Odd Lots - Odd Lots Talks Beak Capitalism on Money Stuff Talking Chicken

Episode Date: December 27, 2024

Back in November, we released our series called Beak Capitalism, which took a look at the entire US economy through the lens of chicken. Then we went on the Money Stuff podcast, hosted by Matt Levine and Katie Greifeld, to talk about our work. Here is a replay of that conversation, for those who missed it. You can subscribe to the Money Stuff podcast here. You can listen to Beak Capitalism here, here, and here. Become a Bloomberg.com subscriber using our special intro offer at bloomberg.com/podcastoffer. You’ll unlock deep reporting, data and analysis from reporters around the world, plus access to a suite of subscriber-only newsletters.See omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask, Alexa, play the Odd Lots podcast on Amazon Music. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. investing is subject to risk vanguard marketing corporation distributor hello odd lots listeners we have something

very special for you joe and i appeared on an episode of bloomberg's latest podcast it's called money stuff and it is hosted by two people that i think you will recognize from odd lots matt levin the esteemed financial columnist and chronicler of capitalism as well as katie gryfeld who knows all things ETFs and horses as well. And Joe and I were there to talk about chicken. That's right. So if you recall, back in November, Tracy and I released a three-part series called Squawk Lots, where we explained how the U.S. economy can be understood through the lens of chicken, basically taking the entire industry from an egg to sandwich, so to speak.

And so we were delighted to go on with Matt and Katie and talk about our work. Technically, it was called Beat Capitalism. Oh, that's right. But Squawklots was our code name for it for a long time. That's right. It's been a long time. Yes, it has. Okay, so we hope you enjoy this special episode of MoneyStuff and definitely give it a listen.

Bloomberg Audio Studios. Podcasts, Radio News. Hello and welcome to a very special crossover episode of the MoneyStuff slash Oddlots Podcasts. I'm Matt Levine and I write the Money Stuff column for Bloomberg. opinion. And I'm Katie Gryfeld, a reporter for Bloomberg News and an anchor for Bloomberg Television. And we have two very special guests in the studio with us today, Katie. Their names are Joe Wisenthal and Tracy Allaway. Wow. This is very exciting. I like the pause to build suspense, Katie. I've been told to pause and then say names

slowly for Gravitaz, so trying it out. It's working. It worked. Yeah, it worked. Yeah, it worked. All right. We've established some gravitas. For what it's worth, Tracy and I, like, like spent three years of odd lots, workshopping ways to introduce guests, and I know early the second time you've had external guests. So don't feel any anxiety. My heart is counted.

Don't feel any anxiety about the guest. Do you remember how we used to do it, Tracy? Yeah, we used to pretend that neither of us, or one of us didn't know what we were going to talk about. And it was like, guess what we're going to talk about? But it didn't make any sense because, like, we clearly knew what we were going to talk about. It took us a while.

How are we doing so far? Because I feel like it's not going super well. It's going fine. What are we going to talk about? What? Someone should make a clocking news. You brought us here. Let's talk about chickens.

You guys obviously have a lot to say. You did a three-part series on chickens recently, which was pretty cool because I feel like this was something different for you guys. Yeah. Every once in a while, we like to shake things up and do something slightly different. Last year, we actually did a three-part series on the rollout of New York's legal marijuana. Oh. Market called Potlots.

This one was a three-part series about chicken. chicken and the code name for it was squawk clots. But the actual name was beat capitalism. And the idea was you can actually explain a lot of really interesting themes in the American economy through the medium of chicken. Yeah. You just think from like egg to chicken sandwich or egg to chicken tender or egg to McNugget. I mean, speak for yourself.

There are just so many interesting, like the sort of premise is there are just so many really interesting things that can be disgusting. gust along that entire supply chain, so whether it's avian flu and how to keep the flock of the birds, whether it's concentration in the poultry market, whether it's the nature of the labor market, how the big poultry companies contract with independent growers and so forth who raise the chickens themselves, which is interesting. Then there's questions about pricing and so forth. And then commodity prices. And then the chicken sandwich war is in the consumer experience of why Papa is versus Panda Express versus whoever. There's a million different things, even within all these things, where it's like, we can learn a little something about how the economy works through that trajectory.

