Greg Page on Food, Agriculture, and Cargill
Jan 12 2015

Greg Page, former CEO of Cargill, the largest privately-held company in America, talks to EconTalk host Russ Roberts about the global food supply and the challenges of running a company with employees and activity all over the world. Page talks about the role of prices in global food markets in signaling information and prompting changes in response to those signals. Other topics include government's role in agriculture, the locavore movement and genetically modified organisms (GMOs).

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Robert Kennedy
Jan 12 2015 at 8:11am

This was a great episode! I enjoy guests that are “in the trenches”, so to speak, and can therefore speak from a practical point of knowledge. I probably don’t agree with the guest about the virtues of the new farm bill but I would not expected him to have any other opinion. I do wish Russ had challenged a bit more on that topic but whatever. But his themes throughout about price signals and comparative advantage and food security were marvelous.

I thought he weaseled a bit about the consolidation of the industry. Russ asked him about consolidation of farming in the US but he really offered a global answer instead. But he is certainly correct that the growth of artisanal farmers is changing the overall makeup.

I also noticed that the episode seemed maybe less edited than others. We got to experience the guest’s pauses in response to questions. I found that illuminating.

Anyway, thanks again, Russ. More guests like Greg, please!

[Thanks, Robert. By way of background: I don’t think Russ has ever edited out any pauses in a guest’s responses. This episode was no different. Some guests naturally fill in their thinking time with temporizing words; and others with silence. We might occasionally edit out from a guest’s or Russ’s recorded track a fit of coughing or a ringing phone. But even then, only if the extraneous sound can be edited out without removing the guest’s words–or the guest’s quietude. We quite understand that those temporizations or quiet times convey thoughtful regrouping matters that are helpful to our guests and listeners alike. (You may also want to see issues in typing up the Highlights from the podcast episode sound files.) –Econlib Ed.]

Cowboy Prof
Jan 12 2015 at 2:16pm

Ditto on Mr. Kennedy’s comments above, though I don’t think he was as weasely on the consolidation question. The comment on how information technology has compressed margins at a faster rate than consolidation has raised those margins was fascinating. It is one of those things you might think as obvious, but you never think of it until you hear it expressly mentioned.

My favorite moment of the podcast was when Mr. Page said, “And I think people miss that, and it’s under-reported, that that signal went out and its speed of response all across the food supply chain to price signals is something that I would not have appreciated as I came out of college in spite of taking a few courses in microeconomics.”

I plan to direct my students to that quote because while many of them can draw the supply and demand curves from imaginary data in a textbook and identify where the lines cross as the market clearing price, I don’t think that most students understand the information behind prices relative to supply and demand issues.

I don’t think this will change minds right away, but I still can point it out.

Also a very balanced approach to GMOs, which was refreshing.

As for audio editing, I don’t mind the pauses in the tape, but running a podcast myself I do try to edit out coughs and other noises. There were a few times near the end of the interview that the heavy breathing of the guest tended to distract me and was a bit annoying listening to with earbuds in.

Pat Bayer
Jan 12 2015 at 10:32pm


This was a very interesting interview in so many ways – especially in highlighting that what is the most energy efficient or environmentally sustainable way to feed 7+ billion people living in a wide variety of circumstances around the world may not always be what seems like the obvious answer.

More generally, even though I often disagree with your perspective, I enjoy your interviews and really appreciate the fact that you are transparent about your point of view and its potential biases.

That said, I found the discussion of the better “housing” for animals in the modern factory farms cringe-worthy. I really wish you had pressed your guest on the ethical issues related to the inhumane treatment of animals. It would have been interesting to hear how one of these giant corporations determines its own ethical boundaries when operating in competitive global markets and across such a wide variety of regulatory regimes.

I don’t think it does economists any favors to discuss the often-underappreciated benefits of global markets without even acknowledging that there can be serious negative consequences that stem from the pure profit motive when massive corporations are left completely to their own devices. I think it has the effect of leading many listeners to conclude that you are naive at best and purposely misleading at worst.

I don’t mean to be overly critical – just my two cents – keep up the great work!

Jan 12 2015 at 10:46pm

This was an interesting episode, and I thought the guest’s answers were overall quite balanced considering this is coming from a Cargill executive.

I wasn’t convinced on the merits of the farm bill, either. Mr. Page discusses the market distortions introduced by previous legislation yet does not make a compelling case for why the insurance scheme is different. If it’s just about insurance for farmers to manage their risk, why not let the private sector take care of that? Private insurance seems to solve these problems in every other sector, and I don’t see why farming should be any different.

But, of course, it’s a political thing and it’s advantageous both to Cargill and to farmers to let taxpayers assume the burden of risk instead. On this point, I wish Prof. Roberts had pressed Mr. Page more directly. He was too soft on this guest.

This conversation touches on the geopolitics of food but completely ignores the US government’s policy since the Nixon era of using food as a weapon. Food is used to destabilize the regimes of US political opponents and the US farm subsidies are an important part of that weapon. I would have loved to hear a candid talk with a Cargill executive about that!

Jan 12 2015 at 11:33pm

“chicken moves around the world. How does it get there?”

Great question. People always ask “Why?” Nobody ever asks “How?”

I also liked the part about how we were “using grain to heat the chickens.” It reminded me of Steven Landsburg’s Price Theory textbook. He has a great illustration of the knowledge problem in his chapter on knowledge and information in which a benevolent social planner doesn’t realize that natural gas and chicken feed are supplements, so he misallocates resources. That example stuck with me, and it came rushing back when Mr. Page made his comment.

Justin P
Jan 13 2015 at 5:10pm

Re: GMOs

I really really really hope that you interview someone actually knowledgeable about GMO and Plant sciences after you interview NNT. His argument against GMO really has no place in plant sciences and is completely based off false premises. Perhaps you could have listener questions like you had on previous podcasts. I thought that was a good idea.

All that said, the guest was spot on about GMOs. The science on safety is clear and industry does not need to go down the Fear mongering based path that anti-GMO advocates, like NNT have gone down. Industry rarely makes statements about the necessity of GMOs, only that they are tool to use. I chalk that up to a few common strawmen coming from anti-GMO groups. Another famous one is yields. Anti-GMO groups harp about yields but no company has ever created a GE crop that increased intrinsic yields. Yields increase as a consequence of reduced pest pressure. It’s a pleasant side effect, not the goal.

Re: Consolidation

I don’t see Page “weasel” out at all. It’s really about what you are actually measuring when people talk about consolidation. It means lots of different things to different people. Do people mean the increased “corporatization” of farming?
The answer is yes…corporations are growing. But you have to remember this qualifier. Most farmers operate as a S corp. So it is both true that most farms in the US are small family owned farms and that most farms are corporations. I always challenge someone to name a cross state farming corporation…meaning a farming corp (production not servicing like Cargil or Monsanto) that operates across multiple states. I’ve yet to have anyone answer that.

Overall, it was a very good podcast. I have been harping to Russ to have more podcasts on Agriculture. I’m hopeful to see a podcast with Jayson Lusk, author of Food Police as a guest. Kevin Folta would be an excellent guest to counter Taleb on GMO.

Greg Linster
Jan 13 2015 at 6:29pm

Great episode, Russ!

One issue that was never discussed in this episode is the fact that there is a difference between food that will keep people alive and food that will help people thrive. Are all calories created equal? Thanks to this podcast (De Vany, Taleb, and Taubes in particular), I’ve been increasingly convinced that the answer to that question is “no”. Our understanding of human nutrition seems to be on par with our understanding of macroeconomics.

