Navigating the Grain Market: Advice From Heather Howell Davis

[00:00:00.750] - Chris Griffin
Welcome to Back to your Roots, a podcast that provides insight into all things farming, financing, and farm life, guiding you Back to your Roots. Thanks for joining us. I'm your host, Chris Griffin.

[00:00:19.980] - Heather Howell Davis
Hey, guys. I'm Jordan Turnage, and thanks for coming back and listening to us on the Back to your Roots podcast. Today, we have Ms. Heather Howell Davis. She is a co-owner of Davis Pork, LLC. Along with her husband, Ron. She helps with her parents, Mr. Eric and Ms. Brenda Howell, manage Eric Howell Grain, all located all there in Marshall County, Kentucky. Ms. Heather, thank you so much for coming in.

[00:00:40.840] - Heather Howell Davis
Thank you for having me.

[00:00:42.100] - Chris Griffin
I know there's a lengthy legacy to your family farm. Can you just tell us a little bit the history of your parents, your grandparents, where you got started, and where you're at today?

[00:00:52.130] - Heather Howell Davis
I think the basis of where we started this business was the work ethic of my grandparents on both sides of my family. My dad's parents, Mama and Papa, bought the farm where my office is now in the late '40s, early '50s. My grandmother, who was a very intelligent woman, a school teacher, is the one that pushed my grandfather to do that. And he was born in a shack down the road. He talked about the snow coming in through the ceiling and covering his blanket at night.

[00:01:21.840] - Chris Griffin
I got you.

[00:01:22.770] - Heather Howell Davis
And that work ethic, and the work ethic they instilled in my dad and his brothers and sisters to work on the farm just kept building. My mom also comes from a family of strong workers.

[00:01:35.890] - Jordan Turnage
I can vouch for that.

[00:01:37.300] - Heather Howell Davis
Yeah. And we just finished up revamping our website, which is ehgrain.com. And on there, it tells about Gran, who's my mom's mom, she needed a job, and this was in the '20s or '30s. She would show up every day at the biggest company in Fulton and ask the boss when he got out of his car for a job. He kept saying no. She'd still go every day and be there before he got there and ask for a job. Finally, he said, If you're that determined, come on in. That's the work ethic that was instilled in me.

[00:02:10.140] - Jordan Turnage
Persistence.

[00:02:10.500] - Heather Howell Davis
Persistence.

[00:02:10.900] - Chris Griffin
You're talking about that website, Kip Ellington, when I was walking down the hall getting ready to come in here. He was like, I think they just started up a new website or revamped their website and ask her about it. Tell us a little bit about that and some things you can find on there if people are looking you guys up.

[00:02:25.230] - Heather Howell Davis
Well, first and foremost, it gives the prices for any grain customers that want to deliver grain to any of our three locations. One in Brewers, which is the farm we're talking about, our main location. Then we also have locations in Stella, we call it, and Murray Parish Road, which we call Murray. It gives the prices for the day and the contract price for fall. That's the main thing. Then also it just gives a little history of our family. It has a place where you can send us a message. If you're looking for a row crop farmer, if it's a location that we can't handle, we can give you names customers of ours and friends of ours that we would trust with your land and a place to apply for employment with us.

[00:03:07.550] - Jordan Turnage
Heather, on here, we've got you down as the Queen of Grain Marketing. Can you give us an idea of what grain marketing involves and entails?

[00:03:16.000] - Heather Howell Davis
I'm not the Queen of Grain Marketing. I was homecoming queen one time, but I've never been a queen after that.

[00:03:22.300] - Jordan Turnage
I was prom king.

[00:03:22.980] - Jordan Turnage
That just said you how ugly the school was.

[00:03:25.400] - Heather Howell Davis
What was that?

[00:03:25.810] - Jordan Turnage
I was prom king.

[00:03:27.210] - Heather Howell Davis
Okay, your royalty.

[00:03:28.720] - Jordan Turnage
That just shows you how ugly the school was.

[00:03:31.130] - Heather Howell Davis
No. But whenever I read that, I thought, Oh, my goodness, Queen of Grain Marketing. I got to thinking about it. I have done this over half my life, but there's still new things to learn, and I still don't have it down. And now my dad would still be working. If he had grain marketing figured out and was just rolling in the millions every year, he would still farm. I don't know if I would still farm. You cannot figure out the grain market. What our goal is to see what the market is offering. As farmers, we know our production costs, and we try to make a profit there. We just want to be in business the next year and pass down this land this business to the next generation and make our payments. I haven't figured out the golden ticket in the grain marketing. I really thought 25 years ago when I started, I was going to figure it out, and I haven't figured it out yet. But I am still in business, so that's good.