How did you decide on that? Was that like, you're like, we want to talk about chicken first and then later you realize there are a lot of lenses? Or we're like, we need to talk about antitrust. So, chicken. I actually, I'm struggling to remember what the exact genesis. I remember. I remember. I remember.

Chikins in your backyard. Yeah. Yeah. I have a long-term love of chickens. And my great ambition in life is to one day have. backyard chickens and I'm inching closer to that dream. Would you say love of chickens do you mean alive chickens to hang out with or dead chickens to eat or both totally indifferent? Both. All forms. Like one then the other? Well, I would raise chickens and I would have eggs and that way I would be

immune to egg inflation. But I know some people who raise meat chickens and I don't think I would do that. It seems hard. It's depressing because meat chickens are very different to egg laying chickens. They look different. They don't really do anything. They kind of just like waddle around and flop over. And then one day you kill them. Yeah. It's sad. The other thing too, in addition to Tracy's affinity for chickens, we've done a lot of chicken episodes in the past. So there's this guy, Glenn Hickman that we talked to. We've talked to him twice on the show. He has a big egg operation in Arizona. And so we talked about when egg prices were surging. We talked to him when avian flu, which unfortunately, like, is getting headlines again. We talked to him. We've talked to him. We've talked to. We've talked to. to Samuel Ryan's an analyst who thought that wings stop the country's biggest chicken chain and the biggest single buyer. And there are certain lessons about pricing power that we learned because, you know, as wholesale wings went up, they raised their prices aggressively. When wholesale wing prices went down, they did not cut their prices. So we've done a lot of chicken related content in the past. It's like, oh, why don't we like put some of this together? This was the surprising thing. When we were putting together, you know, the list of people that we wanted to speak to for this series, like 80% of them we had actually spoken to.

before. So unknowingly, we were already a chicken podcast. Wow. It's like it found you guys. Yes. When you were putting together that list, where was Ray Dalio on the list? Wait, what does Ray Dalio say about chicken? Do you not know? No. Are you pretending to not know? No, I don't know. Now I feel really dumb because it's like, oh, does he have that huge chicken coop? No, no, that's the London guy. Oh, what? No, no, I didn't. So I feel like this is too good to be true. It's too good to be true. He didn't. He didn't. Because we talked about the history of China. I did it.

You did it. Okay. So what is, what's the urban legend? According to Ray Dalio. This comes from Ray Dalio, like, including on podcasts. And I think on like the Bridgewater website, when he was working on Wall Street before he started Bridgewater, he was like doing commodities stuff. And one of his clients was McDonald's.

And McDonald's were, I think this is like, according to your history, like, this is a few years after they had like introduced the chicken McNuggett, but before they rolled it out nationally. And they were worried apparently about. volatility of chicken prices because they're like, well, we can't put chicken nuggets on the menu if the price is going to go up and down because they have to pull it off the menu or raise the prices. It would be terrible. We need to take the volatility out of chicken prices. And they came to Ray Dalio allegedly and they're like, can you sell us as one does hedge? And Ray Dalio is like, wow, there's not like a liquid chicken market at the time. This is, I think, from the Bridgewater website. He argued that since a full-grown chicken was nothing more than a baby chick plus quarter. corn and soy milk. The price of the grains were the volatile costs, and they could hedge corn and soybean prices. And they could, and so he sold McDonald's a bunch of corn and soy derivatives, and they were able to roll out the chicken McNuggets. Yeah. First of all, I love that Ray Dalio's like chosen

creationist story for himself. His background legend is I helped invent chicken McNuggets. Oh, that's a good one, though. Secondly, McDonald's did not invent chicken McNuggets, which is something that we learned from the podcast. McDonald's did not invent the chicken nugget, but Ray Dalio shepherded the chicken McNugget as a menu item. Sure. Okay, fine. We'll let him have that one. But the interesting thing is we did learn about volatility in pricing because this is something that the Wingstop CEO actually brings up.

