us a quick and dirty, my friend.

2:23

And, thanks for being here. Yeah, well, thanks, Damian.

2:26

I'm, I'm looking forward to it.

2:28

so just by way of background,

2:31

you did a pretty good job. But,

2:34

you know, I'm a business transaction lawyer.

2:37

and mostly what that means is I help,

2:40

you know, my clients, execute sophisticated

2:43

corporate transaction and mergers, acquisitions, divestitures, joint ventures, etc..

2:49

and, you know, while I work with clients

2:52

in a, in a broad array of industries,

2:55

including, you know, health care, medical device, health IT,

2:58

you know, manufacturing, distribution, etc..

3:01

a big and growing part of my practice has been,

3:06

agribusiness, food beverage agribusiness.

3:10

I don't know if you mentioned, but I'm, you know, I'm in the Twin

3:12

Cities, Minneapolis, and, you know,

3:17

Minneapolis, fortunately, has a lot of, of,

3:20

significant players in the agribusiness industry.

3:23

And as a result, that's, a lot of the activity up here,

3:27

that happens to be related to that.

3:29

So that's sort of kind of how I've been,

3:33

sort of introduced to the, to to the industry.

3:37

my, my clients are in that space.

3:40

And so as I've been working with them

3:42

over the last several years on, they're either

3:46

they're buying businesses that are selling businesses, in agribusiness, I, you know, I've,

3:51

I've become familiar with some of the trends going on there and,

3:56

so that, you know, that's not I guess that's what we're talking about today.

3:59

Well, here's my, assertion, impression, I don't know

4:03

use of that word here. Perception.

4:06

a lot of money poured into ag

4:09

starting, I don't know, call it five years ago. And then we had this amazing thing happening

4:13

in that the production, ag and production prices at the farm gate do drive

4:16

a lot of what happens upstream, downstream, within AG.

4:18

I mean, if you're if you're selling, you're selling, technologically advanced wheat

4:24

or you're talking about new, seed genetics,

4:26

whatever that thing should be a lot of it all boils down to what's the actual

4:30

ag sector look like? And that comes down to farm income. Well, 2021, 2022, 2023 are 3

4:36

Record-setting Farm income years.

4:39

by by leaps and bounds and in both nominal

4:43

and real inflation adjusted dollars.

4:46

And so you had this thing where tech money was looking for somewhere to go.

4:50

And I'm you can even go back to, you know, Beyond Meat, which is an AG company.

4:54

It's a food product, I oppose it,

4:56

I don't want to eat that garbage, but it's a, it's an ag

4:59

that they came out in 2018 and you know their stock price was bid up.

5:03

Now it's down 95% from what it had been.

5:05

So you see these different things where money was pouring into ag oh ten years ago.

5:11

And I think it hit a zenith a couple of years ago.

5:14

But there's still obviously money that wants to be in ag.

5:17

And it is now the play that, you know,

5:20

there's a lot of startups, a lot of tech biologicals, those kinds of things.

5:24

Now is the money. Instead of looking at new technology, looking at

5:30

merging, consolidating. Because usually when you start

5:32

seeing a contraction in, in an industry

5:36

or a contraction in the, in the income,

5:38

then there's a push for consolidate. And so you kind of give me that perception,

5:42

am I right. That money started slowing down.

5:44

And there's less chasing technology now.

5:47

There's more of a view. Let's go with, consolidation and merging

5:51

versus, expansion of technology.

5:54

Yeah, I know, but I think you're right.

5:57

I mean, your perception is right, and it at least

6:00

it's consistent with, with what I'm seeing.

6:03

And frankly, I, you know, I, I was looking at,

6:06

some data recently just in terms of,

6:09

you know, investment in the industry.

6:12

And I actually this is, you know, not unique to ag

6:16

but I, you know, venture capital activities.

6:19

So, you know, what you're talking about in terms of the technology investments

6:24

has slowed down in the last couple of

6:26

really the last year, 18 months,

6:29

and the merger and acquisition activity

6:32

similarly were, you know, either

6:34

a strategic is buying another company operating in this space or,

6:38

or a private equity fund might be buying an operating company outright.

6:43

That activity has slowed. And, you know,

6:45

and what the ag industry is experiencing,

6:47

which is not dissimilar from from the broader market.

6:51

But we're going to talk about ag here,

6:53

you know, is there you know, there's been some economic uncertainty.

6:57

Of course, interest rates are higher.

