WEBVTT 00:00:11.720 --> 00:00:15.060 Breaking free from the chains of the past Where 00:00:15.060 --> 00:00:18.820 truth moves faster than a Holstein calf No law 00:00:18.820 --> 00:00:21.660 waiting on some printed page We're charting new 00:00:21.660 --> 00:00:25.300 ground in the digital age From genomic codes 00:00:25.300 --> 00:00:29.120 to robot facts We cut through the noise, no hold 00:00:29.280 --> 00:00:32.460 them back not your daddy's dairy news tonight 00:00:32.460 --> 00:01:03.270 we're sparking Welcome to the Bullvine Podcast, 00:01:03.750 --> 00:01:06.390 your honest, no -nonsense source for the latest 00:01:06.390 --> 00:01:08.930 in the dairy world. Today, we're diving into 00:01:08.930 --> 00:01:11.530 the biggest shakeups facing the dairy industry 00:01:11.530 --> 00:01:16.150 in 2025. From trade wars to global shifts, we've 00:01:16.150 --> 00:01:18.609 got the insights to help you navigate and thrive. 00:01:18.989 --> 00:01:22.049 Stay tuned and get ready to take your farm to 00:01:22.049 --> 00:01:24.269 the next level. Welcome back to The Bullvine 00:01:24.269 --> 00:01:26.890 Podcast, the show that digs deep into the topics 00:01:26.890 --> 00:01:29.109 that matter to dairy producers. That's right. 00:01:29.250 --> 00:01:32.109 Today we're tackling a really interesting feature 00:01:32.109 --> 00:01:34.090 article from The Bullvine that's got everyone 00:01:34.090 --> 00:01:36.290 talking. We're going to break it all down. Absolutely. 00:01:36.469 --> 00:01:38.530 And this isn't just, you know, any article. It's 00:01:38.530 --> 00:01:42.450 a deep dive into something that truly sent shockwaves 00:01:42.450 --> 00:01:45.109 through our industry this spring. We're talking 00:01:45.109 --> 00:01:48.500 about dairy's $6 billion shock. Surviving the 00:01:48.500 --> 00:01:51.280 New Reality. Yeah, that one. Zooms right in on 00:01:51.280 --> 00:01:54.519 those infamous nine days in April. A very intense 00:01:54.519 --> 00:01:57.019 period. Right. A brief intense period that led 00:01:57.019 --> 00:02:00.040 to a projected, get this, $6 billion loss for 00:02:00.040 --> 00:02:02.079 the American dairy industry. Just staggering. 00:02:02.260 --> 00:02:05.040 So our mission today is to really understand 00:02:05.040 --> 00:02:10.000 the rapid fire events that unfolded. Yeah. What 00:02:10.000 --> 00:02:11.800 actually happened during that critical time. 00:02:11.919 --> 00:02:14.159 Yeah. Unpack that timeline. And where did the 00:02:14.159 --> 00:02:17.860 pain hit hardest? Because it wasn't the same 00:02:17.860 --> 00:02:20.300 everywhere, was it? Definitely not. Very regional. 00:02:20.539 --> 00:02:23.099 And most importantly, what can you, listening 00:02:23.099 --> 00:02:25.939 right now, what can you actually do to navigate 00:02:25.939 --> 00:02:29.819 this profoundly new reality? Practical steps. 00:02:30.020 --> 00:02:32.699 That's key. Exactly. This isn't just about the 00:02:32.699 --> 00:02:36.800 numbers. It's about providing practical, actionable 00:02:36.800 --> 00:02:40.479 strategies for your operations survival and hopefully 00:02:40.479 --> 00:02:43.419 long -term thriving. Right. Now, as we unpack 00:02:43.419 --> 00:02:45.680 the article's analysis of these trade tensions 00:02:45.680 --> 00:02:49.219 and the economic fallout, we want to be really 00:02:49.219 --> 00:02:52.659 clear. Our role here is just to impartially convey 00:02:52.659 --> 00:02:55.719 the information and perspectives presented in 00:02:55.719 --> 00:02:57.479 the source material. Yep, just reporting what 00:02:57.479 --> 00:02:59.659 the article says. We're not endorsing any particular 00:02:59.659 --> 00:03:01.919 political viewpoint here, just laying out the 00:03:01.919 --> 00:03:04.930 analysis. You got it. The article really hammers 00:03:04.930 --> 00:03:07.710 home that this isn't just some, like, abstract 00:03:07.710 --> 00:03:10.250 trade spat happening way off in Washington that 00:03:10.250 --> 00:03:12.770 you can afford to ignore. No. It's hitting your 00:03:12.770 --> 00:03:14.430 bottom line right now. It doesn't matter if you're 00:03:14.430 --> 00:03:17.270 running 50 head in Vermont or, you know, 5 ,000 00:03:17.270 --> 00:03:20.409 out in California's Central Valley. We know many 00:03:20.409 --> 00:03:23.370 of you have milked cows through droughts, recessions, 00:03:23.370 --> 00:03:25.449 regulatory nightmares, you name it. We've seen 00:03:25.449 --> 00:03:27.889 tough times before. But as the article puts it, 00:03:27.990 --> 00:03:32.150 spring 2025 truly, quote, Knocked the U .S. dairy 00:03:32.150 --> 00:03:34.449 industry sideways. That's a good description. 