One of the reasons we saw chicken wing prices specifically go up so much in the aftermath of the pandemic was that it turns out they're the most volatile, like, part of the chicken. Can I say I have a contrary opinion? I think Ray Dalio did invent the chicken McNugget. Anyone could invent a fried lump of chicken. It takes a true genius to invent the financial hedging instruments that allows it to be commercialable. So I now accept the premise that actually he and not the person who, like, put the chicken meat in batter should get actually be the true father of the chicken macsadette. I think that financial engineering underrated is that moving force in like the real economy. I like this take.

And he did the financial engineering behind the chicken meat. Tracy has shaking her head. Well, you're right. it gets to an interesting question about what drives progress. Is it underlying technology or is it the finance? Which came first? The chicken pick nugget. The soybean future.

Which came first, the nugget or the financial engineer and get to bad rap. And it turns out if you need that to commercialize. But it brought us easy to consume protein. Yeah, I take it. I now give the crown to write. Do you think that, right? Like every major innovation, like there's this step of physical invention and then there's the step of like working out the financing.

Yeah. And like the financing people are generally unheralded. bit well-paid and Herald. I think Dahlia is managing. Yeah. But this is Joe's pitch to try to get Ray on the podcast, I think, to talk about chicken. We should have them on our podcast to talk about exclusive. You know, who is the New York Mets manager who claimed to invent the rap?

Do you remember that? Who is it? You know the rap sandwich? I've heard of it. The New York Mets manager in the 90s claimed to have invented the rap sandwich. I can't remember his name right now. Anyway, it sort of reminds me of that. It's like claiming to invent the apple pie.

Like if you just say it loudly enough, it's probably true. Yeah. Can we talk about why wings are the most volatile part of the chicken? I did not know that. I would have thought it was, I guess, any other part of the chicken. From your podcast, I thought it was that the supply of chickens is set by the demand for chicken breasts. And so the demand for chicken breasts goes down. The supply of chickens goes down.

And wings do not drive the supply of chickens. So the wing price is just like. Thank you for listening. That's exactly it. You learned something. The chicken breast is like the benchmark from which all the other parts. Yeah. It's like a big part and it's like the thing that's most used.

And so like essentially if you're wing stop, you're buying like a sort of like. Leftover. The discard. Yeah. I like thigh, by the way. It's more than the breast. I think it's like a better, it's like the best cut. Have you guys had chicken feet?

No. Oh, yeah. They're really good. And in Asia, people always say they're a really good source of collagen. So like a lot of young women or older women will eat them for skit care purposes. I believe it. Do you eat it or do you just sort of slather it on your face? No, no, you eat it.

You like nibble on it. Oh, man. You can get it at most dim sum places in Chinatown here. So if we ever want to take a trip and it's actually, I really find them quite delicious. I would love to watch you guys eat that. I'm not very adventurous myself, but boy, do I like being included. I have a new puppy and I get served a lot of ads for a lot of doctors. food products and there's definitely like an extremely foot-looking chicken foot product that is

I do feed my cat dried chicken hearts. Like that's a like little crunchy snack. I've had some fertile chicken hearts. I've had, yeah, I have. Or chicken liver. Is that something? Oh, chicken liver is. Yeah.

I think I had chicken hearts too. You can make a Thanksgiving stuffing out of chicken liver. It's really good. Timely. Yeah. We'll provide our recipe for chicken liver Thanksgiving stuffing after this podcast. Can I say, so this is a three-part series. The part that caught my ears the most was just like the physicality of the chicken and how it's changed that the idea that like a chicken in the 1920s looks so much different than a chicken in the 2020s.

Like I feel like I knew that somewhere in the back of my mind, but this really brought it into stark focus for me, just how much we've changed chickens. Yeah, so chickens like a lot of domesticated animals are like the products of, you know, centuries and certainly decades of evolution. chickens, in case you're wondering, I think they originally came from forests of Indonesia. And back then, they were like skinny little jungle birds. And I think they were mostly like black. Anyway, they spread around the world. It turns out everyone loves chicken. One of the most fascinating parts of chicken history.

