Chickenization: An Odd Lots Crossover

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Speaker 9 Bloomberg Audio Studios.

Speaker 13 Podcasts, radio, news.

Speaker 11 Hello, and welcome to a very special crossover episode of the Money Stuff slash Oddlots podcasts.

Speaker 11 I'm Matt Levine, and I write the Money Stuff column for Bloomberg Opinion.

Speaker 15 And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

Speaker 11 And we have two very special guests in the studio with us today, Katie.

Speaker 15 Their names are Joe Wisenthal and Tracy Halloway.

Speaker 11 Wow.

Speaker 15 This is very exciting.

Speaker 11 Amazing.

Speaker 14 I like the pause to build suspense, Katie.

Speaker 15 I've been told to pause and then say names slowly for Gravitas. So

Speaker 11 it's working. It worked? Yeah, it worked.
It worked. All right.
We've established some Gravitas.

Speaker 11 For what it's worth, Tracy and I spent three years of odd lots workshopping ways to introduce guests. And I know we're only the second time you've had external guests.
So don't feel any

Speaker 11 anxiety about the guest. Do you remember how we used to do it, Tracy?

Speaker 14 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?

Speaker 14 But it didn't make any sense because like we clearly knew what we were going to talk about.

Speaker 11 It took us a while.

Speaker 15 How are we doing so far? Because I feel like it's not going super well. It's going fine.

Speaker 11 What are we going to talk about?

Speaker 15 Someone should make a

Speaker 15 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

Speaker 14 market called potlots this one was a three-part series about chicken and the code name for it was squawk squawklots, but the actual name was beat capitalism.

Speaker 14 And the idea was you can actually explain a lot of really interesting themes in the American economy through the medium of chicken.

Speaker 11 Yeah, you just think from like egg to chicken sandwich or egg to chicken tender or egg to McNugget.

Speaker 15 I mean, speak for yourself.

Speaker 11 There are just so many interesting, like the sort of premise is there are just so many really interesting things that can be discussed along that entire supply chain.

Speaker 11 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.

Speaker 11 Then there's questions about pricing and so forth. And then commodity prices and then the chicken sandwich wars and the consumer experience.
of why Papa is versus Panda Express versus whoever.

Speaker 11 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?

Speaker 11 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 were you like, we need to talk about antitrust?

Speaker 11 What is

Speaker 11 antitrust?

Speaker 14 I actually, I'm struggling to remember what the exact genes is.

Speaker 11 Remember chickens in your backyard? Yeah. Yeah.

Speaker 14 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

Speaker 11 love of chickens. Do you mean alive chickens to hang out with or dead chickens to eat or totally indifferent? Both.
All forms.

Speaker 11 Like one, then the other.

Speaker 14 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's hard.

Speaker 14 It's depressing because meat chickens are very different to egg-laying chickens. They look different.
They don't really do anything.

Speaker 11 They kind of just like waddle around and flop over. And then one day you kill them.
Yeah.

Speaker 14 It's sad.

Speaker 11 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.

Speaker 11 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.

Speaker 11 We talked to him when avian flew, which unfortunately is getting headlines again. We talked to him.

Speaker 11 We've talked to Samuel Ryan, an analyst who thought that WingStop, the country's biggest chicken chain and the biggest single buyer.

Speaker 11 And there are certain lessons about pricing power that we learned because, you know, as wholesale wings went up, they raised their prices aggressively.

Speaker 11 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?

Speaker 14 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.

Speaker 14 So unknowingly, we were already a chicken podcast.

Speaker 11 Wow. Yeah.

Speaker 15 It's like it found you guys.

Speaker 11 Yes. When you were putting together that list, where was Ray Dahlia on the list?

Speaker 6 Wait, what does Ray Dahlia say?

Speaker 11 No. Are you pretending to not know? No, I don't know.

Speaker 14 Oh, does he have that huge chicken coop?

Speaker 11 Oh, no, that's the London guy. Oh, what? No, he did not.

Speaker 15 I feel like this is too good to be true.

