WEBVTT

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Breaking free from the chains of the past Where

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truth moves faster than a Holstein calf No law

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waiting on some printed page We're charting new

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ground in the digital age From genomic codes

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to robot facts We cut through the noise, no hold

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them back not your daddy's dairy news tonight

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we're sparking Welcome to the Bullvine Podcast,

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where we challenge conventional dairy wisdom

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with the data -driven insights that actually

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matter for your operation's bottom line. Today,

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we're diving into an analysis that's going to

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make every traditional dairy organization extremely

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uncomfortable. You're about to hear something

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that exposes one of the industry's most dangerous

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myths. the idea that traditional dairy states

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automatically offer the best production environments.

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We've just completed the most comprehensive regional

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cost breakdown ever published, and the results

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are absolutely devastating for anyone still making

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location decisions based on heritage rather than

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hard economics. Here's a number that should wake

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up every dairy professional listening. There's

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now a $12 .70 per hundredweight profit difference

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between the best and worst dairy regions. That's

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$178 ,000 annually for a 1 ,000 -cow operation

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before you even consider the compounding effects

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over decades. While Kansas posted an explosive

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15 .7 % production increase, traditional strongholds

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like California actually declined. Yet where's

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the honest discussion from state dairy organizations

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about what this geographic disruption really

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means for your survival? What you're about to

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hear isn't just another cost analysis. It's an

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expose of how the dairy establishment has been

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keeping producers anchored to economically obsolete

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locations while smart money floods toward regions

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with systematic competitive advantages. Let's

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get into the data that's reshaping America's

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milk map. Welcome to the Deep Dive. You know,

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you might feel you've got a pretty good handle

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on the cost of producing milk on your farm, right

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there in your region. But what if your actual

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location, the very ground you're operating on,

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is silently, maybe slowly, bleeding your bottom

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line? What if that whole deep -rooted idea of,

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you know, traditional dairy heritage, is actually

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a multi -million dollar anchor? holding you back

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year after year. Today, we're not just questioning

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those assumptions. We're really going to tear

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them down with some cold, hard data. Indeed.

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We're jumping into a pretty deep strategic financial

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analysis of the U .S. dairy sector, specifically

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looking at 2024 and projecting into 2025. And

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this isn't about, you know, broad brushstrokes

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or general trends everyone talks about. This

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is about zooming right in. We're focusing on

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the granular numbers that expose exactly where

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dairy profits are being made, sure, but maybe

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more importantly, where they're just Vanishing.

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Our framework for this deep dive, it's built

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on the latest critical articles from the bull

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vine, combined with comprehensive USDA data.

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Gives us a remarkably clear picture. Right. And

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our core mission. for you listening, is to really

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distill the most impactful nuggets of knowledge

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from all this. We want to empower your critical

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decisions, thinking about farm location, maybe

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strategic expansion or essential technology adoption.

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This isn't about just throwing darts at a board

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with what -ifs. It's a data -driven look at what

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is happening and what our model suggests will

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happen very soon. Okay, so let's set the stage

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a bit. The big picture for 2024 -2025. The U

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.S. dairy sector is, well, it's undergoing what

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you can only call a significant transformation.

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No exaggeration there. We kicked off 2025 with

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generally favorable feed prices, which was good

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news, and the national dairy herd saw a modest

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but still notable expansion. It reached about

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9 .349 million head. Now that's up about 2 ,500

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head from January 2024. Not huge growth, but

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growth nonetheless. The initial projections,

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they put the almost price for 2025, around $22

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.61 per hundredweight, or runderetto as we'll

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call it, which is just a tiny dip from the $22

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.61 average we saw in 2024. So initially it looked

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pretty stable. Okay, stable at first glance.

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Yeah. But you said the narrative gets interesting.

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Yeah, here's where it gets, frankly, a bit volatile.

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Almost immediately, subsequent forecasts threw

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in considerable uncertainty. We saw some pretty

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significant downward revisions to that 2025 all

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-milk price. Some projections dropped it as low

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as $21 .10 per month, others maybe $21 .60. No,

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that's quite a drop from the initial $22 .60.

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Suggests some real nervousness or flux in the

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market. It really does, a delicate balance. Yet,

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here's the counterpoint. Despite those price

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fluctuations, milk production itself, it's actually

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anticipated to increase. We're looking at maybe

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it'd be a 0 .5 % rise, pushing total production

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up towards 226 .9 billion pounds in 2025. Now,

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this growth isn't totally surprising when you

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look at two things. First, that slightly larger

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herd size we mentioned. And second, a projected,

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albeit small, 0 .3 % increase in output per cow.

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Efficiency gains. But what's really underpinning

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all this, even with the price volatility, are

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the strong returns producers saw back in 2024.

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returns seem to be driving expectations for continued

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herd expansion into 2025. Producers are responding

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to that recent profitability. Okay, so we've

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got this picture of growth, but also price volatility

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that really forces us to unpack what the Bullvine

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article flags as a major, maybe the major underlying

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force here, which is this profound... geographic

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realignment happening in U .S. dairy. It's not

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just about where the cows are moving. It's about

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the whole comparative cost landscape. It's shifting

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dramatically across the country. Precisely. And

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the Bullbine article meticulously dissects this,

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breaking the U .S. down into five distinct major

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dairy regions. Each one has its own unique characteristics

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that profoundly influence profitability and,

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let's be honest, long -term operational viability.

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Understanding these differences, it's not optional

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anymore. It's absolutely foundational to any

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strategic planning you're doing. Okay, let's

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map them out then. So first, the Great Plains.

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That's areas like Kansas, Nebraska, Colorado,

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the Texas High Plains. These are regions that

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are, well, they're rapidly emerging as significant

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new centers for dairy, really challenging the

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old guard. Yeah. Then you've got the region we've

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known for decades as the traditional dairy belt.

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Think Wisconsin, Minnesota, Iowa, Illinois. These

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are the historical strongholds, right? Where

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so much of the industry's legacy was built. Then

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moving west. Moving westward, we look at the

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western states. California, Idaho, Washington,

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Oregon. Now this is a region that has seen just

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immense shifts in its dairy landscape, especially

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with the last decade or so. Lots of consolidation

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and change. Okay. And then heading southeast.

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Then we look at the southeastern expansion states.

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Places like Georgia, North Carolina, Virginia,

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Tennessee. These areas are experiencing considerable

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growth and modernization. Often you see brand

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new large -scale operations popping up there.

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Right. And finally, the northeastern traditional

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states. New York, Pennsylvania, Vermont. These

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states, obviously, they have a really strong

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dairy heritage, a deep connection to the land.

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generations of farming. But as this analysis

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seems to suggest, that dairy heritage might,

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kind of surprisingly, come with a very real,

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tangible hidden cost, something that impacts

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competitiveness today. That's exactly what the

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numbers suggest. Now let's try and connect these

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regions directly to the overall cost of production

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per hundredweight. Nationally, we did see a positive

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trend. The average total cost per hundred decreased

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to $23 .60 in 2024. That's a notable improvement

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from $26 .74 back in 2023. And this actually

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resulted in a positive net return on average

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of $1 .42 per hundred across the whole U .S.

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Now that sounds like pretty good news on the

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surface, right? A clear rebound from losses the

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year before. Yeah, the $1 .42 positive sounds

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okay nationally, but you're saying that hides

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the real story. It really does. Here's where

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it gets truly illuminating. This national average,

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as our data models clearly indicate, it completely

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obscures some truly significant regional variations.

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What we're witnessing, and the data backs this

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up, is a profound geographic realignment of dairy

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production that's actively underway, driven almost

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purely by economic forces. And it's not subtle,

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is it? The Bullvine article points to some...

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Frankly, shocking changes in production volume.

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Just looking at the May 2025 data, we're seeing

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these remarkable double digit increases in places

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like Kansas up 15 .7%. Texas up 8 .9%. South

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Dakota up 9 .5%. Huge jumps. Huge jumps. And

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at the exact same time, those traditional dairy

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regions, the historic strongholds, they're experiencing

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sharp declines. California down 1 .8%. Illinois

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down 4 .0%. Oregon down 2 .3%. Washington down

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3 .3%. This can't just be coincidence. That pattern

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is too strong. it feels like a fundamental restructuring

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it absolutely is and the pattern is unmistakable

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these dramatic shifts they reflect deep -seated

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economic advantages in those growing regions

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think about it These new powerhouses, they aren't

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just inheriting old infrastructure. They are

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actively building entirely new production systems,

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systems optimized right from the blueprint stage

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for maximum efficiency and, frankly, unprecedented

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scale. This fundamentally translates to lower

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per unit costs and enhanced profitability, even

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if we don't have explicit procurate cost data

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yet for these brand new systems. Plus, you have

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the presence of modern processing infrastructure

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nearby and critically, often more favorable regulatory

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environments. Those contribute. significantly

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too. This trend, as the bullvine argues, it strongly

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signals that the historical advantages of the

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older dairy regions, they're actively diminishing.

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It's compelling producers like you to seriously

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consider new locations that are simply more conducive

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to modern, efficient, large -scale operations.

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For anyone making strategic location decisions

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right now, this isn't just a consideration, it's

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probably the critical consideration. And speaking

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of scale, that brings us right to an uncomfortable

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truth that the bullvine article just keeps hammering

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home. Scale continues to be just a paramount

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driver of cost efficiency. It seems like a universal

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principle here. Larger operations generally reduce

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production costs per hundredweight, and this

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reality is just unquivocally accelerating industry

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consolidation. And we're not just talking theory

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or anecdotes here. There's verified USDA Economic

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Research Service data providing pretty incontrovertible

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proof. Consider this. The average total cost

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per hundred pounds of milk. It's a staggering

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$42 .70 for herds with fewer than 50 cows. $42

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.70. Now, compare that to farms operating with

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2 ,000 or more cows. That average total cost,

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it plummets to just $19 .14. $19 .14. Wow. Okay,

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that is not a small difference. It's huge. It's

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a substantial $23 .56 per hundred up advantage,

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purely based on scale. $23 .56. That's a colloquial

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disparity. It's not just a statistical quirk.

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It's like an economic chasm opening up. The Bullvine

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article calculates this creates an $83 ,220 annual

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viability gap just for a 500 -cow operation,

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simply due to lacking scale. especially when

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you factor in the projected margin compression

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we might see. That kind of relentless economic

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pressure year in, year out, it just fundamentally

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reshapes the entire industry and, like you said,

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significantly speeds up consolidation. Smaller

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operations just face this massive uphill battle.

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Exactly. This economic reality, it means that

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for many smaller operations, the paths forward

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are getting narrower. It's either, you know,

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dramatic expansion to try and achieve a competitive

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scale or a strategic pivot towards highly specialized,

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high value niche markets where maybe volume isn't

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the primary driver. Or in some cases, it might

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mean a carefully planned and hopefully dignified

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exit from the industry. This fundamental principle,

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the absolute necessity of scale, it applies across.

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all regions. It really forms a foundational element

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for any expansion strategy you might be considering.

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And if we connect this back to the bigger picture,

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achieving optimal operational scale is just as

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critically important to your financial future

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as the specific geographic region you choose

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to operate in. Okay, so scale is key. Now let's

00:12:39.279 --> 00:12:41.179
dive into that regional profitability and the

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net returns for 2024. You mentioned what the

00:12:43.980 --> 00:12:47.460
bullvine Sarkley calls the $12 .70 per hundred

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block chasm. That sounds dramatic. We know the

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national average net return improved to $1 .42

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positive in 2024. a nice turnaround for the $4

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.23 loss in 2023. But again, this aggregate figure,

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it completely masks these substantial regional

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disparities. It's like that average temperature

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analogy you use, some places freezing, some sweltering.

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That's a perfect analogy. Let's break down some

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of those state -level net returns for 2024 just

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to illustrate this point clearly. California,

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despite seeing some production decline, actually

00:13:15.789 --> 00:13:18.029
saw a strong improvement in profitability. A

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positive $5 .42 per hundred net return, pretty

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strong. Iowa also posted positive returns, plus

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$1 .40 per Kentucky achieved a positive $1 .13

00:13:27.610 --> 00:13:30.669
per hundred beat. So some bright spots. OK, positive

00:13:30.669 --> 00:13:32.870
returns in those states. What about the traditional

00:13:32.870 --> 00:13:35.210
heartland like Wisconsin? Wisconsin, interestingly,

00:13:35.389 --> 00:13:38.169
was basically treading water, nearing breakeven,

00:13:38.190 --> 00:13:40.309
but with a slight loss of negative zeros for

00:13:40.309 --> 00:13:42.789
four cents per hundred eight. Barely breakeven.

00:13:42.889 --> 00:13:44.950
But then you look at New York, still stubbornly

00:13:44.950 --> 00:13:47.409
negative with a loss of $1 .46 per hundred feet.

00:13:47.649 --> 00:13:50.149
Indiana was even less profitable, a loss of $4

00:13:50.149 --> 00:13:53.409
.60 per hundred feet. Pennsylvania suffered consistent

00:13:53.409 --> 00:13:56.240
deeper losses. negative seven dollars and six

00:13:56.240 --> 00:13:58.679
per hundred degree and michigan was right there

00:13:58.679 --> 00:14:01.200
among the most costly states to operate in showing

00:14:01.200 --> 00:14:03.000
a loss of seven dollars and twenty eight cents

00:14:03.000 --> 00:14:04.899
per hundred feet so let's process that for you

00:14:04.899 --> 00:14:06.799
the dairy producer listening what does this brutal

00:14:06.799 --> 00:14:09.080
math really mean for your actual balance sheet

00:14:09.080 --> 00:14:11.720
it means a michigan operation purely because

00:14:11.720 --> 00:14:13.820
of where it's located starts every single year

00:14:13.820 --> 00:14:15.659
twelve dollars seventy cents per hundred weight

00:14:16.240 --> 00:14:18.679
behind a comparable California operation, $12

00:14:18.679 --> 00:14:21.299
.70. Now, let's translate that. For just a standard

00:14:21.299 --> 00:14:24.779
1 ,000 -cow operation, it's a shocking $178 ,000

00:14:24.779 --> 00:14:27.240
annually, just vanishing from your potential

00:14:27.240 --> 00:14:29.259
profits. Before you even think about the compounding

00:14:29.259 --> 00:14:31.340
effects over decades, that's not a small difference.

00:14:31.419 --> 00:14:33.399
That's a critical location -based competitive

00:14:33.399 --> 00:14:35.980
disadvantage. It's huge, and if we extrapolate

00:14:35.980 --> 00:14:38.700
that out further... say over a typical 20 -year

00:14:38.700 --> 00:14:41.799
facility depreciation period. This persistent

00:14:41.799 --> 00:14:44.659
location disadvantage compounds to a staggering

00:14:44.659 --> 00:14:47.980
$3 .56 million in lost competitive advantage.

00:14:48.220 --> 00:14:51.279
Three and a half million dollars just gone because

00:14:51.279 --> 00:14:53.899
of geography? Exactly. That's the power of location

00:14:53.899 --> 00:14:56.919
economics. The persistence of these losses in

00:14:56.919 --> 00:14:59.399
states like Michigan, Indiana, New York, Pennsylvania,

00:14:59.700 --> 00:15:02.899
even as the national average improved. It strongly

00:15:02.899 --> 00:15:05.480
suggests that their underlying fixed invariable

00:15:05.480 --> 00:15:08.120
costs things like unpaid labor assumptions capital

00:15:08.120 --> 00:15:11.440
recovery repairs equipment general overhead there's

00:15:11.440 --> 00:15:14.539
just disproportionately high or maybe less adaptable

00:15:14.539 --> 00:15:17.500
to market swings this data unequivocally highlights

00:15:17.500 --> 00:15:19.679
that relying only on national outlooks can be

00:15:19.679 --> 00:15:21.980
incredibly misleading for you you simply must

00:15:21.980 --> 00:15:24.779
know your specific regional economic reality

00:15:24.779 --> 00:15:28.159
okay as if those regional cost disparities weren't

00:15:28.159 --> 00:15:30.179
enough to worry about there's another subtle

00:15:30.179 --> 00:15:32.240
but apparently potent cost factor you mentioned

00:15:32.240 --> 00:15:35.120
earlier What the bull line calls the hidden tax

00:15:35.120 --> 00:15:37.740
of processing proximity. An often underestimated

00:15:37.740 --> 00:15:40.159
cost that can just quietly eat away at your profitability.

00:15:40.480 --> 00:15:42.419
It absolutely does. Let's look at the numbers

00:15:42.419 --> 00:15:45.600
again. Mill calling charges, for instance. They

00:15:45.600 --> 00:15:48.720
surged by a significant 21 % in just one year.

00:15:49.179 --> 00:15:51.919
Jumped from 51 cents to 62 cents per hundred

00:15:51.919 --> 00:15:55.120
foot. This isn't just a tiny inflationary adjustment.