And I don't know why I know this, but for some reason I do, is in the 1850s, there was a chicken bubble. So what happened was Queen Victoria got. really into chickens, like breeding chickens, exotic chickens. And because she was the queen, a bunch of other people got into it. And it sort of became this fad where people were paying like lots and lots of money to get really exotic chickens. Were they eating them or just breeding them? No, they were just breeding them. They were pets selling them to other people. Yeah. The bubble eventually burst, by the way. And the really interesting. Yeah. Probably. But the really interesting thing is because exotic chickens became cheap,

Charles Darwin started doing research with all these different chickens from around the world on evolution. So the Victorian chicken bubble indirectly influenced our understanding of evolution. This is like how the telecom bubble in 99 and 2000. And then we had the broadband. And then, yeah, then because of the bubble that we had the evolutionary theories of Darwin. I didn't know that. This didn't come up, did it on the podcast? No, I couldn't figure out where to put it in.

I saved it for this podcast specifically. There's a really funny book that was written. sort of contemporaneously with the 1850s all about, it's called hen fever, and it's about the chicken bubble. And it has the most amazing illustrations, including it has this picture of a guy blowing a bunch of different bubbles. And some of them are like what you would expect, like the South Sea expeditions and railway stocks and things like that. But then some of them are shanghai's and cochins, which are types of chickens. And then there's one that's labeled female novelists. So I guess in the 1850s, they thought female novelists were fat.

Too many. Piped down. By the way, that was my favorite of the three. Like, I really like the consumer angle. Obviously, it's fun to talk about the chicken sandwich wars. It's interesting, like, the market structure and some of the antitrust questions and the power. But, like, I do think, like, one of the great sources of wealth in modern society is abundant access to fairly inexpensive protein. Yeah.

And the story of the chicken getting plumber and plumber, the antibiotics that are used to keep them alive and keep them growing and avoid sickness, the sort of feeding mechanisms and so forth that have turned the sort of scrawny bird that Tracy was talking to and a sort of very tasty bird. Like to me, that's like, that's riveting. That's exciting. That's progress right then it turned. That and the soybean futures to make it more.

Yeah, right. And the soybean futures, which of course are crucial, which we really like, that's the thing. We could have done like because chicken is so great. We could have done episodes on feed futures because chicken is just so inherently connected to everything else. This could have been like a 12-part series easily, I think. I was going to say you've got to get Ray Dalio on. Yeah, well, Ray Dalio.

Now we're in a booking war. Victorian chicken bubble. Yeah. The grain market that underpins chicken nuggets. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real.

Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out,

go see the record for yourself at vanguard.com. That's vanguard.com slash audio. All investing in subject to risk, vanguard market. Corporation Distributor. Eating well shouldn't be complicated, but somehow it turns into recipes, prep, clean up, and half your Sunday gone. Factor solves all that. These are fresh, ready-to-eat meals designed by dietitians, delivered to your door,

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like Tyson and Purdue, where they like, the integrators deliver hours old chicks to the farmers. The farmers take care of them for a couple of weeks, and then the integrators take them back and turn them into children. chicken nuggets. Why is it like that? That's a really good question. I think it's just like an outcrop of the way the chicken industry evolved. By the way, I have an interesting fact, if you don't know, chickens can still be sent live through the U.S. mail so you can live order baby chips. Have you done that? No, but I don't really want to. I would rather go to like a local agricultural truck. Like a tractor supply. Yeah, exactly. But anyway, so the way it worked is in the sort of 1920s,

1930s, we started getting these big broiler houses. So people discover, this is actually one of Joe's favorite stories, the woman in Delaware. Yeah, there was a woman in Delaware who had a great name. Cecile Long Steel. And she ordered what? She ordered 100 chickens. And actually got, no, it was like 10 chicks. She ordered like 10 chicks in the mail and accidentally ordered 1,000. So she's like, all right, I guess I'm going to become a farmer. That never happens to me. No, it doesn't happen to me either. The point about Uber. And so then people get into the farming business. There's like, Oh, I like the idea of farming. And it doesn't seem that bad to be a chicken farmer.

But like they're extremely highly constrained. The integrators, they deliver them the chickens. They tell them the exact specifications of the barn, the temperature, the feed, how much feed, and so forth. And then they compete against each other in what's called the tournament system. Yeah. So you as the farmer are actually responsible for a lot of the capital investments that are needed to raise chickens. Meanwhile, the big integrators like a Tyson or Purdue, they provide a lot of the inputs. So the baby chicks themselves, they'll tell you like what medicines to use, what kind of food.