A couple questions come to mind: Is it possible to feed the current world population on Paleo/Primal/Ancestral Principles that seem to help humans thrive? If not, is it unethical for some of us to choose to eat that way anyway?

For what it’s worth, I love these food/health related episodes.

***Justin P: Are you sure you understand Taleb’s argument against GMOs? The few responses I’ve seen in response to his argument have clearly missed the point and commit the “carpenter fallacy”. The issue isn’t plant science, or the safety of eating GMO foods. The issue is taking a systemic risk in area where we don’t really understand what’s going on and where there are global consequences.

Gene Banman
Jan 14 2015 at 11:53am


A word about electric cars. Several times, including in this pod-cast, you use electric cars as an example of a product/technology that is miss (over) promoted by its advocates. This week you said something to the effect that electric cars do not reduce carbon emissions in the case where it causes an increase in coal produced electricity.

In the most conservative analysis, electric cars running off of coal produced electricity generate about the same amout of carbon per mile as a Prius. A Prius is hardly an average car. Most analysis show the electric car beating the Prius in this case.

Most of the country has a mix of electric generation sources: natural gas, hydro, nuclear, geothermal, as well as coal. California has no coal. Natural Gas is gaining rapidly over coal as fracking technology has made it the low cost energy source. With any of these sources, electric cars produce substantially less carbon per mile than the Prius and certainly the average car.

Furthermore, there are many other benefits of going electric: reducing trade with the Wahhabi supporting Saudi’s and the anti American Russians and Venezuelans. Making better use of the power plant capital investment (cars are usually charged at night). Getting transportation onto an exciting new technology (batteries) which are improving in energy density and cost. In the next ten years we will see electric cars become less expensive than their equivalent gasoline powered competition.

I think it is time to get off you anti-electric car hobby horse.

Love the show. Keep up the great work!


Jan 14 2015 at 1:25pm


I’m a liberal (I guess) but a huge fan.

I was very surprised to hear the CEO of a company that gives almost all of it’s lobbying dollar to conservative candidates at the federal level claim that his industry needed a safety net. “with no safety net whatsoever … the world would get to experience what food insecurity feels like.”

So, is he saying that his industry needs constant government assistance or we will face “food insecurity”? What does he mean by that euphemism? Does he believe all industries need taxpayer assistance or just his?

You know, we always say on the left that conservatives like government handouts, but only the ones that are for them.

There have been more interesting shows, but this one left me with a lot of questions.


Robert Semmens
Jan 14 2015 at 1:57pm

I enjoyed the podcast and echoing other thoughts I think it is a good idea to interview more practioner on EconTalk. After all where does bottom up type market knowledge come from but from the practioner?

That said I believe it was a missed opportunity to question a CEO about how he manages the regulatory process to enhance his business. As Mr. Page laughed about a good portion of his time is focused on regulaory issues. Cargill is a well-known and huge DC lobbyist, especially on the farm bills, and, of course, Cargill is not lobbying to benefit the general public. It is a classic example of small costs and concentrated benefits. So I wanted to know how Mr. Page, who seems to be quite thoughtful and reflective, could personally justify this lobbying. Mr. Page bemoans sugar subsidies but never discusses corn subsidies.

Russ started to touch on this issue in the discussion on food security but backed off. A significant part of the dollar per global customer for “food security” Mr. Page discussed no doubt ends up in Cargill’s pocket. So what really is food security? Why is the appropriate base the global customer when the vast majority of the cost is on the US consumer? What is the impact on food security in aggregate when we mandate food security on one particular crop given the distortionary effect on other crops? Why is a farm bill the right place to create global food security? Does the farm bill really create food security? Is there an insurance mechanism that can more transparently provide security if it is desirable? To pick other recent related topics why not financial security? Why not auto manufacturing security?

I think if free market, bottoms up oriented folks don’t also challenge big business on these issues, we will have less moral standing to challenge the managed market, top down folks. In any event, whatever your bias- and mine is quite clear-, it seems to me like legitimate area of questioining for Mr. Page.

Russ Roberts
Jan 14 2015 at 7:13pm

Robert Semmens,

You and I agree on the issue of Cargill’s lobbying and influence on public policy. But that issue isn’t why I invited Greg Page and if I brought it up, we’d be unlikely to have a thoughtful conversation on the topic. He would push Cargill’s interests and defend them. Not so interesting. You’ll notice that he brought up the farm bill. I wasn’t surprised that he thought it was a good thing. I tried to make it clear that I don’t want government subsidizing the food industry but I didn’t expect to learn much from pushing that point.

Tim Geithner, former Fed official and Secretary of the Treasury was on a recent flight I was on (though he sat in a different part of the airplane). I thought about introducing myself and inviting him to be a guest on EconTalk but decided against it. From what he has written, I knew he’d try to justify his bailout of the firms he was supposed to regulate. Talking with him about that is unlikely to be educational. Maybe entertaining. Maybe not. And if I did invite him to talk about the bailouts, I’d have to make clear that my perspective was very different from his and that I planned to press him. Under those conditions, I suspect he would be uninterested in appearing.

Same thing with Greg Page. If I want to learn about the costs and benefits of the farm bill, he’s unlikely to be the best source. I expect my listeners to take his claims with a few or many grains of salt.

I do hope to have someone else on the program who might be able to talk about the government’s role in the food supply from a less self-interested perspective.

Russ Roberts
Jan 15 2015 at 9:57am


I too thought of that Steve Landsburg example of natural gas and chicken feed being substitutes. Steve actually learned that from Dan Gressel, a fellow graduate student whose family was in the egg business and who knew the power of substitution and price incentives. When Page mentioned it, I wanted to give Dan a shout out but the conversation drifted elsewhere.

Price changes have effects that are hard to foresee and yield unexpected consequences.

Russell (not Russ Roberts)
Jan 15 2015 at 8:59pm

What a great episode. This was yet another example of the economics of real life. People responding to incentives in various ways. Imaginative ways. I started thinking about Hayek’s “The Use of Knowledge in Society” almost right away.

People responding to incentives…that’s what I love about economics.

Jan 16 2015 at 11:12am

It’s nice to have people who have skin in the game and big decisions to make that comment on the economy! Although I have to say, usually CEOs sound like cheesy marketing robots that can never say anything that would possibly lead to a conflict. Maybe because Cargill is so privately held, that’s why this guy is different?

Jan 16 2015 at 9:02pm


Okay, maybe it would not have been very educational to press Mr. Page on the farm bill.

I was wondering if someone could explain what Mr. Page meant when he said “we went through a period where we worked very closely with the U.S. Treasury and others to ensure that the flow of capital to agriculture was sustained.” That sounds a lot like what the investment banks did.

He claimed the farm bill costs the tax payer “less than $1 per global citizen.” That is $7 billion. The farm bill is authorized for $95 billion a year for ten years. And what are these “other tools to offset” the farm bill? Are they additional government expenditures?

Bloomberg says ethanol is costing drivers $13 billion this year. That is a backdoor tax going directly to agriculture.

So is his industry really getting over $100 billion a year in federal assistance? Am I missing something? How can we says that he is responding to market forces? How can we say he has skin in the game?

Actually, I am glad you did not challenge Mr. Page. Only poor people should be made to feel ashamed of receiving government handouts.

Thank you,

Jan 17 2015 at 9:59am

Surprised more commenters didn’t echo Barry’s point. The ethanol program has raised global corn and grain prices substantially, hurting the world’s poor most of all. Perhaps a CEO has to convey corporate policy, but that doesn’t erase the hypocrisy of extolling price signals while supporting their subversion via subsidies and mandates that fatten Cargill’s bottom line.