00:15:55.299 --> 00:15:58.559
It's a direct, measurable, and escalating burden

00:15:58.559 --> 00:16:02.480
on your operations finances. 21 % in one year

00:16:02.480 --> 00:16:05.700
is steep. It is. And for farms shipping milk

00:16:05.700 --> 00:16:08.460
more than 50 miles, this translates directly

00:16:08.460 --> 00:16:11.120
into a quantifiable hidden tax ranging anywhere

00:16:11.120 --> 00:16:13.799
from 35 cents up to 93 cents per hundred per

00:16:13.799 --> 00:16:15.919
weight. Depends on your volume and the exact

00:16:15.919 --> 00:16:17.779
distance, of course. But let's put that into

00:16:17.779 --> 00:16:21.159
perspective. For a 1 ,000 cow operation, these

00:16:21.159 --> 00:16:23.419
transportation costs alone can easily amount

00:16:23.419 --> 00:16:26.559
to over $164 ,000 annually. That's essentially

00:16:26.559 --> 00:16:28.360
avoidable expense if you happen to be closer

00:16:28.360 --> 00:16:31.580
to a processor. $164 ,000. That's a huge figure.

00:16:31.740 --> 00:16:33.700
And it feels like something many producers might

00:16:33.700 --> 00:16:35.820
just see as a logistics cost, not really a location

00:16:35.820 --> 00:16:38.899
problem. But it is, isn't it? A subtle penalty

00:16:38.899 --> 00:16:41.299
for being in the wrong spot relative to processing?

00:16:41.789 --> 00:16:44.049
It absolutely is. And the industry is clearly

00:16:44.049 --> 00:16:47.129
responding to this reality. You see these significant

00:16:47.129 --> 00:16:49.649
investments in new processing infrastructure

00:16:49.649 --> 00:16:54.429
like that impressive $186 .3 million DRI facility

00:16:54.429 --> 00:16:57.750
going up in Nebraska. That fundamentally underscores

00:16:57.750 --> 00:16:59.690
a critical shift in the industry's strategic

00:16:59.690 --> 00:17:02.649
priorities. Processing proximity is increasingly

00:17:02.649 --> 00:17:04.670
determining farm viability and profitability,

00:17:04.990 --> 00:17:07.029
maybe even more than just on -farm production

00:17:07.029 --> 00:17:09.250
efficiency alone. You could have the most efficient

00:17:09.250 --> 00:17:11.109
dairy operation in the world running perfectly.

00:17:11.369 --> 00:17:13.829
But if your milk has to travel hundreds of miles

00:17:13.829 --> 00:17:16.190
to get processed, those excessive transportation

00:17:16.190 --> 00:17:18.329
costs can just utterly undermine your margins.

00:17:18.529 --> 00:17:20.910
It makes processing proximity an absolutely crucial

00:17:20.910 --> 00:17:23.089
consideration for your strategic location and

00:17:23.089 --> 00:17:25.450
expansion decisions. It's about optimizing the

00:17:25.450 --> 00:17:27.710
entire supply chain, not just focusing inside

00:17:27.710 --> 00:17:30.109
the farm gate. That's an incredible amount of

00:17:30.109 --> 00:17:33.829
detail just on the regional cost landscape. It

00:17:33.829 --> 00:17:36.049
really highlights how complex this whole picture

00:17:36.049 --> 00:17:38.829
is becoming. Now let's do that deep dive into

00:17:38.829 --> 00:17:41.369
some key granular cost categories themselves.

00:17:42.170 --> 00:17:44.450
Explore the regional variations, the trends,

00:17:44.569 --> 00:17:47.589
starting with feed costs, which, as we all know,

00:17:47.589 --> 00:17:49.730
are often the single dominant variable and a

00:17:49.730 --> 00:17:52.000
constant source of, well, headaches and volatility.

00:17:52.279 --> 00:17:55.059
Yeah. Feed expenses consistently represent the

00:17:55.059 --> 00:17:57.400
largest single cost category for dairy farms.

00:17:57.799 --> 00:18:00.619
Often it's over 40 % of total operating costs

00:18:00.619 --> 00:18:03.019
nationally. And if you look globally, that figure

00:18:03.019 --> 00:18:06.079
can climb even higher, sometimes as high as 48%.

00:18:06.079 --> 00:18:09.359
It's the big one. The outlook for 2025, according

00:18:09.359 --> 00:18:11.519
to the Bullvine article and our internal projections,

00:18:11.819 --> 00:18:14.579
it does indicate a generally more favorable environment

00:18:14.579 --> 00:18:16.920
for feed costs, which is certainly welcome news.

00:18:17.180 --> 00:18:20.180
But, and this is a big but, regional variations

00:18:20.180 --> 00:18:22.700
and that inherent market volatility remain critical

00:18:22.700 --> 00:18:25.640
considerations. It demands constant vigilance.

00:18:25.640 --> 00:18:27.619
Okay, so the projections for 2025 are looking,

00:18:27.660 --> 00:18:30.460
on the whole, pretty optimistic then? Generally,

00:18:30.460 --> 00:18:32.839
yes. Overall feed expenses are anticipated to

00:18:32.839 --> 00:18:36.259
decrease by... pretty notable 10 .1%, down to

00:18:36.259 --> 00:18:40.559
an estimated $62 .4 billion nationwide. That's

00:18:40.559 --> 00:18:43.920
a substantial reduction from 2024 levels. Now,

00:18:44.000 --> 00:18:46.619
this decline, coupled with the potentially higher

00:18:46.619 --> 00:18:48.680
dairy prices we discussed earlier, is expected

00:18:48.680 --> 00:18:50.680
to come together to create what the bullvine

00:18:50.680 --> 00:18:53.319
actually describes as an exceptional profit environment

00:18:53.319 --> 00:18:55.859
for producers. Sounds like a much -needed reprieve

00:18:55.859 --> 00:18:58.220
after some tough years. It certainly does. Let's

00:18:58.220 --> 00:19:00.039
break down some of the key commodity prices feeding

00:19:00.039 --> 00:19:02.259
into this. Corn, for instance, is projected to

00:19:02.259 --> 00:19:06.099
be in the range of $4 .20, $4 .39 per bushel

00:19:06.099 --> 00:19:08.779
for 2025. That's a significant decrease from

00:19:08.779 --> 00:19:12.319
the $6 .54 average we saw back in 2023. Even

00:19:12.319 --> 00:19:14.859
with some regional bumps like Indiana's Q1 2025

00:19:14.859 --> 00:19:18.240
price heading $4 .58, the overall trend is clearly

00:19:18.240 --> 00:19:20.799
downward. Soybean meal, another big one, expected

00:19:20.799 --> 00:19:24.220
to average maybe $300 to $310 per ton in 2025.

00:19:24.680 --> 00:19:27.359
Again, significantly lower than the $420 plus

00:19:27.359 --> 00:19:30.299
we saw in 2023. And alfalfa hay, which thankfully

00:19:30.299 --> 00:19:32.779
softened quite a bit through 2024, is projected

00:19:32.779 --> 00:19:37.000
around $170, $180 per ton for 2025. That's a

00:19:37.000 --> 00:19:40.220
notable drop from $251 per ton in 2024. These

00:19:40.220 --> 00:19:42.410
are all really positive indicators for your input

00:19:42.410 --> 00:19:44.670
costs. So the national trends look promising,

00:19:44.809 --> 00:19:46.910
definitely. But we know regional differences

00:19:46.910 --> 00:19:49.500
are always lurking. How do those regional price

00:19:49.500 --> 00:19:52.099
variations and maybe supply chain impacts factor

00:19:52.099 --> 00:19:54.900
into the real feed cost picture? Because a national

00:19:54.900 --> 00:19:57.059
average can hide a multitude of sins. Right.

00:19:57.140 --> 00:19:59.259
They're absolutely critical to understanding

00:19:59.259 --> 00:20:01.319
your true cost. Let me give you a really concrete

00:20:01.319 --> 00:20:05.000
example from the Bullvine article. In 2024, Wisconsin's

00:20:05.000 --> 00:20:08.019
corn prices were around $4 .04 per bushel, and

00:20:08.019 --> 00:20:11.799
alfalfa hay was about $160 per ton. Okay. Now,

00:20:11.819 --> 00:20:14.859
New York on the surface had cheaper corn at $3

00:20:14.859 --> 00:20:18.029
.08 per bushel. Sounds good, right? A nice advantage.

00:20:18.390 --> 00:20:20.990
Yeah, seems like it. New York's alfalfa hay cost

00:20:20.990 --> 00:20:24.730
a staggering $2 .26 per ton in that same period.

00:20:25.009 --> 00:20:28.490
Now compare that to Iowa in February 2025, where

00:20:28.490 --> 00:20:31.470
alfalfa hay was reportedly as low as $105 ,000

00:20:31.470 --> 00:20:33.970
per ton. Huge difference. And Texas, around the

00:20:33.970 --> 00:20:38.150
same time, saw corn prices about $4 .45, $4 .58,

00:20:38.450 --> 00:20:42.269
soybeans around $10 .76. So different mixes everywhere.

00:20:42.529 --> 00:20:44.150
That New York example is really telling, though.

00:20:44.210 --> 00:20:46.170
It highlights how a seemingly small regional

00:20:46.170 --> 00:20:48.539
advantage one feed commodity can just be completely

00:20:48.539 --> 00:20:50.799
wiped out by a significant disadvantage in another

00:20:51.240 --> 00:20:53.460
Precisely. The bullvine explicitly highlights

00:20:53.460 --> 00:20:56.599
this. New York's apparent corn advantage. It

00:20:56.599 --> 00:20:59.900
just evaporates when its alfalfa costs $66 per

00:20:59.900 --> 00:21:04.160
ton more than Iowa's. $66. Now, for a 1 ,000

00:21:04.160 --> 00:21:06.940
cow operation consuming, let's say, 8, 10 tons

00:21:06.940 --> 00:21:10.160
of alfalfa daily, that difference alone translates

00:21:10.160 --> 00:21:14.299
to an additional $192 ,000 to $240 ,000 annually

00:21:14.299 --> 00:21:16.500
just in feed excesses. Wow. Just from that one

00:21:16.500 --> 00:21:19.059
input difference. Yeah. That's a substantial...

00:21:19.579 --> 00:21:22.640
often hidden regional cost that directly hammers

00:21:22.640 --> 00:21:24.940
your profitability, regardless of what the national

00:21:24.940 --> 00:21:27.220
price forecasts say. It truly underscores the

00:21:27.220 --> 00:21:28.960
need for you to have a holistic view of your

00:21:28.960 --> 00:21:31.660
specific regional input market, not just cherry

00:21:31.660 --> 00:21:34.119
picking one commodity price. Wow, that's a huge,

00:21:34.299 --> 00:21:36.220
almost invisible drain on capital right there.

00:21:36.380 --> 00:21:38.359
So given these regional nuances and the inherent

00:21:38.359 --> 00:21:41.279
volatility, what can you as a producer actually

00:21:41.279 --> 00:21:44.240
do to proactively optimize these feed costs beyond

00:21:44.240 --> 00:21:46.559
just hoping for low market prices? Improving

00:21:46.559 --> 00:21:49.400
feed efficiency itself is paramount. Our data

00:21:49.400 --> 00:21:51.839
models consistently show that improvements there

00:21:51.839 --> 00:21:54.579
can reduce your production costs by a significant

00:21:54.579 --> 00:21:58.680
$1 .75 or $0 .25 per hundred WD and more advanced

00:21:58.680 --> 00:22:01.319
strategies focusing on efficiency. They can actually

00:22:01.319 --> 00:22:07.000
save you up to $470 per cow annually. $470 per

00:22:07.000 --> 00:22:09.460
cow. That adds up. It really does. We're talking

00:22:09.460 --> 00:22:12.200
about tangible savings directly tied to how efficiently

00:22:12.200 --> 00:22:14.920
your herd converts feed into milk. Things like...

00:22:15.259 --> 00:22:17.740
Precision feeding systems, for example, especially

00:22:17.740 --> 00:22:20.339
when combined with AI -driven ration optimization,

00:22:20.799 --> 00:22:23.200
they have demonstrated potential to cut feed

00:22:23.200 --> 00:22:26.240
costs by 5 -10%. And they do that while maintaining

00:22:26.240 --> 00:22:28.720
or even improving your production levels. Furthermore,

00:22:28.859 --> 00:22:31.240
using strategic procurement methods like forward

00:22:31.240 --> 00:22:33.579
contracting maybe 60 -70 % of your anticipated

00:22:33.579 --> 00:22:36.420
feed needs, that offers crucial price certainty.

00:22:36.519 --> 00:22:38.500
It allows you to capitalize on favorable market

00:22:38.500 --> 00:22:40.680
dips rather than just being completely at the

00:22:40.680 --> 00:22:43.019
mercy of daily price swings. Gives you some control.

00:22:43.920 --> 00:22:46.779
Okay, despite this generally positive outlook

00:22:46.779 --> 00:22:49.279
for feed prices overall, there's always that

00:22:49.279 --> 00:22:51.079
element of risk, isn't there? It's never guaranteed.

00:22:51.339 --> 00:22:53.819
What are the top volatility risks that producers

00:22:53.819 --> 00:22:56.839
absolutely need to keep on their radar? You're

00:22:56.839 --> 00:22:59.180
absolutely right to emphasize that. While multiple

00:22:59.180 --> 00:23:01.980
sources are forecasting these significant decreases

00:23:01.980 --> 00:23:05.880
in feed costs for 2025, these same sources explicitly

00:23:05.880 --> 00:23:08.420
highlight what they call top volatility risks.

00:23:08.759 --> 00:23:11.099
And you need to be aware of these. They include

00:23:11.099 --> 00:23:13.579
things like... unpredictable weather extremes

00:23:13.579 --> 00:23:16.119
think persistent drought in the western corn

00:23:16.119 --> 00:23:19.079
belt which can just devastate crop yields there

00:23:19.079 --> 00:23:21.240
are also geopolitical uncertainties that can

00:23:21.240 --> 00:23:23.480
suddenly disrupt global supply chains you never

00:23:23.480 --> 00:23:25.980
know when that might happen and significant fluctuations

00:23:25.980 --> 00:23:29.220
in energy prices those directly impact fertilizer

00:23:29.220 --> 00:23:31.779
production costs and transportation costs for

00:23:31.779 --> 00:23:34.450
feed right the ripple effects Exactly. Shifts

00:23:34.450 --> 00:23:37.210
in biofuel policies can divert crops away from

00:23:37.210 --> 00:23:39.970
feed use and broader macroeconomic pressures

00:23:39.970 --> 00:23:42.390
like inflation, interest rates, they all play

00:23:42.390 --> 00:23:44.710
a role. So what this implies is while the average

00:23:44.710 --> 00:23:47.269
forecast might be lower, short term price spikes

00:23:47.269 --> 00:23:49.529
or significant regional supply chain disruptions

00:23:49.529 --> 00:23:52.309
are not only possible, but frankly, highly probable.

00:23:52.470 --> 00:23:55.089
Something will likely happen somewhere. This

00:23:55.089 --> 00:23:57.509
absolutely necessitates proactive risk management

00:23:57.509 --> 00:24:00.670
strategies and continued investment in those

00:24:00.670 --> 00:24:02.720
feed efficiency technologies to try and buffer

00:24:02.720 --> 00:24:05.859
against unexpected price surges. It really demands

00:24:05.859 --> 00:24:08.359
continuous market monitoring from you, not just

00:24:08.359 --> 00:24:10.819
a set it and forget it approach based on one

00:24:10.819 --> 00:24:13.240
forecast. Okay, a lot to watch on the feed front.

00:24:13.319 --> 00:24:16.259
Let's pivot now to labor costs. This is another

00:24:16.259 --> 00:24:17.900
area that seems to be becoming an increasingly

00:24:17.900 --> 00:24:21.240
significant and rising operational burden for

00:24:21.240 --> 00:24:23.420
dairy farms everywhere. It feels like a challenge

00:24:23.420 --> 00:24:25.839
everyone in agriculture is wrestling with. Oh,

00:24:25.839 --> 00:24:28.339
indeed. Labor consistently makes up a significant

00:24:28.339 --> 00:24:31.180
chunk of total dairy farm operating costs, typically

00:24:31.180 --> 00:24:34.690
around 25%. And our data indicates it can be

00:24:34.690 --> 00:24:37.049
even higher for larger, more labor -intensive

00:24:37.049 --> 00:24:39.809
operations. This whole expense category is projected

00:24:39.809 --> 00:24:43.269
to reach record highs in 2025. Total costs forecast

00:24:43.269 --> 00:24:46.839
to increase to $53 .5 billion nationally. Now,

00:24:46.859 --> 00:24:49.480
that represents a 9 .5 % rise just since 2023.

00:24:49.740 --> 00:24:51.460
This isn't just simple inflation. It feels like

00:24:51.460 --> 00:24:53.539
a structural shift in the cost of human capital

00:24:53.539 --> 00:24:55.420
on farms. And what are we seeing in terms of

00:24:55.420 --> 00:24:58.240
the actual average hourly wages across different

00:24:58.240 --> 00:25:00.880
regions for 2025? Are there big disparities there,

00:25:00.920 --> 00:25:02.839
too? There are, and they're important to track.

00:25:03.420 --> 00:25:05.339
Nationally, if you look at employer costs for

00:25:05.339 --> 00:25:07.880
employee compensation, including benefits, that

00:25:07.880 --> 00:25:11.319
averaged $45 .38 per hour back in March 2025.