And so in the eyes of the farmers, they feel like they are absorbing a lot of the big risks here while not really having a lot of control over stuff that ultimately affects the end product. And then the tournament is you have this pool of farmers in an area and your pay for some period is how far above or below the average of that pool. Yeah, so you're pitted against each other. You're pitted against each other. There's like a fixed pot and then each round, you know, some people had the best chickens or the heaviest chickens or whatever it is, and some had the worst and so forth.

And so it's a very constrained type of farming. If you imagine farming in Iowa and some idyllic sense, which I think some people still do, but I think we also know it's big industrial business. It's not that vision. Yeah. So it's sort of like retailers like not owning their real estate. It's like it's like weird that like the capital requirement comes from the, you know, individual small farmers and like these big companies aren't making the capital investments.

It seems to be a super beneficial way of structuring their business for the big companies, right? You could see why they like it. And by the way, like asset light. Yeah, that's exactly. And they will argue that like actually providing the initial round of chicks and the food and the medicine is. like a big cost center and they are taking that on. But again, like all the farmers we spoke to had pretty similar complaints. Right. It's not like Uber. It's not like literally they're just like, you know, like a matching app. Like they have a lot of. Yeah. Yeah. That's right. That's right.

But, you know, sometimes like when Uber, you're like, oh, you could like be an entrepreneur, you know, like they pitch it that. But in the end, the rules of the business are heavily constrained and it's all within the context of Uber and policy changes that Uber can make, etc. It's similar to that in that there's a cap on one's ability to be sort of like actually a business owner, given how constrained it is. Oh, you can be a farmer. You can like, yeah, but it's like, no, really, you're just like following their orders. Speaking of Uber, it also gets to something else in the modern U.S. economy, which is sort of the prevalence of the middleman and the power that they wield over the economy. So Uber basically matches passengers with drivers

and it makes a lot of money from doing that. If you look at the farming industry, for every dollar that comes out of agriculture, farmers get like 20 cents. The other 80 cents is going to someone else. And a lot of the someone else turns out to be middlemen, like the distribution networks, the integrators in some respect, the packaging, things like that. And there's the role of the pricing algorithm setting. So this is really interesting because we talked to all these like antitrust experts,

and they're like various targets of the integrators themselves, whether they're uncompetitive things. And this has come up over the years. But another thing that's come up across a range of industries, again, chicken as the lens to uncover other aspects of the economy, is can you have tacit price setting systems, not via people getting in a smoke-filled room and doing nefarious things? But via a third-party pricing entity that everyone uses as some agree. upon Oracle and people make this claim in all kinds of different industries these days. And again, I'm not a antitrust lawyer expert. I don't have a view on this, but it is certainly one area that the antitrust-focused people are eager to sink their teeth into.

We talked to this on our podcast about farmers markets because there's like a Cornell project that gives basically like market price information to people running stalls at farmers markets. and I sort of jokingly suggest that that is analogous to like, you know, the DHAJ brought a case against the real page and the rental business. And then you talk about they brought a case against acrostats and the sort of big agriculture business. Lurking beneath every antitrust case is a discussion over whether you're actually breaking the law or it's just good business. Right. It's wild because it's like, you know, in the olden days, like you'd get together in a room and you'd be like, oh, these are our prices, these are our prices.

And you'd like wink or whatever. And it'd be like, oh, we've agreed to separate us. Here, there's no, like, explicit agreement, but it's just, if everyone has each other's prices, then there is an argument that I'm not really sure it's true. It seems to be true. There's an argument that that, like, allows the multi-raiseries. It's a coordinating mechanism. Yeah, it's a coordinating mechanism. If I know everyone's prices, I can undercut everyone by a penny and I can, you know, gain market share. And that doesn't seem to be.

I know the question is in some of these instances, whether you get penalized or whether. Now, I don't have any, I do not know whether this ever came up in the agriestat's claim in, in, in. some of the interests in aggristats. But isn't one of the arguments, at least in Real Page, that some of the allegations are that there was some penalty to landlords who deviated or that there was some, right? I don't think it's quite that. But I think that Real Page is both providing the information and also providing a pricing recommendation.