00:03:35.090 --> 00:03:37.229 Sideways. Adaptability isn't just a buzzword 00:03:37.229 --> 00:03:39.909 anymore. It's the absolute key to making it through 00:03:39.909 --> 00:03:42.830 this. Survival, really. Yeah. And if you haven't 00:03:42.830 --> 00:03:45.069 felt it directly in your milk check yet, well, 00:03:45.270 --> 00:03:47.509 you need to buckle up and pay close attention 00:03:47.509 --> 00:03:50.069 to this deep dive because the ripple effects 00:03:50.069 --> 00:03:52.789 are definitely still unfolding. Okay, so let's 00:03:52.789 --> 00:03:55.409 unpack this dramatic period. The article calls 00:03:55.409 --> 00:03:58.650 it nine days that changed everything. Quite the 00:03:58.650 --> 00:04:01.810 headline. It really set the stage for an almost, 00:04:02.030 --> 00:04:06.250 I mean, unprecedented rapid escalation of trade 00:04:06.250 --> 00:04:09.229 tensions with China. It seemed to catch even 00:04:09.229 --> 00:04:11.789 seasoned industry veterans off guard. Yeah, the 00:04:11.789 --> 00:04:13.930 speed was something else. And the whole situation 00:04:13.930 --> 00:04:17.350 actually began simmering well before April. It 00:04:17.350 --> 00:04:20.310 didn't just pop up overnight. No. Back on February 00:04:20.310 --> 00:04:23.230 4th, the U .S. administration put in place what 00:04:23.230 --> 00:04:26.370 seemed like a, well, a modest 10 % tariff on 00:04:26.370 --> 00:04:28.509 a whole range of Chinese imports. Right. The 00:04:28.509 --> 00:04:31.370 justification cited was national security concerns 00:04:31.370 --> 00:04:33.769 related to fentanyl trafficking, according to 00:04:33.769 --> 00:04:36.649 the article. Okay. And then by March 10th, China 00:04:36.649 --> 00:04:40.610 had already fired back. Yep. Their first retaliatory 00:04:40.610 --> 00:04:44.089 10 % tariff, specifically targeting U .S. dairy 00:04:44.089 --> 00:04:46.829 products. Dairy and also things like sorghum, 00:04:46.850 --> 00:04:49.800 soybeans, beef. Right. it was a clear signal 00:04:49.800 --> 00:04:51.660 wasn't it a tit -for -tat response definitely 00:04:51.660 --> 00:04:55.100 showed neither side was uh willing to back down 00:04:55.100 --> 00:04:57.860 easily and that was just the beginning you can 00:04:57.860 --> 00:05:00.379 just imagine the tension right trading floors 00:05:00.379 --> 00:05:03.339 boardrooms phones ringing off the hook at the 00:05:03.339 --> 00:05:05.790 co -op oh yeah People scrambling, trying to figure 00:05:05.790 --> 00:05:07.509 out what just happened and what it meant. And 00:05:07.509 --> 00:05:09.589 what truly jumped out at me digging into this 00:05:09.589 --> 00:05:12.589 article was how quickly that initial sort of 00:05:12.589 --> 00:05:15.209 skirmish spiraled. Into a full -blown trade war, 00:05:15.310 --> 00:05:17.790 basically. Exactly. The article describes this 00:05:17.790 --> 00:05:20.829 dramatic acceleration when, according to the 00:05:20.829 --> 00:05:23.389 source, President Trump, in a speech framed around 00:05:23.389 --> 00:05:27.209 Liberation Day on April 3rd, announced an additional 00:05:27.209 --> 00:05:30.779 34 % tariff. on all goods imported from China. 00:05:30.899 --> 00:05:33.399 Wow. OK, so that brought the total U .S. rate 00:05:33.399 --> 00:05:36.800 up to? A pretty staggering 54 percent cumulative. 00:05:37.160 --> 00:05:40.660 54 percent. Yeah. And the article notes the administration 00:05:40.660 --> 00:05:43.620 justified this by pointing to China's own existing, 00:05:43.699 --> 00:05:47.500 quote, 67 percent trade barriers and framed it 00:05:47.500 --> 00:05:50.500 as fixing longstanding unfair trade practices. 00:05:50.600 --> 00:05:53.300 Right. Standard justifications in these situations. 00:05:53.519 --> 00:05:56.750 And China, true to form, didn't blink. They responded 00:05:56.750 --> 00:05:58.850 immediately. Immediately announced a symmetrical 00:05:58.850 --> 00:06:02.930 response on April 4th. A matching 34 % retaliatory 00:06:02.930 --> 00:06:05.069 tariff on all goods imported from the United 00:06:05.069 --> 00:06:07.930 States. All goods. Ouch. Scheduled to kick in 00:06:07.930 --> 00:06:10.410 just a few days later, April 10th. So this wasn't 00:06:10.410 --> 00:06:12.529 just a simple exchange anymore. No way. This 00:06:12.529 --> 00:06:14.810 was a clear escalation. It effectively more than 00:06:14.810 --> 00:06:17.170 tripled the punitive duties facing U .S. dairy 00:06:17.170 --> 00:06:19.810 exporters almost overnight. The sense of disbelief 00:06:19.810 --> 00:06:21.629 must have turned into real panic for a lot of 00:06:21.629 --> 00:06:23.709 folks. You bet, as the implications started to 00:06:23.709 --> 00:06:25.730 sink in. Okay, so here's what the article says. 00:06:25.769 --> 00:06:28.639 It gets really interesting. It zeroes in on that 00:06:28.639 --> 00:06:31.160 critical nine -day period, April 2nd to April 00:06:31.160 --> 00:06:33.600 12th. The core of the crisis. Describing it as 00:06:33.600 --> 00:06:36.040 an unprecedented spike in trade hostilities. 