00:25:12.140 --> 00:25:14.740
But focusing specifically on hired farm workers,

00:25:14.920 --> 00:25:18.519
the national average wage was $19 .52 per hour

00:25:18.519 --> 00:25:21.799
during the April 2025 reference week. Regionally,

00:25:21.799 --> 00:25:24.099
you see differences. Wisconsin workers averaged

00:25:24.099 --> 00:25:27.599
$18 .34 per hour, but that had a wide range from

00:25:27.599 --> 00:25:31.420
$11 .40 up to $23 .54, depending on the specific

00:25:31.420 --> 00:25:35.319
job. California saw average wages of $17 .93

00:25:35.319 --> 00:25:38.380
per hour, again with a big range from $11 .15

00:25:38.380 --> 00:25:42.009
to $23 .01. New York's minimum wage for farm

00:25:42.009 --> 00:25:44.809
workers is notable, too, ranging from $15 .50

00:25:44.809 --> 00:25:47.470
up to $17 per hour, depending on the region and

00:25:47.470 --> 00:25:49.950
the size of the employer. In the mountain regions

00:25:49.950 --> 00:25:52.450
like New Mexico, livestock workers averaged around

00:25:52.450 --> 00:25:56.650
$17 .54, $70 .73 per hour. These variations,

00:25:56.789 --> 00:25:58.630
even if they seem small per hour, they add up

00:25:58.630 --> 00:26:01.210
incredibly quickly across a full staff. That's

00:26:01.210 --> 00:26:03.529
a pretty wide range state by state. And I imagine

00:26:03.529 --> 00:26:05.849
labor availability and crucially things like

00:26:05.849 --> 00:26:07.769
immigration policies, they have a huge, almost

00:26:07.769 --> 00:26:09.690
unquantifiable impact here, don't they? How does

00:26:09.690 --> 00:26:11.210
turnover factor in as well? That's got to be

00:26:11.210 --> 00:26:14.019
costly. They absolutely do. These escalating

00:26:14.019 --> 00:26:16.519
labor costs, they're significantly exacerbated

00:26:16.519 --> 00:26:18.759
by these pervasive challenges in just finding

00:26:18.759 --> 00:26:21.920
available labor and the direct impact of immigration

00:26:21.920 --> 00:26:24.500
policies. For instance, some proposed policies

00:26:24.500 --> 00:26:26.180
that could potentially reduce the availability

00:26:26.180 --> 00:26:28.799
of non -U .S. workers. Estimates suggest they

00:26:28.799 --> 00:26:31.220
might increase farm wage costs by around 20 percent

00:26:31.220 --> 00:26:33.900
and maybe temporarily lead to a 10 percent decline

00:26:33.900 --> 00:26:36.619
in productivity as farms adjust. Now, for a typical

00:26:36.619 --> 00:26:39.599
250 cow dairy, the bullvine suggests this could

00:26:39.599 --> 00:26:42.069
result in a significant annual hit to net farm

00:26:42.069 --> 00:26:44.789
operating income, ranging from $27 ,000 all the

00:26:44.789 --> 00:26:49.009
way up to a staggering $110 ,000 loss. $110 ,000

00:26:49.009 --> 00:26:51.250
just from policy changes potentially affecting

00:26:51.250 --> 00:26:53.890
labor supply. Wow. It's a massive potential impact.

00:26:54.049 --> 00:26:57.170
And turnover. Yeah, that's a huge, often overlooked

00:26:57.170 --> 00:26:59.970
financial dream. Just poor onboarding practices

00:26:59.970 --> 00:27:04.150
alone can cost you over $4 ,425 per new hire.

00:27:04.269 --> 00:27:06.349
That's in lost productivity, recruitment expenses,

00:27:06.630 --> 00:27:09.079
training time. Furthermore, while the industry

00:27:09.079 --> 00:27:11.000
standard turnover rates can be sadly as high

00:27:11.000 --> 00:27:14.319
as 35%, our data indicates these can be dramatically

00:27:14.319 --> 00:27:17.240
reduced, maybe down to under 10%, with strategic

00:27:17.240 --> 00:27:19.880
investments. Things like providing quality employee

00:27:19.880 --> 00:27:22.319
housing can make a huge difference. Plus, you

00:27:22.319 --> 00:27:24.440
have the cost of H -2A guest workers, those non

00:27:24.440 --> 00:27:27.200
-immigrant workers authorized for ag labor. They

00:27:27.200 --> 00:27:29.539
can range from $25, $30 per hour, which is often

00:27:29.539 --> 00:27:32.400
higher than the $15, $25 you might pay domestic

00:27:32.400 --> 00:27:34.940
labor. And then on top of that, the disaggregation

00:27:34.940 --> 00:27:37.119
rule, which basically requires workers to paid

00:27:37.119 --> 00:27:39.220
the highest possible wage for any task they perform

00:27:39.220 --> 00:27:41.759
during their shift, even minor ones. All these

00:27:41.759 --> 00:27:43.960
factors can significantly inflate your real labor

00:27:43.960 --> 00:27:46.660
expenses. So with labor costs clearly on this

00:27:46.660 --> 00:27:48.720
relentless upward trajectory, what role does

00:27:48.720 --> 00:27:50.839
automation play in trying to mitigate this burden?

00:27:50.960 --> 00:27:53.240
Is it still just an option or has it really become

00:27:53.240 --> 00:27:55.660
more of a necessity for survival? Given these

00:27:55.660 --> 00:27:58.099
accelerating labor costs and availability issues,

00:27:58.400 --> 00:28:01.599
strategic investment in automation is unequivocally

00:28:01.599 --> 00:28:04.599
no longer a luxury. It's really become a competitive

00:28:04.599 --> 00:28:07.420
necessity. The Bullvine calls it a critical survival

00:28:07.420 --> 00:28:09.700
strategy for modern dairy farms, and I think

00:28:09.700 --> 00:28:12.059
that's accurate. Our models indicate that strategic

00:28:12.059 --> 00:28:14.279
automation can potentially reduce your annual

00:28:14.279 --> 00:28:18.039
labor costs per cow from around $375 down to

00:28:18.039 --> 00:28:21.210
maybe $165. That's a huge drop, over half. It's

00:28:21.210 --> 00:28:24.390
a remarkable 56 % reduction. And crucially, that

00:28:24.390 --> 00:28:26.710
kind of saving can pay for the automation investment

00:28:26.710 --> 00:28:29.089
itself in under two years, especially during

00:28:29.089 --> 00:28:31.609
periods of acute labor shortages when wages spike.

00:28:32.460 --> 00:28:35.079
Now, robotic milking systems, they are certainly

00:28:35.079 --> 00:28:37.839
a significant capital outlay. We're talking $150

00:28:37.839 --> 00:28:42.000
,000, $275 ,000 per unit, maybe up to $300 ,000

00:28:42.000 --> 00:28:44.500
per robotic unit once installation is factored

00:28:44.500 --> 00:28:47.119
in. Big numbers. But they offer a surprisingly

00:28:47.119 --> 00:28:49.579
rapid payback period, estimated around seven

00:28:49.579 --> 00:28:51.980
years. That's dramatically faster than the over

00:28:51.980 --> 00:28:54.220
15 years you often see projected for just doing

00:28:54.220 --> 00:28:56.539
conventional parlor upgrades. And beyond the

00:28:56.539 --> 00:28:58.619
direct cost savings on labor, these systems can

00:28:58.619 --> 00:29:01.500
also often boost milk production by 15 -20 %

00:29:01.500 --> 00:29:04.230
per capita. cow, an increase overall labor efficiency

00:29:04.230 --> 00:29:06.930
may be up to 2 .2 million pounds of milk per

00:29:06.930 --> 00:29:09.269
full -time worker compared to maybe 1 .5 million

00:29:09.269 --> 00:29:11.529
pounds in conventional parlors. That's a really

00:29:11.529 --> 00:29:13.369
compelling financial argument for automation

00:29:13.369 --> 00:29:15.950
then. Are there other examples of automated systems

00:29:15.950 --> 00:29:18.289
offering this kind of tangible, quantifiable

00:29:18.289 --> 00:29:20.630
return on investment? Oh, absolutely. Automated

00:29:20.630 --> 00:29:23.049
systems like, say, how manager technology systems

00:29:23.049 --> 00:29:24.789
that monitor health and reproduction, they've

00:29:24.789 --> 00:29:27.329
demonstrated substantial and quantifiable returns.

00:29:28.089 --> 00:29:31.490
Our data shows them generating around $32 ,611

00:29:31.490 --> 00:29:34.369
in annual ROI for an average dairy using them.

00:29:34.509 --> 00:29:36.869
They can reduce the labor needed for heat detection

00:29:36.869 --> 00:29:41.009
by 50 % and contribute potentially up to $668

00:29:41.009 --> 00:29:43.589
,000 in added revenue from performance benefits.

00:29:43.869 --> 00:29:46.829
Things like achieving a 20 % reduction in mastitis

00:29:46.829 --> 00:29:50.450
cases or 15 % less lameness through early detection.

00:29:50.809 --> 00:29:53.150
Huge health benefits with financial payoffs.

00:29:53.250 --> 00:29:55.509
So this establishes a really clear cause and

00:29:55.509 --> 00:29:58.509
effect. Rising labor costs necessitate automation.

00:29:58.869 --> 00:30:00.650
And automation, when implemented strategically,

00:30:01.009 --> 00:30:03.009
provides a substantial and verifiable financial

00:30:03.009 --> 00:30:05.309
benefit. It really positions it as a critical

00:30:05.309 --> 00:30:07.410
strategic investment for your long -term viability.

00:30:07.730 --> 00:30:10.049
For dairy producers, just trying to manage labor

00:30:10.049 --> 00:30:12.210
costs with the same old traditional methods is

00:30:12.210 --> 00:30:14.569
no longer sufficient. Proactive investment in

00:30:14.569 --> 00:30:16.730
automation is rapidly becoming a key competitive

00:30:16.730 --> 00:30:19.150
differentiator. And it's a fundamental pathway

00:30:19.150 --> 00:30:21.690
to long -term profitability, directly influencing

00:30:21.690 --> 00:30:24.269
expansion decisions too, as new facilities can

00:30:24.269 --> 00:30:25.910
be designed with automation built in from the

00:30:25.910 --> 00:30:27.740
start. start. That makes perfect sense. It's

00:30:27.740 --> 00:30:30.160
about future -proofing the operation. But I imagine

00:30:30.160 --> 00:30:32.960
the actual feasibility of implementing automation

00:30:32.960 --> 00:30:37.259
and its true cost, it probably varies significantly

00:30:37.259 --> 00:30:40.519
by region, right? Especially due to existing

00:30:40.519 --> 00:30:43.500
infrastructure deficits. Not every farm has the

00:30:43.500 --> 00:30:46.140
same level of connectivity or power supply. You're

00:30:46.140 --> 00:30:48.039
hitting on an absolutely crucial point there.

00:30:48.400 --> 00:30:51.000
While automation clearly offers compelling solutions

00:30:51.000 --> 00:30:53.740
for these escalating labor costs, its implementation

00:30:53.740 --> 00:30:56.619
faces very real practical hurdles, what we can

00:30:56.619 --> 00:30:59.359
call regional infrastructure deficits. For instance,

00:30:59.460 --> 00:31:01.660
the Midwest and the Northeast. They're generally

00:31:01.660 --> 00:31:03.759
better positioned for automation adoption. Why?

00:31:03.960 --> 00:31:06.299
Because they tend to have more established electrical

00:31:06.299 --> 00:31:09.359
infrastructure, better rural broadband, and closer

00:31:09.359 --> 00:31:11.720
proximity to equipment dealers, and importantly,

00:31:11.960 --> 00:31:14.000
the vital service networks needed to maintain

00:31:14.000 --> 00:31:16.440
these complex systems. Right, the support system.

00:31:16.660 --> 00:31:19.779
Exactly. In stark contrast, Western states often

00:31:19.779 --> 00:31:21.660
encounter greater infrastructure challenges.

00:31:22.000 --> 00:31:24.380
You've got vast geographic dispersion between

00:31:24.380 --> 00:31:27.339
farms and, critically, often aging electrical

00:31:27.339 --> 00:31:29.980
systems on many existing dairy operations that

00:31:29.980 --> 00:31:32.059
just weren't built for this kind of power demand.

00:31:32.559 --> 00:31:34.960
Similarly, those emerging dairy regions like

00:31:34.960 --> 00:31:38.079
Texas and Kansas, despite their rapid dairy growth,

00:31:38.200 --> 00:31:40.160
they often lack the necessary support infrastructure

00:31:40.160 --> 00:31:42.319
for these really advanced automation systems.

00:31:43.690 --> 00:31:45.509
caught up yet. Now, this is not a minor detail

00:31:45.509 --> 00:31:47.650
when you're making location decisions. A region

00:31:47.650 --> 00:31:49.769
might initially look attractive on paper, maybe

00:31:49.769 --> 00:31:51.849
lower land costs, maybe favorable regulations.

00:31:52.329 --> 00:31:54.730
But if it lacks the necessary rural connectivity

00:31:54.730 --> 00:31:57.990
or sufficient electrical capacity or robust service

00:31:57.990 --> 00:32:00.849
networks for advanced automation, then the effective

00:32:00.849 --> 00:32:03.470
cost of implementing these essential labor -saving

00:32:03.470 --> 00:32:05.549
technologies could be significantly higher for

00:32:05.549 --> 00:32:08.829
you, maybe even entirely prohibitive. This adds

00:32:08.829 --> 00:32:11.170
a really critical layer of complexity to calculating

00:32:11.170 --> 00:32:14.180
the real cost of dairy. It highlights these often

00:32:14.180 --> 00:32:16.140
hidden infrastructure costs that you absolutely

00:32:16.140 --> 00:32:18.819
must factor into your strategic planning. That's

00:32:18.819 --> 00:32:20.539
a truly critical insight. It goes way beyond

00:32:20.539 --> 00:32:22.180
just looking at the sticker price of the equipment

00:32:22.180 --> 00:32:25.579
itself. Okay, let's move on then to land and

00:32:25.579 --> 00:32:28.599
property costs. These are, of course, fundamental

00:32:28.599 --> 00:32:30.960
capital investments for any dairy operation.

00:32:31.200 --> 00:32:33.559
And again, surprise, surprise, they exhibit significant

00:32:33.559 --> 00:32:36.099
regional variations and are affected by changing

00:32:36.099 --> 00:32:39.490
tax rules. Indeed. Land and property costs, they're

00:32:39.490 --> 00:32:42.069
shaped not just by market demand, but also by

00:32:42.069 --> 00:32:44.410
these evolving tax implications, which can be

00:32:44.410 --> 00:32:46.569
quite complex. For instance, look at Nebraska.

00:32:46.930 --> 00:32:49.430
The market value of agricultural land there actually

00:32:49.430 --> 00:32:52.910
declined by 2 % in 2025, down to an average of

00:32:52.910 --> 00:32:56.730
$3 ,935 per acre. That was the first decrease

00:32:56.730 --> 00:32:59.930
seen since 2024. So maybe a slight recalibration

00:32:59.930 --> 00:33:02.369
happening in some specific areas. In contrast,

00:33:02.410 --> 00:33:05.000
you look at Wisconsin. Average agricultural land

00:33:05.000 --> 00:33:07.579
price there increased by a notable 7 % just from

00:33:07.579 --> 00:33:12.480
2023 to 2024, hitting $6 ,363 per acre. These

00:33:12.480 --> 00:33:14.640
opposing trends just underscore how highly localized

00:33:14.640 --> 00:33:16.640
land values really are. You can't paint the whole

00:33:16.640 --> 00:33:18.839
country with one brush. What about California?

00:33:18.940 --> 00:33:21.440
We know water availability is such a huge, often

00:33:21.440 --> 00:33:23.880
contentious factor there. Does that directly

00:33:23.880 --> 00:33:26.259
influence land values in a measurable way? Oh,

00:33:26.319 --> 00:33:28.380
in California's Central Valley, water reliability

00:33:28.380 --> 00:33:30.579
isn't just a factor. It's become the dominant

00:33:30.579 --> 00:33:32.819
driver of land value. It's almost everything.

00:33:33.180 --> 00:33:36.200
The Bullvine article highlights a clearly visible

00:33:36.200 --> 00:33:39.640
decline in 2024 listing prices for open land

00:33:39.640 --> 00:33:42.480
and permanent plantings, specifically for parcels

00:33:42.480 --> 00:33:44.700
that lack secure district surface water rights.

00:33:45.180 --> 00:33:47.720
However, land that does have guaranteed water

00:33:47.720 --> 00:33:50.140
rights, like parcels within the Fresno Irrigation

00:33:50.140 --> 00:33:53.619
District, those remained highly liquid. Almond

00:33:53.619 --> 00:33:55.279
orchards there were trading anywhere between

00:33:55.279 --> 00:33:59.359
$21 ,000 up to $42 ,000 per acre. Huge range

00:33:59.359 --> 00:34:01.759
tied directly to water security. Exactly. It

00:34:01.759 --> 00:34:03.680
demonstrates that water reliability has become

00:34:03.680 --> 00:34:06.819
the primary, almost singular determinant of agricultural

00:34:06.819 --> 00:34:10.159
land value in that specific water -stressed region.