Speaker 9 It's too good to be true.

Speaker 11 But it's a little bit more difficult. He did.
Because we talked about the history of chicken.

Speaker 11 He did.

Speaker 11 So what's the urban legend?

Speaker 11 According to Ray Dahlia. This comes from Ray Dahlia,

Speaker 11 including on podcasts, and I think on the Bridgewater website, when he was working on Wall Street before he started Bridgewater, he was doing commodities stuff. And one of his clients was McDonald's.

Speaker 11 And McDonald's were, I think this is like, according to your history, this is a few years after they had introduced the chicken McNugget, but before they rolled it out nationally.

Speaker 11 And they were worried, apparently, about

Speaker 11 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 you have to pull it off the menu or raise the prices.

Speaker 11 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

Speaker 11 a press hedge? And Ray Dalio was like, wow, there's not like a liquid chicken market at the time. This is, I think, from the Bridgewater website.

Speaker 11 He argued that since a full-grown chicken was nothing more than a baby chick plus corn and soy meal, the price of the grains were the volatile costs. And they could hedge corn and soybean prices.

Speaker 11 Oh, that's a good thing.

Speaker 11 And so he sold McDonald's a bunch of corn and soybean derivatives, and they were able to roll out the chicken McNuggets.

Speaker 14 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.

Speaker 14 Secondly, McDonald's did not invent chicken McNuggets, which is something that we learned from the podcast.

Speaker 11 McDonald's did not invent the chicken nugget, but Ray Dalio shepherded chicken McNugget as a menu item in the middle.

Speaker 14 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 Wing Stop CEO actually brings up.

Speaker 14 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.

Speaker 11 Can I say, I have a card-triggering opinion. I think Ray Dalio did invent the chicken McNugget.
Anyone could invent a fried lump of chicken.

Speaker 11 It takes a true genius to invent the financial hedging instruments that allows it to be commercialable.

Speaker 11 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.

Speaker 11 I think that financial engineering is underrated as a moving force in like the real economy. I like this thing.
I think you did the financial engineering behind the chicken meat nugget.

Speaker 11 Tracy is shaking her head. Well, you're right.

Speaker 14 It gets to an interesting question about what drives progress. Is it

Speaker 14 underlying technology or is it the

Speaker 11 chicken McNugget?

Speaker 11 The soviet future. Which came first, the nugget or the financial engineering get to bad rap.

Speaker 11 And it turns out if you need that to commercialize easy to consume protein. Yeah, I take it.

Speaker 11 I now give the ground a rap. Do you think that, right? Like every major innovation, there's the step of physical impetus, and then there's the step of working out the financing.
Yeah.

Speaker 11 And the financing people are generally unheralded, but well-paid.

Speaker 11 They're okay.

Speaker 14 I think Dahlio's managing. Yeah.
But this is Joe's pitch to try to get Ray on the podcast, I think, to talk about chicken.

Speaker 11 We should have him on our podcast to talk about.

Speaker 11 You know,

Speaker 11 who is that New York Mets manager who claimed to invent the rap? Do you remember that?

Speaker 11 You know the rap sandwich? I've heard of it. The New York Mets manager in the 90s claimed to have invented the wrap sandwich.
I can't remember his name right now.

Speaker 11 Anyway, it sort of reminds me of that.

Speaker 15 It's like claiming to invent the apple pie. Like, if you just say it loudly enough, it's probably true.

Speaker 11 Yeah.

Speaker 15 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.

Speaker 11 From your podcast, I thought it was that

Speaker 11 the supply of chickens is set by the demand for chicken breasts. And so if the demand for chicken breasts goes down, the supply of chickens goes down.
And wings do not drive the supply of chickens.

Speaker 11 And so the wing price is just like. Thank you for listening.
That's exactly it.

Speaker 14 You learned something.

Speaker 15 That's cool. The chicken breast is like the benchmark from which all the other breasts are.