Jan 17 2015 at 3:01pm

Pat Bayer writes:

That said, I found the discussion of the better “housing” for animals in the modern factory farms cringe-worthy. I really wish you had pressed your guest on the ethical issues related to the inhumane treatment of animals…

I don’t think it does economists any favors to discuss the often-underappreciated benefits of global markets without even acknowledging that there can be serious negative consequences that stem from the pure profit motive when massive corporations are left completely to their own devices.

Pat, even as a vegetarian who finds the treatment of most farm animals immoral, I am not sure I understand your criticism.

Are you saying that the mistreatment of animals is a function of the size of the corporations? Or is driven by the corporations seeking profit?

Or are the two paragraphs not meant to be related at all?

If you do think the two are connected, I offer the example of recreational fishing. For no profit, and certainly not as part of a massive corporation, most people find it acceptable to cause great pain to fish. This leads me to the conclusion that the disregard for the importance of animal suffering has little to do with profit or the size of corporations.

Jan 17 2015 at 3:08pm

Tim Geithner, former Fed official and Secretary of the Treasury was on a recent flight I was on (though he sat in a different part of the airplane). I thought about introducing myself and inviting him to be a guest on EconTalk but decided against it. From what he has written, I knew he’d try to justify his bailout of the firms he was supposed to regulate. Talking with him about that is unlikely to be educational…

Russ, I’m a little sad to read this.
One of my favorite episodes from last year was the one with Jeffrey Sachs. I think your ability to stay calm while disagreeing means you can have useful conversations with people you disagree with.

And I would hope that you would be able to get into the details and really explore the underlying assumptions that lead Geithner to take the actions he did, rather than just disagree about the actions themselves.

This also makes me curious why you had on Piketty, given your level of disagreement.

Thanks for another great episode.

Russ Roberts
Jan 17 2015 at 7:25pm


Perhaps you misunderstood my point about Tim Geithner. He is a politician. Not literally and not right now. But he doesn’t pretend to be a truth-seeker or educator. Piketty is totally different. Yes, he has biases as we all do and yes he wants to defend his work but he claims to be providing insight. We don’t agree on some things so we discuss those things. I hope that discussion is educational.

It’s interesting you mention Sachs. My impression was that he was not particularly interested in discussing the merits of the Millennium Village Project. He acted as if their merits were undeniable. That was interesting and educational in and of itself, but it did help you and me understand the merits of the project.

I am always eager to talk to people who don’t agree with me. Disagreement is not the reason I am uninterested in talking to Tim Geithner.

Dave N
Jan 17 2015 at 9:37pm

I also found the comparison of CAFO’s with air-conditioned offices in Washington somewhat disingenuous. Yes they both increase productivity but it’s an immense reach to imply that chickens are better off living confined in cages (in the case of layers) or with average floorspace amounting to a sheet of paper (in the case of broilers) because they are no longer exposed to the extremes of outdoor conditions.

And I think it’s impossible to suggest that being imprisoned in a farrowing crate for much of her life is beneficial to a sow. The argument is often made that it improves the life of the piglet (in saving it from being crushed) but even if true it’s only because the natural behavior of the pig is a distant memory in this type of intensive farming. Same with tail docking and beak clipping.

It’s disturbing that the law allows animals in the food production system to be treated in ways that would be considered cruel outside of it. This is what can happen when productivity is the sole (or at least main) standard by which things are measured.

Dallas Weaver Ph.D.
Jan 19 2015 at 11:40am

Mr. Page provided an excellent discussion of the way price impacts the agriculture production system with all its complex links.

However, when he covered the change in ag policy from direct subsides to subsidized crop insurance he shifted gears and supported the subsidized crop insurance. As an intelligent person knowledgeable about agriculture, he surly knew that this subsidized crop insurance will incentivize the farmer to make non-optimal risk analysis decisions.

For a specific example, consider a farmer facing a >70% probability of a drought year according to long range forecasts, which would increase prices a little but decrease yields a lot. Checking his soil nutrients he would rationally use less fertilizer from Cargill as required for the lower yield. However, with his down side covered with near free insurance, his decision would be to bet on the low probability outcome and spend a lot on fertilizer to the benefit of Cargill and the detriment of the environment and tax payers paying for the insurance.

His response to this insurance issue could have been a rational analysis of it being better than the political alternative of direct subsidy, but still a policy that harms rational risk analysis, the tax payers along with the environment and world. Must self-interest always dominate thinking?

Russ Roberts
Jan 19 2015 at 2:07pm

Dallas Weaver PhD,

I don’t think self-interest always dominates thinking but whatever the proportion is, it is less than the proportion of the time that self-interest dominates talking. That is why, as I mentioned above, I wasn’t planning to talk about the farm bill. I do have an episode scheduled to discuss government farm subsidies.

David Zetland
Jan 22 2015 at 12:25pm

Excellent interview with a guy who’s really in the middle of some serious issues. I agree that it would have been counterproductive to “attack” on the farm bill, but I would have liked to hear more on why he thought the Farm Bill was MORE useful than alternatives.

On Saudi, btw, I’ll mention that they are STILL doing a lot of fossil groundwater irrigation. I am glad that they are importing more food, but they seem to have switched to using the water for fodder for (domestic) dairy production.

Evan Sayre
Jan 22 2015 at 7:29pm

As a small farmer just outside the Twin Cities. I had a couple thoughts from my perspective.

Mr. Page stated that row crop farming has less of a carbon footprint than does a farmer delivering 5 lbs of tomatoes to a house in the suburbs of Minneapolis. While I agree much energy would be used if every small farmer delivered their products directly to the consumer, row crop farming still uses a tremendous amount of energy. Fertilizers, dryers, tractors, etc all use energy. As the concentration of small farmers increase other benefits of a market would also come. Like shared delivery and other co-operative benefits.

Mr. Page also continued to contend that food security comes from commodity crops. Almost all of those crops are inedible without significant processing after harvest. I am not sure anyone in the world would cry out to eat more soybeans.

I would have liked if Russ would have challenged Mr. Page on the design of the market as a whole. Meaning, whether this type of ag is market driven at all or merely a construct of cronny capitalism. And, it seemed a bit like Russ was exercising some conformation bias. But, that might just be my bias!