00:34:10.920 --> 00:34:13.179
Nationally, just for context, the average value

00:34:13.179 --> 00:34:15.090
for agricultural land in including buildings,

00:34:15.309 --> 00:34:19.429
was reported at $4 ,140 per acre in 2024. Okay,

00:34:19.469 --> 00:34:21.210
so beyond the initial purchase price of the land,

00:34:21.269 --> 00:34:23.730
what about the ongoing costs? Property tax rates,

00:34:23.809 --> 00:34:25.730
agricultural exemptions, these can really affect

00:34:25.730 --> 00:34:27.969
the true year -after -year cost of ownership,

00:34:28.150 --> 00:34:30.170
can't they? They vary dramatically by state and

00:34:30.170 --> 00:34:32.030
have a significant impact on your annual carrying

00:34:32.030 --> 00:34:34.710
costs. Iowa, for example, has assessment limitations

00:34:34.710 --> 00:34:37.130
that restrict the growth in aggregate taxable

00:34:37.130 --> 00:34:39.630
value across the whole state to just 3 % annually.

00:34:39.829 --> 00:34:42.389
That provides some level of predictability for

00:34:42.389 --> 00:34:45.150
producers there. In Indiana, however, the base

00:34:45.150 --> 00:34:47.570
rate for farmland property taxes increased to

00:34:47.570 --> 00:34:51.250
$2 ,280 per acre for 2025. That's a substantial

00:34:51.250 --> 00:34:55.590
20 % rise just from 2024. And worse, it's projected

00:34:55.590 --> 00:34:58.630
to keep increasing every year until 2029. That's

00:34:58.630 --> 00:35:01.090
a compounding burden you need to plan for. Wisconsin

00:35:01.090 --> 00:35:03.170
assesses agricultural land. based on its use

00:35:03.170 --> 00:35:05.369
value, how it's actually being used for farming

00:35:05.369 --> 00:35:08.070
rather than its full market value. This typically

00:35:08.070 --> 00:35:10.469
results in lower property taxes for active farms.

00:35:10.590 --> 00:35:12.849
However, there's a catch. A conversion charge

00:35:12.849 --> 00:35:14.829
applies if you convert that land to non -farm

00:35:14.829 --> 00:35:17.769
use. For instance, it was $1 ,238 tax relief

00:35:17.769 --> 00:35:19.650
for conversions under 10 acres in Dane County

00:35:19.650 --> 00:35:22.429
back in 2024. California offers potentially substantial

00:35:22.429 --> 00:35:25.010
property tax relief through what are called Agricultural

00:35:25.010 --> 00:35:27.670
Preserve Contracts, Williamson Act. These can

00:35:27.670 --> 00:35:30.510
lead to annual savings of 20 -75 % by assessing

00:35:30.510 --> 00:35:33.090
land based on its agricultural income potential

00:35:33.090 --> 00:35:35.369
rather than its full market development potential.

00:35:35.789 --> 00:35:38.650
New York also has various property tax exemptions

00:35:38.650 --> 00:35:40.309
aimed at supporting agricultural businesses.

00:35:40.630 --> 00:35:42.630
So these nuances are absolutely critical for

00:35:42.630 --> 00:35:45.130
understanding the true ongoing carrying cost

00:35:45.130 --> 00:35:47.309
of your land investment. But looming over all

00:35:47.309 --> 00:35:49.510
of this, there's also a highly significant federal

00:35:49.510 --> 00:35:51.989
tax cliff approaching, isn't there? That sounds

00:35:51.989 --> 00:35:54.329
like it has huge long -term cost implications

00:35:54.329 --> 00:35:57.349
for farm succession, maybe even the very survival

00:35:57.349 --> 00:35:59.780
of some family farms. This is quite possibly

00:35:59.780 --> 00:36:01.699
one of the most critical and time -sensitive

00:36:01.699 --> 00:36:03.980
financial considerations facing dairy producers

00:36:03.980 --> 00:36:06.840
right now. It demands immediate attention. Many

00:36:06.840 --> 00:36:09.039
key provisions of the 2017 Tax Cuts and Jobs

00:36:09.039 --> 00:36:12.039
Act, or TCJA, are set to expire automatically

00:36:12.039 --> 00:36:14.960
on December 31, 2025. That's just around the

00:36:14.960 --> 00:36:17.260
corner. Specifically, the federal estate tax

00:36:17.260 --> 00:36:19.599
exemption. It is currently slated to decrease

00:36:19.599 --> 00:36:22.579
by a dramatic 50%. It's projected to drop to

00:36:22.579 --> 00:36:25.699
approximately $7 .61 million per individual starting

00:36:25.699 --> 00:36:29.900
January 1, 2026. That's down from $13 .99 million

00:36:29.900 --> 00:36:32.599
per individual in 2025. Cut in half, essentially.

00:36:33.099 --> 00:36:35.840
Exactly. Cut roughly in half. And this reduction

00:36:35.840 --> 00:36:38.059
has profound implications. It could literally

00:36:38.059 --> 00:36:40.599
force farm families to sell valuable assets,

00:36:40.719 --> 00:36:42.539
potentially even parts of the farm operation

00:36:42.539 --> 00:36:45.980
itself, simply to cover the steep 40 % federal

00:36:45.980 --> 00:36:48.679
estate taxes on farm values exceeding that lowered

00:36:48.679 --> 00:36:51.219
exemption amount. This is especially concerning

00:36:51.219 --> 00:36:53.699
given the generally rising values of agricultural

00:36:53.699 --> 00:36:56.619
land we've seen over the past decade. Therefore,

00:36:56.880 --> 00:36:59.159
for your location and expansion decisions, and

00:36:59.159 --> 00:37:01.679
absolutely crucially, for ensuring the financial

00:37:01.679 --> 00:37:04.039
viability of passing the farm to the next generation,

00:37:04.320 --> 00:37:06.920
you must conduct detailed financial and estate

00:37:06.920 --> 00:37:09.219
planning now. You need to explore strategies

00:37:09.219 --> 00:37:11.460
to mitigate these impending, potentially crippling

00:37:11.460 --> 00:37:14.280
tax costs and ensure the intergenerational transfer

00:37:14.280 --> 00:37:16.780
of your operation can happen without catastrophic

00:37:16.780 --> 00:37:19.679
tax burden forcing a sale. The clock is seriously

00:37:19.679 --> 00:37:21.599
ticking on this one. That's a ticking clock that

00:37:21.599 --> 00:37:23.500
really demands immediate attention for so many

00:37:23.500 --> 00:37:26.579
producers. Okay, shifting gears slightly, let's

00:37:26.579 --> 00:37:29.260
talk about water and utility costs. These are,

00:37:29.320 --> 00:37:31.820
of course, absolutely essential inputs, but they

00:37:31.820 --> 00:37:33.639
often have significant, sometimes unexpected

00:37:33.639 --> 00:37:35.940
regional disparities. They're not just minor

00:37:35.940 --> 00:37:37.980
overhead. They could be a major swing factor

00:37:37.980 --> 00:37:40.579
in profitability. They are indeed highly variable

00:37:40.579 --> 00:37:43.690
and, in many cases, escalating inputs. Water

00:37:43.690 --> 00:37:45.849
costs in particular are increasing pretty much

00:37:45.849 --> 00:37:48.050
across the board, but Western states are definitely

00:37:48.050 --> 00:37:50.730
seeing the most significant rises. This isn't

00:37:50.730 --> 00:37:52.889
random. It's driven by fundamental factors like

00:37:52.889 --> 00:37:55.530
increasing water scarcity, more stringent environmental

00:37:55.530 --> 00:37:57.929
regulations related to water use and quality,

00:37:58.130 --> 00:38:00.349
and necessary, often expensive, infrastructure

00:38:00.349 --> 00:38:03.449
investments to maintain supply. In California,

00:38:03.550 --> 00:38:06.050
for example, the state faces these ongoing, well

00:38:06.050 --> 00:38:07.809
-publicized drought conditions and stringent

00:38:07.809 --> 00:38:09.789
water regulations that directly increase your

00:38:09.789 --> 00:38:12.329
production costs. Water rights fees there are

00:38:12.329 --> 00:38:14.570
substantial, and they keep escalating. Application

00:38:14.570 --> 00:38:17.349
fees alone can range from $5 ,000 up to a mind

00:38:17.349 --> 00:38:20.409
-boggling $811 ,000, depending entirely on your

00:38:20.409 --> 00:38:22.889
annual water usage in acre feet. Then you have

00:38:22.889 --> 00:38:24.909
annual permit and license fees on top of that.

00:38:25.730 --> 00:38:28.889
$350 plus an additional 12 sq ft over a small

00:38:28.889 --> 00:38:31.769
10 acre foot baseline. Furthermore, water quality

00:38:31.769 --> 00:38:34.269
fees specifically for HUAFO's concentrated animal

00:38:34.269 --> 00:38:36.989
feeding operations, those increased by 5 .3 -5

00:38:36.989 --> 00:38:40.769
.5 % just in the 2024 -25 fiscal year. It all

00:38:40.769 --> 00:38:43.150
adds up. Those application fees are just immense.

00:38:43.570 --> 00:38:46.110
What about other states that maybe aren't facing

00:38:46.110 --> 00:38:48.570
such extreme water stress like California? Are

00:38:48.570 --> 00:38:51.360
costs rising there too? Yes. Even in less arid

00:38:51.360 --> 00:38:54.059
regions, costs are definitely on the rise. Idaho's

00:38:54.059 --> 00:38:56.079
water right rental prices, for example, are increasing

00:38:56.079 --> 00:38:59.440
from $23 per acre foot through 2024, jumping

00:38:59.440 --> 00:39:02.780
up to $33 per acre foot beginning in 2025. That's

00:39:02.780 --> 00:39:05.400
a significant jump. In Washington state, overall

00:39:05.400 --> 00:39:07.960
water utility revenues increased by 8 % in 2024

00:39:07.960 --> 00:39:11.139
and are projected to rise another 5 .5 % in 2025.

00:39:11.679 --> 00:39:13.739
Their monthly basic service chart is increasing

00:39:13.739 --> 00:39:18.039
from $37 up to $41 .27 by 2025. Plus, they have

00:39:18.039 --> 00:39:20.079
additional increases in the tiered assumption

00:39:20.079 --> 00:39:23.199
rates. Oregon saw some proposed water fee increases

00:39:23.199 --> 00:39:25.300
for water rates transactions get reduced, but

00:39:25.300 --> 00:39:27.219
they were still significant, about 50 % of the

00:39:27.219 --> 00:39:29.500
original proposal. And while drilling fees, they're

00:39:29.500 --> 00:39:32.599
still increased by 1040%. Even Kansas, one of

00:39:32.599 --> 00:39:34.980
those growing dairy regions, is investing significantly

00:39:34.980 --> 00:39:36.940
in water reservoir protection and irrigation

00:39:36.940 --> 00:39:39.340
infrastructure. Transfers from their state water

00:39:39.340 --> 00:39:42.260
plan fund increased by $9 .5 million just for

00:39:42.260 --> 00:39:45.480
fiscal year 2025. The point is, these increases

00:39:45.480 --> 00:39:47.420
aren't merely inflationary adjustments. They're

00:39:47.420 --> 00:39:49.420
driven by fundamental issues of supply, demand,

00:39:49.619 --> 00:39:51.599
infrastructure. needs and environmental stewardship.

00:39:51.739 --> 00:39:54.699
For your location decisions, access to affordable

00:39:54.699 --> 00:39:56.940
and reliable water is absolutely no longer a

00:39:56.940 --> 00:39:58.980
given, even in traditionally water -rich areas.

00:39:59.219 --> 00:40:01.699
It's become a critical strategic resource you

00:40:01.699 --> 00:40:04.019
have to evaluate carefully. And what about the

00:40:04.019 --> 00:40:06.340
everyday utility costs, electricity, natural

00:40:06.340 --> 00:40:09.619
gas, propane? Are they falling in that same steep

00:40:09.619 --> 00:40:13.019
upward trend, or is it more mixed? Utility costs

00:40:13.019 --> 00:40:15.280
present a more mixed outlook nationally, but

00:40:15.280 --> 00:40:17.480
again, with significant regional divergences

00:40:17.480 --> 00:40:20.059
that you absolutely need to be aware of. Natural

00:40:20.059 --> 00:40:22.420
gas, for instance, is expected to remain relatively

00:40:22.420 --> 00:40:25.360
low nationally through 2025. That's good news

00:40:25.360 --> 00:40:27.900
overall. However, the regional variations are

00:40:27.900 --> 00:40:30.199
pretty significant. The West is projected to

00:40:30.199 --> 00:40:32.579
see about a 6 % decrease in natural gas prices.

00:40:32.659 --> 00:40:35.900
The South, maybe a 4 % decrease. But the Northeast

00:40:35.900 --> 00:40:38.619
could see a 1 % increase, and the Midwest, notably,

00:40:38.840 --> 00:40:41.710
is projected for an 11 % increase. Price primarily

00:40:41.710 --> 00:40:43.949
due to expectations of colder weather driving

00:40:43.949 --> 00:40:46.449
up demand there. 11 % jump in the Midwest. Wow.

00:40:46.610 --> 00:40:49.349
Yeah, significant. For electricity, the U .S.

00:40:49.369 --> 00:40:51.329
average residential price is projected to increase

00:40:51.329 --> 00:40:54.929
by about 2 % in 2025, reaching around $0 .168

00:40:54.929 --> 00:40:57.829
per kilowatt hour. And wholesale power prices

00:40:57.829 --> 00:40:59.909
are anticipated to rise by a more substantial

00:40:59.909 --> 00:41:03.369
7%. California in particular faces increased

00:41:03.369 --> 00:41:05.869
operational electricity costs due to its aggressive

00:41:05.869 --> 00:41:07.929
state -mandated transition to renewable energy

00:41:07.929 --> 00:41:10.349
sources. While that's beneficial long -term,

00:41:10.429 --> 00:41:12.690
it temporarily increases utility bills as the

00:41:12.690 --> 00:41:14.630
massive infrastructure upgrades are paid for.

00:41:14.949 --> 00:41:17.329
Propane consumption is expected to increase in

00:41:17.329 --> 00:41:19.769
2025, again due to colder temperature forecasts,

00:41:20.110 --> 00:41:22.690
but an estimated 8 % decrease in retail prices

00:41:22.690 --> 00:41:24.869
means overall costs should remain pretty similar

00:41:24.869 --> 00:41:28.030
to 2024 levels. So the key takeaway for you as

00:41:28.030 --> 00:41:30.010
a producer is that you simply cannot assume uniform

00:41:30.010 --> 00:41:32.829
utility costs across different regions. A detailed

00:41:32.829 --> 00:41:34.969
analysis of regional energy markets and state

00:41:34.969 --> 00:41:37.210
-specific energy policies is absolutely necessary

00:41:37.210 --> 00:41:39.710
to accurately project your utility expenses and

00:41:39.710 --> 00:41:41.849
truly understand your total operational costs.

00:41:42.090 --> 00:41:44.449
Don't just use the national average here. So

00:41:44.449 --> 00:41:47.170
many variables constantly shifting, all impacting

00:41:47.170 --> 00:41:50.829
that bottom line. Okay, let's turn our attention

00:41:50.829 --> 00:41:54.170
now to capital and infrastructure costs. Modernizing

00:41:54.170 --> 00:41:56.690
and expanding dairy operations clearly necessitates

00:41:56.690 --> 00:41:59.300
substantial capital investment. And the financial

00:41:59.300 --> 00:42:01.619
landscape for making these big expenditures is

00:42:01.619 --> 00:42:03.500
shaped by evolving tax incentives and varying

00:42:03.500 --> 00:42:05.820
levels of regional support. It's definitely a

00:42:05.820 --> 00:42:08.260
significant outlay, no question. Let's talk specifics

00:42:08.260 --> 00:42:11.840
on new facility construction costs. Robotic milking

00:42:11.840 --> 00:42:14.000
facilities that includes the building itself,

00:42:14.280 --> 00:42:16.280
the robots, necessary milk stores they typically

00:42:16.280 --> 00:42:18.960
cost in the range of $14 ,000, $15 ,000 per stall,

00:42:19.119 --> 00:42:22.320
or you could look at it as $35, $38 per square

00:42:22.320 --> 00:42:24.679
foot. The individual robotic milking systems,

00:42:24.719 --> 00:42:26.539
just the units themselves, typically range from

00:42:26.539 --> 00:42:30.880
$150 ,000, $275 ,000 per unit, or maybe $300

00:42:30.880 --> 00:42:34.079
,000 per robotic unit once you factor in installation

00:42:34.079 --> 00:42:36.980
and integration. For building brand new conventional

00:42:36.980 --> 00:42:38.940
parlors with full structures, you're probably

00:42:38.940 --> 00:42:40.860
looking at $28 ,000, $36 ,000. thousand dollars

00:42:40.860 --> 00:42:44.019
per milking stall quite expensive however retrofitting

00:42:44.019 --> 00:42:46.440
existing parlors if possible is generally a more

00:42:46.440 --> 00:42:48.239
cost -effective option maybe around three five

00:42:48.239 --> 00:42:50.159
hundred seven thousand dollars per milking stall

00:42:50.159 --> 00:42:52.719
and basic free stall barns just a structure excluding

00:42:52.719 --> 00:42:54.280
electrical and plumbing which adds significant

00:42:54.280 --> 00:42:56.099
costs typically around three thousand thirty

00:42:56.099 --> 00:42:57.699
five hundred dollars per stall these are all

00:42:57.699 --> 00:42:59.559
significant numbers that require very careful

00:42:59.559 --> 00:43:02.079
financial planning and justification and how

00:43:02.079 --> 00:43:04.460
do things like equipment purchase versus lease

00:43:04.460 --> 00:43:06.760
costs and those all -important depreciation schedules

00:43:06.760 --> 00:43:09.519
factor into managing these substantial capital

00:43:09.670 --> 00:43:12.190
outlays. Because it's not just the upfront price

00:43:12.190 --> 00:43:14.570
tag, it's how you finance it and account for

00:43:14.570 --> 00:43:16.550
it over time that really matters for cash flow.