Speaker 11 Wingflakes are a big part, and it's like the thing that's most used. And so, like, essentially, if you're a wing stop, you're buying like a sort of like

Speaker 11 leftover. The discard.
Yeah. I like thigh, by the way.
It's

Speaker 11 more than the breast. I think it's like a better, it's like the best cut.

Speaker 14 Have you guys had chicken feet?

Speaker 11 Oh, yes. They're really good.

Speaker 14 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 skincare purposes.

Speaker 11 I believe.

Speaker 15 You eat energy, you just sort of slather it on your face.

Speaker 14 No, no, you eat it. You like nibble on it.

Speaker 11 Oh, man. You can get it at most dim sun places in Chinatown here.
So if we ever want to take a trip, it's actually, I really find them quite delicious.

Speaker 15 I would love to watch you guys eat that. I'm not very adventurous myself, but boy, do I like being included.

Speaker 11 I have a new puppy and I got served a lot of ads for a lot of... dog food products and there's definitely like an extremely foot looking chicken foot

Speaker 11 feed my cat dried chicken hearts like that's a like little crunchy cat snack I figured. You've had some

Speaker 11 chicken hearts. I've had, yeah, I have.
Or chicken liver. Is that something? Chicken liver is.
Yeah, yeah. I think I've had chicken hearts.

Speaker 14 You can make a Thanksgiving stuffing out of chicken liver.

Speaker 11 It's really good.

Speaker 15 Timely. Yep.

Speaker 14 We'll provide our recipe for chicken liver Thanksgiving stuffing after this podcast.

Speaker 15 Can I say, so this is a three-part series.

Speaker 11 Yeah.

Speaker 15 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

Speaker 15 looks so much different than a chicken in the 2020s.

Speaker 15 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.

Speaker 14 Yeah, so chickens, like a lot of domesticated animals, are like the products of, you know, centuries and certainly decades of evolution.

Speaker 14 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.

Speaker 14 Anyway, they spread around the world. It turns out everyone loves chicken.

Speaker 14 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.

Speaker 14 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.

Speaker 14 And it sort of became this fad where people were paying like lots and lots of money to get really exotic chickens.

Speaker 15 Are they eating them or just breeding them?

Speaker 14 No, they were just breeding them.

Speaker 11 They were

Speaker 14 selling them to other people.

Speaker 14 The bubble eventually burst, by the way. And the really interesting thing...

Speaker 11 Probably.

Speaker 14 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.

Speaker 14 So the Victorian chicken bubble indirectly influenced our understanding of evolution.

Speaker 11 This is like how the telecom bubble in 99 and 200. And then we had the broadband rolling.
And then, yeah, then because of the

Speaker 11 we had the evolutionary theories of Darwin. I didn't know that.
This didn't come up, did it, on the podcast?

Speaker 14 No, I couldn't figure out where to put it in. I saved it for this podcast specifically.

Speaker 14 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.

Speaker 14 And it has the most amazing illustrations, including it has this picture of a guy blowing a bunch of different bubbles.

Speaker 14 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.

Speaker 14 And then there's one that's labeled female novelists. So I guess in the 1850s, they thought female novelists were fast.

Speaker 11 Too many.

Speaker 12 Pipe down. By the way, that was my favorite of the three.

Speaker 11 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.

Speaker 11 But like, I do think like one of the great sources of wealth in modern society is abundant access to fairly inexpensive protein. Yeah.

Speaker 11 And the story of the chicken getting plumper and plumper, 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.

Speaker 11 Like to me, that's like, that's riveting. That's exciting, that's progress right there.
Then it does.

Speaker 11 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.

Speaker 11 We could have done episodes on feed futures because chicken is just so inherently connected to everything else.

Speaker 14 This could have been like a 12-part series easily, I think.

Speaker 15 I was going to say, you've got to get Ray Dalio on.

Speaker 11 Yeah, well, Ray Dalio and a booking war.

Speaker 14 Victorian Chicken Bubble. Yeah.
The grain market that underpins chicken nuggets.

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Speaker 9 EasyCater, your business tool for food.

Speaker 10 To learn more, visit easycater.com/slash podcast.

