Breaking free from the chains of the past Where
truth moves faster than a Holstein calf No law
waiting on some printed page We're charting new
ground in the digital age From genomic codes
to robot facts We cut through the noise, no hold
them back not your daddy's dairy news tonight
we're sparking Welcome to the Bullvine Podcast,
where we challenge conventional wisdom and deliver
the insights that matter most to dairy industry
professionals. I'm your host, and today we're
diving deep into one of the most controversial
topics shaping our industry right now. You've
probably heard the narrative countless times
at producer meetings and industry conferences.
Illegal immigration killed the family dairy farm.
But what if I told you that everything you've
heard about this topic is completely backwards?
What if the real story behind dairy's great consolidation
has nothing to do with immigration and everything
to do with cold, hard economics? In today's episode,
we're examining the forces that have led to the
loss of over 15 ,000 dairy farms in just five
years, while milk production has actually increased.
We'll explore why farms with 2 ,000 cows or more
operate at nearly $10 per 100 weight less than
their smaller counterparts, and why this cost
gap, not labor policy, is the real driver of
consolidation. This isn't about politics. This
is about understanding the economic fundamentals
that determine who survives and who gets consolidated
in modern dairy farming. So grab your coffee,
and let's get into the data that's reshaping
everything we thought we knew about our industry.
Welcome back to the Bullvine podcast, the show
that digs deep into the topics that matter to
dairy producers. That's right. Today, we're tackling
a really interesting feature article from the
Bullvine that's got everyone talking. We're going
to break it all down. This deep dive is all about
dairy's great consolidation beyond the blame
game. It challenges a, well, a very common narrative
you might have heard. indeed the one that often
blames immigration for the loss of family farms.
It's a powerful, frequently repeated story when
we see such rapid change in the industry. But
what does the data in this report actually reveal?
about that belief. Let's unpack this. Okay. So
the article immediately challenges that common
narrative. You know, the one saying immigrant
workers are destroying the dairy industry. Yeah,
I've definitely heard that one floating around.
But what's fascinating here is how the data from
the Great Consolidation Report completely flips
that script. It's counterintuitive for many,
maybe, but the analysis shows immigrant workers
are not destroying dairy. They are absolutely
essential to its survival. Essential is a...
strong word. The article highlights they produce,
what, like 79 % of America's milk supply? Is
that right? Yes, 79%. It's the vast majority.
And the economic modeling from Texas A &M paints
a pretty dire picture if that workforce were
to just disappear. Right. It projects milk prices
spiking by, what was it, 90 .4 %? Yeah, 90 .4%.
And the entire industry losing about $32 .1 billion.
So it shows an industry that isn't being killed
by immigration, but is, you know, profoundly
dependent on it just to function. This truly
flips the script on the blame game. Okay. So
while we're clearing that up, we still have to
face the raw numbers on farm loss because they
are, well, they're brutal. The USDA census data
shows we lost 15 ,866 dairy farms just between
2017 and 2022. Yeah. That's more than three operations
closing every single day. These are tough numbers
and it's visible, right? You see those for sale
signs where dairies used to be, but here's the
twist. What happened to total milk production
during that same time? You'd think it would drop,
wouldn't you, with all those farms closing? Logically,
yes. But no. Total milk production actually increased
by 5%. It went from 215 .5 billion pounds in
2017 up to 226 .4 billion pounds in 2022. Fewer
farms, more milk. Fewer farms, more milk. That
tells you very clearly that some operations have
figured out how to operate at a... well, a massive
scale. They've cracked the code on efficiency.
And the geography is fascinating, too. You know,
traditional states like Wisconsin, Pennsylvania,
New York, they saw significant farm losses. We're
talking 2 ,740 in Wisconsin alone. Right. Big
numbers. Pennsylvania lost 1 ,570. New York,
1260. But then states like Texas, Idaho and New
Mexico are seeing significant investment in new
facilities. Big ones. Exactly. This isn't random.
It's strategic capital following the most profitable
opportunities. It's not about chasing cheaper
labor primarily, but about pure economies of
scale. As one banker friend quoted in the article
put it, the middle is disappearing. You're either
getting really big or you're getting out. Getting
bigger, getting out. Yeah. And the USDA census
data backs this up with a huge structural shift.