00:43:16.969 --> 00:43:19.449
Financing options are absolutely key to managing

00:43:19.449 --> 00:43:21.170
cash flow when you're talking about these kinds

00:43:21.170 --> 00:43:24.849
of numbers. As of April 2025, typical loan interest

00:43:24.849 --> 00:43:27.750
rates for farm operating loans direct were around

00:43:27.750 --> 00:43:31.570
5 .375%, and farm ownership loans direct were

00:43:31.570 --> 00:43:35.150
at 5 .750%, so borrowing costs are significant.

00:43:35.710 --> 00:43:38.510
Leasing new or used farm equipment, maybe with

00:43:38.510 --> 00:43:41.349
fixed lease rates starting around 6 .45 % or

00:43:41.349 --> 00:43:44.030
higher, offers several potential benefits. It

00:43:44.030 --> 00:43:45.829
can reduce your upfront capital requirement,

00:43:46.409 --> 00:43:48.670
improve your immediate cash flow, and offer potential

00:43:48.670 --> 00:43:50.889
tax advantages by allowing lease payments to

00:43:50.889 --> 00:43:53.409
often be written off as operating expenses. However,

00:43:53.630 --> 00:43:55.869
there's a seismic shift happening right now that's

00:43:55.869 --> 00:43:58.409
impacting capital costs dramatically. The phasing

00:43:58.409 --> 00:44:00.730
out of 100 % bonus depreciation. Right. That's

00:44:00.730 --> 00:44:02.489
the second big tax cliff we've talked about.

00:44:02.800 --> 00:44:05.480
Exactly. This critical deduction, which allowed

00:44:05.480 --> 00:44:07.500
farmers like you to write off the entire cost

00:44:07.500 --> 00:44:10.059
of qualifying new or used equipment up front,

00:44:10.119 --> 00:44:12.179
providing immediate tax relief. It has already

00:44:12.179 --> 00:44:14.820
dropped to 80 percent back in 2024. It will be

00:44:14.820 --> 00:44:17.670
only 60 percent in 2025. And then it phases out

00:44:17.670 --> 00:44:20.829
completely, reaching 0 % by 2027. What this means

00:44:20.829 --> 00:44:23.829
practically, that $500 ,000 robotic milker you

00:44:23.829 --> 00:44:26.429
might purchase in 2025, it will only yield a

00:44:26.429 --> 00:44:29.389
$200 ,000 bonus depreciation deduction, 60 %

00:44:29.389 --> 00:44:32.710
of $500 QM minus the SEC 179 portion potentially.

00:44:33.050 --> 00:44:36.510
That compares to a full $500 ,000 immediate deduction

00:44:36.510 --> 00:44:40.409
just a few years ago in 2022. Post -2025, your

00:44:40.409 --> 00:44:42.610
deductions for such equipment will revert back

00:44:42.610 --> 00:44:45.170
to the much longer standard 7 or sometimes 20

00:44:45.170 --> 00:44:47.739
-year depreciation scale. significantly delaying

00:44:47.739 --> 00:44:49.179
your tax relief and increasing the near -term

00:44:49.179 --> 00:44:51.719
cost of capital. Now, the Section 179 deduction

00:44:51.719 --> 00:44:55.320
limit for 2025 is $1 ,250 ,000, which is helpful,

00:44:55.480 --> 00:44:57.800
but it doesn't fully replace the broad benefits

00:44:57.800 --> 00:45:00.000
of bonus depreciation, especially for very large

00:45:00.000 --> 00:45:01.679
investments, and it has limitations like not

00:45:01.679 --> 00:45:03.960
creating a loss. Plus, it's important to remember

00:45:03.960 --> 00:45:05.699
that some states, like New York, don't conform

00:45:05.699 --> 00:45:07.820
and don't allow the federal bonus depreciation

00:45:07.820 --> 00:45:10.619
deduction for state tax purposes. This tax cliff

00:45:10.619 --> 00:45:13.599
on depreciation demands urgent attention if you're

00:45:13.599 --> 00:45:16.300
planning major capital expenditures. So the message

00:45:16.300 --> 00:45:19.059
is clear. Producers really need to act fast to

00:45:19.059 --> 00:45:21.500
maximize those remaining bonus depreciation benefits

00:45:21.500 --> 00:45:24.380
before they shrink further. What about other

00:45:24.380 --> 00:45:26.760
specific tax incentives and credits for capital

00:45:26.760 --> 00:45:28.960
investments, maybe at the state level? Are there

00:45:28.960 --> 00:45:31.000
programs out there that can help soften the blow

00:45:31.000 --> 00:45:33.219
of making these large investments, especially

00:45:33.219 --> 00:45:36.460
with bonus depreciation fading? Yes. Thankfully,

00:45:36.579 --> 00:45:38.760
there are still various federal and state programs

00:45:38.760 --> 00:45:40.980
that can offer crucial incentives, although the

00:45:40.980 --> 00:45:43.019
big federal bonus depreciation is diminishing

00:45:43.019 --> 00:45:46.250
rapidly. California's 2024 Dairy Plus program,

00:45:46.449 --> 00:45:48.789
for instance, provides substantial grants specifically

00:45:48.789 --> 00:45:51.070
for advanced manure management projects. They

00:45:51.070 --> 00:45:55.030
offer $750 per cow up to a maximum of $1 .25

00:45:55.030 --> 00:45:57.630
million per project. That's significant support.

00:45:58.110 --> 00:46:00.570
Wisconsin offers producers a farmland preservation

00:46:00.570 --> 00:46:02.949
credit and also a manufacturing and agricultural

00:46:02.949 --> 00:46:05.289
credit, both of which can help reduce overall

00:46:05.289 --> 00:46:08.329
state tax burdens. New York provides a farm workforce

00:46:08.329 --> 00:46:11.230
retention tax credit, $1 ,200 per eligible employee

00:46:11.230 --> 00:46:14.030
annually, and also an overtime tax credit, which

00:46:14.030 --> 00:46:16.969
directly help offset rising labor costs. Their

00:46:16.969 --> 00:46:18.909
dairy farm modernization grant program is also

00:46:18.909 --> 00:46:21.670
quite significant. It awarded $21 .6 million

00:46:21.670 --> 00:46:25.630
to 103 farms just in 2024 for upgrades. Tennessee

00:46:25.630 --> 00:46:28.829
has its TAEP Dairy Solutions Program, offering

00:46:28.829 --> 00:46:31.530
a 50 % cost share up to a maximum of $10 ,000

00:46:31.530 --> 00:46:34.130
for purchasing eligible dairy equipment. Pennsylvania

00:46:34.130 --> 00:46:36.469
offers farm vitality planning grants and various

00:46:36.469 --> 00:46:38.449
clean energy and conservation grants that dairies

00:46:38.449 --> 00:46:41.019
might qualify for. And Vermont's Northeast Dairy

00:46:41.019 --> 00:46:43.280
Business Innovation Center provides dairy farm

00:46:43.280 --> 00:46:46.159
improvement and modernization grants with awards

00:46:46.159 --> 00:46:49.619
typically ranging from $15 ,000 up to $100 ,000

00:46:49.619 --> 00:46:52.860
for eligible projects. So the key message here

00:46:52.860 --> 00:46:54.980
is twofold. First, the phasing out of federal

00:46:54.980 --> 00:46:57.260
bonus depreciation will significantly increase

00:46:57.260 --> 00:46:59.599
the effective after -tax cost of your investments,

00:46:59.880 --> 00:47:02.320
demanding urgent strategic planning and potentially

00:47:02.320 --> 00:47:05.760
accelerating purchases into 2025. Second, you

00:47:05.760 --> 00:47:08.480
must concurrently, meticulously explore and leverage

00:47:08.480 --> 00:47:10.519
these available state -level grant and credit

00:47:10.519 --> 00:47:12.639
programs that can make a real difference to the

00:47:12.639 --> 00:47:14.980
affordability of necessary upgrades. We've covered

00:47:14.980 --> 00:47:16.940
a tremendous amount of ground across all those

00:47:16.940 --> 00:47:19.659
major cost categories. It's a lot to digest.

00:47:20.269 --> 00:47:22.110
Now, let's briefly touch on some other critical

00:47:22.110 --> 00:47:24.510
operating expenses that, while maybe less dominant

00:47:24.510 --> 00:47:27.369
than feed or labor, can still significantly impact

00:47:27.369 --> 00:47:29.429
your dairy operation's overall financial health

00:47:29.429 --> 00:47:32.250
and profitability. Certainly. There are definitely

00:47:32.250 --> 00:47:35.429
other important line items to consider. First,

00:47:35.550 --> 00:47:37.610
let's look at veterinary and animal health costs.

00:47:38.110 --> 00:47:40.670
National spending on veterinary care and pharmaceuticals

00:47:40.670 --> 00:47:44.309
is projected to reach a substantial $41 .4 billion

00:47:44.309 --> 00:47:48.570
in 2025. It's an essential, non -negotiable expense

00:47:48.570 --> 00:47:50.530
for maintaining herd health and productivity.

00:47:50.849 --> 00:47:53.630
The recent highly pathogenic avian influenza,

00:47:53.789 --> 00:47:56.789
or HPAI, outbreak, for example, that has significantly

00:47:56.789 --> 00:47:59.369
impacted dairy herds in various regions, with

00:47:59.369 --> 00:48:01.510
California being particularly affected early

00:48:01.510 --> 00:48:04.550
on. Thankfully, the USDA stepped in and has offered

00:48:04.550 --> 00:48:06.710
crucial financial assistance programs to help

00:48:06.710 --> 00:48:09.489
cover HPAI related costs. Things like testing,

00:48:09.690 --> 00:48:12.829
specific vet expenses, PPE, costs associated

00:48:12.829 --> 00:48:15.369
with milk disposal, and importantly, compensation

00:48:15.369 --> 00:48:17.889
for actual milk production losses due to affected

00:48:17.889 --> 00:48:21.130
cows. While specific per cow regional cost data

00:48:21.130 --> 00:48:23.289
for unpredictable disease outbreaks isn't always

00:48:23.289 --> 00:48:25.570
readily available, it's crystal clear that such

00:48:25.570 --> 00:48:27.929
events can substantially and unpredictably increase

00:48:27.929 --> 00:48:30.150
your health -related expenditures. It really

00:48:30.150 --> 00:48:32.469
underscores the need for robust biosecurity protocols

00:48:32.469 --> 00:48:34.849
on your farm and also having some financial contingency

00:48:34.849 --> 00:48:37.179
planning in place for the unexpected. Okay, health

00:48:37.179 --> 00:48:39.719
costs are crucial. What about those marketing

00:48:39.719 --> 00:48:42.000
and transportation expenses to get milk to the

00:48:42.000 --> 00:48:45.099
processing facilities? Especially given our earlier

00:48:45.099 --> 00:48:47.460
discussion about how absolutely critical processing

00:48:47.460 --> 00:48:50.159
proximity has become for the bottom line. Yeah.

00:48:50.539 --> 00:48:52.199
These are a growing concern, and they have a

00:48:52.199 --> 00:48:54.079
direct impact on the final milk check you receive.

00:48:54.420 --> 00:48:56.699
As we mentioned earlier, average milk hauling

00:48:56.699 --> 00:48:59.019
charges nationally increased by that sharp 21

00:48:59.019 --> 00:49:02.059
% in just one year, rising from $0 .51 to $0

00:49:02.059 --> 00:49:04.980
.62 per hundredweight. And the general rule of

00:49:04.980 --> 00:49:07.219
thumb cost to transport milk has risen to roughly

00:49:07.219 --> 00:49:10.780
$0 .92 per hundredwell per hundred miles traveled.

00:49:10.980 --> 00:49:13.320
So for operations shipping milk more than 50

00:49:13.320 --> 00:49:15.199
miles, they're effectively paying that hidden

00:49:15.199 --> 00:49:17.320
tax we talked about, somewhere between $0 .35

00:49:17.320 --> 00:49:19.360
and $0 .93 per hundredweight, which just roads

00:49:19.360 --> 00:49:22.130
your margin. The construction of major new processing

00:49:22.130 --> 00:49:24.670
infrastructure like that DRI facility in Nebraska,

00:49:24.949 --> 00:49:28.650
$186 .3 million investment, absolutely reinforces

00:49:28.650 --> 00:49:31.050
the point. Processing proximity is becoming more

00:49:31.050 --> 00:49:33.130
critical to your profitability than even having

00:49:33.130 --> 00:49:36.070
highly efficient on -farm production alone. It's

00:49:36.070 --> 00:49:38.250
a total supply chain optimization issue now.

00:49:38.920 --> 00:49:41.239
Furthermore, you need to be aware of recent federal

00:49:41.239 --> 00:49:44.260
milk marketing order or FMMO reforms. Those became

00:49:44.260 --> 00:49:47.019
effective in June 2025. They included things

00:49:47.019 --> 00:49:49.039
like increased make allowances for manufacturers,

00:49:49.320 --> 00:49:51.579
which can depress farm gate prices, and also

00:49:51.579 --> 00:49:53.519
revised class I price differentials across the

00:49:53.519 --> 00:49:55.659
country. These complex regulatory adjustments

00:49:55.659 --> 00:49:58.480
can also directly influence the final value of

00:49:58.480 --> 00:50:00.579
your producer milk checks, underscoring the need

00:50:00.579 --> 00:50:02.539
to understand how these formulas work in your

00:50:02.539 --> 00:50:05.079
specific region. Then there are the ever -present

00:50:05.079 --> 00:50:07.219
and seemingly ever -increasing environmental

00:50:07.219 --> 00:50:15.340
compliance. They really are a significant and

00:50:15.340 --> 00:50:18.079
generally escalating factor globally and domestically.

00:50:18.239 --> 00:50:20.639
You look at the decline in EU milk production,

00:50:20.840 --> 00:50:23.519
for example. That's partly attributed by analysts

00:50:23.519 --> 00:50:26.300
to increasingly stringent environmental regulations

00:50:26.300 --> 00:50:28.920
over there. It signals a potential global trend

00:50:28.920 --> 00:50:31.400
that could very well impact U .S. dairies more

00:50:31.400 --> 00:50:34.420
broadly if similar regulations are widely implemented

00:50:34.420 --> 00:50:37.460
here down the road. Within the U .S., programs

00:50:37.460 --> 00:50:39.760
like the Environmental Quality Incentives Program,

00:50:40.099 --> 00:50:43.219
or EQIP, provide crucial cost -sharing assistance

00:50:43.219 --> 00:50:45.960
for implementing conservation practices, like

00:50:45.960 --> 00:50:49.099
building modern manure storage systems. EQIP

00:50:49.099 --> 00:50:51.900
typically offers 75 % reimbursement for standard

00:50:51.900 --> 00:50:54.860
participants, and even up to 90 % reimbursement

00:50:54.860 --> 00:50:56.880
for producers classified as socially disadvantaged,

00:50:57.360 --> 00:51:00.670
beginning, or veteran farmers. California's Dairy

00:51:00.670 --> 00:51:03.150
Plus program also offers specific grants for

00:51:03.150 --> 00:51:05.090
advanced manure management technologies, which

00:51:05.090 --> 00:51:07.530
is very helpful. However, there's a significant

00:51:07.530 --> 00:51:09.769
counterpoint to consider here, highlighting the

00:51:09.769 --> 00:51:12.889
complexity. In New York, for instance, some lawmakers

00:51:12.889 --> 00:51:15.010
are actively pursuing legislation that would

00:51:15.010 --> 00:51:18.510
actually cap farm size at 699 cows. Cap farm

00:51:18.510 --> 00:51:20.369
size? That seems counter to the scale argument.

00:51:20.670 --> 00:51:24.690
Exactly. The Bullvine argues, quite convincingly,

00:51:24.690 --> 00:51:26.929
I think, that such a measure would effectively

00:51:27.440 --> 00:51:30.219
eliminate the scale economy's essential for survival

00:51:30.219 --> 00:51:33.159
for modern dairy operations in New York. And

00:51:33.159 --> 00:51:34.800
it would make adopting advanced environmental

00:51:34.800 --> 00:51:37.280
technologies economically devastating for the

00:51:37.280 --> 00:51:39.639
state's dairy industry because you need scale

00:51:39.639 --> 00:51:42.019
to afford them. This clearly illustrates how

00:51:42.019 --> 00:51:44.039
some regulatory approaches, while perhaps well

00:51:44.039 --> 00:51:46.579
-intentioned from one perspective, can inadvertently

00:51:46.579 --> 00:51:49.139
and severely increase the effective cost of compliance

00:51:49.139 --> 00:51:52.300
by hindering the very efficiency and scale that

00:51:52.300 --> 00:51:54.900
are often necessary to adopt modern, sustainable

00:51:54.900 --> 00:51:58.519
solutions. Wisconsin also saw increases in things

00:51:58.519 --> 00:52:01.739
like agrochemical license fees in 2024 -2025,

00:52:02.119 --> 00:52:04.519
another small example of these rising regulatory

00:52:04.519 --> 00:52:07.539
burdens. So as a producer, you must not only

00:52:07.539 --> 00:52:09.880
budget for ongoing compliance costs, but also

00:52:09.880 --> 00:52:12.380
actively monitor and engage with state and federal

00:52:12.380 --> 00:52:14.719
regulatory developments as they can fundamentally

00:52:14.719 --> 00:52:17.099
reshape your economic viability. And let's not

00:52:17.099 --> 00:52:19.460
forget insurance requirements and premiums, which

00:52:19.460 --> 00:52:21.639
are absolutely crucial for risk management, especially

00:52:21.639 --> 00:52:24.230
with price volatility. Right. The Dairy Margin

00:52:24.230 --> 00:52:26.889
Coverage, or DMC, program remains a vital safety

00:52:26.889 --> 00:52:29.030
net tool for mitigating downside price risk.