7:00

And so the, you know, the cost of doing a transaction

7:03

or making investment is up there are,

7:06

you know, some global uncertainties with what's, you know, what's happening

7:09

in the Ukraine and elsewhere. And,

7:12

and of course, we've got a, you know,

7:14

an election coming up at the end of this year. So I think there's some uncertainty

7:17

in the economy about, you know, generally, although, you know, maybe

7:21

we haven't had the recession that was predicted that there's,

7:25

you know, there's just some general uncertainty that I think is causing

7:28

some of the investment activity that you

7:30

that we were seeing two years ago, let's say,

7:34

to slow tail off a little bit.

7:37

And, you know, my expectation,

7:39

my hope is that that will change here

7:41

in the next few months. Maybe if there's an interest rate,

7:44

change that, that will sort of drive some activity.

7:47

But we'll see. 54 years old have been paying

7:53

attention for a long time. I started reading

7:56

and paying attention to media when I was like 10 or 11 years old.

7:58

Really?

8:01

And you just said, well, there's a lot of uncertainty in the market.

8:03

I think I have I'm not sure there's a month.

8:06

Sure as hell not a year since 1980 that I have not heard.

8:11

There's a lot of uncertainty in the market. So I think at some point

8:14

we say this again and again and over and over and over,

8:18

and we pretend that somehow

8:20

these market conditions are so remarkably different

8:23

than those market conditions of a year ago, day ago, month ago, decade ago, whatever,

8:27

am I right? Is it really a little over?

8:30

I know that sounds jaded, because now I've just taken every CNBC

8:34

talking head and basically said, you're useless

8:37

because I've been hearing this every day, month,

8:39

year, decade. Well, there's a lot of uncertainty in the market.

8:44

I mean, is there really that much uncertainty in the market from what there was one year ago,

8:47

one month ago, ten years ago?

8:49

Well, in some ways, I mean, there's probably less uncertainty there.

8:52

And it was a year ago, right? I mean, a year ago

8:55

or maybe 18 months ago, all you all we were hearing

8:58

was about sort of the impending recession

9:01

that, you know, that that was on the horizon.

9:03

And the question wasn't sort of

9:07

whether it was coming. It was when it was going to head

9:09

and how bad it was going to be. And sort of the general economy,

9:12

I guess, has weathered all of that,

9:14

that sort of anticipated negative news.

9:18

Now, you know, and whether where we we've sort of

9:21

hit the safe landing that everyone was anticipating or not, but

9:25

but in any event, it's sort of appears that a recession hasn't happened

9:28

and it's not coming. So in some ways, the,

9:32

you know, there's less uncertainty in the economy than there probably was

9:36

18 months ago. Yeah. But, you know, interest rates are still high.

9:40

And there's still, you know, I mean, again, every four years

9:43

we have an election. We're going to have one year at the end of this year.

9:45

And so, you know, there's

9:48

who knows what will be the outcome of that election.

9:51

but you're right. I mean, that is that's not unique.

9:54

You know, that was the case four years ago. It was the case four years prior

9:57

was the case in 1980. So yeah.

10:01

So yeah, we do have these sort of cycles, but there's, you know,

10:06

but yeah, I don't know that this time is all that different from, from other times.

10:10

But I, you know, at least what I'm seeing in my own practice

10:13

generally is that, you know, the

10:15

the market has slowed down from where we were two years ago,

10:17

where the market, that's where I want to go.

10:19

So the market, the market to you to clarify

10:22

it doesn't mean commodity markets, doesn't mean stock market.

10:25

The market to you means the money that comes to you and says,

10:29

help us buy this thing.

10:31

Right. Where's the market? Yeah, yeah.

10:34

Not to me. I'm not a I'm not a broker.

10:37

But right where my clients are saying, hey, we want to buy we, we,

10:41

we want to buy this business or we want to, we want to deploy capital

10:44

into this industry where we want to make this investment that has

10:49

that is not as active as it was 18 months ago.

10:52

And that's. Yeah. So what's interesting is

10:54

and you just said I'm not a broker. So I want to ask you how this works right here.

10:58

You know, how the how the transaction.

11:02

Because this is something that I think many of us read about, hear about,

11:05

but a lot of folks are listening to The Business of Agriculture

11:08

podcasts are saying, how the hell does this actually happen?

11:10

So I want to get into that. Before I do, some of you might notice

11:13

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11:15

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11:48

Check it out. yeah.

11:51

You're not a big investment banker.

11:54

All right, so, you know, an investment

11:57

banker is always just, brokering deals,

12:00

putting together deals, and then they make their money on on the advice on the,

12:04

you know, cut, sell, whatever. You're not an investment banker.

12:07

So you still have a does an ag entity

12:11

come to you and say, we we're already in talks to buy this.

12:14

Now you gotta help us through the legal hurdles.