Farms with under 100 cows down 42%. 42%. Then
100, 499 cows down 33 .6%. Even the 500, 999
cow farms saw a 35 .1 % drop. And the 1 ,000,
2 ,000, 499 cow farms were down 10%. So losses
across... Almost all size categories. But, and
here's the kicker, farms with 2 ,500 cows or
more actually grew. They grew by 16 .8%, going
from 714 farms to 834. Okay. And now, those 2
,500 plus cow operations produce 46 % of all
U .S. milk. Almost half. That data just lays
bare the starkness of this fundamental restructuring.
It feels like a profound and... Pretty aggressive
transformation. It really is. So we've debunked
the immigration myths. We've seen the numbers
on farm loss and production. What's the real
economic engine behind this consolidation? What
does the report say is the core driver? That's
the critical question, right? And the USDA Economic
Research Service analysis on production costs
is incredibly revealing here. What did they find?
What are the numbers? Well, they found that farms
with 2 ,000 plus cows averaged $23 .06 per hundred
weight in production costs. Okay, $23 .06 for
the big guys. Right. Now compare that to farms
with 100, 199 cows. Their costs, $32 .83 per
hundredweight. Wow, that's nearly a $10 per hundredweight
difference. A huge competitive gap, almost 10
bucks. In real world terms, just thinking about
150 cow operation, that means about a $27 ,000
a year disadvantage compared to their larger
neighbors. Yeah, or $135 ,000 over five years.
It adds up fast. And that has nothing to do with
labor costs, right? This isn't about wages. Absolutely
nothing. This is purely operational economics.
But here's the real eye -opener, Sarah. When
you dig into the non -feed costs, you know, equipment,
repairs, utilities, capital, compliance, the
difference is staggering. While the difference
in feed costs was about $2 .50 per hundredweight
between those groups, the gap in non -feed expenses
was a staggering $19 .59 per hundredweight. $19
.59. Almost $20. That's almost eight times the
difference compared to feed costs. Why is that
so critical? It's critical because for smaller
herds, those under 1 ,000 cows, those non -feed
costs actually exceed their feed costs. More
than feed. Yeah. All those fixed expenses, the
barn, the parlor, the machinery, they get spread
across much, much larger volumes on the mega
dairies, diluting the cost per unit. Right. Makes
sense. So their biggest expense pressure isn't
what goes into the cow. It's everything else
around it. This is a structural disadvantage.
As Dr. Mark Stevenson at the University of Wisconsin
puts it, the economics are pretty unforgiving.
Unforgiving. He says when your fixed costs are
higher than your variable costs, you're in a
structurally disadvantaged position. in a commodity
market. That really paints a tough picture, a
structurally disadvantaged position. It does.
It makes it incredibly hard to compete on price
alone if you're not at scale. Let's circle back
to labor then, but reframing it, like we discussed,
as an essential force, not the problem. What's
the reality of dairy labor today, according to
the article? Well, it's interesting. Immigrant
workers make up 51 % of the total dairy workforce.
About half. Right. But critically, they produce
79 percent of the nation's milk supply. 79 percent.
So that tells you they are disproportionately
on the larger, more productive farms. Exactly.
And the article stresses this isn't really about
suppressing wages. It's about availability and
willingness. There's a story about one Vermont
farmer. Yeah. Received only two applications
from native born workers in 20 years. Two compared
to 150 immigrants who applied. Two versus 150.
That says a lot, doesn't it? It really does.
And wages have also gone up substantially. The
median advertised wage for meat and dairy workers
jumped, what, 33 .7 % between 2019 and 2022?
Yeah, far faster than the national median. So
labor is now a pretty big chunk of costs, 18
% to 25 % of total operating costs, the article
says. Definitely not cheap labor anymore, if
it ever truly was. But the real problem, the
real Achilles heel here, is the legal status
and the uncertainty around it. Oh, so? Well,
the H -2A guest worker program, it's designed
for seasonal work, you know, like picking apples
or harvesting vegetables. Right, not year -round
dairy. Exactly. Dairy farming is 365 days a year.