00:52:29.250 --> 00:52:32.489
The 2025 DMC program largely remains unchanged

00:52:32.489 --> 00:52:35.269
from previous years. It offers Tier 1 coverage

00:52:35.269 --> 00:52:37.030
for the first 5 million pounds of production

00:52:37.030 --> 00:52:39.349
history, with premiums ranging from essentially

00:52:39.349 --> 00:52:42.510
zero up to 1 .05 cents a sheet for maximum coverage.

00:52:42.789 --> 00:52:46.309
Tier 2 coverage above 5 million pounds has premiums

00:52:46.309 --> 00:52:50.119
from zero up to 1 .813 fine cents a sheet. Looking

00:52:50.119 --> 00:52:52.360
back, the average net indemnity paid out by DMC

00:52:52.360 --> 00:52:56.440
from 2018 through 2024 was $1 .35 cent -set wheat,

00:52:56.599 --> 00:52:58.980
indicating its historical effectiveness in providing

00:52:58.980 --> 00:53:01.480
support during low -margin periods. However,

00:53:01.619 --> 00:53:03.880
it's important to note that for 2025, DMC payments

00:53:03.880 --> 00:53:05.820
are actually projected to decrease significantly,

00:53:06.099 --> 00:53:09.699
maybe by $8 .9 million or 12 % nationally, primarily

00:53:09.699 --> 00:53:11.760
due to those lower projected feed costs improving

00:53:11.760 --> 00:53:14.079
the calculated margin. This suggests potentially

00:53:14.079 --> 00:53:16.340
less reliance on government safety nets for profitability

00:53:16.340 --> 00:53:18.949
in the near term, possibly requiring you to explore

00:53:18.949 --> 00:53:20.909
other risk management strategies like futures

00:53:20.909 --> 00:53:23.110
or options more actively. Also worth noting,

00:53:23.269 --> 00:53:25.809
the annual administrative fee for DMC is waived

00:53:25.809 --> 00:53:28.170
for producers who qualify as limited resource,

00:53:28.469 --> 00:53:30.969
beginning socially disadvantaged, or veteran

00:53:30.969 --> 00:53:34.110
farmers, creating a small $100 annual cost advantage

00:53:34.110 --> 00:53:36.650
for those specific groups. Okay, one last category

00:53:36.650 --> 00:53:39.730
before we synthesize. State income and sales

00:53:39.730 --> 00:53:42.869
taxes for agricultural businesses. These are

00:53:42.869 --> 00:53:44.530
often overlooked maybe day to day, but they can

00:53:44.530 --> 00:53:46.250
certainly take a bite out of profits come tax

00:53:46.250 --> 00:53:49.320
season. Taxation absolutely significantly impacts

00:53:49.320 --> 00:53:51.820
your overall dairy profitability. And state level

00:53:51.820 --> 00:53:54.159
taxes vary considerably across the U .S., creating

00:53:54.159 --> 00:53:56.940
another layer of regional cost difference. State

00:53:56.940 --> 00:53:58.800
income tax rates, for example, run dramatically.

00:53:59.780 --> 00:54:01.880
California's top marginal rate can be up to 14

00:54:01.880 --> 00:54:05.860
.4 percent. New York's up to 10 .9 percent. Compare

00:54:05.860 --> 00:54:08.199
that to states like Texas, Florida, South Dakota,

00:54:08.360 --> 00:54:10.980
Washington, Wyoming, which have no state income

00:54:10.980 --> 00:54:13.579
tax at all on individuals or businesses. That

00:54:13.579 --> 00:54:15.659
alone is a massive difference in your net income

00:54:15.659 --> 00:54:18.289
potential. depending on location. Many states

00:54:18.289 --> 00:54:20.769
also offer crucial sales tax exemptions specifically

00:54:20.769 --> 00:54:23.610
for agricultural inputs, things like equipment,

00:54:23.829 --> 00:54:27.269
feed, seed, fertilizer, and supplies. Iowa, for

00:54:27.269 --> 00:54:29.150
example, has broad exemptions covering bedding

00:54:29.150 --> 00:54:30.969
materials, fertilizers, chemicals, machinery,

00:54:31.190 --> 00:54:33.429
fuel, electricity used directly in agricultural

00:54:33.429 --> 00:54:36.070
production. Knowing these exemptions is key to

00:54:36.070 --> 00:54:38.710
managing costs. And finally, beyond that big

00:54:38.710 --> 00:54:40.489
federal state tax cliff we discussed earlier,

00:54:40.869 --> 00:54:42.869
state -level estate and inheritance taxes also

00:54:42.869 --> 00:54:45.030
vary. California currently has none. Wisconsin

00:54:45.030 --> 00:54:47.289
has none. has none. But New York does have a

00:54:47.289 --> 00:54:50.010
state estate tax with its own basic exclusion

00:54:50.010 --> 00:54:54.409
amount of $7 ,160 ,000 for 2025. This compounds

00:54:54.409 --> 00:54:56.829
the federal issue producers are facing, requiring

00:54:56.829 --> 00:54:58.690
comprehensive estate planning that carefully

00:54:58.690 --> 00:55:00.550
considers both federal and state regulations

00:55:00.550 --> 00:55:02.829
to minimize the total tax bite on farm succession.

00:55:03.190 --> 00:55:05.829
Okay, that's a truly comprehensive breakdown

00:55:05.829 --> 00:55:08.269
of all the cost components. It paints a picture

00:55:08.269 --> 00:55:11.150
of immense complexity, constant change, and really

00:55:11.150 --> 00:55:13.630
significant regional divergence. It's definitely

00:55:13.630 --> 00:55:16.170
not a simple business. Now, let's try to shift

00:55:16.170 --> 00:55:18.909
our focus and synthesize this. What are the key

00:55:18.909 --> 00:55:21.030
strategic financial insights that emerge from

00:55:21.030 --> 00:55:22.630
all this data, especially when you're thinking

00:55:22.630 --> 00:55:24.469
about critical location and expansion decisions?

00:55:24.750 --> 00:55:27.250
Let's start with break -even milk prices by region.

00:55:27.409 --> 00:55:30.469
Right, break -even milk prices. As our analysis

00:55:30.469 --> 00:55:33.550
clearly indicates, they are highly variable from

00:55:33.550 --> 00:55:36.829
farm to farm and region to region. They are fundamentally

00:55:36.829 --> 00:55:39.670
influenced by your specific operations scale,

00:55:39.909 --> 00:55:42.610
its inherent efficiency level, and those unique

00:55:42.610 --> 00:55:44.750
regional cost structures we just spent so much

00:55:44.750 --> 00:55:47.769
time detailing. Therefore, a one -size -fits

00:55:47.769 --> 00:55:50.489
-all national break -in in price is simply misleading.

00:55:50.809 --> 00:55:53.190
It can offer a false sense of security if you're

00:55:53.190 --> 00:55:55.710
below it or unnecessary despair if you're above

00:55:55.710 --> 00:55:58.800
it without context. For instance, the bullvine

00:55:58.800 --> 00:56:00.940
analysis highlights that operations producing

00:56:00.940 --> 00:56:04.320
below about 24 ,000 pounds of milk per cow annually

00:56:04.320 --> 00:56:06.940
will likely struggle to remain profitable if

00:56:06.940 --> 00:56:08.739
the all -milk price settles down at or below

00:56:08.739 --> 00:56:11.500
that $21 .60 sibilant level we discussed earlier,

00:56:11.699 --> 00:56:14.389
regardless of which region they're in. This powerfully

00:56:14.389 --> 00:56:16.510
emphasizes that your internal efficiency and

00:56:16.510 --> 00:56:19.010
achieving sufficient scale are just as critical,

00:56:19.110 --> 00:56:21.550
maybe even more so sometimes, than external market

00:56:21.550 --> 00:56:23.650
prices in determining your actual profitability.

00:56:24.050 --> 00:56:26.309
And how did those specific cost categories we

00:56:26.309 --> 00:56:28.150
just dissected, fee deficiency, labor costs,

00:56:28.369 --> 00:56:30.389
overhead burdens, how do they directly impact

00:56:30.389 --> 00:56:32.530
these individualized break -in points for a producer?

00:56:32.969 --> 00:56:35.130
They are the direct inputs into that breakeven

00:56:35.130 --> 00:56:37.730
calculation. Feed efficiency improvements, for

00:56:37.730 --> 00:56:40.449
instance, as we saw, can potentially reduce your

00:56:40.449 --> 00:56:43.730
production costs by a significant $1 .75, $1

00:56:43.730 --> 00:56:46.849
.25 per hundred EA. The Bullvine looked at one

00:56:46.849 --> 00:56:49.489
specific Pennsylvania farm example. Their breakeven

00:56:49.489 --> 00:56:53.010
was calculated at $19 .75 based on current feed

00:56:53.010 --> 00:56:55.929
prices. But importantly, that could drop down

00:56:55.929 --> 00:56:58.630
to $18 .90 with some targeted feed efficiency

00:56:58.630 --> 00:57:00.309
improvements. That's a meaningful difference.

00:57:00.789 --> 00:57:02.639
High labor costs, which we explored. in detail

00:57:02.639 --> 00:57:05.320
also significantly elevate your breakeven points.

00:57:05.679 --> 00:57:07.619
More labor costs means you need a higher milk

00:57:07.619 --> 00:57:10.480
price just to cover expenses. Similarly, those

00:57:10.480 --> 00:57:12.800
states we identified with high burdens from overhead

00:57:12.800 --> 00:57:14.820
and capital recovery, like Pennsylvania and New

00:57:14.820 --> 00:57:17.099
York, Michigan, they experienced those consistent

00:57:17.099 --> 00:57:19.940
losses in 2024. That strongly indicates they

00:57:19.940 --> 00:57:21.599
have inherently higher effective break -even

00:57:21.599 --> 00:57:23.960
points compared to more profitable states. On

00:57:23.960 --> 00:57:26.559
the positive side, in Ohio, back in January 2025,

00:57:27.079 --> 00:57:29.360
the income over nutrient cost for cows milking

00:57:29.360 --> 00:57:32.500
85 pounds a day was calculated at about $13 .73

00:57:32.500 --> 00:57:35.260
per hundred weight, and even for 70 -pound cows,

00:57:35.320 --> 00:57:38.079
it was $13 .42 per hundred weight. That indicates

00:57:38.079 --> 00:57:39.860
a pretty profitable scenario for those efficient

00:57:39.860 --> 00:57:42.380
operations at that time illinois is even projected

00:57:42.380 --> 00:57:44.820
by some university budgets to see economic costs

00:57:44.820 --> 00:57:47.679
run slightly below total returns in 2025 which

00:57:47.679 --> 00:57:49.639
would be a positive shift not seen there in the

00:57:49.639 --> 00:57:52.039
last 10 years suggesting improving break events

00:57:52.039 --> 00:57:54.639
are possible even in traditional regions and

00:57:54.639 --> 00:57:56.719
remember the projection that dairy margin coverage

00:57:56.719 --> 00:58:00.320
payments will likely decrease in 2025 that suggests

00:58:00.320 --> 00:58:02.760
less reliance on government safety nets for achieving

00:58:02.760 --> 00:58:05.360
profitability further emphasizing the absolute

00:58:05.360 --> 00:58:07.820
need for you to accurately calculate your individual

00:58:20.950 --> 00:58:24.289
Okay, moving beyond just breaking even, let's

00:58:24.289 --> 00:58:26.469
look at the potential upside. The return on investment,

00:58:26.750 --> 00:58:29.909
the ROI for making some of these key dairy investments,

00:58:30.050 --> 00:58:31.829
especially as technology adoption becomes so

00:58:31.829 --> 00:58:34.030
critical. How compelling are these investments

00:58:34.030 --> 00:58:36.909
financially? Do they really pay off? Modern dairy

00:58:36.909 --> 00:58:39.429
technologies based on the data offer not only

00:58:39.429 --> 00:58:42.010
significant cost reductions, but also substantial

00:58:42.010 --> 00:58:44.570
potential for revenue generation and measurable

00:58:44.570 --> 00:58:47.050
improvements in herd health. This really positions

00:58:47.050 --> 00:58:49.389
them as essential investments for boosting overall

00:58:49.389 --> 00:58:51.829
profitability and ensuring your long -term viability

00:58:51.829 --> 00:58:54.900
in this competitive landscape. Robot milking

00:58:54.900 --> 00:58:57.139
systems, as we discussed earlier, despite the

00:58:57.139 --> 00:58:59.800
high upfront cost, offer that surprisingly rapid

00:58:59.800 --> 00:59:03.059
estimated seven year payback period. That's significantly

00:59:03.059 --> 00:59:05.340
faster than the 15 plus years often projected

00:59:05.340 --> 00:59:07.239
for just doing conventional parlor upgrades.

00:59:07.440 --> 00:59:09.780
And remember, they can also lead to a very tangible

00:59:09.780 --> 00:59:12.199
15, 20 percent increase in milk production per

00:59:12.199 --> 00:59:15.320
cow. That's revenue generation. Automated monitoring

00:59:15.320 --> 00:59:17.599
systems like the CalManager example have yielded

00:59:17.599 --> 00:59:19.800
really impressive financial returns in case studies,

00:59:19.980 --> 00:59:23.480
including that $32 ,611 in calculated annual

00:59:23.480 --> 00:59:26.500
ROI for an average dairy, and potentially contributing

00:59:26.500 --> 00:59:29.920
up to $668 ,000 in added revenue from performance

00:59:29.920 --> 00:59:33.239
benefits like reducing mastitis by 20 % and lameness

00:59:33.239 --> 00:59:35.880
by 15%. Those are staggering figures for ROI.

00:59:36.119 --> 00:59:38.219
What about other, maybe less obvious technologies?

00:59:38.340 --> 00:59:40.750
Are they showing similar payback potential? Yes,

00:59:40.789 --> 00:59:43.369
the data suggests strong returns across various

00:59:43.369 --> 00:59:45.849
tech categories. Milk predictive analytics, for

00:59:45.849 --> 00:59:48.989
example, using AI to forecast production. Studies

00:59:48.989 --> 00:59:51.349
show it offers a rapid eight -month payback period

00:59:51.349 --> 00:59:54.630
and can potentially result in a $1 .30 per hundred

00:59:54.630 --> 00:59:57.170
to eat milk premium for producers who can leverage

00:59:57.170 --> 00:59:59.170
that information effectively with their processor

00:59:59.170 --> 01:00:01.929
or for management decisions. Feed efficiency

01:00:01.929 --> 01:00:04.630
AI, focusing specifically on optimizing feed

01:00:04.630 --> 01:00:07.210
utilization through data analysis. That shows

01:00:07.210 --> 01:00:09.949
a quick seven, 10 -month payback period. potentially

01:00:09.949 --> 01:00:12.469
leading to a 5 -10 % reduction in your biggest

01:00:12.469 --> 01:00:15.739
cost category feed. Data integration platform

01:00:15.739 --> 01:00:17.760
systems that pull together all your disparate

01:00:17.760 --> 01:00:20.599
farm data into one place for analysis. They demonstrate

01:00:20.599 --> 01:00:22.840
about a 12 -month payback period and a remarkable

01:00:22.840 --> 01:00:26.260
5 .8 to 1 ROI ratio on 1 ,000 cow dairies in

01:00:26.260 --> 01:00:28.539
some studies. That proves the immense value of

01:00:28.539 --> 01:00:30.320
having interconnected, actionable information

01:00:30.320 --> 01:00:33.239
at your fingertips. And even smart calf monitoring

01:00:33.239 --> 01:00:35.420
systems, which track individual calf health indicator.

01:00:35.699 --> 01:00:37.679
They show ROI within just seven, eight months,

01:00:37.820 --> 01:00:39.840
primarily by significantly slashing calf mortality

01:00:39.840 --> 01:00:42.960
rates, sometimes by up to 40%. Fewer losses equals

01:00:42.960 --> 01:00:45.000
better returns. These aren't just incremental

01:00:45.000 --> 01:00:46.920
improvements you might get from tweaking things.