12:16

Or does a non-ag entity come to you and say,

12:19

we've been position, we've got $100 million to spend,

12:21

and there's this poultry producer over here in southern Minnesota.

12:26

We're going to we're going to buy him, walk us through it.

12:28

How's it work? Yeah, right.

12:30

So both but I, you know, more often I'm

12:33

working with a client who is already has an

12:36

either has already identified a company

12:39

they want to buy, or maybe they're going through a sale process

12:43

and has already identified that partner.

12:46

and they come to us and, you know, want us to help them execute

12:50

that transaction from helping to negotiate the, the,

12:54

the terms of the deal, the structure of the deal,

12:57

help them, through the due diligence process.

13:00

and then help kind of help them,

13:02

legal side largely get to the, to a successful closer.

13:07

occasionally somebody will come to us

13:09

and say, hey, we're, you know, we're looking for this type of,

13:13

you know, this type of,

13:17

this type of company we want to buy or product

13:19

or whatever. Do you know? So, you know,

13:22

do you have anybody in your network who might be,

13:25

you know, that sort of fits that profile? So we will get sort of

13:28

brought into those situations. But that's not really what we do.

13:32

And it's, you know, not really what we get compensated for.

13:35

Right. When it's a government service,

13:38

it's a service of, you know, you know, if you're in the industry.

13:42

I mean, honestly, I sort of look at it is, you know, we're we're sort of a,

13:46

you know, if you're going to be in the industry,

13:48

you try to try to help and support others

13:51

as much as you can and make connections that are that are useful.

13:55

You know, some ways that are, you know, we don't get to actually

13:57

we're not directly benefited by that, but it's

14:00

sort of part of part of

14:02

being a participant in the industry.

14:04

Yeah. All right. So we talked about what is happening.

14:07

So money's drying up or the flow has certainly

14:12

moved maybe not to a trickle, but it's definitely slowed down

14:15

a lot going into new ventures technology all the stuff you know.

14:19

And frankly, I gotta tell you, I, I think it flowed in for a long time

14:23

and I can almost say, where the hell are the results?

14:25

We're supposed to have driverless tractors with autonomous fertilizer buggies.

14:29

We're supposed to have a lot of stuff going here. I'm talking you and I recorded this Q2 of 2024

14:35

for all the money that poured in.

14:38

What's the result? And then the next thing is,

14:40

where's the money going now?

14:42

Well I yeah, I don't,

14:44

I don't know that I can comment on the result I would say,

14:48

I mean maybe you can comment on the results.

14:50

Okay. I already did come up with the results. I got it on the results.

14:53

I'm fascinated by the technology we have,

14:56

but I don't think that I don't think the

15:00

if you give someone $1 billion, if you

15:02

if you give me $100 billion and I give you,

15:05

a calculator, you're going to say,

15:08

yeah, that's all right. That's kind of a letdown. And that's where I think I am on, on the on the

15:13

the pace of ag technology. Yes. It's impressive. My God, look at it.

15:16

But for the amount of money that's trickled in that's not a trickle.

15:18

I did that flowed in. It flowed in like you know like geysers

15:23

I don't know that we've maybe it's just not there yet.

15:26

And all of a sudden it's going to be, you know, the it's ready

15:29

to bust through the next dam, but it doesn't seem like it's made it.

15:34

I don't, I don't, I don't think that we've seen as big

15:36

a result as I would have hoped for.

15:40

yeah. Well, yeah. I mean, you're, Yeah.

15:43

But I, you know, if you sort of, I mean, if you look at sort of the application

15:47

in other industries as well, like, you know, we have to really solve

15:50

all the health care problems we intended to solve with all the money

15:52

that's been deployed into health care, and that's government, though. That's government.

15:56

So that's also I mean, it's also private capital

15:59

that's gone into fund, you know, technology

16:02

probably things that have not made.

16:06

We haven't sort of solved all the problems there. We haven't solved all the problems.

16:09

And in agriculture, although, you know, we've

16:11

I mean, there's there's a lot of things that agriculture

16:14

ultimately will need to solve because we're, you know,

16:16

you're feeding the world, right? And there's,

16:19

there's, there's, there's a lot that will need to happen there

16:21

that has not yet happened.

16:24

you know, I'm not a technologist,

16:26

so I don't it's sort of hard for me to comment on that,

16:28

but I, I wouldn't say that like the capital has dried up.

16:31

I because it exists.