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Speaker 11 Wait, I want to talk about the market structure. Yeah.
There's an episode on essentially like how chicken is like Uber, where

Speaker 11 the farmers who farm the chickens don't own the chickens.

Speaker 11 They're outsourced from like these big, they call them integrators, like Tyson and Purdue, where they like the integrators deliver hours-old chicks to the farmers.

Speaker 11 The farmers take care of them for a couple of weeks, and then the integrators take them back and turn them into chicken nuggets. Why is it like that?

Speaker 14 That's a really good question. I think it's just like an outcrop of the way the chicken industry evolved.

Speaker 14 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 chicken. Have you done that?

Speaker 14 No, but I don't really want to.

Speaker 11 I would rather go to like a local agricultural tractor and get one. Yeah, exactly.

Speaker 14 But anyway, so the way it worked is in the sort of 1920s, 1930s, we started getting these big broiler houses.

Speaker 14 So people discovered, this is actually one of Joe's favorite stories, the woman in Delaware.

Speaker 11 Yeah, there was a woman in Delaware who had a great name, Cecile Longsteele. And she ordered what? She ordered 100 chickens and actually.

Speaker 14 Oh, no, it was like 10 chicks.

Speaker 11 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.

Speaker 11 The point about Uber, and so then people get into the farming business. They're like, oh, I like the idea of farming.
And it doesn't seem that bad to be a chicken farmer.

Speaker 11 But like, they're extremely highly constrained.

Speaker 11 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.

Speaker 11 And then they compete against each other in what's called the tournament system.

Speaker 14 Yeah, so you as the farmer are actually responsible for a lot of the capital investments that are needed to raise chickens.

Speaker 14 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.

Speaker 14 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.

Speaker 11 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. So you're pitted against each other.

Speaker 11 You're pitted against each other.

Speaker 11 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.

Speaker 11 And so it's a very constrained type of farming.

Speaker 11 If you imagine farming in Iowa in 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.

Speaker 11 It's just sort of like retailers like not owning their real estate.

Speaker 11 It's like, it's like weird that the capital requirement comes from the individual small farmers and like the big companies aren't making the capital investments.

Speaker 14 It seems to be a super beneficial way of structuring their business for the big companies, right? You could see why they like it.

Speaker 11 And by the way, like asset light.

Speaker 14 Yeah, that's exactly it. 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.

Speaker 14 But again, like all the farmers we spoke to had pretty similar complaints. Right.

Speaker 11 Because it's not like Uber. It's not like literally they're just like, you you know, like a matching app.
Like they have a lot of, you know, yeah, that's right. That's right.

Speaker 11 But, you know, sometimes like with Uber, you're like, oh, you can like be an entrepreneur, you know, like they pitch at that.

Speaker 11 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, et cetera.

Speaker 11 It's similar to that in that there is a cap on one's ability to be sort of like actually a business owner in the sense given how constrained it is. Oh, you can be a farmer.

Speaker 11 You can like farm, but it's like, no, really, you're just like following their orders.

Speaker 14 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.

Speaker 14 So Uber basically matches passengers with drivers and it makes a lot of money from doing that.

Speaker 14 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.

Speaker 14 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.

Speaker 11 Aaron Ross Powell, Jr.: And there's the role of the pricing algorithm setting companies. So, this is really interesting because we talked to all these like antitrust experts, et cetera.

Speaker 11 And they're like various targets of the integrators themselves, whether they're uncompetitive things. And this has come up over the years.

Speaker 11 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 agreed-upon oracle?

Speaker 11 And people make this claim in all kinds of different industries these days. And again, I'm not an antitrust lawyer expert.

Speaker 11 I don't have a view on this, but it is certainly one area that the antitrust-focused people are like eager to sink their teeth into.

Speaker 11 We talked about this on our podcast about farmers' markets because there's like a Cornell project that like gives basically like market price information to people running stalls at farmers markets.

Speaker 11 And I sort of jokingly suggest that

Speaker 11 that is analogous to like, you know, the DIJ brought a case against RealPage in the rental business.