00:06:36.519 --> 00:06:39.399 The U .S. really signaled its intent, like maximum 00:06:39.399 --> 00:06:42.420 pressure, on April 9th. What happened then? They 00:06:42.420 --> 00:06:45.019 raised the U .S. tariff on Chinese goods to a 00:06:45.019 --> 00:06:50.519 cumulative rate of 145%. 145%. Yeah. But what 00:06:50.519 --> 00:06:53.740 made it even more, I guess, aggressive was the 00:06:53.740 --> 00:06:57.160 simultaneous announcement. A 90 -day pause on 00:06:57.160 --> 00:07:00.860 new tariffs for all other countries. Ah, so isolating 00:07:00.860 --> 00:07:03.360 China. Exactly. The article describes it as a 00:07:03.360 --> 00:07:06.279 calculated geopolitical maneuver. Isolate Beijing 00:07:06.279 --> 00:07:08.740 economically, diplomatically. Prevent a united 00:07:08.740 --> 00:07:10.819 front against, well, what the article calls U 00:07:10.819 --> 00:07:13.379 .S. protectionist policies. Right. So for us 00:07:13.379 --> 00:07:16.079 in dairy, this meant the China market was collapsing. 00:07:16.120 --> 00:07:18.379 But vital channels to Mexico, Canada. Which were 00:07:18.379 --> 00:07:20.600 already strained. Right, already strained. But 00:07:20.600 --> 00:07:23.120 they were spared from that extreme level of escalation, 00:07:23.139 --> 00:07:25.620 at least for that moment. A small mercy, maybe. 00:07:25.839 --> 00:07:29.220 A temporary reprieve elsewhere. In China's response, 00:07:29.459 --> 00:07:32.240 I'm guessing swift again. Once again, swift and 00:07:32.240 --> 00:07:34.459 severe. Showed they weren't backing down. On 00:07:34.459 --> 00:07:37.480 April 10th. The day their previous 34 % was supposed 00:07:37.480 --> 00:07:40.160 to start. Exactly. It's at a 34%, the rate on 00:07:40.160 --> 00:07:44.360 U .S. goods jumped to 84%. 84%. Good grief. And 00:07:44.360 --> 00:07:47.040 it didn't stop there. Just two days later, April 00:07:47.040 --> 00:07:50.579 12th, China escalated again. To a final, truly 00:07:50.579 --> 00:07:55.740 prohibitive rate. of 125 percent 125 wow the 00:07:55.740 --> 00:07:57.939 article emphasizes that this made u .s dairy 00:07:57.939 --> 00:08:01.139 exports to china quote no longer marketable that 00:08:01.139 --> 00:08:03.120 was the government's own term no longer marketable 00:08:03.120 --> 00:08:05.139 yeah that says it all this wasn't just a number 00:08:05.139 --> 00:08:07.259 it was like a commercial blockade right overnight 00:08:07.259 --> 00:08:10.389 it just ripped apart years of market development 00:08:10.389 --> 00:08:13.430 work. And way more severe than the 2018 -2019 00:08:13.430 --> 00:08:16.310 dispute, right? That was like 25 % tariffs. Yeah, 00:08:16.329 --> 00:08:18.970 around 25%, which still allowed some participation, 00:08:19.170 --> 00:08:22.910 some trade. But 125 % price competitiveness is 00:08:22.910 --> 00:08:25.410 just gone, erased. Imagine being a processor. 00:08:25.649 --> 00:08:28.009 You've got contracts, commitments, and suddenly 00:08:28.009 --> 00:08:30.009 your product is priced completely out of your 00:08:30.009 --> 00:08:32.129 biggest market. The article talks about this 00:08:32.129 --> 00:08:35.039 palpable sense of shock, disbelief. Turning into 00:08:35.039 --> 00:08:37.419 just frantic efforts to find anyone else to buy 00:08:37.419 --> 00:08:39.659 the stuff. A nightmare scenario. So the immediate 00:08:39.659 --> 00:08:42.960 impact on specific exports. Yeah. It was profound. 00:08:43.299 --> 00:08:45.320 Almost instantaneous. Let's hear the numbers. 00:08:45.379 --> 00:08:47.700 The article laid them out pretty starkly. Okay. 00:08:47.740 --> 00:08:50.659 The main numbers really tell the, well, the ugly 00:08:50.659 --> 00:08:53.659 story, as the article puts it. Wei exports to 00:08:53.659 --> 00:08:58.820 China plummeted by 70%. 70%. That's huge. Mostly 00:08:58.820 --> 00:09:01.039 the low -protein whey permeate, right, the backbone 00:09:01.039 --> 00:09:03.799 of the trade. Yeah, 34 million pounds less of 00:09:03.799 --> 00:09:06.899 it. And the higher -value whey protein concentrate, 00:09:07.200 --> 00:09:12.220 WPC, that fell even more, 83%. 83 % drop, wow. 00:09:12.360 --> 00:09:16.080 And lactose. And far much better, down 59 % in 00:09:16.080 --> 00:09:18.399 May. Okay, put that in context for us. How much 00:09:18.399 --> 00:09:20.059 were we selling there before this? That's the 00:09:20.059 --> 00:09:23.399 kicker. Before this mess, China was buying a 00:09:23.399 --> 00:09:27.120 massive 42 % of all U .S. whey exports. 