That Texas A &M study from 2015, the one modeling
the loss of this workforce, it's alarming. What
were those projections again? 2 .1 million fewer
dairy cows, 48 .4 billion pounds less milk, and
over 7 ,000 dairy farms forced to close. Just
gone. That's catastrophic. And even if you only
had a 50 % reduction in that workforce, it would
still spike milk prices 45 .2 % and cost the
economy $16 billion. Wow. There's a quote from
a larb scale producer in Idaho. He said, if this
workforce vanished tomorrow, we'd have dead cows
within 48 hours because there's literally nobody
else to milk them. Dead cows within 48 hours.
That puts a fine point on the severity, doesn't
it? It really does. It highlights the vulnerability.
Okay. What about technology? How does that fit
into the consolidation picture? We hear a lot
about robots. Yeah, it's what researchers call
the technological treadmill. You know, you have
to keep adopting new tech just to stay competitive.
Take Delaval VMS robotic milking systems. Great
tech. But expensive, right? Very. Over $200 ,000
per unit. But they can slash direct milking labor
by up to 60%. So these efficiency gains come
with huge capital requirements. Which means primarily
bigger operations can afford them. Precisely.
They often use technology to optimize productivity,
maybe not necessarily replace immigrant workers
entirely, but certainly to manage more cows with
the same or fewer people. So only well -capitalized
operations can really afford these big investments,
which just widens that competitive gap we talked
about. Exactly. What else is driving this? The
article mentioned something called processor
pull. Yes, that's another huge factor. There's
been massive consolidation downstream, too, not
just at the farm level. How much consolidation
are we talking? Just three major cooperatives.
Dairy Farmers of America, Lando Lakes, California
Dairies, they now handle over 80 % of the nation's
milk marketing. 80 %? Just three co -ops? Yeah.
And these big processors, they're building these
new, huge plants. Efficient, but they need massive,
consistent volumes of milk to run properly. Makes
sense. There's a quote from a DFA representative
who basically admitted, we're building plants
that need four to five million pounds per day.
We can't deal with 200 small farms. We need 10
large ones. 10 large ones instead of 200 small
ones. That creates powerful incentives for consolidation
right at the farm level, doesn't it? Absolutely.
If your processor needs huge volumes, you either
get huge or you risk losing your market. It's
interesting to compare this to how other major
dairy countries handle these kinds of pressures.
Are we unique? We kind of are. Canada has supply
management, right? New Zealand has its strong
cooperative processing model with Fonterra. The
EU provides a lot more direct support. Denmark
and the Netherlands are investing heavily in
automation and environmental tech. So our approach,
relying heavily on immigrant labor, but with
all this policy uncertainty. Yeah, it's unique
among developed dairy economies, and you could
argue, maybe more risky long -term. And the environmental
sustainability angle, too. How does that play
in it? It's increasingly important. Large -scale
operations might have advantages with things
like advanced manure management or energy efficiency
tech, just because they can spread those big
investment costs over more cows. Right. Economies
of scale again. But then again, there's also
this growing consumer demand for sustainable
products, which often favors smaller, maybe more
transparent operations or creates niche markets.
Plus, climate change itself, heat stress, extreme
weather that test resilience in ways that might
favor larger operations with better infrastructure.
It's complex. It definitely sounds like a lot
of interlocking pressures. So after digging through
all that information, what's the key takeaway
for a farmer listening today? How can they actually
apply this knowledge from the article to their
own operation? Yeah, that's the crucial part.
And the article does a good job breaking down
some clear action insights based on operation
size. It recognizes it's not a one -size -fits
-all situation. Okay, let's start with the smaller
guys, maybe 100, 500 cows. What's the immediate
advice for them? For that 100 -500 cow group,
the advice is really immediate focus on maximizing
milk quality premiums. There's often money left
on the table there. Good point. Then explore
value -added opportunities and do it within the
next 18 months, not thinking five years down
the road. Things are moving too fast. Value -added
like what? Direct marketing? Jeez. Could be.
Or consider cooperative processing partnerships
to gain some scale benefits. And importantly,
seriously evaluate the economics of an organic
transition. Organic? Why specifically organic?