[00:04:31.850] - Jordan Turnage
Well, that's what makes it fun.

[00:04:33.550] - Heather Howell Davis
If every day was the same, it'd be boring.

[00:04:35.440] - Jordan Turnage
Oh, yeah. Dealing with the grand market that we've had deal with the past few years, what are some real benefits to our farmers out there for marketing their grain beforehand?

[00:04:45.030] - Heather Howell Davis
Well, I have a lot of farmers that have grain in storage right now, and my husband and I are one of them, and we made a poor choice because we had great prices last fall, and we had great forward contract options in front of us, and we were greedy, and we thought it would go up a little more, and we put that in storage.

[00:05:04.030] - Jordan Turnage
Not the only one.

[00:05:04.650] - Heather Howell Davis
No, I'm not alone in the boat.

[00:05:06.800] - Jordan Turnage
That's for sure. That's a big boat, too, this year.

[00:05:09.170] - Heather Howell Davis
Repeat your question, Jordan.

[00:05:10.440] - Jordan Turnage
So just whatever the benefits for... Yes, we're sitting on grain right now, but overall, what would you say are the benefits for people marketing their grain? Because years past, we're like, yes, we've seen the markets come down this year. But also, two or three years ago, a lot of guys were making money by selling it straight to the granary. But what is that, I guess, safety blanket for farmers? What's the big benefit of going ahead and marketing their grain?

[00:05:40.740] - Heather Howell Davis
Well, what I see as the safety benefit is that you can sell your grain at a set price by forward contracting, even before you plant it. So if you know your production costs and you see that the market is offering a price where you can make a profit, go ahead and forward price it. And we do hedge to arrive contracts for two, three, four, five years in advance. If you see that the Chicago Board of Trade is offering a good price, we can do a hedge to arrive contract. That's a contract without setting your basis. Now, the big granaries, Bungies, and ADMs, they have all kinds of marketing programs. But with us, for our personal crops, and for our customers at our small business, we can do hedge to Arrive if you see an advantageous price.

[00:06:22.740] - Jordan Turnage
That's where I was piggybacking off that. Can you list out some of the various grain contracts that you have available and just What are the basics of what the details to what each of them mean for our listeners?

[00:06:34.520] - Heather Howell Davis
The Hedge to Arrive contract is setting only the Chicago Board of Trade price, and you're going to set your basis later. The basis is the difference between what you can get at the local granary and what the Chicago Board is. The basis is determined by a lot of factors, from electric bill, our trucking cost, barge rates, weather, all kinds of factors. If you do a contract with a set price, locking in the Chicago Board of Trade and your basis for a flat price. So that is the price you get when you pull across the scales. We do those two, and we have done some basis contracts, but as the bookkeeper, I prefer a flat price contract. Oh, I'm sure. Because a lot of people have gotten burned on the hedge to arrive contracts with a huge wide basis. They contract that and it looks great two years out, and then they forget about it, and then they have to have a 50, 60, 70, 80 cent negative basis, and they get burned there.

[00:07:33.050] - Chris Griffin
Can you tell the listeners why is it important to have a marketing plan each year as a farmer and what that looks like for them?

[00:07:42.040] - Heather Howell Davis
Well, I look at it as, how am I going to be able to make my payments to River Valley AgCredit? If I have a marketing plan and I know my production cost, I can look at what the market's offering me and see if I can make a profit to make my payments to keep rolling in farming.

[00:07:59.140] - Jordan Turnage
Building trends trends, history?

[00:08:01.630] - Heather Howell Davis
Yeah, I'm sure there's a lot of people out there a lot smarter than I am that have the trends figured out. But I just deal in my small business, I look at what I have right here. Like I said, I've tried to figure out the grain market before, and dad and I have tried to form educated guesses on what this crop report means. Sometimes we hit a home run, and sometimes it does the exact opposite of what we think it's going to do.

[00:08:28.950] - Jordan Turnage
If more people did it, it'd be a common thing.