42%. 00:09:27.549 --> 00:09:30.649 Nearly half. And an even more staggering 72 % 00:09:30.649 --> 00:09:33.549 of U .S. lactose. 72%. Okay, so this wasn't some 00:09:33.549 --> 00:09:35.590 minor market we're talking about. Not even close. 00:09:35.669 --> 00:09:39.250 It was absolutely critical for managing the byproducts 00:09:39.250 --> 00:09:41.570 from our massive cheese production. Right. Got 00:09:41.570 --> 00:09:43.450 to do something with all that whey. So when that 00:09:43.450 --> 00:09:45.929 tap just suddenly turned off, it created this 00:09:45.929 --> 00:09:47.529 enormous ripple effect through the whole supply 00:09:47.529 --> 00:09:50.049 chain. Hit the cheese plants especially hard. 00:09:50.269 --> 00:09:51.809 Okay, and this is where the article brings in 00:09:51.809 --> 00:09:54.590 that concept. The profitability mirage. Explain 00:09:54.590 --> 00:09:56.519 that. Right. So you might have looked at the 00:09:56.519 --> 00:09:59.480 national all milk price forecasts. And surprisingly, 00:09:59.600 --> 00:10:02.039 they stayed relatively stable through the summer. 00:10:02.200 --> 00:10:04.799 Holding around, what, $22 per hundred weight 00:10:04.799 --> 00:10:07.279 in August? Something like that? Yeah, exactly. 00:10:07.679 --> 00:10:11.480 But that stability masked severe pain underneath. 00:10:11.799 --> 00:10:14.779 How so? Because the U .S. dairy system, especially 00:10:14.779 --> 00:10:17.960 the huge cheese sector in the Midwest, is structurally 00:10:17.960 --> 00:10:21.179 dependent on efficiently and profitably getting 00:10:21.179 --> 00:10:23.919 rid of whey. Its main byproduct. And China was 00:10:23.919 --> 00:10:26.179 that indispensable market for the low -protein 00:10:26.179 --> 00:10:28.240 whey, the permeated cure. They absorbed vast 00:10:28.240 --> 00:10:31.580 quantities. When that market vanished, the whey 00:10:31.580 --> 00:10:34.620 surplus created this huge bottleneck, both logistically 00:10:34.620 --> 00:10:37.360 and financially, for the cheese plants. So a 00:10:37.360 --> 00:10:39.879 valuable byproduct suddenly becomes a costly 00:10:39.879 --> 00:10:42.340 disposal problem. Exactly. And that erodes the 00:10:42.340 --> 00:10:44.299 profitability of their main business, making 00:10:44.299 --> 00:10:47.600 cheese. Right. So think of it like this. Your 00:10:47.600 --> 00:10:50.340 overall farm income might look OK on paper because, 00:10:50.399 --> 00:10:53.179 say, butter and cheese sales were strong to other 00:10:53.179 --> 00:10:56.700 markets. But if one crucial high value component 00:10:56.700 --> 00:10:59.519 of your milk, the waste stream in this case, 00:10:59.519 --> 00:11:01.940 suddenly becomes unsellable or has to be dumped 00:11:01.940 --> 00:11:04.480 at a huge discount. That's a massive localized 00:11:04.480 --> 00:11:07.580 pain. Right. And the average national price doesn't 00:11:07.580 --> 00:11:09.940 fully capture that specific hit. So while the 00:11:09.940 --> 00:11:12.820 national forecasts seemed. maybe manageable, 00:11:12.980 --> 00:11:15.740 a lot of producers and processors were actually 00:11:15.740 --> 00:11:18.860 facing an acute profitability crisis, hidden 00:11:18.860 --> 00:11:21.200 by the averages. Yeah, and in fact, the USDA's 00:11:21.200 --> 00:11:24.480 Economic Research Service had already slashed 00:11:24.480 --> 00:11:28.240 its 2025 all -milk price forecast by $0 .50 a 00:11:28.240 --> 00:11:31.240 hundredweight down to $21 .00. Okay. And the 00:11:31.240 --> 00:11:33.639 Class III milk price, that got cut by $0 .35 00:11:33.639 --> 00:11:37.139 to $17 .60. Futures contracts for May and June 00:11:37.139 --> 00:11:40.299 actually sank below $17 for a bit. Wow. So the 00:11:40.299 --> 00:11:41.980 market was reacting just maybe not reflected 00:11:41.980 --> 00:11:44.120 in that single all milk number initially. Exactly. 00:11:44.159 --> 00:11:46.179 And the wider economic ripples were significant, 00:11:46.360 --> 00:11:48.360 too. The overall effective U .S. tariff rate 00:11:48.360 --> 00:11:51.220 hit 18 .6 percent, the highest since 1933. This 00:11:51.220 --> 00:11:54.139 is the Great Depression era. Wow. Yeah. Threatening 00:11:54.139 --> 00:11:56.360 inflation, potentially reducing real GDP across 00:11:56.360 --> 00:11:58.779 the whole economy, not just dairy. OK, so while 00:11:58.779 --> 00:12:00.919 the U .S. and China are throwing these tariff 00:12:00.919 --> 00:12:04.419 punches, what about competitors? Ah, good question. 00:12:04.659 --> 00:12:07.620 The market dynamics shifted incredibly quickly. 00:12:08.259 --> 00:12:10.620 Competitors were basically waiting in the wings. 