Speaker 11 And then you talk about they brought a case against AgroStats and the sort of big agriculture business.

Speaker 14 Lurking beneath every antitrust case is a discussion over whether you're actually breaking the law or

Speaker 14 it's just good business. Right.

Speaker 11 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 then you'd like wink or whatever, and it'd be like, Oh, like we've agreed to separate.

Speaker 11 Here, there's no like explicit agreement, but it's just that if everyone has each other's prices, yeah, then there is an argument that I'm not really sure is true.

Speaker 11 It seems to be true, yeah, there's an argument that that like allows them all to be. It's a coordinating mechanism, yeah, it's a coordinating mechanism.

Speaker 11 If I know everyone's prices, I can undercut everyone by a penny and I can, you know, gain market share.

Speaker 11 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 Agri-Stats claim in some of the interests in AgroStats.

Speaker 11 But isn't one of the arguments at least in RealPage

Speaker 11 that some of the allegations are that there was some penalty to landlords who deviated or that there was some, right?

Speaker 11 I don't think it's quite that, but I think it's that RealPage is both like providing the information and also providing a pricing recommendation. And so RealPage pushes those up, let's say.

Speaker 11 But if you're providing pure information, like I think if you have a literal terminal. If I have a SPY ETF, I'm going to look at the ticker on the Bloomberg terminal first before I sell it, right?

Speaker 14 You'll do market research.

Speaker 11 Yeah, yeah. Did that actually happen in the old days? Like, people are like, oh, a smoke-filled room wink.
Like, did that really happen?

Speaker 11 Or is that just a metaphor that we use to describe coordination?

Speaker 14 Are you asking that?

Speaker 11 I'm asking Matt as a lawyer.

Speaker 11 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.

Speaker 11 shell producers going to those meetings. And like, there's like a dinner, and like, was the dinner to discuss raising prices or not?

Speaker 11 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?

Speaker 11 There's a famous story, and I'm not forgetting on where it was, but 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 to say that they were.

Speaker 11 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, it's like a famous story in antitrust enforcement.

Speaker 11 But Matt, to your point,

Speaker 14 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?

Speaker 14 This is something that we talk about in the first episode when we're talking about the consumer experience and inflation.

Speaker 14 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.

Speaker 14 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.

Speaker 14 And when that happens, you know, consumers hear about them.

Speaker 14 And so if companies 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.

Speaker 14 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?

Speaker 11 Check out Beak Capitalism on the Odd Lots podcast feed, wherever you get your podcasts.

Speaker 1 For enterprise organizations, managing all your food needs is a tall order.

Speaker 5 But with Easy Cater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform, all while consolidating your corporate food spend so you can control costs, streamline billing and payment, and simplify reporting.

Speaker 9 EasyCater, your business tool for food.

Speaker 10 To learn more, visit easycater.com/slash podcast.

Speaker 16 These days, AI can help you write emails, summarize long meetings, and even create presentations that impress your most demanding customer.

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Speaker 11 Do you guys know about the Georgia dock?

Speaker 11 No.

Speaker 14 Like dock, like D-O-C-K? This rings a bell, actually.

Speaker 11 I wrote about this years ago, and I don't know if it's still a thing. There have been, like, periodic waves of antitrust interest in the chicken industry.

Speaker 11 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 Schrantz.

Speaker 11 He worked for the like Georgia Department of Agriculture or whatever.

Speaker 11 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?

Speaker 11 Which, as I learned from your podcast, no one produces two and a half pound chickens anymore.

Speaker 11 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.

Speaker 11 And then a lot of like chicken supply contracts were set as like a premium organization. So, presumably they were pushing it up, right?

Speaker 11 So, like there were allegations that they were reporting too high prices to the Georgia.

Speaker 14 We have another episode for our 12-part series.

Speaker 11 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.

Speaker 11 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.

Speaker 11 And it was just like you call, 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.

Speaker 11 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.

Speaker 11 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?

Speaker 11 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.