01:00:47.320 --> 01:00:50.400
These technologies appear to be potentially transformative

01:00:50.400 --> 01:00:53.579
for efficiency and profitability. So it really

01:00:53.579 --> 01:00:55.679
sounds like these technologies aren't nearly

01:00:55.679 --> 01:00:58.619
nice -to -haves anymore. They're rapidly becoming

01:00:58.619 --> 01:01:01.239
survival critical, especially when we consider

01:01:01.239 --> 01:01:03.420
their impact on achieving necessary scale and

01:01:03.420 --> 01:01:06.019
efficiency. Exactly. The adoption of technology

01:01:06.019 --> 01:01:08.099
is fast becoming a non -negotiable element for

01:01:08.099 --> 01:01:10.000
maintaining competitiveness in the modern dairy

01:01:10.000 --> 01:01:12.619
industry. For example, those precision feeding

01:01:12.619 --> 01:01:15.139
systems we mentioned, which can deliver maybe

01:01:15.139 --> 01:01:19.920
a $137 per cow annual profit boost and an 18

01:01:19.920 --> 01:01:23.300
% reduction in feed waste. They typically achieve

01:01:23.300 --> 01:01:26.059
economic viability primarily in operations with

01:01:26.059 --> 01:01:29.869
around 800 -12 cows or more. Scale matters for

01:01:29.869 --> 01:01:32.269
adopting some tech. The high capital requirements

01:01:32.269 --> 01:01:34.730
for some advanced automation also present what

01:01:34.730 --> 01:01:37.030
the bullvine insightfully terms financial access

01:01:37.030 --> 01:01:40.210
challenges by farm size. With midsize operations,

01:01:40.530 --> 01:01:43.809
say generally in the 200 -500 cow range, often

01:01:43.809 --> 01:01:45.769
representing the sweet spot for adopting things

01:01:45.769 --> 01:01:47.630
like robotic milking, because they might have

01:01:47.630 --> 01:01:49.889
the scale to justify it, but aren't yet so large

01:01:49.889 --> 01:01:51.929
that the investment becomes overwhelmingly complex

01:01:51.929 --> 01:01:54.210
or debt heavy. Historically, the dairy industry

01:01:54.210 --> 01:01:55.909
has been somewhat slower to adopt automation

01:01:55.909 --> 01:01:58.059
compared to other agricultural sectors. like

01:01:58.059 --> 01:02:00.539
row crops or poultry. And our analysis strongly

01:02:00.539 --> 01:02:02.820
indicates that this previously conservative approach

01:02:02.820 --> 01:02:04.840
is increasingly becoming a critical competitive

01:02:04.840 --> 01:02:07.760
disadvantage today. the very geographic disruption

01:02:07.760 --> 01:02:09.780
we've been observing in dairy production. It's

01:02:09.780 --> 01:02:11.659
partly attributable to these emerging regions

01:02:11.659 --> 01:02:14.440
actively adopting brand new production systems

01:02:14.440 --> 01:02:16.460
that are optimized for both efficiency and scale,

01:02:16.719 --> 01:02:18.840
often incorporating cutting -edge technology

01:02:18.840 --> 01:02:22.460
right from day one. Operations that fail to adapt

01:02:22.460 --> 01:02:25.039
this new technological paradigm are unfortunately

01:02:25.039 --> 01:02:28.000
facing accelerated consolidation as the entire

01:02:28.000 --> 01:02:30.480
industry fundamentally reshapes itself around

01:02:30.480 --> 01:02:32.760
technological prowess and data -driven management.

01:02:33.019 --> 01:02:35.639
And what about that idea of component value optimism?

01:02:35.719 --> 01:02:38.500
You mentioned it earlier. Is that truly emerging

01:02:38.500 --> 01:02:41.440
as a new significant revenue driver for producers

01:02:41.440 --> 01:02:43.880
to actively focus on beyond just total pounds

01:02:43.880 --> 01:02:46.739
shipped? It absolutely is, and it marks a fundamental

01:02:46.739 --> 01:02:48.699
shift in how you should be thinking about the

01:02:48.699 --> 01:02:51.280
product you're selling. The market is increasingly

01:02:51.280 --> 01:02:53.559
differentiating the value of milk based on its

01:02:53.559 --> 01:02:56.599
components. We're seeing rising prices and stronger

01:02:56.599 --> 01:02:58.840
demand specifically for butterfat and protein,

01:02:59.099 --> 01:03:01.559
driving values for things like butter, cheese,

01:03:01.719 --> 01:03:05.260
nonfat dry milk, NDM, and whey. This is partly

01:03:05.260 --> 01:03:08.059
due to shifting consumer demand, but also significantly

01:03:08.059 --> 01:03:10.900
due to increased export opportunities for these

01:03:10.900 --> 01:03:13.360
concentrated components. It's creating a sort

01:03:13.360 --> 01:03:16.519
of market bifurcation. What this means for you

01:03:16.519 --> 01:03:18.940
is that operations which successfully optimize

01:03:18.940 --> 01:03:21.139
for higher percentages of components, specifically

01:03:21.139 --> 01:03:23.619
butterfat and protein, will capture significantly

01:03:23.619 --> 01:03:26.659
higher revenue per pound of milk shipped. For

01:03:26.659 --> 01:03:29.099
example, numerous analyses show that each 0 .1

01:03:29.099 --> 01:03:31.480
% increase in butterfat content can add roughly

01:03:31.480 --> 01:03:35.139
$0 .15 per $100 per $0 .20 per mono tea to your

01:03:35.139 --> 01:03:37.340
milk check, depending on current component prices.

01:03:37.940 --> 01:03:40.059
In the Southeast region, specifically looking

01:03:40.059 --> 01:03:42.340
at Class M8 milk sales, studies showed that increasing

01:03:42.340 --> 01:03:45.360
fat percentage added a substantial $1 .28 per

01:03:45.360 --> 01:03:48.159
$0 .38 per 100 tea to producer milk checks in

01:03:48.159 --> 01:03:50.900
recent periods. That's huge! A $1 .30 extra per

01:03:50.900 --> 01:03:53.039
100 weight, just for higher fat. Exactly. It

01:03:53.039 --> 01:03:55.539
highlights the potential. This shift fundamentally

01:03:55.539 --> 01:03:58.239
means that just focusing on maximizing sheer

01:03:58.239 --> 01:04:01.300
volume, the old pounds mentality, is becoming

01:04:01.300 --> 01:04:03.559
insufficient for maximizing your profitability.

01:04:04.039 --> 01:04:06.860
Strategic producers must now prioritize genetic

01:04:06.860 --> 01:04:09.920
selection, using indices like TPI that emphasize

01:04:09.920 --> 01:04:13.000
components, and fine -tuning feeding programs

01:04:13.000 --> 01:04:15.119
specifically to consistently enhance component

01:04:15.119 --> 01:04:17.500
yields. That's how you maximize your overall

01:04:17.500 --> 01:04:20.119
milk check value and ensure better long -term

01:04:20.119 --> 01:04:22.280
financial health in this evolving market. Okay,

01:04:22.300 --> 01:04:23.920
so pulling all these threads together now, the

01:04:23.920 --> 01:04:25.940
big geographic shifts, the accelerating tech

01:04:25.940 --> 01:04:28.880
adoption, this new focus on components, how do

01:04:28.880 --> 01:04:30.500
all these pieces fit into the broader emerging

01:04:30.500 --> 01:04:32.880
trends and the future of cost competitiveness

01:04:32.880 --> 01:04:34.940
for the U .S. dairy industry? What's the sum

01:04:34.940 --> 01:04:37.159
total of this whole analysis telling us? We are

01:04:37.159 --> 01:04:39.860
definitely witnessing several profound, deeply

01:04:39.860 --> 01:04:41.739
interconnected trends that are fundamentally

01:04:41.739 --> 01:04:45.119
redefining the industry right now. First, that

01:04:45.119 --> 01:04:47.710
geographic realignment of dairy production. It

01:04:47.710 --> 01:04:50.769
is not a passing phase. It's a powerful, efficiency

01:04:50.769 --> 01:04:54.909
-driven structural trend. The May 2025 milk production

01:04:54.909 --> 01:04:57.230
data confirms the significant shift away from

01:04:57.230 --> 01:05:00.130
many traditional dairy regions. Kansas, as we

01:05:00.130 --> 01:05:02.780
noted, posted what the bull vine called a mind

01:05:02.780 --> 01:05:05.599
-blowing 15 .7 % production increase year over

01:05:05.599 --> 01:05:09.119
year. Texas showed 8 .9 % growth. That contrasts

01:05:09.119 --> 01:05:10.880
sharply with the sustained declines we're seeing

01:05:10.880 --> 01:05:12.800
in traditional strongholds like California, a

01:05:12.800 --> 01:05:15.699
magnitude of 1 .8%. These new powerhouse regions,

01:05:15.900 --> 01:05:17.800
they're not merely adding a few more cows to

01:05:17.800 --> 01:05:20.179
old systems. They are building entirely new production

01:05:20.179 --> 01:05:22.639
systems, optimized from the ground up for efficiency

01:05:22.639 --> 01:05:25.639
and unprecedented scale. This strongly suggests

01:05:25.639 --> 01:05:27.679
that the legacy advantages held by older dairy

01:05:27.679 --> 01:05:30.019
regions are fundamentally diminishing, compelling...

01:05:34.980 --> 01:05:38.320
And that accelerated technology adoption we spent

01:05:38.320 --> 01:05:40.800
time on. It truly sounds like it's moved from

01:05:40.800 --> 01:05:43.519
optional to absolutely non -negotiable now. It

01:05:43.519 --> 01:05:46.400
unequivocally has. The dairy industry's historically

01:05:46.400 --> 01:05:48.699
somewhat conservative approach to automation.

01:05:49.199 --> 01:05:52.199
It's now proving to be, frankly, a competitive

01:05:52.199 --> 01:05:54.519
death sentence for operations that lack strategic

01:05:54.519 --> 01:05:57.949
vision or the capital to invest. The very geographic

01:05:57.949 --> 01:06:00.389
shifts we're observing are partly attributable

01:06:00.389 --> 01:06:03.050
to these new production systems being optimized

01:06:03.050 --> 01:06:06.110
for efficiency and scale, and often incorporating

01:06:06.110 --> 01:06:08.349
advanced technology right from their inception.

01:06:08.590 --> 01:06:11.889
It's baked in. Crucially, a dairy operation's

01:06:11.889 --> 01:06:14.110
capacity for capital investment in technology

01:06:14.110 --> 01:06:17.090
upgrades, and maybe just as importantly, its

01:06:17.090 --> 01:06:19.289
ability to successfully integrate these complex

01:06:19.289 --> 01:06:22.730
management systems into daily operations. These

01:06:22.730 --> 01:06:24.849
are now key indicators of its future readiness

01:06:24.849 --> 01:06:28.469
and its potential for long -term viability. Operations

01:06:28.469 --> 01:06:30.769
that fail to adapt to this technological imperative

01:06:30.769 --> 01:06:33.829
are, sadly but realistically, facing accelerated

01:06:33.829 --> 01:06:37.050
consolidation as the industry fundamentally reshapes

01:06:37.050 --> 01:06:38.869
itself around those who can leverage technology

01:06:38.869 --> 01:06:40.969
effectively. Then there's the market differentiation

01:06:40.969 --> 01:06:42.409
through components that you just emphasized.

01:06:42.630 --> 01:06:45.610
Yes, this is that critical strategic shift away

01:06:45.610 --> 01:06:48.849
from a purely pounds mentality towards a component

01:06:48.849 --> 01:06:51.170
mentality if you want to maximize your milk chicks

01:06:51.170 --> 01:06:53.760
going forward. The Bullvine article highlights

01:06:53.760 --> 01:06:56.400
that breeding programs focusing on TPI, the total

01:06:56.400 --> 01:06:59.139
performance index, which specifically prioritizes

01:06:59.139 --> 01:07:01.159
traits like butterfat percentage and protein

01:07:01.159 --> 01:07:03.760
content, are consistently outperforming genetics

01:07:03.760 --> 01:07:06.039
programs focused primarily on just maximizing

01:07:06.039 --> 01:07:08.800
milk volume in terms of overall herd profitability.

01:07:09.280 --> 01:07:11.800
This strategic shift towards actively optimizing

01:07:11.800 --> 01:07:14.039
component yields is no longer just an option

01:07:14.039 --> 01:07:16.340
for a few niche players. It's becoming crucial

01:07:16.340 --> 01:07:18.820
for maximizing your milk checks and achieving

01:07:18.820 --> 01:07:21.460
better overall profitability in an increasingly

01:07:21.460 --> 01:07:24.579
dysfunctional Finally, how do the bigger picture

01:07:24.579 --> 01:07:26.880
global market dynamics and export opportunities

01:07:26.880 --> 01:07:29.059
play into this increasingly competitive domestic

01:07:29.059 --> 01:07:31.719
landscape? Does the world market offer opportunities

01:07:31.719 --> 01:07:33.920
or just more risk? Well, while the U .S. dairy

01:07:33.920 --> 01:07:36.400
sector certainly faces its own internal challenges

01:07:36.400 --> 01:07:38.780
with costs and consolidation, constraints on

01:07:38.780 --> 01:07:41.139
global production elsewhere are, somewhat ironically,

01:07:41.440 --> 01:07:44.159
creating new potential avenues for U .S. exports.

01:07:44.670 --> 01:07:46.849
EU milk production, for instance, is forecasted

01:07:46.849 --> 01:07:51.170
to decline again, maybe by 0 .2 % in 2025. This

01:07:51.170 --> 01:07:53.150
is primarily attributed to the impact of their

01:07:53.150 --> 01:07:55.210
increasingly stringent environmental regulations

01:07:55.210 --> 01:07:57.469
limiting expansion or even forcing contraction.

01:07:57.909 --> 01:08:00.610
This decline in a major competing exporting region

01:08:00.610 --> 01:08:03.010
creates potentially significant export opportunities

01:08:03.010 --> 01:08:04.969
for efficiently positioned U .S. operations,

01:08:05.429 --> 01:08:07.650
those that have superior cost structures and

01:08:07.650 --> 01:08:09.889
modern technology enabling them to compete globally.

01:08:10.110 --> 01:08:12.530
The U .S. currently exports nearly one -fifth,

01:08:12.650 --> 01:08:15.780
about 18 to 19%. of its total dairy solids production,

01:08:16.140 --> 01:08:18.699
primarily in the form of non -fat solids like

01:08:18.699 --> 01:08:21.720
skim milk powder and whey proteins. Mexico, Canada,

01:08:21.840 --> 01:08:24.060
and Southeast Asia, replacing China to some extent,

01:08:24.260 --> 01:08:26.399
collectively accounted for a large share, maybe

01:08:26.399 --> 01:08:29.100
around 40%, of total U .S. dairy export value

01:08:29.100 --> 01:08:31.659
in 2024. However, it's definitely not without

01:08:31.659 --> 01:08:34.340
risks. Trade tensions and sudden retaliatory

01:08:34.340 --> 01:08:37.739
tariffs, like China's recent 84 % tariff slapped

01:08:37.739 --> 01:08:40.680
on U .S. whey exports, can certainly introduce

01:08:40.680 --> 01:08:43.060
significant volatility and market disruption.

01:08:43.210 --> 01:08:45.890
But despite these challenges, the overall trends

01:08:45.890 --> 01:08:47.829
seem to point towards tightening global milk

01:08:47.829 --> 01:08:50.170
supplies and shifting demand patterns that create

01:08:50.170 --> 01:08:52.390
strategic opportunities for those U .S. producers

01:08:52.390 --> 01:08:55.750
who are adaptable, efficient and maintain a consistently

01:08:55.750 --> 01:08:57.630
competitive cost structure, allowing them to

01:08:57.630 --> 01:09:00.390
participate in export markets. OK, that is a

01:09:00.390 --> 01:09:02.989
lot to process, truly. But the picture that emerges

01:09:02.989 --> 01:09:06.149
is crystal clear. The U .S. dairy industry is

01:09:06.149 --> 01:09:08.880
navigating a period of intense. fundamental transformation.

01:09:08.979 --> 01:09:10.920
It's being driven relentlessly by economics,

01:09:11.199 --> 01:09:14.680
by technology, and by geography. So based on

01:09:14.680 --> 01:09:17.020
this incredibly detailed deep dive into the bullvine

01:09:17.020 --> 01:09:19.500
article and the supporting USDA data, what are

01:09:19.500 --> 01:09:21.479
the absolute key conclusions we can draw? And

01:09:21.479 --> 01:09:23.699
maybe more importantly, what are the most actionable,

01:09:23.819 --> 01:09:25.819
practical recommendations for you, the dairy

01:09:25.819 --> 01:09:27.680
producer listening right now? All right, let's

01:09:27.680 --> 01:09:30.279
try and summarize the key conclusions distilled

01:09:30.279 --> 01:09:32.939
from this comprehensive deep dive analysis. First,

01:09:33.199 --> 01:09:36.409
geographic realignment is paramount. the dramatic

01:09:36.409 --> 01:09:38.210
shift we're seeing in milk production towards

01:09:38.210 --> 01:09:40.369
emerging regions. It's not a temporary blip.

01:09:40.369 --> 01:09:42.649
It's a fundamental realignment driven by the

01:09:42.649 --> 01:09:45.229
construction of new, highly efficient systems

01:09:45.229 --> 01:09:48.029
and increasingly favorable local economic and

01:09:48.029 --> 01:09:50.909
regulatory conditions in those areas. Location

01:09:50.909 --> 01:09:53.840
matters more than ever. Second, scale is non

01:09:53.840 --> 01:09:56.800
-negotiable for cost efficiency. That stark cost

01:09:56.800 --> 01:09:59.239
differential we saw between small and large operations.