16:33

It's just sitting there waiting to be deployed

16:36

in, in, in opportunities that are,

16:39

you know, when I think when investors view that the that

16:43

the return is sort of commensurate with the,

16:45

with the risk they're taking. And right now,

16:48

I think, you know, interest rates probably are a big part of preventing, you know,

16:52

to the extent that is part of the,

16:55

transaction capital structure, it's,

16:58

you know, it's more expensive to do a deal now than it was,

17:02

you know, 18 months, 24 months ago.

17:05

So you're thinking that's a part of it. And I think some of the and I, you know,

17:09

sorry to me to, to to to cut you off,

17:11

but I was talking with with a client recently,

17:15

a sort of they're a big, a big player in this space.

17:19

They make a lot of that in part of their business.

17:23

They make some venture capital investments. and they are, you know,

17:27

and they have a number of investments they've already made.

17:29

And they're rather than looking at new investments right now,

17:33

they want to make sure that their own portfolio companies,

17:36

that they, you know, that they have the capital preserve

17:38

to invest in those companies

17:40

to weather whatever the storm is that might happen over the next 6 to 12 months.

17:44

So instead of making new investments,

17:47

they're kind of hunkering down, waiting to see how the next 6-12 months play out,

17:51

make sure that they can properly capitalize

17:54

their existing investments and then kind of reassess.

17:58

Yeah, that's that's some of what I'm seeing happen in the market now.

18:02

All right. So yeah, I you can't tell me

18:05

specifically what you're working on. But we teased out cage free eggs.

18:08

That's one of the things that your, your,

18:10

your PR person put out there about.

18:15

What's what's going on? Why are cage free eggs

18:17

something of an example of what you think is going on in terms of investment trends in ag?

18:24

Yeah. And so this sort of counters a little bit of what I was talking about

18:27

in terms of, you know, uncertainty in the market and, and

18:31

in maybe the, the lack of,

18:35

slowness of M&A activity generally.

18:39

but but in the ag industry, I mean, you've got some other,

18:42

some other things going on that are driving interest in M&A activity there.

18:47

and largely,

18:49

you know, some of this is being driven by state,

18:52

legislation which is mandating,

18:56

that is mandating that eggs

19:00

produced and sold in their states, come from,

19:04

you know, humanely, cultivated eggs,

19:09

however, they define that largely, you know, cage free,

19:13

cage free infrastructure. so there's a number of states

19:16

that are either already have that legislation,

19:19

including California and Massachusetts. There's some others that will be coming online

19:23

within the next year or two. And I think a number of others

19:26

that are sort of thinking about that. And so some of that is being, you know, is

19:31

you know, state legislatures,

19:34

responding to their own constituents

19:36

who are demanding this. Some of it is, you know, responding

19:39

to, to to lobbying efforts, others,

19:42

it is just responding to, you know, in

19:45

some of it is being just is driven

19:47

probably by, to a certain extent by consumer demand.

19:52

Okay. So

19:54

money, you know, I know some investor

19:57

people that, you know, sit and just look at, that

20:02

leases to put money all the time and they talk about where the puck is going.

20:06

And some of them are very, agnostic.

20:08

They don't get into the politics. They just say, well,

20:10

it looks like there's going to be this legislation. So let's go over here

20:13

and invest and deploy cash over here, because this legislation

20:15

is going to make good for us or

20:17

hey, here's this trend line.

20:19

So how much of it is let's legislatively driven

20:23

in terms of your clients versus trying to predict the marketplace

20:26

consumer trends?

20:28

It's certainly a part of that. But I mean, it

20:30

it's you know, if you're predicting the marketplace trends

20:34

and legislation is saying, hey, this is

20:37

these are the only products that you're going to be able to sell in our state,

20:40

you know, and California is a big market, right.

20:42

And so that that's going to have a,

20:45

you know, that's going to impact demand,

20:48

kind of the demand side of it regardless.

20:51

but there's also, you know, large companies have made pledges,

20:55

cage free pledges. you know, that they're only going to be selling,

21:00

cage free produced eggs that,

21:03

you know, by a date, by a certain date.

21:05

and you also seeing some, you know,

21:08

you know, consumers, I guess, voting with their wallets and

21:11

and buying that, that type of product as opposed to,

21:15

to, you know, conventionally produced eggs.

21:18

It's my understanding. It's my understanding. So it was a long time ago,

21:22

like almost ten years ago. Seven. Yeah.

21:25

Somewhere around seven years ago, Kroger came out

21:27

McDonald's Taco Bell,

21:29

which doesn't really use a whole hell of a lot of eggs.

21:31

McDonald's gets through a lot of eggs, and Kroger certainly retails a lot of eggs,

21:37

said we're going to go cage free. I think that by the year

21:39

2025, maybe by the year 2024,

21:42

either way, it's right now or next year.