[00:08:30.870] - Heather Howell Davis
But what I have found is that farmers that market just a little bit along, do 5,000 bushel contracts, say every two weeks. Their average is better. I was thinking about in my years of doing this, I looked at the numbers that we just dealt with last year. Mom and dad and Ron and I have about 150 landlords and 105 different farmers who are delivering grain to us also. In all those years working with all those people, I can think of maybe twice that someone has marketed the majority of their crop and really hit a home run and been happy walking out of the greenery. But the guys that do just a little bit along and hedge their price seem to be in business again the next year.

[00:09:16.460] - Jordan Turnage
So they're just eyeballing it. And then with that communication, is that where they could go on their website, on your website and shoot and compare where you guys are as far as a grain market in a comparison where the Chicago Board of Trade is, and then say, Hey, today's looking like a good day. Because I'll have guys come in, especially during the wheat, and say, If I can get wheat for such and such right now, if I can get it penciled over this much, should I go ahead and book some? I was like, If you can get it, I would go ahead and do it. But do you all have an alert system or anything like that? Do you all send out mass text or emails?

[00:09:53.760] - Heather Howell Davis
We don't have an alert system. We do update the website daily, and we get lots of phone calls and texts and emails and messages.

[00:10:01.200] - Jordan Turnage
So it's a more personal relationship that you guys have.

[00:10:04.430] - Heather Howell Davis
Yeah. Knowing your production cost is number one. And keeping up with the market. When we have farmers that say, Well, I haven't even looked at the Chicago Board of Trade in six months. That's not a good idea.

[00:10:16.310] - Jordan Turnage
No.

[00:10:17.310] - Heather Howell Davis
Just look at it every other day. Look at our website, look at Chicago Board of Trade.

[00:10:21.740] - Chris Griffin
I'd be like, Oh, that's not looking at interest rates for six months. I'm like, Oh, my gosh, I had no idea our rates were coming up or going down.

[00:10:26.750] - Jordan Turnage
You miss a week. You can look So you can lose your lunch. So looking at cash prices, how do you guys determine cash prices at the granary?

[00:10:37.860] - Heather Howell Davis
That's based on a variety of factors from the other elevators that we can deliver to, what their prices are. So I look at probably seven different elevators every day: Bungy, ADM, Viterra, CGB, Seamer, all of those. Look at their basis. And just dad and I get an idea of what we can get after where we've purchased the grain. And barge rates, a few years when the barges weren't moving.

[00:11:06.120] - Jordan Turnage
The river levels being the way they were.

[00:11:07.960] - Heather Howell Davis
Yeah, river levels. Those type of things control the basis.

[00:11:10.750] - Jordan Turnage
That's one of the big things I was going to ask. What those variable experiences and issues that we've ran into, what are some of the main big ones that you've had to overcome and deal with in the past, I'd say five years as far as hazards and challenges?

[00:11:31.320] - Heather Howell Davis
When Ukraine was invaded and went to war, the wheat market went sky high, and I couldn't even answer the phone quick enough to contract grain. As it was going up, I was transferring money from River Valley to our account to cover margin calls. Every time we contract grain or buy grain straight off the truck, we hedge it on the Chicago Board of Trade. So as those markets were up, we were having to make those margin calls, and that was a scary few days.

[00:12:00.300] - Jordan Turnage
I'm sure.

[00:12:00.650] - Heather Howell Davis
Yeah, really scary few days. We eventually had to say we can't contract any more wheat because we were going to use all of our operating loan on margin calls, and we just waited for it to cool off.

[00:12:11.640] - Jordan Turnage
Yeah, not knowing how firm that bottom was. I'm sure.

[00:12:14.440] - Heather Howell Davis
Yeah.

[00:12:14.920] - Chris Griffin
Yeah.

[00:12:15.620] - Jordan Turnage
Did you guys run into anything? As far as COVID hitting in 2020, did you guys run into any unexpected challenges as far as with logistics, barge rates? Because I know everything had a reason to double price seemed like it did. What challenges did you guys face on that, and what did you guys use to remedy that, get through the storm?

[00:12:38.990] - Heather Howell Davis
As far as the granary, Eric Howell Grain, I don't recall a challenge, and I may have just blocked that out.

[00:12:44.800] - Jordan Turnage
But I'm sure on the pork side-

[00:12:47.880] - Heather Howell Davis
On the pork side and on the row crop side and on the maintenance of the bins, just the cost of repair, doubling.