00:12:10.799 --> 00:12:13.820 Like New Zealand. Exactly. The article highlights 00:12:13.820 --> 00:12:16.419 New Zealand's insurmountable advantage. They've 00:12:16.419 --> 00:12:19.179 had a duty -free... Free trade agreement with 00:12:19.179 --> 00:12:22.720 China since January 2024. Duty free. OK. So their 00:12:22.720 --> 00:12:25.259 dairy products walk right into China. Zero tariffs. 00:12:25.580 --> 00:12:28.559 Meanwhile, U .S. stuff is facing 84 percent, 00:12:28.700 --> 00:12:31.460 125 percent tariffs. You can imagine the price 00:12:31.460 --> 00:12:34.340 gap. It's enormous. Yeah. No amount of efficiency 00:12:34.340 --> 00:12:36.779 or quality improvement on our side could possibly 00:12:36.779 --> 00:12:39.200 bridge that kind of tariff difference. So what 00:12:39.200 --> 00:12:41.490 happened to their market share? New Zealand now 00:12:41.490 --> 00:12:45.269 controls a massive 46 % of China's dairy import 00:12:45.269 --> 00:12:48.909 market. 46%. Huge increase. Dramatic increase 00:12:48.909 --> 00:12:50.690 from an already strong position. But it's not 00:12:50.690 --> 00:12:53.049 just market share, right? It's about trust. Ah, 00:12:53.330 --> 00:12:55.830 the reliability factor. Totally. Chinese buyers 00:12:55.830 --> 00:12:58.149 facing all this uncertainty, unpredictability 00:12:58.149 --> 00:13:00.889 from U .S. sources, they quickly locked in longer 00:13:00.889 --> 00:13:03.289 -term contracts with New Zealand and EU suppliers. 00:13:03.690 --> 00:13:05.730 Often paying a premium just for the stability. 00:13:06.320 --> 00:13:08.740 Right. Fundamentally altering the competitive 00:13:08.740 --> 00:13:11.379 landscape. This really damages the U .S. reputation 00:13:11.379 --> 00:13:15.220 as a reliable supplier. And that's a wound that 00:13:15.220 --> 00:13:19.240 could take years, maybe decades to heal, even 00:13:19.240 --> 00:13:21.960 if tariffs drop tomorrow. Absolutely. The trust 00:13:21.960 --> 00:13:24.419 is broken. OK, so it's clear this was a brutal 00:13:24.419 --> 00:13:26.980 hit for whey and lactose, specifically to China. 00:13:27.220 --> 00:13:29.759 Devastating. But to keep us on our toes, the 00:13:29.759 --> 00:13:31.679 article points out it wasn't all doom and gloom 00:13:31.679 --> 00:13:33.559 across every single product category. Right. 00:13:33.639 --> 00:13:35.519 There's some surprising contrasting data in there. 00:13:36.090 --> 00:13:38.769 Which is important. Despite those dramatic drops 00:13:38.769 --> 00:13:41.409 in whey and lactose to China, U .S. cheese exports 00:13:41.409 --> 00:13:44.970 actually hit a record high in May 2025. A record. 00:13:45.129 --> 00:13:48.950 50 ,000 metric tons. Yeah. Continuing a record 00:13:48.950 --> 00:13:51.809 -setting pace for the year. And butterfat exports 00:13:51.809 --> 00:13:55.570 surged, too. Up 151 % compared to the same time 00:13:55.570 --> 00:13:59.330 in 2024. Wow. 151%. So where was all that going? 00:13:59.509 --> 00:14:01.889 Markets outside China. Fueled by strong demand. 00:14:02.350 --> 00:14:04.389 particularly from Mexico, Japan, South Korea, 00:14:04.509 --> 00:14:06.590 Southeast Asia. Places where U .S. products were 00:14:06.590 --> 00:14:08.850 still price competitive. Exactly. So the core 00:14:08.850 --> 00:14:11.090 message here seems to be it's not a problem with 00:14:11.090 --> 00:14:13.409 global demand for dairy products overall. It's 00:14:13.409 --> 00:14:15.529 a problem with politics, as the article puts 00:14:15.529 --> 00:14:19.110 it. Market access. Right. And they even mentioned 00:14:19.110 --> 00:14:22.250 that brief diplomatic truce in mid -May. It paused 00:14:22.250 --> 00:14:24.110 the terror fights for a moment. Yeah. And Chinese 00:14:24.110 --> 00:14:27.330 buyers rushed back in briefly, right? Boosted 00:14:27.330 --> 00:14:30.340 Juneway and lactose exports temporarily. But 00:14:30.340 --> 00:14:32.080 that just underscored how sensitive the market 00:14:32.080 --> 00:14:34.500 was and the underlying demand that competitors 00:14:34.500 --> 00:14:37.259 were quickly moving to capture long term shows 00:14:37.259 --> 00:14:40.159 how fragile those connections became. Yeah, definitely 00:14:40.159 --> 00:14:42.850 highlights the volatility. Okay, so we've seen 00:14:42.850 --> 00:14:45.590 how fast the global trade winds shifted, creating 00:14:45.590 --> 00:14:48.669 this, well, perfect storm. But storms rarely 00:14:48.669 --> 00:14:51.110 hit every shore with the same force, do they? 00:14:51.309 --> 00:14:53.289 Good point. The article really dives into how 00:14:53.289 --> 00:14:55.789 this tariff avalanche cascaded across the country. 