21:44

And the production industry said crap

21:47

we're gonna start converting. And I were reading this like five years ago.

21:50

The industry said we better convert. So bunch of

21:53

producers looked at barns that were already kind of,

21:56

you know, getting depreciated out and dilapidated out and said,

21:59

the next barn is going to be cage free because that's where we're going

22:02

to command this premium. And there was a premium for a while.

22:04

There's my understanding that we hit a point where

22:07

there was so much cage free production that the premium went away,

22:11

that like one fourth of the eggs

22:13

you're buying conventional, Kroger

22:16

might have been actually produced cage free

22:18

without getting the premium. That was my understanding.

22:21

And I got told that by someone in the industry just a couple of years

22:23

ago, you, before we hit record, said

22:25

you're not sure that's the case anymore because production is caught up, is there?

22:30

Help me out here. Yeah. And I'm so I,

22:35

to be honest, I don't really know the answer to whether Kroger is able to meet, it's sort of,

22:40

you know, if there's sufficient eggs in the market to, to meet that demand.

22:45

I, you know, I do know that,

22:48

you know, not all of the facilities in, in states

22:51

that have cage free legislation have been converted.

22:55

I do know that, you know, that there's sort of

22:57

in other states, there are, you know, people who are thinking about converting,

23:01

who have not converted. And a big part of, you know, obviously

23:06

the a big part of that is, is the cost of converting.

23:09

And so that's not insignificant.

23:12

Yeah. To undertake converting from a conventional operation

23:15

to a cage free operation. So

23:21

you know, so anyway, I think to get to where we need to be,

23:25

my understanding is the market is about 30% right now.

23:28

I could I could have that wrong. Okay. I think the last time I saw data on this

23:32

that approximately like 30% of eggs today are, are in that range,

23:37

are, cage free as opposed

23:40

if you could conventionally. Right. I mean, so there's still,

23:43

you know, if you get to 100%, that's within a long way to go if,

23:47

if that's ultimately where we're going to.

23:50

All right. So here's the thing. Let's talk about

23:54

first off, if that's all about a conversion, I don't know where the merger

23:57

and acquisition happens other than there's some entity

23:59

that is really good at making cage free eggs.

24:01

And then, another egg producer says, crap,

24:05

we can't we don't want to convert. We're going to buy them.

24:08

Well, there's only like three dozen companies

24:10

who control 90% of egg production

24:12

in United States. So I can't really imagine that there's rampant

24:16

amounts of mergers and acquisitions happening within egg production.

24:19

I can see it in other places in ag,

24:21

but not in egg production, because it's already pretty damn consolidated,

24:24

am I right? Well, yes. But I mean, you've still got some

24:28

some other producers, even larger producers

24:31

who are in some states who are saying,

24:33

I don't want to undertake the costs to convert

24:36

or, you know, a family operation where,

24:39

you know, generationally they're thinking about kind of

24:42

what's the next step here, who you know,

24:44

all right, who's going to operate this business?

24:47

Do we want to make the investment we need to make, or is now a good time to sell?

24:53

Is somebody else some either private equity fund

24:57

or strategic buyer in this space?

25:00

Might they be interested in buying our,

25:02

you know, our existing egg operation

25:04

and making the investments that need to be made to convert

25:07

our existing facility to cage free.

25:09

And so, you know, some of the clients I'm working with are viewing

25:13

this opportunistically because they have relationships

25:17

with some of these, you know, further,

25:20

some of the same producers today who are in that situation who are thinking,

25:24

you know, am I going to transition this to my kids?

25:27

And I willing to make that investment myself?

25:29

And so that's where I'm seeing this come up.

25:32

And and then I want to find out then also about what you are seeing,

25:36

and then also how a merger and acquisition

25:39

even works. I want you to to do all that

25:41

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26:40

what's what do I need to know?

26:42

Maybe somebody is listening to this right now and they say, you know, I want to expand.

26:47

I want to buy. What do I need to know?

26:49

What do I need to do? Or they say, I am one of these ag companies that,

26:55

you know, I know I might pass it on to

26:57

maybe I'm in ag tech, maybe I'm a light manufacturing.

26:59

Hell, I don't know. I mean, you see it, all right? We just

27:01

we threw out cage free eggs because it’s an interesting thing for the title.

27:04

But the reality is you see all kinds of things, right?

27:06

Tell us what you've seen and then what anybody would need to know.

27:11

Yeah. So I you know, let's look at it

27:13

maybe from the perspective of somebody who, who owns, a facility today,

27:18

an egg production facility. But I, you know,

27:20

I guess it could be any type of business who's who's thinking,

27:24

hey, I don't, you know, I don't want to make the investment I need to make.