Speaker 11 And so they actually have a whole set of rules about the collection process that addresses basically exactly this question.

Speaker 15 I thought you were going to bring up the dog kill index. That's

Speaker 11 Tracy's obsession.

Speaker 15 I don't think anyone is pushing up the price of that benchmark article.

Speaker 14 This was one of our questions at a recent Bloomberg quiz was like, which of these indexes is actually real, which of these turbinal indexes? And the one that was real was the dog kill index.

Speaker 14 Almost no one got that right.

Speaker 11 Yeah, that's a hundred.

Speaker 14 No one believes that that actually exists. You know, we used to have a Columbia.

Speaker 11 Oh, yeah.

Speaker 14 So it's basically the number of dogs that die in the possession of airplanes when they're in air transit.

Speaker 11 I know. Yeah.

Speaker 14 But speaking of the Cobb indexes, we used to have a Columbia kidnapping index, too. But I think they discontinued that once

Speaker 11 things

Speaker 11 died down a bit.

Speaker 15 Some deep lore.

Speaker 11 This is lore.

Speaker 15 I do want to talk about the price of eggs more. Yeah.

Speaker 11 That's another index, right? There's like the

Speaker 11 best part of it.

Speaker 15 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.

Speaker 15 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.

Speaker 15 And I'm never quite sure where 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.

Speaker 15 And I just don't know where we are in terms of how worried I should be about bird flu.

Speaker 14 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.

Speaker 1 And where we are with bird flu.

Speaker 14 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.

Speaker 14 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.

Speaker 14 The interesting thing is, we're starting to get it in other animals, too.

Speaker 14 So, you know, cows, pigs are the really worrying one because pigs have like a genome that is very similar to humans.

Speaker 14 And so, the concern is that if it gets into pigs, it'll mutate into something that we're going to be doing.

Speaker 15 So, that was my next

Speaker 15 question. Like, at what point personally, I need to be concerned about contracting bird flu in some way.

Speaker 14 When more pigs start getting bird flu, and when it starts mutating.

Speaker 11 Some smart people I know are like anxious. Yeah.
Yeah.

Speaker 14 You need a pig mutation index on the Bloomberg terminal. That would be really worrying.

Speaker 15 Got to 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,

Speaker 15 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.

Speaker 15 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?

Speaker 14 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.

Speaker 14 Joe has heard me tell this story before. Not many people know that I was born in Arkansas.

Speaker 14 And so, I spent time there with my grandma and she used to take me to like chicken farms for fun or something.

Speaker 14 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, blah, blah, blah.

Speaker 14 And you'd walk in and you'd be like looking around and there are a lot of dead chickens. They're just like lying there.
You know, they get cleaned up once a day or so, but. there's a lot.

Speaker 14 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.

Speaker 14 They can eat the grain, infect it that way. And so that's one reason why it's been really hard to stamp out.

Speaker 11 Speaking on this point, you know, another interesting angle here is the sort of externalities of industrial. What's his name? Austin Frerek.
Yeah. He's one of the guys.

Speaker 11 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.

Speaker 11 But there are some interesting costs that we have to take seriously.

Speaker 11 And one of them is environmental and what it does to sort of the various water streams and some of these areas where there is a lot of industrial farming and excrement gets in the water, which is really bad, obviously.

Speaker 11 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.

Speaker 11 and why in some farming communities there's been like a pushback about like how much more of this do we we want and how much everyone else's cheap chicken is sort of slow degradation of the environment around it.

Speaker 11 So depressing.

Speaker 14 We've left you speechless.

Speaker 11 Is there like an artisanal chicken farming ecosystem or is that just

Speaker 14 backyard chickens would be one way of doing that?

Speaker 11 If you go to a store to buy like the fanciest chicken you can find, is it still from a giant warehouse or

Speaker 14 that's actually a good question. I know of one, again, I'm slightly obsessed with chickens.

Speaker 14 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.

Speaker 15 Well, on a slightly bigger scale, I interviewed the CEO of Vital Farms last week, and one of their

Speaker 15 advertising points is that it's like 107 square feet per chicken. So that was really interesting.