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Podcast Episode Highlights
0:33Intro. [Recording date: January 5, 2015.] Russ: Before introducing today's guest, I want to encourage listeners to go to, and in the upper left-hand corner of the page you'll find a link to a survey where you can tell me a little bit about yourself and vote for your 5 favorite episodes of 2014. Now for today's guest. He is Greg Page, the Executive Chairman and former CEO (Chief Executive Officer) of Cargill, the world's largest privately held company with revenues in 2013 of about $136 billion. They have about 142 thousand employees and they are involved in many, many aspects of the food business. Greg, welcome to EconTalk. Guest: Good to be with you, Russ. Russ: Let's start with what Cargill does. I said you're involved in the food industry. I know that doesn't begin to cover it. And I know you can't do that--if we had the whole hour on this, I'm sure you cover it. But just briefly: what does Cargill do? What are they involved in? Guest: So, we describe ourselves as being involved in food, ag (agricultural), and risk management. And in the food-and-ag space we would differentiate the upstream activities of dealing directly with farmers and producers, whether that's producer education on how to produce products that are safer, cleaner, more fit for purpose; and then following those through the links to where many of our customers are the consumer packaged goods companies that your listeners would recognize--the Nestles, the Krafts, the Unilevers, the General Mills of the world. We also provide risk management; and we started out in 1865--this year is our 150th anniversary--we started out really as a risk management company. So we work both at the producer level and at the consumer level helping people manage their price risk and their supply chain risk. Russ: So, you were CEO for a little over 6 years. Which I suppose to some people might seem like a short time to be in one job; but I'm sure it was a very intense experience. Was there anything remotely like a typical day? What's it like, day to day, to be the CEO of an enterprise that massive? Guest: I don't know that there would be a typical day. Certainly there are rhythms in any big company in terms of our interaction with our shareholders, who have been enormously supportive and loyal to the company for 150 years--both the Cargill and the MacMillan families continue to own all of the stock in the company excluding that which they share with employees. And so there is a certain normal day to that rhythm, or a normal month. We have a Board of Directors that fortunately is also populated by 6 external executives; since we are as an employee stock ownership company they serve as fiduciaries for our employees and have been enormously important to the company. So there is a portion of my time as Chairman and CEO that is spent dealing with our Board members as well as our shareholders. I think the second thing, given that we're in 67 countries and do business probably in 140 different countries, there is a geopolitical element to a typical month, or a typical week. I would normally spend more 100 days outside of the United States in support of our employees and our customers in a variety of places and roles. So I think the only thing that's common about a week or a given month is the uncertainty that events around the world bring to Cargill. And so I tried, and I believe the advice I've given to my successor is, to keep a portion of my calendar open and not to be oversubscribed, given that there will be time that will be required for events that can't be predicted or projected. Russ: Was there a crisis in those 6 years that stands out that you had to deal with? That you could talk about? Guest: Well, certainly the late summer and the fall of 2008, the financial crisis in particular; and the timing of it--it came during the North American harvest season and one of the manifestations of the crisis was a shrinking of the liquidity. And clearly agriculture requires a lot of liquidity to buy harvests from farmers as they come due on a biological cycle. And so we went through a period where we worked very closely with the U.S. Treasury and others to ensure that the flow of capital to agriculture was sustained. And I think that sticks out in my mind. There were a lot of other offshoots of that event in terms of individual commodity prices plummeting and some individual country-specific events such as those in the former Soviet Union. But more broadly, the liquidity crisis in 2008 was certainly an interesting time for agriculture overall. Russ: You've been with Cargill, I think, according to the site that I saw, for 4 decades. Is that right? Guest: Yes. This is my 41st year. Russ: Wow. So you probably knew something about food going into that job. Was there a lesson that you learned about food and food supply that you hadn't learned beforehand? I'm sure you learned a lot being CEO. But in terms of just food, anything stand out? Guest: I think an underappreciated aspect of food and agriculture certainly the interconnectedness of the various links in the supply chain but powerfully within that is the role of price in changing behavior in a positive way. I think most of the general media will cover price movements generally on the upside as a harbinger of inflation or as something that's unfair. Russ: Something sinister, yeah. Guest: Something sinister. But in point of fact, that you watch as price signals very quickly go through the global agricultural landscape and cause players and each individual link to behave differently. And I've seen it in a very positive way. That after, for instance, the very recent result, severe weather in 2012 in the U.S. Midwest, the way in which farmers in the outback of Brazil and other places in Latin America and Central Europe, the way they responded to that drop in supply related to U.S. weather to ensure that the amount of calories that we actually produced worldwide as you look at 2012 and 2013 together were very close to on trend. And I think people miss that, and it's under-reported, that that signal went out and its speed of response all across the food supply chain to price signals is something that I would not have appreciated as I came out of college in spite of taking a few courses in microeconomics. But it's something that we try to talk about more openly and more often as price movements are usually cast in a very ugly light. In point of fact people miss the huge positive value they have in terms of food security. Russ: That's a great example. Of course we're in the middle of a very dramatic fall in energy prices right now, and when energy prices rise, there's always sinister talk. Somehow when they fall, there's nothing sinister. Except for how slow they fall. They never fall fast enough. But they do fall, which is surprising. And as you point out, they do change behavior, on both ends, the up and the down. How about on the personal level? Any particular lessons you learned from going into that chair of CEO? Guest: A sense of nakedness. Each word and each gesture is overanalyzed by a large group of people, internally and externally. I think you come from a small town and hopefully are sincerely modest and you find yourself and your comments being overly impactful to people. I think you learn very quickly that the risks of thinking out loud are greater than the benefits of it. So my goal had never been to be anything but transparent, but there is a certain caution that you grow into rather quickly as you find out that people have a hard time distinguishing between what's part of your learning process in your verbalizing in order to get people's reaction versus actually encouraging people to act on those thoughts. Russ: It's a very tough job. I've talked at length to a couple of CEOs in my life, not very many; and it was a while before that happened. And I don't think we really have, those of us who are out here in the world, much of an idea what that life is like. There must be a certain loneliness, also. I'm sure you got a lot of advice before you went into the job. But I wonder how much you ended up communing with other CEOs about the challenges. Does that happen? Guest: Yes. And what's interesting is you first think you're the only CEO that's seeking those opportunities where you can be unfettered in your thinking and comments. But I think most CEOs appreciate a couple of weekends a year where they can interact with other people whose day to day work experiences are quite parallel to their own, in spite of the fact that you are in very different industries and very different points in the cycles of those various industries. And in some cases very different geographies. The degree of commonality is pretty high. And there is a value to that, that I've seen. And I think the fact that many CEOs are willing to give up a couple of weekends a year to have those interactions says that it's beneficial. And I think it's beneficial to the person; I think it's beneficial to the corporation and to the shareholders.
10:41Russ: Obviously you can't answer this question precisely, but what proportion of your time as CEO would be taken up by what we might call legal and regulatory issues? Guest: Mmm. Russ: 110%? Guest: Yeah. In one way. They form a backdrop for a whole host of other decisions that you make. Right? Who you choose; the whole issue of 'the imaginary horribles,' we call them. How do you prepare yourself for those 5 or 6 standard-deviation events that can really change the trajectory of a company? And so, the degree that you spend time to mitigate risks to have a balance sheet that's resilient to really, really harsh external financial environments, you could make the case that it preoccupies, or pre-populates, all of your other decision-making. Russ: How much time did you spend brainstorming about those black swans, those 5-6 standard-deviation disasters? Guest: Not enough. But a significant amount of time. And I think it was Eisenhower: The plan means nothing; the planning means a lot. And so I think the whole ongoing discussion as you meet with individual division heads and asking the kind of 'what keeps you awake at night' questions is an ongoing process. Part of it is not for the headquarters to be prepared for that but to have a sense of how well prepared individual country leaders or individual industry leaders are for that and how much time they are giving it. I think the one thing you learn in Cargill, 67 countries and 65 different businesses, and many of them in places where our participation is mandated by nature, in terms of crops only grown in some places and not others. People often ask me, "Greg, why does Cargill continue to stay in country x?' Because we have to. Ours is to figure out how to do it within the bounds of our ethics and to have a balance sheet and a set of risk profiles that realize that we are going to be in difficult circumstances many times. And so what's important to us is the people we choose as leaders and their willingness to prepare themselves through those black swan events.