And so Real Page pushes those up, let's say. But if you're providing pure information, like I think if you have a literal penalty if I have an SPYETF, I'm going to look at the ticker on the Bloomberg Terminal. first before I sell it, right? You'll do market research. Yeah, yeah. Did that actually happen in the old day? Like, people like, oh, smoke-filled room winked.

Like, did that really happen? Or is that just a metaphor that we use to describe coordination? Are you asking Matt if he was there? I'm asking Matt as a lawyer. The most famous cartel is OPEC where they meet in a room, right? And there have been recent cases, you know, like the FTC is a little concerned about some, like, U.S. shell producers go into those meetings. And there's like a dinner.

And like, was the dinner to discuss raising prices or not? Like the people say, no, the FTC says, yes, it's like a little. There was definitely a dinner. What did they talk about at the dinner? There's a famous story, and I'm not forgetting on where it was. There's a famous story of a company like there was a formal policy that they would say, we are not going to collude with competitors. And then they'd wink, say they were.

And then like they sent out a memo or like there's like a recording of someone saying, I didn't wink. Like it's like a famous story in antitrust enforcement. But Matt, to your point, your point earlier, about like, okay, if you could see everyone's prices or you have like a rough guideline about what's going on with prices, why don't you just undercut your competitors? This is something that we talk about in the first episode when we're talking about the consumer experience and inflation. And the answer is, well, if you only have a handful of big companies that are doing this, you know, first of all, the incentive is not necessarily there to try to get into a price war. This is the classic like antitrust argument if you consolidate companies and they raise their prices. They have more market power.

But there's another aspect going on in the past few years, which is we had the big pandemic, we had avian flu, we had labor shortages. We had all these massive one-off specific events. And when that happens, you know, consumers hear about them. And so if companies say, well, we have to raise our prices because of avian flu or because of the pandemic, consumers are, more willing to kind of accept that. And they have fewer alternatives, right? If everyone is doing it at the same time because of these same like exogenous shocks, then where are you going to go to get cheap eggs or chickens? Check at Beak Capitalism on the Oddlots podcast feed, wherever you get your podcasts. Eating well shouldn't be complicated, but somehow it turns into recipes, prep, cleanup,

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Do you guys know about the Georgia dock? No. Like doc like D-O-C-K This rings a bell actually I wrote it about this years ago I don't know if it's still a thing There have been like periodic waves of antitrust interest

In the chicken industry And there was one in like 2017 2018 that I used to refer to as chicken libor There was a thing, an index called the Georgia Dock Index Which was set by a guy His name was Artie Schronz He worked for the like Georgia Department of Agriculture

or whatever And he would call chicken producers every day, every week or whatever, and say, what price are you getting for like two and a half pound chickens, which, as I learned from your podcast, no one produces two and a half pound chickens anymore. So the people would make up a number and they'd tell him the number and he'd write it down and that would go into the Georgia Dock Index. And then a lot of chicken supply contracts were set as like a premium order. So presumably they were pushing it up. It's chicken libel. So like there were allegations that they were, you know, reporting two high prices to the

We have another episode for our 12-part series. It's interesting over the years you learn, like, how many indices that exist that you can find a chart of are essentially put together like this. Years ago, probably about nine years ago, I remember talking to someone who was working at Bloomberg, actually. And there was like some scrap metal index. And it was just like you call it. There were like a handful of junk metal yards that you call up and then you get the price. Actually, you know, speaking of another one is lumber. And what's really interesting, so the company that creates the lumber index, I think it's called random lengths, actually.

And they're the ones who create the benchmark futures. They also have a very interesting thing. So they do this. They call various places. How much did you sell a piece of lumber for each day? And then what's actually cool is you can read the contract and they talk about all of the ethical things that, like the rules of the question, because they are aware that all indices such as these create situations potentially like Georgia docs or LIBOR. And so they actually have a whole set of rules about the collection process that addresses basically exactly this question. I thought you were going to bring up the dog kill index that's on the terminal.

This is Tracy's obsession. But I don't think anyone is pushing up the price of that benchmark artificially. This was one of our questions at a recent Bloomberg quiz was like which of these indexes is actually real, which of these turpinal indexes. And the one that was real was the dog kill index. Almost no one got that right. Yeah, that's a hum you. No one believes that that actually exists. You know, we used to have a Columbia listeners that do.