27:27

Or, you know, maybe the next generation isn’t up

27:30

isn’t up for it. They want to do something else.

27:32

Or maybe the time is right to sell. Maybe the time is right to sell,

27:35

because I'm getting overtures and, and it seems like maybe I should consider this.

27:39

Right. So you're, you know, either, you know, I mean,

27:43

player, you know, it's a relatively small industry.

27:46

A lot of the, you know, the big players know,

27:49

you know, net know of it. So I mean often these things take time.

27:53

I mean the clients I have who are doing this successfully have developed relationships,

27:57

you know, especially if they're on the buy side that then develop relationships

28:00

over a number of years. And so they already know

28:03

the owners of the business, the owners trust them, they trust the owners.

28:08

And when it, you know, when a time comes up

28:10

to have a transaction, it's sort of natural.

28:12

But if you know, if you haven't, if you haven't already established

28:15

those relationships, you know, often

28:19

you'd be engaging some kind of broker or you mentioned an investment banker

28:23

to kind of help you think about, you know, one which you can get for your business

28:27

and two you know, then have them kind

28:31

of run a process to go out and help identify the buyers,

28:35

you know, like create a competitive process

28:38

and they identify buyers who are interested in your, your business.

28:42

and we, you know, often we get brought in at that time

28:45

to kind of help a seller think through how how do you best position

28:48

your business for a sale? Who's going to be attracted to this work?

28:52

If there's any sort of weak points in the business, how do we

28:55

how do we try to clean those up? Now, before you go to market and sell

28:59

so you can maximize how you can maximize price

29:01

and make it most certain that you're going to get to get to a closing, which is really often

29:06

what a seller cares about. They want to make sure they get to the closing.

29:08

They want to get the most price. And when they want to reduce uncertainty

29:13

as much as possible. Yeah.

29:15

Interesting. So where are you?

29:19

Where do you think your work. How will

29:23

the customers, the category change for you?

29:29

You know about what the market looks like. Well, what's the market

29:31

look like moving forward in 2024 from what

29:33

it was a year ago, in terms of the types of deals you're doing?

29:37

Yeah, I don't it's all I mean, the,

29:39

in terms of types of deals, I imagine

29:42

they won't change that much. I think, you know, if there's an interest rate,

29:47

positive interest rate change in the next couple months, that that will likely,

29:53

free up some pent up demand that

29:56

I think, you know, you see that, but it's my understanding that there's

29:58

still boatloads of money sitting around.

30:00

And if you're doing it on cash, what the hell does that make?

30:03

Whether we're talking 8% interest or six?

30:05

Well, if you're doing it all on

30:08

if you're doing it all on cash, maybe not a lot, but,

30:11

you know, most of these deals do involve debt.

30:14

and I think just sort of the,

30:16

the favorable movement will probably

30:19

I think people are waiting for that as my sense.

30:22

But, you know, the, you know, percentages matter.

30:27

everyone would prefer to pay less in interest.

30:31

have been more. There's no question about that. But I'm not convinced

30:35

I've been hearing that we're going to see, that. Remember, I also called bullshit

30:38

when they said inflationary inflation was transitory.

30:40

They began that whole talk during the Covid thing,

30:43

which the same time, they're telling us that, if you walk long way down

30:46

an aisle of Walmart and wear a mask, you you're

30:48

you're not going to ever get Covid, which was not true.

30:51

Then they also told us that inflation was transitory.

30:53

And I even I said, I've never heard that word in all my economic studies,

30:57

which of course means temporary. I'm like, well, everything's temporary.

30:59

You know, cancer is temporary. So said so

31:02

cancer is, transitory also until it kills you.

31:05

So inflation that began at the end of 2020

31:08

was supposed to be or mid 2020 was supposed to be transitory.

31:11

Here we are four years later and it's still bad.

31:14

interest rates were supposed to be a temporary fix

31:18

to fix the inflation. I don't see interest rates being markedly lower.

31:23

One year from now than they are now, but half point maybe one.

31:27

I don't see that being, enough to move anything.

31:31

well, I yeah, I mean, you're you're probably right

31:34

that they won't come down significantly. What about my point on cancer being a transitory?

31:39

If inflation is transitory, you like that one, two though?

31:41

yes, I think you're right.

31:43

It either. Right. It's transitory

31:46

one way or another it’s transitory.

31:48

It's transitory. How do you beat it or it beats you and I were killed,

31:51

and it doesn't last forever.

31:53

So really,

31:56

you know, interest rates are up 100%

32:00

from where they were two years ago. You can say, you know,

32:03

I always tell my people that don't think about money. They say, well, 4%, 8%, a 4% move.