Well, the article mentions a 300 -cow Vermont
operation that transitioned. They were getting
$45 per hundredweight. $45? Yeah. While their
conventional neighbors were struggling down at
$21. The math can be pretty compelling depending
on your situation. That's a massive difference.
Okay, what about that middle ground, maybe 502
,000 cow operations? The article called that
the challenging middle. Yes, the challenging
middle ground. For them, the advice is selective
automation. Focus on feeding and monitoring systems
first. That often gives the biggest bang for
your buck initially. Okay, selective automation.
What else? Strengthen your processor relationships
now. While you still have options, solidify those
connections. Carefully weigh geographic expansion
versus intensifying locally. That depends a lot
on land costs and local resources. And crucially,
develop immigration compliance programs immediately.
Don't wait. Get ahead of the uncertainty there.
Makes sense. And for the big players, the 2000
plus cow operations, what's the advice to stay
ahead? They seem to be winning, but they can't
rest, right? Absolutely not. For them, it's accelerate
technology adoption across all systems. Milking,
feeding, management, data analysis. Diversify
processing relationships to reduce risk. Don't
become dependent on just one buyer, even at that
scale. Good point. Invest heavily in labor retention
programs because turnover is incredibly costly
when you're that big. And seriously, consider
vertical integration opportunities controlling
more of your supply chain to manage risk. Looking
ahead then, the article paints this picture of
the industry not just consolidating, but really
splitting. Exactly. It projects this continued
bifurcation, this split into two distinct businesses.
On one hand, you'll have these high -volume tech
-heavy, professionally managed operations, almost
like manufacturing milk. Milk factories, basically.
In a sense, yeah. And on the other hand, you'll
have value -added, locally -focused, relationship
-based operations, more like artisanal production,
focusing on a specific consumer. And that middle
ground just gets squeezed harder and harder.
It becomes increasingly untenable. And again,
not because of immigration, but because of those
fundamental economics of scale and that heavy
fixed -cost burden for smaller operations. So
the core message we've pulled out of this deep
dive is pretty clear. Immigrant workers didn't
kill the traditional American dairy farm. If
anything, they've been keeping the lights on.
Absolutely. Keeping the lights on while these
powerful economic forces are really determining
who survives consolidation. And the real threat
isn't their presence. It's the profound economic
and operational risk if that essential workforce
were suddenly removed. That's the vulnerability.
That's the key vulnerability and maybe the one
that needs more focus. It really does shift the
whole perspective, doesn't it? So the question
for you listening isn't if consolidation will
continue. No, that seems pretty certain. It's
whether you'll be a consolidator or get consolidated.
That's the blunt reality the article lays bare.
The story of Derry's future is going to be about
adaptation, not blame. So we really encourage
you to reflect on your own operation in light
of this. How have your cost structure changed?
Are you seeing these non -feed costs rise? What
are the real labor challenges you're facing?
And what are sustainable solutions? What tech
investments actually make sense for you? And
how are you preparing for continued consolidation
in your area? These aren't easy questions for
sure. No, definitely not. But they're definitely
the right ones to be asking right now. Great
points. And that's all the time we have for today's
Deep Dive. For more articles and insights, be
sure to visit www .thebullvine .com. Don't forget
to subscribe wherever you get your podcasts.
Thanks for listening. are the ones positioning
themselves to write the next chapter of American
dairy farming. Remember, while everyone else
is fighting yesterday's battles, the smart money
is already preparing for tomorrow's opportunities.
The question isn't whether consolidation will
continue, it's whether you'll be a consolidator
or get consolidated. Want to dive deeper into
this analysis? Head over to www .thebullvine
.com where you'll find the full article, complete
with tables, data sources, and practical strategies
for different operation sizes. And don't forget
to subscribe to the Bullvine Podcast wherever
you get your podcasts, because the future of
dairy farming won't be determined by who we blame
for the past, but by who's smart enough to adapt
to what's actually happening. This has been the
Bullvine Podcast. Keep challenging conventional
wisdom, keep asking the tough questions, and
keep building the future of dairy. We'll see
you next time.