Oh, yeah. So it's basically the number of dogs that die in the possession of airplanes when they're in air transit. It's a very macabre episode. I know. Yeah. But speaking of macab indexes, we used to have a Columbia kidnapping index, too. But I think they discontinued that once things died down a bit. Some deep lore.

This is lore. I do want to talk about the price of eggs more. Yeah. That's another index, right? There's like, yeah, yeah, yeah. Well, it's sort of become one of, at least in my circles, one of the most watched indexes because you talk about inflation and the thing that people complain about is gas and eggs. And, I mean, Tracy, you were mentioning that there's well-explained reasons why the price of eggs has been so volatile, bird flu being one of them. And I'm never quite sure we are in the cycle of bird flu because it's an issue.

and then it feels like it died down again. Now we're talking about bird flu again. And I just don't know where we are in terms of how worried I should be about bird flu. So when we started the series, we did not really expect eggs to become this huge political talking point. But they did during the election. And where we are with bird flu, okay, so we had a really big spike in 2022 and we saw the price of eggs shoot up. That since died down. But if you look at the egg price index on the Bloomberg, there's more than one, by the way.

We have a bunch of different ones. You can see they're starting to go back up again. And that's because we are getting more bird flu reported. The interesting thing is we're starting to get it in other animals too. Yeah. So, you know, cows, pigs are the really worrying one because pigs have like a genome that is very similar to humans. And so the concern is that if it gets into pigs, it'll mutate into something that would be very bad for humans. question, like at what point personally I need to be concerned about contracting bird flu in some way.

When more pigs start getting bird flu and when it starts mutating. Some smart people I know are like anxious. Yeah. You need a pig mutation index on the Bloomberg terminal. That would be really worrying. Kind of get our best and brightest on us. That's worrisome. Well, before I spiral, let's just keep it to like the chicken industry because I do wonder, I mean, how does it spread?

One of the parts that was a hard listen when it came to this episode was listening to, I think it was Craig Watts describing how he had like 30,000 chickens in 20,000 square feet. It sounds like these birds are just on top of each other. So, I mean, how quickly does bird flu spread? And what does that mean for the industry? So you're right. This is one of the downsides of industrial scale chicken farming, which is you have a lot of birds and you have them in a relatively crowded space. Joe has heard me tell this story before. Not many people know that I was born in Arkansas. And so I spent time there with my grandma. And she used to take me to like chicken farms for fun or something. I don't know why. But I would walk into these like giant warehouses thinking like, oh, this is going to be fun. I'm going to play with like fluffy baby chicks. And I love chickens. And you'd walk in and you'd be like looking around and there are a lot of dead chickens. They're just like, lots. there, you know, they get cleaned up once a day or so, but there's a lot.

Mm-hmm. So, yeah, this is the issue. So you have crowded conditions. It's very difficult to segregate farm chickens from the wild bird population. Like wild birds that have avian flu can still get in. They can eat the grain, infect it that way. And so that's one reason why it's been really hard to stamp out. Speaking on this point, you know, another interesting angle here is the sort of externalities.

of industrial. What's the name? Austin Frereck? One of the guys. And talk about the wastewater runoff, et cetera. And so like, like I said, I am an optimist about the existence of cheap protein, and I think it's a marker of a wealthy society. But there are some interesting costs that we have to take seriously. And one of them is environmental and what it does to sort of the various water streams in some of these areas where there is a lot of industrial farming and excrement gets in the water, which is really bad, obviously. And so there are, you know, obviously, bird flu itself and the potential for that to move into other animals is scary. But then there are also this sort of like slower burn issues and why in some farming communities there's been like a pushback about like how much more of this do we want and how much everyone else has cheap chicken is sort of slow degradation of the environment around it. So depressing. We've left you speechless.

Is there like an artisanal chicken farming ecosystem or is that just not a Well, I mean, backyard chickens would be one way of doing that. If you go to a store to buy like the fanciest chicken you can find, is it still from a giant warehouse? That's actually a good question. I know of one, again, I'm slightly obsessed with chickens. I know of one like avian geneticist in the Northeast who breeds really interesting chickens. and he's sort of like on a small scale. So maybe they do exist.