32:07

I said, no, that's four points, but say 100% move.

32:11

You doubled the cost of money. Well,

32:15

if it comes down just a little bit, you're still up, you know, 100%.

32:19

So it's kind of like when retail stores, you know,

32:22

triple the price or something, then mark 20% off it.

32:24

I mean, if interest rates go back to 7.3% or something

32:28

or 6.9%, you're still talking about

32:30

significantly higher inflation, interest rate cost.

32:33

And it was cost of money. That is then it was just two years ago.

32:37

Yeah. But I you know,

32:39

I say my, my, my sense is that there are,

32:43

there are good deals to be had that are waiting to be done,

32:46

because they can be done cheaper.

32:48

So, you know, if the expectation is I can do it

32:51

cheaper in three months than I can do it

32:54

today, I'd probably wait three months now.

32:57

You know, I suppose if if the interest rate environment

33:00

can continue, you know, if it's going to continue to decline, right,

33:04

then people might sit in wait for the next

33:08

reduction and then the, you know, the next reduction

33:10

in the next reduction. So I don't know, maybe that'll be a self-fulfilling prophecy.

33:14

And we'll kind of never get there.

33:16

because people are continuing to wait for interest rates to decline.

33:18

But in the meantime, there are still good deals to be had,

33:22

even at interest rates, you know, in the current environment.

33:25

And that's where I want to go, because this is we're going to get out of here

33:27

on this little topic where the good deals are, by the way,

33:30

I, I'm different. And maybe this is why I'm entrepreneurial.

33:33

I think if you wait around thinking, oh,

33:35

there's this is a really good deal, but I'm going to wait

33:37

until the injuries go down, then the deal goes away.

33:39

Or like, gosh, wonder why that went away? Because if you sit around and let good deals.

33:43

yeah. Now I think you

33:45

if you see something that makes sense, you should buy it.

33:48

Period. Right.

33:51

The interest is not if your deal is predicated,

33:54

you know, sort of is, is not good under

33:57

the current interest rate environment, but is better.

33:59

You know, is good at, you know, one interest, you know,

34:02

that's probably not the right. It's not the right deal. Right.

34:05

What is a good deal? What's going on right now? That's a good deal. Get me out of here.

34:09

Well, you know, again, I mean, so we ask the question.

34:12

I'm going to another way. My friend Rob Siok and I who is an ag entrepreneur Canadian.

34:17

We don't hold that against him. Right. And and part time Arizonian.

34:21

And we record an episode in the summer. He came to visit me in my farm

34:24

and we were talking about money and I and so I,

34:27

we posed the question, if I had $1 billion

34:30

would play off of the Barenaked Ladies, if I had $1 million, which was a Canadian, band

34:34

Canadian said, if I had $1 billion, where would I put it in ag?

34:39

Or even would I put it in ag? So let's ask you,

34:41

because that was recorded like in August. So here we are recording this Q2 of 24,

34:46

eight months down the road. Now, I gave you $1 billion.

34:50

I know you're not the investment banker, but you see deals.

34:53

You're the legal side of all these deals. I give you a billion, 100 million.

34:56

What are the numbers? Where you gonna put it? In ag.

34:59

in cash. If I,

35:02

if I, if I was if I was smarter about investing

35:05

than just helping people, I'd

35:07

probably be doing that, to be honest.

35:09

yeah.

35:11

I don't know. I mean, I, you know,

35:15

I do like, I'm excited by what

35:19

some of my clients are doing in the, you know,

35:21

I still think,

35:24

eggs are a good business, but it's. I mean, it's not sexy at eggs.

35:29

Eggs are not sexy, no. And and you know what, the margins.

35:33

I didn't, you know, need to make, like, $0.02 an egg or penny an egg or something.

35:37

But now, with this inflation, what? Eggs are up 70%

35:40

from where they were, or 50%, depending on the price cycle

35:43

or under from just a couple years ago. So you still like eggs?

35:46

Yeah. I'm, you know, I mean, I like the

35:49

I sort of like where the market is headed

35:51

generally. I mean, it's, you know, it's expensive to convert to cage free.

35:57

It's the, the cost of operating a cage

36:01

free operation, I think is more is higher than,

36:05

but you do get it. You do get a premium on the eggs,

36:08

and that's where the market is heading. So for now. For now.

36:11

Yeah. That's true. Okay. I will keep throwing other things at you.

36:14

Beef processing. Meat processing.

36:16

there was a bunch of federal money's tossed out a couple of years ago

36:20

because we decided that the big four.