13:14Russ: That's a nice segue to some of the policy issues I'd like to turn to. Talk about food security. What does that phrase mean? And what does Cargill do to worry about it? Guest: The food security was a main, great question. To me, it's the ability over time and over a broad swath of geography and over broad swaths of the world income demographics to provide affordable safe nutritious food. So that's at the highest level. And I say 'over time' because weather will throw curve balls at us, whether it's the 2012 event here in the United States or weather events that we've experienced in the Black Sea region in the last 4 or 5 years, etc., etc. Second thing is: food security if it's defined one country at a time, none of us will be food secure. So it is an interdependent definition that we try to get people to appreciate. One of the big threats to food security is the attempt by individual countries to define food security only in the context of their own citizens. That manifests itself in some cases--people try to start trying to grow crops for which they enjoy no comparative advantage. And so they take valuable acres, valuable rainfall, and force farmers, through tax policy or other means, to plant crops which don't really suit their situation, because they are simply not prepared to have trust-based trade with others who do enjoy advantage in that crop. A good positive example is as China's population and per capita GDP (Gross Domestic Product) has grown, they've come to realize that raising all their own soybeans doesn't make sense--that they have far more comparative advantage in growing starches: wheat, rice, and corn. And so they have allowed themselves to become significant trust-based traders with the United States to some degree and with Latin America to a great degree on soybeans, and have taken their local water and land to grow starch, where they do enjoy comparative advantage. Everybody wins. If today China had a policy of trying to be self-sufficient in soybeans, every single person on earth would be less food secure. And getting that simple message across is more difficult than you'd think; and to this very day, we continue to see governments suddenly becoming anxious about a given crop where they enjoy no advantages and yet compelling their farmers to grow those crops for this sense of single-nation defined food security. Really dangerous for all 7 billion people. Might make great local politics in a given country. But if that were practiced on a broad scale by a large number of countries, a lot of our food security would evaporate. Russ: I was shocked in prepping for this interview to discover, which I did not know beforehand, that Saudi Arabia had been trying to become a wheat exporter. Which is a rather extraordinary story. Guest: It's great to go and see. Yeah. You can see the remnants of it. They've stopped, obviously, and have significantly wound that activity down. But I was there: the Minister of Commerce shared with me--at one point 90% of the pumped water that they were bringing up out of the ancient aquifer was being used for agriculture. And they realized that that water was most likely fossil water and not replenishing. And it made no sense to continue to do that vis-a-vis buying their barley from the Canadians, for instance. Russ: So, let's talk about the United States. We are thought to be a free-trade country. And we are more free trade than we were 100 years ago or 50 years ago. But there are of course pockets where we intervene--for political reasons, presumably. Two that come to mind are sugar, where we don't let in much sugar from the rest of the world, or sugar-based stuff. And the other is corn. Which, as far as I can tell, we subsidize in all kinds of complicated ways, through ethanol requirements and other policies. A lot of people have blamed that, the ethanol requirement and other corn-based policies, for pushing down the price of corn artificially worldwide, because we export it, making it harder for farmers outside the United States to make a living. What are your thoughts on that? What do we know about that? Guest: Well, I think, even the question is mixing a couple of different forces. So, compelled import prohibitions--and certainly we have those to some degree in poultry through phytosanitary rules. In the case of sugar it's been very explicit for quite some time. Those clearly are a manifestation of politics, and they enforce by definition a cost on consumers, albeit in the case of the United States probably relatively modest as a percent of GDP, but it is a de facto form of indirect taxation on consumers in order to pass revenue-certainty to a small group of producers--in this case, cane and sugar beet producers. It's been there for a long time; it will probably continue for a long time, based on the political makeup in the United States. In the total scheme of our food system, it's probably relatively small. The second issue that you brought up about corn; and clearly in the case of ethanol, particularly from the period from 2007 until probably in the last 6 or 7 months has been the fact that it has raised the price of grain and therefore been a burden on the world's poorest people. It clearly creates demand for corn. If you look at it from a policy standpoint, what we see going on in just biofuels more broadly, and particularly in the last 7, 8 months, is commodity prices have collapsed. If you go back 25 or 30 years ago, whenever agricultural prices collapse, government reaction to that was generally to restrain supply, even going back into the 1930s where there were restraints on supply to try to get commodity prices up during the Depression. What's come out in the last 15 years is a realization by governments, by putting in demand requirements you can also raise agricultural prices. And so we've gone from a ag policy worldwide, where price management was generally carried out through the Treasury using its money to restrict supply, we've now entered an area where treasuries have realized, we don't need to use any money if we simply put a mandate. It's a very easy tax, if you will, to put on automobile owners by and large to put in place a biofuel mandate. And so recently for instance we've seen India put in place a sugar-based biofuels mandate at a price way above market clearing. And so this is no longer Western Europe or a U.S. set of policy prescriptions. We have seen at least a dozen countries that are worried about the collapsing prices of commodities on their rural farmers and trying to prevent a rural-to-urban migration on an unplanned basis, and don't have the Treasury to do it through supply restrictions. They are putting in place demand mandates that have--S&D [?supply and demand?] price discovery dynamic have the same effect. And so they are benign to the Treasury; they are a modest tax on each individual person. Most of it falls on vehicle owners who arguably would not be in the bottom quartile of income demographics. And so the great new tool of ag policy in the world is demand management through biofuels. Then back to the U.S. subsidy programs. Clearly they've changed with the new farm bill. And the direct payments have gone away; and so the primary vehicle is insurance subsidies. I would make the argument for that in terms of global food security, having that safety net for the world's largest and most benevolent exporter is a good tradeoff to make for global food security, and the way I would describe that is, as a result of that insurance safety net, we have continued even in today's low commodity prices to see American farmers to be relatively aggressive in terms of the quality and quantity of inputs they use to grow their crops. If they were operating with no safety net whatsoever at today's market dynamic I think you would almost certainly see a more precipitous decline in the amount of fertilizer that's used, in the amount of intensification that's in place, because they would be managing both the yield versus input tradeoff that they always have to make, but also the price tradeoff and a working capital tradeoff. And with no safety net whatsoever I think they would take more risks--i.e., reduce the amount of inputs in intensification. If that was combined with bad weather, the world would get to experience what food insecurity feels like when at least part of it is precipitated by a farmer's hedging of their own risks. So, I'll stop there to be sure it makes sense, because I think it's a really important concept. And I don't mean to be an apologist for the farm bill, but at a cost of less than $1 per global citizen, in effect you take one of the most productive countries in the world and ensure that they continue to practice agronomy on a very aggressive level. And given our willingness to be free traders, to me it raises food security to have that safety net in place. Is that potentially disruptive? Yes. Are there other tools to offset that? Yes.