[00:12:57.060] - Chris Griffin
So I know you said you've been there for... How many you've been doing this for? This is 25th year.

[00:13:03.490] - Jordan Turnage
So you just got started when you're five.

[00:13:05.730] - Heather Howell Davis
I started when I was five.

[00:13:06.720] - Jordan Turnage
Yeah.

[00:13:07.690] - Chris Griffin
So even in lending, let's say I've only been in lending for four and a half years, I've seen a lot of changes just in that short amount of time. So I'm sure you've seen a lot of changes, either good or bad. So what are some things when you started compared to now that you've seen that have helped your job and changed the grain marketing side and market? What are some things that have made it a little more challenging and difficult? Can you just go on that just in detail?

[00:13:33.740] - Heather Howell Davis
When I was in college, our professors would say, when I was working on my master's in ag, they would say, There's going to be fewer and fewer small farmers. And I thought, Well, that's not right. No. And then I see, yes, that is true, that there are fewer and fewer small farmers.

[00:13:51.460] - Jordan Turnage
But I'm sure, like with Mr. Eric, I'm sure he's got some horror stories from the '80s, like everybody else does, having to deal with high interest rates and expenses being the way they were then, and then the market's not exactly being where they needed to be.

[00:14:07.480] - Heather Howell Davis
Yes. In regards to the last question about the things that are changing, there are fewer small farmers, and the larger farmers have semis, the larger farmers have on-farm storage. I'm finding that the younger generation that's coming up know more about grain marketing than the older generation was. Dad said 30 years ago, there wouldn't be much of a change in the market from week to week, a few cents. Now there can be 30 cents in a day, 15 cents in a day.

[00:14:38.000] - Chris Griffin
Do you attribute that extra knowledge? Is it just them getting educated or is it them going to college? Is it taught in the ag more prevalent than it was back then? Or what do you think that leads to that?

[00:14:51.360] - Heather Howell Davis
Well, I'm not sure exactly, but I can think about my grandfather with maybe an eighth-grade education. He was a very intelligent man, but he didn't really think about what was going on in Argentina or Brazil.

[00:15:05.650] - Jordan Turnage
It's a global war.

[00:15:07.000] - Chris Griffin
It was a little war in a...

[00:15:08.950] - Heather Howell Davis
Yeah.

[00:15:09.850] - Heather Howell Davis
And all your neighbors farmed. So you were just thinking about survival. And so maybe my dad's generation grew up from that and wasn't as active in learning about the Chicago border trade. And the people who really dug in and learned did do well. Yes, I do think these young farmers that are starting, most of them are college educated, but you certainly don't need a college education to be successful in farming.

[00:15:35.510] - Jordan Turnage
No.

[00:15:35.580] - Heather Howell Davis
But it does... What I tell my children is that it's exercising your mind. So we do do business with a lot of small farmers, and we fill a lot of holes. If someone has filled their contract at a big granary and they don't have truck drivers, they could come close by to our locations. We offer storage when other places are not. But the farmers that do have on-farm storage, I find that they are not marketing their grain. They're just putting it in the bins and speculating. Now, my lender would not allow me to do that. I'm not going to speculate. That's the scary thing.

[00:16:09.640] - Jordan Turnage
You might get a phone call from Trent on that.

[00:16:11.030] - Heather Howell Davis
Yeah, we get a phone call. It's not safe for us as a granary, and it's not safe for a farmer either, just to put it in their bins and forget about it. Then the horror stories that you were talking about, of course, corn, soybeans, didn't produce the yields that they do now, the scientific advances, the traits, and they didn't produce the yields. But also there wasn't crop insurance, or if there was, it wasn't something that was utilized.

[00:16:37.060] - Chris Griffin
That's scary.

[00:16:38.050] - Heather Howell Davis
Yeah, scary. I talked to dad sometimes about the years that he was building a house and there had been a drought for three years. How did you do that?

[00:16:49.460] - Jordan Turnage
Yeah, a lot of faith.

[00:16:50.720] - Heather Howell Davis
Yeah, a lot of faith.

[00:16:51.860] - Jordan Turnage
If we had a magic snow globe to shake and see, if you had a chance to look into it, what would you think What are some of the big challenges? Not so much challenges, but where do you see the market's changing here in the next 10 years?