00:14:56.289 --> 00:14:58.289 Very different experiences depending on where 00:14:58.289 --> 00:15:00.429 your farm is. That's an excellent point. The 00:15:00.429 --> 00:15:02.769 regional impacts were far from uniform. Let's 00:15:02.769 --> 00:15:05.909 start with America's dairy land itself, Wisconsin. 00:15:06.309 --> 00:15:09.269 Yeah, the $52 .8 billion dairy economy there. 00:15:09.529 --> 00:15:12.129 How'd they fare? Took it right on the chin. University 00:15:12.129 --> 00:15:14.690 extension economists there are projecting state 00:15:14.690 --> 00:15:17.250 losses between one, two billion dollars this 00:15:17.250 --> 00:15:19.889 year alone. One to two billion. That's that's 00:15:19.889 --> 00:15:23.350 huge for one state. It's not abstract. It's real 00:15:23.350 --> 00:15:26.009 farms facing potentially existential challenges. 00:15:26.210 --> 00:15:28.570 If you're milking in Wisconsin, the article says 00:15:28.570 --> 00:15:32.909 the eastern counties like Kiwani, Brown, Manitowoc. 00:15:32.929 --> 00:15:35.480 Yeah, those areas. With the large operations 00:15:35.480 --> 00:15:38.379 closely tied to the big export -heavy processors, 00:15:38.679 --> 00:15:41.139 they got hammered the worst. Because those processors 00:15:41.139 --> 00:15:43.960 had invested heavily in whey and lactose facilities 00:15:43.960 --> 00:15:46.279 specifically for China. Exactly. State -of -the 00:15:46.279 --> 00:15:48.740 -art stuff. When those markets just evaporated, 00:15:48.840 --> 00:15:52.399 the financial fallout was immediate. Severe. 00:15:52.580 --> 00:15:54.960 But it wasn't the same story everywhere in Wisconsin. 00:15:55.340 --> 00:15:58.559 No. In stark contrast, the smaller operations 00:15:58.559 --> 00:16:00.639 may be grazing dairies in the driftless region 00:16:00.639 --> 00:16:02.980 Grand, Crawford counties. They showed more resilience. 00:16:03.299 --> 00:16:05.580 Why was that? They weren't, as the article puts 00:16:05.580 --> 00:16:07.679 it, hanging their hat on China to begin with, 00:16:07.759 --> 00:16:09.879 often serving more local markets or processors 00:16:09.879 --> 00:16:11.899 with different broader strategies. Makes sense. 00:16:12.039 --> 00:16:14.259 Diversification helps. So for a typical, say, 00:16:14.379 --> 00:16:18.159 250 -cow Wisconsin operation, the economic modeling 00:16:18.159 --> 00:16:21.600 suggests income reductions of 15 % to 50%. 15 00:16:21.600 --> 00:16:24.870 % to 50%. Wow. That translates to... Annual losses 00:16:24.870 --> 00:16:29.129 anywhere from $27 ,000 up to $110 ,000. Imagine 00:16:29.129 --> 00:16:31.289 that phone call or just seeing that on your statement. 00:16:31.669 --> 00:16:34.990 A 50 % income cut. It's not just a number. That's 00:16:34.990 --> 00:16:37.309 a threat to your family, your legacy, forcing 00:16:37.309 --> 00:16:40.429 really painful decisions. Herd size, staffing, 00:16:40.789 --> 00:16:43.309 future plans. So the immediate homework from 00:16:43.309 --> 00:16:45.230 the article for listeners. Get on the phone with 00:16:45.230 --> 00:16:49.159 your field rep today. Find out exactly what percentage 00:16:49.159 --> 00:16:51.879 of your milk goes toward products that were China 00:16:51.879 --> 00:16:54.019 -bound. Knew your exposure. That's your personal 00:16:54.019 --> 00:16:56.340 pain percentage. Vital info. Absolutely vital. 00:16:56.639 --> 00:16:59.080 Okay, now if you think that's tough, head out 00:16:59.080 --> 00:17:02.279 west. California. The Central Valley Dairies. 00:17:02.279 --> 00:17:04.099 What's their story? The article called it a compound 00:17:04.099 --> 00:17:06.579 crisis. Yeah. UC Davis economists coined that 00:17:06.579 --> 00:17:09.059 phrase. It's the trade disruption combined with 00:17:09.059 --> 00:17:12.180 escalating already high production costs. A perfect 00:17:12.180 --> 00:17:14.160 storm. What kind of cost increases are we talking? 00:17:14.380 --> 00:17:17.700 Feed costs jumped $18 .22 per ton for imported 00:17:17.700 --> 00:17:20.440 concentrates. Ouch. Plus water costs. Adding 00:17:20.440 --> 00:17:23.240 another $1 .25 per hundredweight. That's driven 00:17:23.240 --> 00:17:26.039 by the ongoing water scarcity regulatory stuff 00:17:26.039 --> 00:17:28.660 like SGMA. Sustainable Groundwater Management 00:17:28.660 --> 00:17:31.079 Act. Yeah, mandating pumping reductions. Big 00:17:31.079 --> 00:17:33.640 deal out there. Huge deal. And on top of that, 00:17:33.799 --> 00:17:36.740 energy costs up 12 % year over year. Yeah. Affects 00:17:36.740 --> 00:17:39.299 everything. Cooling, irrigation. Okay, give us 00:17:39.299 --> 00:17:41.420 a concrete example. What does that mean for a 00:17:41.420 --> 00:17:44.980 large dairy? For a, say, 3 ,000 cow operation 00:17:44.980 --> 00:17:48.640 using maybe 300 tons of concentrate a month, 00:17:48.799 --> 00:17:53.670 that's an extra $6 ,600 in feed costs. Every 00:17:53.670 --> 00:17:56.390 month. 