23:46Russ: So, I want to go back to something you said earlier, just to clarify, and then we'll come back to this issue of safety net. You mentioned the increases in grain prices. So, earlier you spoke about the role that price signals play. And I assume what has happened is that as the demand for land to grow corn in the United States it's gotten more expensive to grow non-corn products--soybeans and other products that are used for feed and other purposes. And that's what you meant by the increase in grain prices. Correct? Guest: I'm not sure I understand the question. Russ: Well, in theory, an ethanol requirement, which is going to push up the demand for corn, is going to have a rippling effect through a whole bunch of other markets. Guest: Absolutely. Russ: And that's what you meant when you talked about grain prices going up. Guest: Yup. So, the farmer sits down--the best thing about the U.S. farm bill versus what existed before the last decade--so, what we call freedom to plant--that a farmer can sit down in February and look at his land and look at an array of price signals that he is receiving and determine what crops he should grow. If you go back 15 years ago, in many cases you had to farm to the legislation--that in order to maintain your base acres, and therefore your safety net, you were compelled to grow crops. Today you have in the United States an enormous amount of latitude to make the single best decision for you and your family as to what crop you will grow this year, given your soil moisture levels and a host of other signals. But to sit down at your kitchen table with your advisor or whatever and to make a 10-key calculator determination of what to plant in response to the market signals that you are getting. And so one of the big plusses, and it also has been in the last 15 years, this freedom to use your land according to market signals. Are those market signals shaped by things like biofuels policy? Absolutely. And so, what affects one crop, what affects the price of one crop will clearly affect the level of production for all other crops as well. Russ: Yeah. I don't--that's a fascinating change, which most Americans don't pay any attention to-- Guest: A huge change. Russ: We read for decades that we paid people not to grow stuff. Economists and others thought that was nuts. They pushed--most of us favored no agricultural subsidies. We don't believe that there's a literal security issue. There might be arguments about risk and uncertainty and how hard it is to be a farmer. But we have changed. You want to speculate about changed politically to make that feasible? Or do you want to leave that alone? Because--the reason I say that is when I talk to people, occasionally I talk to people who are legislative assistants in Congress about the sugar thing, which drives me nuts; and they always say, 'Yeah, it drives us nuts, too.' Because it's just politically so-called 'impossible' to get rid of an incredibly large benefit to a handful of people in the sugar beet and sugar cane world, when the costs of that are spread across 330 million Americans. So that's a classic Mancur Olson analysis of why some laws persist. And yet, the subsidy program for agriculture has apparently changed. And I wonder what made that possible. Guest: I think on the positive side what made it possible is the increased financial performance of basic agriculture in the United States over the last decade. That if you take the period prior to, say, 2005, I think you could build a case that agriculture broadly defined was decapitalizing itself; that in the absence of direct farmer payments, that farmers in the United States Midwest, the average age of their machinery was increasing; you can go through a host of issues. The price of land declined precipitously from what it was in 1981, 1982. The amount of money being spent by the railroads on trackage in the grain infrastructure area was at reduced levels because the profitability of those activities wasn't there. You can go through a host of things--the construction of port facilities had basically, nothing had taken place since the late 1970s. And so, what happened is, agriculture went from being in a situation that absent direct capital injections from taxpayers, it felt[?] like it was a negative cash flow business; and it behaved that way broadly. With the advent of China becoming wealthier, more middle class citizens defined as people making more than $10 a day, started to grow, combined with the biofuels mandates in the few[?] geographies at that point in time, suddenly you saw crop prices transition into a net cash flow positive activity. And with that optimism came a sense of confidence. Also what came with it was the realization that trying to overly manipulate acreage allocation was just more than you should ask from a government. And there have always been voices to let market signals determine how farmers planted their crops. Don't make people grow cotton just to maintain their base acres in the cotton program, when the world is crying out for more soybeans to feed itself. And so, I think there was a food security, there was a recognition that it was immoral at some point to force farmers to grow crops that the market wasn't calling for. And so, I think a coalition of a host of voices combined with a sense of more self-confidence in agriculture to take on a less interventionist government farm bill combined to get those things done. So I think there are really positive roots for it. The seed of that and the voices for that had always been there. They just hadn't been a majority. And I think the rising prosperity of the world really gave Congress the confidence to do that. Russ: The food production business has become dramatically more concentrated than it was 25, 50 years ago, correct? Which has reduced some of that variance in incomes that probably was there before. Is that accurate? Guest: No. It depends on what you define on the food business. Clearly-- Russ: Well, I said food production. Guest: Has the market share of the 10 largest grocers increased? Yes. Has the market share of the 10 largest consumer package groups grown through consolidation? Yes. Have the number of railroads serving agriculture in the United States contracted? Absolutely. So at the level of food production, if in the United States clearly the average farm size has grown dramatically in that period, partly accommodated by changes in technology, partly required by the changes in the sophistication of the equipment and the capital that's required to really be the best-cost producer--so there's a lot of voices. At the same time, the proportion of agriculture that continues to be held by extremely small holders, in some cases subsistence farmers who are really trying to feed their family and really aren't responsive to price signals, has that continued to be a big part of the total global calorie production system? Absolutely. And so, I think what we have today is a more bifurcated agriculture with a number of places with larger, very sophisticated farmers; and yet a portion of the world which for geo--not geopolitical but rural sociology issues--have continued to fight against that and have sustained subscale small holders to produce food as a way again to avoid rural-urban migration that they don't want to see. So I think it's hard to generalize and to say that it's been a pervasive consolidation in agriculture, because it hasn't happened. There are 5 or 6 geographies where it has happened, and there are dozens and dozens of countries where it really hasn't changed that much. Russ: Yeah; I mainly meant the United States.
33:09Russ: What I find interesting in the case of Cargill is that--I'm sure I'm not a food expert, and I'm not in the trenches, and you are in the trenches. I'm sure there are a lot of people who find the size of Cargill to be something sinister. What struck me as encouraging on the other side is that your margins remain steady and low, is what it sounds like from my reading. Which suggests it's a fairly competitive environment even when it's more concentrated. Or whatever that means. Guest: I think a couple of things have happened. One it's less concentrated than people think. They often talk about the ABCD--ADM, Bunge, Cargill, and Dreyfus. Yet if you look at our share of global waterborne trade, it really hasn't changed all that much over the last decade. There are a lot of emerging new participants out of Brazil, out of China. Certainly there are a number of trading firms that have emerged in places like Singapore that participate in [?] regional trade flows. The second is the quality and the availability of information has gone up dramatically. So, one of the things that always compresses margins is transparency. And certainly that's grown. So the extent there's been a modest amount of consolidation it's been equally or more than us in information availability. And I think that transparency will continue to have a controlling effect on the ability to raise margins. There's just too much timely high-quality--not too much, there's just more and more high-quality timely information that will have the effect to offset any impacts of consolidation. Russ: You mentioned global--I think the phrase you used was 'global waterborne trade.' You are deeply involved in a lot of stuff being shipped across the world's oceans. You have a large fleet. Is that correct? Guest: On time charter, yes. We don't own a lot of vessels. But we have under time charter contracts, a lot of dry cargo. Russ: And what's moving in those--those are I assume raw agricultural products? Guest: Yes. Russ: Grain and--is it meat also? I've read about how global the chicken market is, and I've been interested in chickens and eggs for a long time. Which is neither here nor there. But, chicken moves around the world. How does it get there? Guest: Yep. Most of it today moves in containers. And so, very different than the dry bulk. But first for your listeners, to put it in context is: I would guess, I don't know the exact number for chicken but I know within the animal protein space in general: About 15% of global poultry production travels across borders, if you would view the EU (European Union) as a single food entity--which is really how it operates in many cases. And so it's still a very localized business. In poultry, the flows, the vast majority of those flows are from countries like Brazil, which enjoy enormous comparative advantage to countries like the Middle East which is just not blessed with the crops or the climate for animal agriculture to the same degree. And so there are some enormous trade flows in poultry that have very good foundation in terms of comparative advantage, and I suspect those will continue to grow. But overall, if you look at calories and grams of protein, the world's food system remains pretty localized. We may be in some years up to 17 or 18% that will trade waterborne in grains and oil seeds[?] but generally probably closer to 15% than to 18%. And so, to the people that are buying that 15-18% it's obviously enormously important. And particularly in the case of countries like Saudi Arabia that have elected to rely on trust-based free trade for their food security to a greater degree. And so we need to keep in mind the portion of the world's food that does trade across international borders is critical to price discovery and it's critical to the food security of people who are trying to benefit from other countries' comparative advantage in their water resources. At the same time, we need to realize that food production remains a highly localized activity. Back to the issue of consolidation: even in the United States, we have seen an enormous growth in organic farms for instance, and artisanal agricultural production. And so even in Minnesota, for the first time in the last census we did not suffer a decline in the total number of farms. Even though the average size of the big row-crop farms did grow, the number of specialty farmers surrounding the Twin Cities, for instance, farming 5-15 acres, has grown dramatically as consumers look forward to seasonal produce raised in a local radius. And so, we're seeing a somewhat bipolar agriculture emerge in the United States, too, with row-crop farms getting larger and more specialty farmers proliferating. Hugely positive thing in my opinion, particularly for employment and population in some of these rural counties that had been suffering shrinkage, to see people coming in and doing high value-added agriculture in their communities is an enormous positive.