[00:17:09.250] - Heather Howell Davis
I'm really not sure, Jordan. When I go into my office, I just look at what I have in front of me and how can I make that best decision for that day. How many truck drivers do I have? How much grain do I have in storage? When's the next harvest approaching? I've got to balance all those out. I got to keep my truck drivers on the road, keep them happy, keep them employed. Is that a price where I can make a profit? As far as how it would change in the next 10 years, I'm not sure. I think there is more than just corn and soybeans being grown in Western Kentucky now, or to my awareness, it is. We are going to grow some canola for the first time next year, and we have some neighbors that are planting acres and acres of watermelons. It's more diversified, large livestock production. But as far as how the markets are going to change, I would be on a beach if I knew that.

[00:18:03.380] - Jordan Turnage
That's right. That's right. That's for sure. Well, I feel like we hit a really good 30,000-foot view of how marketing can be set up in the grain industry. It's setting up for today for planning for tomorrow. Like you said, it's like the plate spinner act. I feel like that's how that role sounds to me, is keeping everything up and going at the same time and trying to think ahead. Are there any tips before we close out that you could maybe give to listeners and farmers out there for them to come as far as having a game plan or markets they need to be looking at or just general information that could benefit them when they come talk to you guys about getting their market set up for following years for future contracts.

[00:18:50.620] - Heather Howell Davis
My advice would just be to know your production costs, keep an eye on the market, whether it's looking at our website, ehgrain.com, or looking at signing up for all the local granaries to get a bid sheet email to you every day. See what's offered, see if you can make a profit at that price and market a little bit along.

[00:19:10.720] - Jordan Turnage
I got you.

[00:19:11.520] - Jordan Turnage
That's the best two cents we can probably get today.

[00:19:15.180] - Heather Howell Davis
What I tell my little boy, who I think is pretty destined to be a farmer-

[00:19:19.190] - Jordan Turnage
I would say so.

[00:19:20.220] - Jordan Turnage
Barron is... Oh, yeah.

[00:19:21.710] - Heather Howell Davis
I think so. When we named him Baron, I named him that because my husband's name is Ron, R-O-N, and Baron is B-A-R-O-N. But the word baron means wealthy landowner. Well, I keep saying that if we make all these payments to River Valley and I don't really screw up, maybe someday he will be a wealthy landowner. But I just tell him to do his best. I think that's something that's lacking in society right now, whether you're working at fast food or you're working in construction or you're farming.

[00:19:53.280] - Heather Howell Davis
Do your best.

[00:19:54.500] - Jordan Turnage
Be the best at the position that you're in.

[00:19:56.580] - Heather Howell Davis
Yeah.

[00:19:56.740] - Heather Howell Davis
Treat other people's land like it's your own.

[00:19:59.760] - Jordan Turnage
Yes. Yes, that's paramount. That's some great advice. Because it's not for this generation, but for the next. You instill on that in a Barron, and that's going to go a long way. I hope so. Oh, yeah. He comes from good stuff. Ron and Mr. Eric are good people. We thank you so much for you and your family for coming in and being such dedicated and loyal members to our association. We really appreciate the time.

[00:20:20.470] - Heather Howell Davis
We sure do appreciate River Valley. Dad has been with River Valley through a lot of changes of names. I know in the early '80s was borrowing money from ACA, I believe. We are thankful for River Valley because without them, we couldn't stay in business and support our families.

[00:20:37.980] - Jordan Turnage
Well, we just look forward to keeping fostering that relationship.

[00:20:40.340] - Chris Griffin
Yeah, for sure.

[00:20:41.110] - Jordan Turnage
As soon as Darren turns 18, we'll get him set up on an operating line of credit, too.

[00:20:44.390] - Heather Howell Davis
Yes, and there will be all new equipment. There you go.

[00:20:48.890] - Jordan Turnage
Well, thank you so much for everybody listening today on the Back to your Roots podcast. Again, thank you so much, Ms. Heather, for coming in. For Chris, I'm Jordan. Thanks for listening.

[00:20:57.930] - Chris Griffin
Thanks for tuning in to Back to your Roots, where we dish the dirt on all things ag. Be sure to never miss an episode by following and subscribing. While there, leave us a review about what you want to hear next. Stay in the know between episodes by following us on Facebook, Instagram, Twitter, LinkedIn, and TikTok. For more resources, go to our website at rivervalleyagcredit.com.