01:09:59.579 --> 01:10:02.199
It unequivocally underscores that achieving sufficient

01:10:02.199 --> 01:10:04.520
economies of scale is a universal imperative

01:10:04.520 --> 01:10:07.100
for cost competitiveness, and this reality is

01:10:07.100 --> 01:10:10.510
accelerating industry consolidation. Third, technology

01:10:10.510 --> 01:10:13.789
adoption is survival critical. Escalating labor

01:10:13.789 --> 01:10:15.970
costs combined with the sheer demand for improved

01:10:15.970 --> 01:10:18.170
efficiency make strategic investment in automation

01:10:18.170 --> 01:10:20.609
and sophisticated data -driven management systems

01:10:20.609 --> 01:10:23.449
absolutely essential. They're no longer optional

01:10:23.449 --> 01:10:25.930
luxuries, and they offer truly compelling returns

01:10:25.930 --> 01:10:28.489
on investment. Fourth, cost structures are highly

01:10:28.489 --> 01:10:30.789
regionalized. Remember this. National averages

01:10:30.789 --> 01:10:33.050
for costs and profitability can be profoundly

01:10:33.050 --> 01:10:36.590
misleading for your individual operation. unique

01:10:36.590 --> 01:10:39.869
regional factors related to feed labor utilities

01:10:39.869 --> 01:10:43.329
taxes and infrastructure create widely divergent

01:10:43.329 --> 01:10:45.369
financial realities that demand individualized

01:10:45.369 --> 01:10:48.710
assessment fifth water and regulatory burdens

01:10:48.710 --> 01:10:51.850
are increasing these represent rising often highly

01:10:51.850 --> 01:10:54.829
localized operational expenses and critically

01:10:54.829 --> 01:10:57.090
some policy approaches like potential farm size

01:10:57.090 --> 01:10:59.449
caps could inadvertently hinder the achievement

01:10:59.449 --> 01:11:01.850
of scale and efficiency needed for long -term

01:11:01.850 --> 01:11:04.590
viability and environmental investment sixth

01:11:04.909 --> 01:11:06.970
the federal tax landscape is shifting dramatically.

01:11:07.250 --> 01:11:09.829
That impending tax cliff, specifically the estate

01:11:09.829 --> 01:11:13.010
tax exemption reduction coming in 2026, and the

01:11:13.010 --> 01:11:15.289
ongoing phase -out of bonus depreciation ending

01:11:15.289 --> 01:11:18.069
after 2026, poses significant immediate threats

01:11:18.069 --> 01:11:20.409
to farm transfers and the affordability of essential

01:11:20.409 --> 01:11:23.270
capital investment. And finally, conclusion number

01:11:23.270 --> 01:11:25.670
seven, market differentiation through components

01:11:25.670 --> 01:11:28.329
is key. Optimizing your milk for higher butterfat

01:11:28.329 --> 01:11:30.550
and protein content is becoming a crucial strategy

01:11:30.550 --> 01:11:33.029
for capturing higher revenue per pound and significantly

01:11:33.029 --> 01:11:35.310
enhancing your overall profitability in today's

01:11:35.310 --> 01:11:38.210
market. Those are the big undeniable takeaways

01:11:38.210 --> 01:11:41.029
from the data. Now for you, the dairy producer.

01:11:41.520 --> 01:11:43.300
Sitting there listening, armed with all this

01:11:43.300 --> 01:11:46.340
information. What are the most critical, actionable

01:11:46.340 --> 01:11:48.520
recommendations you can take away from this deep

01:11:48.520 --> 01:11:51.220
dive? How do you navigate this complex, evolving

01:11:51.220 --> 01:11:53.340
landscape and position your operation for future

01:11:53.340 --> 01:11:56.640
success? Okay, let's get practical. First, reevaluate

01:11:56.640 --> 01:11:59.560
your location strategy. Seriously. For producers

01:11:59.560 --> 01:12:02.239
considering expansion, or frankly, even for those

01:12:02.239 --> 01:12:04.619
just facing persistent unprofitability where

01:12:04.619 --> 01:12:07.279
they are, it's now imperative to conduct a thorough,

01:12:07.399 --> 01:12:10.359
unbiased analysis of these emerging dairy regions

01:12:10.359 --> 01:12:13.779
versus your current situation. Prioritize locations

01:12:13.779 --> 01:12:16.359
that have established or are clearly developing

01:12:16.359 --> 01:12:19.500
proximity to modern, efficient processing facilities.

01:12:19.960 --> 01:12:22.479
You have to strategically minimize those transportation

01:12:22.479 --> 01:12:25.539
costs. Actively seek out favorable regulatory

01:12:25.539 --> 01:12:27.899
environments, states or counties, that actively

01:12:27.899 --> 01:12:30.460
support rather than seem to hinder efficient,

01:12:30.659 --> 01:12:33.680
large -scale, modern dairy operations. Critically,

01:12:33.779 --> 01:12:35.979
ensure adequate and affordable long -term water

01:12:35.979 --> 01:12:39.100
resources. Consider future scarcity risks, not

01:12:39.100 --> 01:12:41.460
just today's supply levels. And verify that the

01:12:41.460 --> 01:12:43.100
underlying infrastructure, things like reliable

01:12:43.100 --> 01:12:45.560
rural broadband, sufficient electrical capacity,

01:12:45.800 --> 01:12:48.319
strong dealer support networks, is truly capable

01:12:48.319 --> 01:12:50.380
of supporting the advanced automation and comprehensive

01:12:50.380 --> 01:12:52.279
data integration you'll likely need to remain

01:12:52.279 --> 01:12:54.840
competitive. Second recommendation, accelerate

01:12:54.840 --> 01:12:57.319
technology investment. isn't just about buying

01:12:57.319 --> 01:12:59.300
a few new gadgets anymore. It's about developing

01:12:59.300 --> 01:13:01.640
and implementing a clear, comprehensive technology

01:13:01.640 --> 01:13:05.220
adoption roadmap for your entire operation. Prioritize

01:13:05.220 --> 01:13:07.319
investments in things like robotic milking systems

01:13:07.319 --> 01:13:09.800
to directly mitigate those relentlessly rising

01:13:09.800 --> 01:13:12.560
labor costs and significantly boost productivity.

01:13:13.429 --> 01:13:15.850
Invest in predictive analytics and integrated

01:13:15.850 --> 01:13:18.909
data management platforms to holistically optimize

01:13:18.909 --> 01:13:21.289
your feed efficiency, enhance herd health through

01:13:21.289 --> 01:13:23.670
early detection, and improve those valuable component

01:13:23.670 --> 01:13:26.430
yields. And critically, our data models strongly

01:13:26.430 --> 01:13:29.689
advise. You need to act decisively to place qualifying

01:13:29.689 --> 01:13:32.970
equipment in service before the end of 2025 to

01:13:32.970 --> 01:13:35.430
maximize those remaining bonus depreciation benefits.

01:13:35.810 --> 01:13:39.649
Remember, it drops from 60 % in 2025, potentially

01:13:39.649 --> 01:13:41.729
to zero afterwards, depending on congressional

01:13:41.729 --> 01:13:44.699
action. This is a time -sensitive financial imperative.

01:13:44.920 --> 01:13:48.000
Don't wait. Third, optimize for components, not

01:13:48.000 --> 01:13:50.159
just volume. This represents that fundamental

01:13:50.159 --> 01:13:52.800
shift in mindset we discussed. Consciously move

01:13:52.800 --> 01:13:54.979
your focus from simply maximizing total milk

01:13:54.979 --> 01:13:57.699
volume to strategically optimizing your butterfat

01:13:57.699 --> 01:14:00.039
and protein content. Review your breeding programs

01:14:00.039 --> 01:14:02.640
rigorously. Select for genetics using tools like

01:14:02.640 --> 01:14:05.680
TPI or NMI that demonstrably enhance component

01:14:05.680 --> 01:14:09.100
yields over just milk volume alone. Work closely

01:14:09.100 --> 01:14:11.359
with your nutritionist to formulate rations that

01:14:11.359 --> 01:14:13.840
specifically support robust component production,

01:14:14.039 --> 01:14:17.039
not just overall milk flow. And proactively explore

01:14:17.039 --> 01:14:19.359
partnerships or conversations with your processors

01:14:19.359 --> 01:14:21.659
about potential premiums for high component milk.

01:14:21.840 --> 01:14:24.119
This will directly translate to higher revenue

01:14:24.119 --> 01:14:26.840
per hundredweight for you. Fourth recommendation,

01:14:27.239 --> 01:14:29.859
implement proactive financial and risk management.

01:14:30.399 --> 01:14:32.800
Calculate your individualized break -even milk

01:14:32.800 --> 01:14:34.800
prices based on your specific cost structure,

01:14:34.979 --> 01:14:37.140
your herd size, and your regional factors. Do

01:14:37.140 --> 01:14:39.199
not rely on published national or even regional

01:14:39.199 --> 01:14:41.600
averages. Know your number. Utilize sophisticated

01:14:41.600 --> 01:14:43.880
risk management tools like forward contracts,

01:14:44.119 --> 01:14:46.220
futures, options, alongside the dairy margin

01:14:46.220 --> 01:14:48.800
coverage program to actively hedge against price

01:14:48.800 --> 01:14:51.100
volatility. Recognize that government payments

01:14:51.100 --> 01:14:53.520
like DMC may provide less support in coming years

01:14:53.520 --> 01:14:56.640
if margins improve. Absolute vital. I can't stress

01:14:56.640 --> 01:14:59.020
it enough. Engage in urgent estate planning now.

01:14:59.140 --> 01:15:01.319
Explore options like lifetime gifting strategies,

01:15:01.699 --> 01:15:04.119
trust structures, or maybe conservation easements

01:15:04.119 --> 01:15:06.699
to strategically mitigate the significant impact

01:15:06.699 --> 01:15:09.079
of that looming federal estate tax exemption

01:15:09.079 --> 01:15:12.739
reduction before January 1st, 2026. Procrastination

01:15:12.739 --> 01:15:14.819
on this front could literally cost your family

01:15:14.819 --> 01:15:17.720
millions in unnecessary taxes, potentially forcing

01:15:17.720 --> 01:15:20.920
asset sales. And finally, the fifth recommendation.

01:15:21.500 --> 01:15:24.640
Monitor the regulatory landscape. Stay meticulously

01:15:24.720 --> 01:15:27.159
informed about evolving state and federal regulatory

01:15:27.159 --> 01:15:30.260
developments, particularly those related to environmental

01:15:30.260 --> 01:15:33.260
compliance standards, water, air, manure and

01:15:33.260 --> 01:15:36.100
changing labor policies, minimum wage, overtime

01:15:36.100 --> 01:15:39.020
rules, immigration impacts, as these can fundamentally

01:15:39.020 --> 01:15:41.100
alter your operating costs and your potential

01:15:41.100 --> 01:15:44.369
for future expansion. Actively engage with your

01:15:44.369 --> 01:15:46.770
state and national industry associations to advocate

01:15:46.770 --> 01:15:49.149
for sensible policies that truly support sustainable

01:15:49.149 --> 01:15:51.630
and efficient dairy production, rather than those

01:15:51.630 --> 01:15:53.810
that inadvertently create economic barriers to

01:15:53.810 --> 01:15:56.670
progress, scale, and profitability. Your voice

01:15:56.670 --> 01:15:58.789
matters in shaping these rules. The Bullvine

01:15:58.789 --> 01:16:00.670
article we've unpacked today, supported by all

01:16:00.670 --> 01:16:04.229
that USDA data, makes it abundantly clear. Your

01:16:04.229 --> 01:16:06.710
geographic destiny, and indeed your economic

01:16:06.710 --> 01:16:09.630
future in this industry, is being decided right

01:16:09.630 --> 01:16:13.220
now, in real time. The producers, who will not

01:16:13.220 --> 01:16:16.039
just survive, but truly dominate the next decade

01:16:16.039 --> 01:16:18.880
of dairy, they won't be those merely perfecting

01:16:18.880 --> 01:16:20.680
yesterday's systems in yesterday's increasingly

01:16:20.680 --> 01:16:23.560
costly locations. They will be the ones who acutely

01:16:23.560 --> 01:16:26.039
recognize that regional competitive advantages

01:16:26.039 --> 01:16:28.819
driven by things like infrastructure, input costs,

01:16:29.079 --> 01:16:31.619
processing access, and regulatory environments

01:16:31.619 --> 01:16:34.180
determine long -term viability more profoundly

01:16:34.180 --> 01:16:36.659
than perhaps any single on -farm management practice.

01:16:37.259 --> 01:16:40.079
Do not let industry romanticism about dairy heritage

01:16:40.079 --> 01:16:42.720
or attachment to a specific place blind you to

01:16:42.720 --> 01:16:45.420
this stark economic reality. The numbers, cold

01:16:45.420 --> 01:16:47.260
and impartial as they are, they don't care about

01:16:47.260 --> 01:16:49.979
your grandfather's legacy. They only reward profitable

01:16:49.979 --> 01:16:52.380
positioning in today's market. Are you positioned

01:16:52.380 --> 01:16:54.920
for profitable growth? Or are you perhaps anchored

01:16:54.920 --> 01:16:56.819
to an increasingly expensive geography that,

01:16:56.899 --> 01:16:59.060
frankly, many traditional dairy organizations

01:16:59.060 --> 01:17:01.260
aren't yet willing to honestly discuss the full

01:17:01.260 --> 01:17:03.640
implications of? Our analysis shows this location

01:17:03.640 --> 01:17:07.840
disadvantage could be costing you $178 ,000 annually,

01:17:08.159 --> 01:17:10.640
compounding into millions over the decades, just

01:17:10.640 --> 01:17:13.220
based on where you operate. The great dairy migration,

01:17:13.460 --> 01:17:16.000
the geographic realignment. It's not just a theory,

01:17:16.039 --> 01:17:17.960
it's accelerating based on verifiable economic

01:17:17.960 --> 01:17:20.939
reality. Position yourself, your operation to

01:17:20.939 --> 01:17:22.779
profit from this transformation, not become a

01:17:22.779 --> 01:17:25.399
casualty of it. There you have it, the uncomfortable

01:17:25.399 --> 01:17:28.319
truth about regional dairy economics that traditional

01:17:28.319 --> 01:17:31.159
industry organizations... desperately want to

01:17:31.159 --> 01:17:34.380
keep buried. If you're still operating under

01:17:34.380 --> 01:17:36.319
the assumption that your grandfather's dairy

01:17:36.319 --> 01:17:38.680
location gives you some kind of inherent advantage,

01:17:39.060 --> 01:17:42.399
you just heard exactly why that thinking is bankrupting

01:17:42.399 --> 01:17:46.520
operations across traditional dairy states. The

01:17:46.520 --> 01:17:49.079
numbers don't lie, and they don't care about

01:17:49.079 --> 01:17:52.880
heritage. They only reward profitable positioning.

01:17:53.279 --> 01:17:55.880
Here's your immediate action step. Create that

01:17:55.880 --> 01:17:58.560
spreadsheet we talked about. Compare your current

01:17:58.560 --> 01:18:01.220
location against three promising expansion regions

01:18:01.220 --> 01:18:04.899
across all cost categories, labor, land, feed,

01:18:05.060 --> 01:18:07.579
utilities, taxes, and regulatory compliance.

01:18:08.560 --> 01:18:10.500
Calculate the per hundred weight differential

01:18:10.500 --> 01:18:13.039
for each category and multiply by your annual

01:18:13.039 --> 01:18:15.859
production. You need to see the real dollar impact

01:18:15.859 --> 01:18:20.159
using USDA cost estimation methodologies. Remember,

01:18:20.399 --> 01:18:23.000
the federal estate tax exemption drops by 50

01:18:23.000 --> 01:18:27.630
% on January 1, 2026. Bonus depreciation continues

01:18:27.630 --> 01:18:31.689
phasing out through 2027. The window for strategic

01:18:31.689 --> 01:18:34.189
positioning is closing faster than most producers

01:18:34.189 --> 01:18:36.970
realize. The Great Dairy Migration isn't just

01:18:36.970 --> 01:18:39.869
happening, it's accelerating based on verifiable

01:18:39.869 --> 01:18:44.310
economic reality. Your analysis will reveal whether

01:18:44.310 --> 01:18:46.909
you're positioned for profitable growth or anchored

01:18:46.909 --> 01:18:49.970
to increasingly expensive geography that industry

01:18:49.970 --> 01:18:53.779
organizations won't honestly discuss. Don't let

01:18:53.779 --> 01:18:56.380
industry romanticism about dairy heritage blind

01:18:56.380 --> 01:18:59.380
you to economic reality. Make sure your next

01:18:59.380 --> 01:19:02.199
strategic decision aligns with mathematical truth

01:19:02.199 --> 01:19:05.220
rather than geographic sentiment that's costing

01:19:05.220 --> 01:19:08.800
you hundreds of thousands annually. This has

01:19:08.800 --> 01:19:11.699
been the Bullvine Podcast. Subscribe wherever

01:19:11.699 --> 01:19:14.979
you get your podcasts. And remember, we're here

01:19:14.979 --> 01:19:17.380
to challenge the conventional wisdom that's keeping

01:19:17.380 --> 01:19:19.760
the dairy industry from reaching its full potential.

01:19:21.140 --> 01:19:24.029
Until next time. Keep questioning everything.