38:54Russ: So, I have no problem with people who want to buy food from someone whose face they see, if they choose to do that. Or food that tastes better. Or--we've interviewed an organic farmer on the program, and I've talked about my wife's participation in a local food co-op. Which is extremely expensive; and very pleasant and tasty. I'm all for it. But a lot of people are suggesting that that's a model that we ought to spread widely. And not just because the food tastes better or it's pleasant to interact with someone who provides your food, but because it's better for the environment or the community in some ways--and that's what's sometimes called the locavore movement. What are your thoughts on that, particularly on the environmental side? Guest: I think it depends on how you measure it. I think when someone has a Ford F-150 pickup pull up in front of their house in suburban Minneapolis as I see people along my street do and the farmer from 20 miles away drops off 5 pounds of tomatoes, I think if we mapped the carbon footprint of that kind of agriculture, it would not give a story that is sustainable measured across the host of dimensions. I think in some cases there are row-crops that are being farmed organically and therefore requiring enormous amounts of tillage to control weeds. And having owned a farm that was farmed organically for a number of years, that kind of continuous tillage in my opinion has some detrimental aspects to soil quality and erosion resistance. And so, it depends on how you measure it. I think it's great for employment. I think it's great for stabilizing real communities. I think people do enjoy touching the hand of the farmer that grew their food. But I think to make a broad generalization that anything that's produced locally is by definition more environmentally sustainable, I don't think would stand the test of mathematics. Russ: How about on the cost side? Again, I think there's a lot of romance about local farming. And of course it reminds one[?] a little bit of electric cars, that are relatively carbon-friendly until you have to expand coal production. So, a small amount of local farming is one thing; being self-sufficient from your local farm region you'd have a bunch of those price signals would unleash a lot of changes that people probably don't anticipate when they advocate for that. What do you think, more generally, the benefits of our global trading system are, where we don't worry much about--much; some people do--but mostly we worry about, 'Where can I buy the highest quality as cheaply as possible?' Guest: I think you should ask again, Russ. I'm not sure that I followed the train of it. Russ: Sorry. A lot of people push for--they are against what you do. They think we shouldn't be involved in 67 countries; each country, each region, each town, each state, each city--there's different flavors of this--but people want to advocate for a much more self-sufficient form of agriculture. And, besides the fact that I think the benefits of that are overstated, I think people grossly underestimate the costs--that is, they underestimate the benefits provided by global trading systems. So, I'm curious if you've thought how large those gains might be. I know it's hard to measure them; you can't measure them with any precision. But if we try to be more self-sufficient, I think we'd be shocked at how expensive it would be; and in turn how beneficial the current system is to the extent it's free. Guest: Yeah. Right. I think we have evidence. We started out with farmers' markets in New York City; when they first started I think they had a 150-mile radius to qualify, under the definition of the local food. I saw recently in the New York Times, they now define local food as 400-mile radius. Which means you can raise almost to the western Pennsylvania border. And all it is, is a realization that an overly restrictive definition of 'local' is both impractical and impossible as well as being significantly more expensive. If I look at it as a larger scale--I lived for a period of time in Thailand and watched while they tried to be self-sufficient in soybeans. They had to pay their farmers more than 50% above the world price to get them to grow a crop in which they enjoyed no advantage. So, there are examples where you can do it, and the price can be big enough. We grow non-GMO (Genetically Modified Organism) crops here in the United States for a number of our customers--that's what they want and we're here to provide choice. I know what we have to pay in terms of premiums to farmers to make them give up that technology to pay for the additional fuel, for more cultivation, to accept lower yields, particularly in years of more stressful weather. And so we get a window through our business on places where you can actually grow a crop that you shouldn't, and what it costs. Call it 40 or 50% at the farm gate. Then there are other crops, like the growing demand for cocoa, where there just is no choice that it will be grown in climates where it can happen, I guess short of growing greenhouse oranges here in Minnesota, really outlandish things like that. There are portions of our diet, unless we are willing to compress the variety of the things we enjoy, where it's just not going to respond to any price or any compelled production beyond the real absurdity of trying to grow cocoa beans or orange juice in greenhouses. And so the costs are not insignificant, percentagewise. I'll stop there.
45:17Russ: I'm glad you mentioned GMOs, because that was going to be my next question. I'm interviewing Nassim Taleb; we talked about black swans earlier. He's responsible for that phrase being somewhat common in conversation now. He is very concerned about Genetically Modified Organisms, GMOs, and the role they play in the food supply. He argues that the uncertainty about it means we shouldn't be involved. What's your take on that? Guest: One, we could feed the world without GMOs; there are other practices that we could follow. So the idea that we are prisoners of this technology I think is something that should be dispelled. On the other hand, I don't think we should try that. I think if our water is precious, if our topsoil is precious, if we really care about the hydrocarbon footprint that we have in terms of the amount of cultivation that we need to carry out, that we should think very carefully about eliminating or demonizing genetic engineering. And so, two things. I don't think we should try to create a future where these products have been stigmatized. On the other side, it does us no good to make consumers feel that we can't feed 9 billion people unless we use this technology. I don't believe it's the case, but it would take more land, it would take more water, it would take more diesel fuel to do it. But we would still provide the calories that 9 billion people are likely to require. As to the issue about human health, I look to third-party institutions, whether it's the Harvard Medical School, the National Academy of Science, the Center for Disease Control, the FDA (Food and Drug Administration), even the European Food Safety Agency, don't make the case that this technology is leading to the creation of crops that harms individuals. That being said, I think we as an industry, and I hope that it's something that will be taken up in the U.S. Congress in the coming year, are prepared to place more strictures on these technologies, a more transparent review process, greater involvement earlier on of the regulatory bodies, be they FDA, EPA (Environmental Protection Agency), USDA (U.S. Department of Agriculture). And so, we need to more thoughtfully and consistently enlist consumers' confidence in these technologies if we are going to have a global food system that uses the least amount of land, least amount of water, and least amount of hydrocarbons. And we can do a better job of that as an industry, and we all need to be prepared to do that because the demonization of this technology, and even more broadly just of science in our food system in our opinion isn't going to lead to a great outcome. What we have to be careful of as a food industry is we don't try to frighten people into these technologies by saying, 'If we don't do this, we can't feed ourselves.' That message isn't necessary. But a message of enlisting and engaging consumers, citizens, young mothers in an understanding of the role of science both environmentally and nutritionally in our food system is something that we all have to do a better job of. Russ: So, we've been selectively breeding stuff forever. I've seen pictures--I think they're probably right--of what a tomato looked like centuries ago. It was a berry. Corn was like a seed. And we have, through judicious and improving knowledge of the genetic process, gotten better at growing stuff. Obviously--my favorite examples, my parents tell me that white meat in a chicken of their era, which would be in the 1940s and 1950s was very different than today, because people prefer white meat so the chicken breasts are larger. They've bred chickens to do that. Is