36:22

And then we had, you know, the pandemic shut down some meat

36:25

and we had some supply issues. Do you see money coming into meat processing

36:31

for mergers or acquisitions? I,

36:34

I don't, just because I guess my clients are not in that space.

36:37

So, if I gave you a bunch of money,

36:39

would you put money there?

36:44

no, because I don't really. I mean, you know,

36:46

if I were to follow Warren Buffett, I did invest in things I know about

36:49

and I don't really know beef processing, so I probably wouldn't, that's, you know,

36:54

nothing against beef processing, but I'd. I'd want to understand

36:58

it. Yeah, I just don't I just don't know.

37:01

Yeah. We call those money murders and cage free eggs.

37:03

Get me out of here. and tell me what what else I need to know that we didn't cover?

37:11

what's going to happen between, in the rest of 2024?

37:14

All right. You kept saying my interest rates. What's going to happen in 2024?

37:17

That anybody needs to know. you said the money's not dried up,

37:20

but the spigot is definitely flowing more slowly.

37:24

He said so much predicated on interest rates

37:26

getting cheaper. I don't really see that being a market difference.

37:28

So what's going to happen between now and the end of the year?

37:31

I think the I think sort of the time pressure of some of the state

37:34

legislative mandates is going to drive,

37:38

is going to drive additional activity. So either people will decide to make,

37:42

you know, to invest in cage free,

37:45

people who have not yet made those investments,

37:48

operators will decide to, you know, make those investments and convert or,

37:52

or investors will have to enter in and in,

37:55

either invest in those businesses or buy them outright on the poultry

37:58

production or egg production. Since it's so few players,

38:01

are we going to get down to where it's like five?

38:03

It's only us isn't only a few dozen right now

38:05

that really control 90% of the eggs?

38:08

You know, in Arizona, it's Hickman's. And my part of the world is Rose

38:11

Acre Farms in Indiana. Well, what's,

38:14

how how few, how many are we going to get down to?

38:18

well, and that's, you know, the Justice Department

38:20

will ultimately probably weigh in on that, too,

38:23

I suppose. you know, there's there's,

38:27

they don't love consolidation in any industry, but, so, yeah,

38:33

I mean, that's part of the analysis here, too, that we don't even really talk about,

38:36

but that's something buyers

38:38

especially need to think about is what how the Justice Department would do,

38:42

you know, especially if you're, you know, one of the largest players

38:45

in the market. We don't need to name names.

38:47

I don't know who they are, but, you know, they're going to have,

38:49

you know, that's sort of a focus

38:52

that they need to have as well. You know, there's an argument right now

38:54

Kroger and Albertsons are trying to, as grocers are trying to fuze

38:58

and just department tolling them up.

39:00

but even fuzed together, it still be about half the size of Walmart

39:05

in terms of grocery sales. So they're saying, why the hell are you trying to prevent us from,

39:08

from fuzing? So I wouldn't say the just departments,

39:11

in the way that the methods

39:13

at which they mete out,

39:17

their judgments are necessarily unbiased or fair.

39:21

yeah. Agreed.

39:23

All right. Well, there we go. His name is Max Bremer. The the he's a business transaction

39:28

attorney for, an entity called Saul Ewing.

39:30

If somebody wants to go a little deeper, they have a question about this

39:32

because they need the legal side of it. How do they get Ahold of you?

39:36

you can you can, well, I'm on our website.

39:39

You can call me (612) 225-2957

39:43

or email me Maxwell dot Bremer ...

39:46

at saul.com.

39:48

I have my my bios on our website.

39:51

Good deal. All right. So we're talking about money

39:53

mergers and cage free eggs. Talking about the investment

39:55

trends in agriculture. Are you tuned in here because the business of agriculture.

39:58

Remember also this this, this

40:01

this show that you love so much is brought to you by Truterra, Redox,

40:03

and my friends at Pattern Ag. So, check out their websites

40:07

if you want to go a little deeper with them. Also, his name is Max Bremer

40:09

Thanks for being here. Till next time. Thanks a lot, Max.

40:12

Thank you Damian, was a pleasure. Till next time.

40:14

Thank you for being here, dear listeners. You know, 200, 300.

40:17

Sorry, almost 350 episodes in the can. Go back and check out some of them.

40:21

They're great things to share and I always try and get a good guest.

40:23

If you have a topic you want me to cover, please shoot me an email.

40:26

I promise you. I look at them and,

40:28

we will see if we can get some more interesting topics

40:31

that I've not covered that you'd like to hear more about. Until next time.

40:34

Thanks for being here. I'm Damian Mason and this is

40:36

The Business of Agriculture. Hey, thanks for being here.

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