6 ,600 extra if you can even reliably 00:17:56.390 --> 00:17:58.289 source the alternatives. That's the other challenge. 00:17:58.329 --> 00:18:00.890 So what are the smart operators doing? They're 00:18:00.890 --> 00:18:04.289 locking in Q1 2026 feed pricing now, trying to 00:18:04.289 --> 00:18:05.990 get ahead of it. But it's complex, right? Not 00:18:05.990 --> 00:18:08.609 just locking prices. No, it's diversifying suppliers, 00:18:09.069 --> 00:18:11.750 reducing dependency on just one source, looking 00:18:11.750 --> 00:18:13.950 at longer term hay contracts while they can, 00:18:14.150 --> 00:18:16.809 hedging against future spikes. The article points 00:18:16.809 --> 00:18:18.950 out that the sheer scale of those Central Valley 00:18:18.950 --> 00:18:22.039 operations. It offers efficiency, sure, but it 00:18:22.039 --> 00:18:24.680 also amplifies their exposure. Right. A small 00:18:24.680 --> 00:18:27.359 price jump per ton becomes exponentially larger 00:18:27.359 --> 00:18:29.740 when you're feeding thousands of cows. So these 00:18:29.740 --> 00:18:32.539 proactive steps aren't just, you know, good business. 00:18:32.720 --> 00:18:35.400 They're absolutely essential for survival where 00:18:35.400 --> 00:18:37.900 margins are already razor thin. Makes sense. 00:18:38.720 --> 00:18:40.960 Okay, let's swing over to the Northeast, Pennsylvania. 00:18:41.839 --> 00:18:44.519 What are their unique challenges? It's a different 00:18:44.519 --> 00:18:46.720 flavor of crisis, but just as tough for their 00:18:46.720 --> 00:18:49.779 mostly mid -sized farms. Their dairy sector exported 00:18:49.779 --> 00:18:53.599 $364 million last year. But mostly to Canada 00:18:53.599 --> 00:18:56.220 and Mexico, right? Not China so much. Exactly. 00:18:56.240 --> 00:18:58.000 So they're dealing with the planning nightmares 00:18:58.000 --> 00:19:02.319 from existing 25 % tariffs on non -USMCA goods. 00:19:02.799 --> 00:19:04.960 Stuff not covered by the U .S.-Mexico -Canada 00:19:04.960 --> 00:19:08.079 agreement. Right. And the looming threat of broader 00:19:08.079 --> 00:19:10.660 35 % tariffs from these really critical trading 00:19:10.660 --> 00:19:13.500 partners, that creates huge uncertainty. And 00:19:13.500 --> 00:19:15.480 the farm structure there is different, too. Yeah. 00:19:15.500 --> 00:19:17.480 Unlike the mega -dairies out west, Pennsylvania 00:19:17.480 --> 00:19:20.940 is mostly 150 -300 cow operations. They depend 00:19:20.940 --> 00:19:23.440 heavily on processor premiums, regional relationships. 00:19:24.039 --> 00:19:27.000 Less cushion to absorb shocks like this. Precisely. 00:19:27.210 --> 00:19:29.490 No large -scale cushion. So the uncertainty itself 00:19:29.490 --> 00:19:31.970 disrupts the regional supply chains. Concerns 00:19:31.970 --> 00:19:34.130 about rising costs of inputs from Canada crossing 00:19:34.130 --> 00:19:36.690 those tariff lines. Ah, like equipment parts, 00:19:36.769 --> 00:19:39.650 specific feed ingredients. Exactly. Even the 00:19:39.650 --> 00:19:41.869 prospect of tariffs on those things can throw 00:19:41.869 --> 00:19:44.549 a wrench into budgeting, planning. It creates 00:19:44.549 --> 00:19:47.430 this cascading effect on profitability for farms 00:19:47.430 --> 00:19:50.930 already on tight margins. OK, so Washington throws 00:19:50.930 --> 00:19:52.950 these curveballs, hitting producers differently 00:19:52.950 --> 00:19:55.890 all over the place. What are the big players, 00:19:56.170 --> 00:19:59.049 the co -ops, the broader industry actually doing 00:19:59.049 --> 00:20:01.650 on the ground? Great question. The article details 00:20:01.650 --> 00:20:03.730 how they're reacting, and there are some pretty 00:20:03.730 --> 00:20:06.390 proactive strategies emerging. Like DFA. What 00:20:06.390 --> 00:20:08.789 are they up to? DFA, for instance, is implementing 00:20:08.789 --> 00:20:11.250 aggressive Southeast Asia marketing strategies, 00:20:11.450 --> 00:20:14.569 looking to launch by Q4. They're actively managing 00:20:14.569 --> 00:20:17.029 the domestic cheese surplus risk. That comes 00:20:17.029 --> 00:20:19.210 from exports being blocked. Right. Finding new 00:20:19.210 --> 00:20:21.910 avenues for it and enhancing feed purchasing 00:20:21.910 --> 00:20:24.130 programs through their regional teams to get 00:20:24.130 --> 00:20:26.589 better prices for members. Okay. How about Lando 00:20:26.589 --> 00:20:28.890 Lakes? They're focusing on enhanced market development 00:20:28.890 --> 00:20:32.039 for alternative export channels. accelerating 00:20:32.039 --> 00:20:34.759 domestic protein ingredient programs, trying 00:20:34.759 --> 00:20:37.160 to capture more value from components. Smart 00:20:37.160 --> 00:20:39.859 move. And offering a six -month payment stabilization 00:20:39.859 --> 00:20:43.079 for members hit hardest by export disruption. 