there some line we shouldn't be crossing, that might be a different quality of genetic engineering that we ought to be more careful about? Is there something that's qualitatively different about some of the stuff we're doing now that we might need to be more careful about? Guest: I think going forward you have to say the answer to your question is Yes. That we should operate on the premise that there are things that science may discover that we should not deploy. I don't know what they are, specifically. I don't think that we are, today, selling any of those products in commerce. But as people push the boundaries of science, will there be moments at which a sound regulatory system and a system of review is going to be important and might someone stumble across a technology, while it creates enormous changes in productivity, it comes with some unintended risks and therefore should not be pursued: I think that's gone on for a long time, whether it's in pharmaceuticals--there are a host of areas where something is a wonderful idea except for its side effects. And so, might that be the case going forward in the area of plant science? I would think that we should prepare for that and put policies in place to address those as they arise. Russ: So, I mentioned chickens and eggs earlier, and I've written about the fact that on a certain level, the technology of, say, egg production is inside the chicken, and you'd think there would be limits to how much more productive you could make a chicken. But of course we play with every single margin of improvement in terms of both how many people are involved in the egg production process, how much nutrition is involved, the role of medicine in making the chickens healthier. So, in the last 50 years, we've totally transformed the productivity of egg production from a subsistence level or slightly above subsistence level, a chicken wandering around in somebody's backyard where you went and picked up the eggs, to a world where it's an incredibly computerized, mechanized process. That's [?] I know a little bit about. But you know a lot more than I do. I'd be curious, in your impression, what pieces of the food business have changed the most dramatically in the last 40, 50 years and where have the biggest productivity increases come from; how were they achieved? Guest: Well, I think you've given a great example--amongst the modern gastrics, the chicken has been enormous. I think the one thing you left out and that's underappreciated, if you go back to the area you described where the chicken was outdoors, and things, if you think about it, it was an era where we had incredibly cheap commodities. And in effect, you were using grain to heat the chicken. Russ: Yep, absolutely. Guest: In the winter. In the same time, when it was that 95-degree wetball[?] temperature in July that the chicken would shut down and [?] and it would really not be very productive, and so what people have missed is that the degree of these improvements have come about as a result of dramatic improvements in the quality of the housing. If you look at the way in which a modern pig or modern chicken or laying hen is housed, it's changed dramatically in terms of their comfort and the amount of energy they spend either heating themselves or the amount of their energy they spend trying to get rid of excessive heat. That's being afforded to them by a much more controlled environment. Russ: Just like us. Guest: Just like us. Same thing. Imagine what worker productivity would be if the average office in Washington, D.C. was not air conditioned. And so it's a host of incremental things that come together. Part of it is genetics, but certainly not all of it. Part of it is nutritional science. Clearly the quality, the intensity and the density of the diets that are fed today--yes, the feed conversion is improved. But the cost of the individual diet has also gone up as the density of them has increased, so in effect more horsepower per pound of feed that we put in front of these animals. So it's all of those things coming together. One of the interesting things that has happened in the last 4 or 5 years as you saw corn go up to $8 is people realize there's a whole 'nother level of housing quality that can have a return on investment. If you forecast a future of $4 corn or a future of $8 corn, you'll see a dramatic difference in how much people invest in the housing facilities for these livestock. Because the return on investment on the housing quality is obviously much better in an $8 corn environment than in a $4 corn environment. And so from an environmental standpoint, broadly defined, you could build a case that people are going to get more out of each kernel of grain if it costs $8, whether it's waste control or whether it's the quality of housing, than out of $4. Now, I don't want to make the case or to be the prophet of the world will be more environmentally sustainable if we have very high-priced grain versus low-priced grain, but there is an element of that that's entirely true: that the incentive to optimize each and every pound of feed provided to the animal is greater, the higher the value of the feed. And so, price again, back as a signal to do the right thing will increase the intensification of housing using livestock as the example. And that could manifest itself over a host of other things as well.
55:35Russ: So, some of these improvements are what we would call--computer technology for example, the delivery of the--we've created a world, and this is true in manufacturing and agriculture, of course, is some sense of [?] manufacturing, a world where very few people are involved. People are expensive. Fortunately, we live in a world where our costs are getting higher because we are more productive in general. And so everybody responds to that by trying to find ways to substitute machines for people and other ways for people. So, that's one way it's happened. How about the science side? How much of the changes, in terms of yields and productivity generally, not just animals but grain production, comes from scientific breakthroughs versus technology or trial and error, all kinds of other ways that we improve things? Guest: I don't know that I know the exact percentage. I think that there's an important interdependence: that, if you are going to buy seed that costs $125 an acre, the return on your investment to buy a planter that puts one of those seeds every 3 inches every time and at the exact distance below the surface of the earth goes up, than if you were using the kinds of open-pollinated seeds from 20 or 25 years ago. And so, I think that you could have wonderful seeds and take them to a place where controlling the depth of the planting or the amount of fertility, the fertility of the soil, the water retention capacity of the soil, you could have the world's greatest genetics and not achieve an outcome. So it is the interconnected deployment of all of those things. And it's been remarkable to watch as the price of fertilizer went from sub-$200 a ton to where it was in 2008, $800 or $900 a ton, the amount of technology, computer and otherwise that went into planters and sprayers and spreaders to optimize that $800 or $900 fertilizer versus $200. So you can see it in the machinery that people buy and the planters they buy and the amount of spending that a farmer will put into his soil testing. And so I think to ascribe 30-40% of our yield improvements came from genetics, even if it were true in a laboratory sense, I don't think it's as meaningful as the realization that farmers and their suppliers and their vendors doing all of those things in concert with each other, informed by price--whether it's the price of the inputs or the price of the crops that they produce--that's where the real magic occurs. And so that's where we're now, we're circled all the way back to what's the Farm Bill under which all of that takes place. Russ: Well, a lot of what we've been talking about has been the role of price in sending signals, and certainly I prefer a world where there is more of that than less of it. And I prefer a world where there's more free trade than less. A lot of what we've been talking about is an application of Friedrich Hayek's article, "The Use of knowledge in society. You just called it magic. He called it a marvel. And the reason I called you to interview you is I'd seen a piece by Marc Gunther in The Guardian. He had sent it to me. And he happened to quote me in it. But he sent it to me; it got me interested in talking to you. And in that article you invoked in a particular sentence Adam Smith, David Ricardo, and Hayek. And I want to close by asking about your interest in economics and where it comes from, and how it affects your work life, to the extent that it does. Guest: Well, it affects it enormously. I see Cargill as a great laboratory of both macroeconomics and microeconomics; that the good news is, given the planting cycle and the harvesting cycle each year provides the opportunity to see many of the things that economic theorists would tell us actually play out on the kitchen tables of individual farmers with 10-key calculators responding to signals. I think in a positive sense watching the NDRC (National Development and Reform Commission) in China make a decision to redefine their definition of food security to include importing soybeans rather than compelling land allocation within their own country, against their comparative advantage, again listening to the voice of Ricardo, to say, hold it, this is really not something that we're good at. And so, we watch it happen, positively and negatively. We see people ignore--to me, to their great disadvantage--the lessons of those three economists in terms of how they price water, in terms of how they charge for infrastructure. And so we get to see both the positive power of the messages that those economists talked about but we also get to see the damaging effect of ignoring them. And in very few cases to we see them as being wrong. That these are rules that at least in food and agriculture apply rather consistently and rather quickly. Russ: And how did you encounter those ideas? When did you encounter them first? Guest: First as a student. And compelled learning. And suddenly there you were, three years into your life at Cargill and thought, 'Aha! Something that my father paid for during those four years is immediately applicable.'