Well, on a slightly bigger scale, I interviewed the CEO of Vital Farms last week. And one of their advertising points is that it's like 107 square feet per chicken. So that was really interesting. He also said, I thought this was interesting too. On his most recent earnings call, our challenge right now, as always,

is that I can't get the chickens to lay more eggs in the short run. So a lot of demand and not a lot of eggs. But, I mean, dad, That's interesting, again, that they're advertising on that point that we give these chickens all this space. Are brown eggs just like better than white eggs? I feel like they don't look as nice. So I think people just assume they must be either better for the environment or healthier. Is there anything to do that? Have you seen the Easter egger chickens? No. These are the ones that lay eggs in all different colors. So like blue and green and white and brown.

How do you, my stupid question, do you feed them different? No. No, they just do it. The one thing I don't know is like whether one Easter egger produces like only green eggs and then another Easter egger will produce like only pink ones. I thought that the bunny rabbits laid the Easter eggs. Yeah, that's right, Katie. You're just thinking that. Chickenization. I said that right.

Do other animal industries look like this? Does the pork industry look like this? What does the cow industry look like? Is it as depressing? Yeah. So this is another talking point from the podcast. which is this very, you know, up until now, unique model of producing chickens where the big integrators are outsourcing a lot of those big capital risks is becoming more common in agriculture

itself. So the big example, Joe brought this up earlier, would be pig farming in Iowa. And it gets to interesting questions in business about who should bear the ultimate costs of a business. We kind of talked about that earlier. But again, to Joe's point earlier, it gets to interesting questions about who should bear the environmental costs. So maybe all of America is okay with Iowa, like being responsible for raising our pigs and having to deal with like manure runoff and stuff like that and spoiling its water systems, but probably Iowa is not. Can I just say like, after having done this series, I don't really view it as depressing. I don't want this to be seen as like, you know, some sort of Jeremiah against the chicken industry.

I just think there's a lot of interesting tensions, right? Like, there's benefits to industrial scale chicken farming. There's complicated market aspects of industrial chicken scale farming. There's amazing consumer outcomes like the chicken sandwich wars and, like, those are very delicious. And there are costs, whether it is the risk borne by the farmers, the risk of disease and the risk of environment. It's a mix, right? But I didn't perceive the whole project to be like an anti-chicken thing at all. No, I want both the people and the chickens to be happy.

That's my version of an ideal future. That's like I can't as an animal freak can't get past the chickens and like, you know, them falling over because like they've been. They're so heavy. Yeah, that's right. Where, you know, they can't stand up straight. I don't know if this came up in any of your discussions. but like where are we on lab grown chicken? Because I...

Another thing, yeah, we do. Another episode that like cheap protein is great for a society. It's the marker of a successful society. But surely there's a way to achieve that without what's happening to these animals. I'm really showing my true colors on this podcast. Are you vegetarian? No. Okay. It's no judgment.

I was for several years and then, you know, I lost. Joe was vegetarian. I was raised vegetarian. I had more. My first meet when I was age 24. Wow. Yeah. When I moved to New York, I was like, all right, and there's just too much good for the year.

You never went back. Yeah, I didn't. I didn't. And I, like, went straight. I was like, I tried. Wait, what was it? Do you remember? So I ate a piece of sushi, which is a little weird because people was like, I was raw, but

I looked at people. And then a week later, I was like eating steaks. I was like, that's a hard launch. Yeah. It's a hard launch. Yeah. My parents were hippies. And so I was raised vegetarian, yeah.

I was a vegetarian for like ages 11 to 14. I feel like I stunned in my growth. I'm shorter than both my parents. But anyway. It doesn't matter. You're a podcaster. Nothing does. Thanks for coming on, guys.

Thanks for having us. That was a blast. Yeah, thank you for letting us talk about chicken. No one made a chicken sound. Or a pun. Yeah. No, you made one pun. I did?

Yeah. I was very proud of you. Wait, what did I say? I can't remember, but you did make one. And that was the Money Stuff Podcast. I'm Matt Levy. And I'm Katie Greifeld. You can find my work by subscribing to the Money Stuff newsletter on Bloomberg.com.

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