Speaker 15 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.

Speaker 15 But I mean, that's interesting again that they're advertising on that point that we give these chickens all this space.

Speaker 11 Are brown eggs just like better than white eggs? I feel like we have they don't look as nice, so I think people just assume they must be either better for the environment or healthier.

Speaker 11 Is there anything to that?

Speaker 14 Have you seen um 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.

Speaker 11 How do you

Speaker 11 cut them to lay?

Speaker 15 Do you feed them different? No.

Speaker 14 No, they just do it.

Speaker 14 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.

Speaker 15 I thought that the bunny rabbits laid the Easter eggs.

Speaker 14 Yeah, that's right, Katie.

Speaker 11 You're thinking that.

Speaker 15 Chickenization. I said that right.

Speaker 15 Do other animal industries look like this? Does the pork industry look like this? What does the cow industry look like?

Speaker 14 Is it as depressing?

Speaker 14 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.

Speaker 14 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.

Speaker 14 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.

Speaker 14 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.

Speaker 14 But probably Iowa is not.

Speaker 11 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.

Speaker 11 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.

Speaker 11 There's amazing consumer outcomes, like the chicken sandwich wars, and like those are very delicious.

Speaker 11 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?

Speaker 11 Like, I don't, but I didn't perceive the whole project to be like an anti-chicken thing at all.

Speaker 14 No, I want both the people and the chickens to be happy. That's my version of an ideal future.

Speaker 15 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

Speaker 15 mutinated to this point where, you know, they can't stand up straight.

Speaker 15 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 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

Speaker 15 what's happening to these animals I'm really showing my true colors on this podcast. Are you vegetarian? No.

Speaker 11 Okay.

Speaker 11 There's no judgment as well.

Speaker 15 I was for several years and then, you know, I lost it.

Speaker 15 Yeah.

Speaker 11 Joe is vegetarian. I was.

Speaker 11 I was raised vegetarian I had my first meet when I was age 24 whoa when I moved to New York I was like all right there's just too much good for the fucking thing I didn't I didn't and I like went straight I was like I tried uh wait what was it do you remember so I ate a piece of sushi which is a little weird because people are like I was raw but I looked at people like and then a week later I was like eating steaks I was like that's so hard launch yeah it's a hard launch

Speaker 11 and so I was raised vegetarian yeah

Speaker 15 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.

Speaker 11 It doesn't matter. You're a podcaster.
I think.

Speaker 11 Thanks for coming on, guys. Thanks for having us.
That was a black. Yeah.

Speaker 14 Thank you for letting us talk about chicken.

Speaker 15 No one made a chicken sound.

Speaker 11 Or a pun. Yeah.
No, you made one pun.

Speaker 14 I did.

Speaker 11 Yeah. I was very proud of it.
Wait, what did I say?

Speaker 14 I can't remember, but you did make one.

Speaker 11 And that was the Money Stuff Podcast. I'm Matt Levie.

Speaker 15 And I'm Katie Greifeld.

Speaker 11 You can find my work by subscribing to the Money Stuff newsletter on Bloomberg.com.

Speaker 15 And you can find me on Bloomberg TV every day on Open Interest between 9 to 11 a.m. Eastern.

Speaker 11 We'd love to hear from you. You can send an email to moneypod at bloomberg.net.
Ask us a question and we might answer it on air.

Speaker 15 You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show.

Speaker 11 The Money Stuff Podcast is produced by Anna Mazarakis and Moses Andong.

Speaker 15 Our theme music was composed by Blake Maples. Special thanks this week to Carmen Rodriguez.

Speaker 11 Brendan Francis Newton is our our executive producer.

Speaker 15 And Sage Bauman is Bloomberg's head of podcasts.

Speaker 11 Thanks for listening to the Money Stuff Podcast. We'll be back next week with more stuff.

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Speaker 15 Check out our special intro offer right now at bloomberg.com/slash podcast offer or click the link link in our show notes.

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