00:20:43.359 --> 00:20:46.380 A critical buffer. That's significant. What about 00:20:46.380 --> 00:20:48.859 the Northeast co -ops? They're optimizing their 00:20:48.859 --> 00:20:51.670 use of the Canadian tariff rate quotas. The TRQs. 00:20:51.670 --> 00:20:54.589 Ah, those specific volume limits for imports 00:20:54.589 --> 00:20:57.930 into Canada at lower tariffs. Exactly. Maximizing 00:20:57.930 --> 00:21:00.430 that allocation is crucial for managing costs 00:21:00.430 --> 00:21:03.289 and keeping that market access, given the unique 00:21:03.289 --> 00:21:05.910 trade relationship. They're also enhancing quality 00:21:05.910 --> 00:21:08.470 bonus programs and expanding forward contracting 00:21:08.470 --> 00:21:11.349 options for members. So the industry isn't just 00:21:11.349 --> 00:21:13.829 sitting back waiting for a bailout. They're actively 00:21:13.829 --> 00:21:16.390 pivoting, innovating. Definitely seems that way. 00:21:16.410 --> 00:21:18.250 They're adapting. Okay, and this leads us right 00:21:18.250 --> 00:21:19.950 into something you mentioned, components. This 00:21:19.950 --> 00:21:21.690 is critical for your MILF check this winter, 00:21:21.809 --> 00:21:23.829 right? Absolutely critical. Component focus. 00:21:24.190 --> 00:21:27.230 The Federal Milk Marketing Order, the FMMO updates, 00:21:27.529 --> 00:21:31.289 they take effect December 1st, 2025, and they're 00:21:31.289 --> 00:21:32.970 going to make component optimization essential. 00:21:33.789 --> 00:21:36.150 Okay, remind us what the FMMO updates are changing. 00:21:36.450 --> 00:21:38.910 They adjust the manufacturing allowances. Basically, 00:21:39.049 --> 00:21:41.230 the costs processors can deduct for turning raw 00:21:41.230 --> 00:21:43.660 milk into cheese or butter. And when those change, 00:21:43.859 --> 00:21:46.420 it directly impacts the formulas for our producer 00:21:46.420 --> 00:21:48.680 pay price. Exactly. Specifically, the cheese 00:21:48.680 --> 00:21:52.240 allowance jumps to 0 .25192 pound, up from 0 00:21:52.240 --> 00:21:55.529 .20023. Okay, quite a jump. and butter butter 00:21:55.529 --> 00:21:58.390 increases to 0 .2272 counts per pound from 0 00:21:58.390 --> 00:22:02.009 .1715 also significant so this is a big shift 00:22:02.009 --> 00:22:04.190 in how value is assigned in the system it really 00:22:04.190 --> 00:22:06.650 is and current industry trends already show better 00:22:06.650 --> 00:22:09.650 fed averaging 4 .41 percent up from 4 .36 percent 00:22:09.650 --> 00:22:12.990 last year proteins at 3 .42 percent up from 3 00:22:12.990 --> 00:22:15.880 .38 the trend is already there So what's the 00:22:15.880 --> 00:22:19.400 real talk impact for a producer? Huge. University 00:22:19.400 --> 00:22:21.599 extension calculations show that just increasing 00:22:21.599 --> 00:22:25.279 protein content by 0 .15 % across a 300 -cow 00:22:25.279 --> 00:22:28.480 herd generates about $22 ,500 in extra annual 00:22:28.480 --> 00:22:32.539 revenue. $22 ,500 extra just for a 0 .15 % protein 00:22:32.539 --> 00:22:34.720 bump. That's not pocket change. That's a serious 00:22:34.720 --> 00:22:36.819 boost to your bottom line. Why such a big impact? 00:22:37.319 --> 00:22:39.950 Because the market. And now the FMMO explicitly 00:22:39.950 --> 00:22:43.690 is recognizing the increased value of those specific 00:22:43.690 --> 00:22:46.670 components. It directly rewards you for producing 00:22:46.670 --> 00:22:49.869 higher quality milk tailored to what manufacturers 00:22:49.869 --> 00:22:52.130 and consumers want. Okay, so how do you achieve 00:22:52.130 --> 00:22:53.970 that? What are the strategies? Focusing genetics 00:22:53.970 --> 00:22:57.230 on high protein bowls. Maximizing nutrition for 00:22:57.230 --> 00:23:00.490 RUP rumen undegradable protein. Making sure cows 00:23:00.490 --> 00:23:03.329 absorb and use protein efficiently for components. 00:23:03.609 --> 00:23:05.369 Right, and implementing management systems that 00:23:05.369 --> 00:23:07.990 boost overall milk quality premiums. And this 00:23:07.990 --> 00:23:10.150 shift also lines up with domestic demand too, 00:23:10.309 --> 00:23:13.509 right? Like Greek yogurt makers. Perfectly. Processors 00:23:13.509 --> 00:23:15.230 making products like Greek yogurt specifically 00:23:15.230 --> 00:23:19.230 seek milk with 3 .3 % plus protein, consistent 00:23:19.230 --> 00:23:22.150 butterfat. This isn't just tweaking prices. It's 00:23:22.150 --> 00:23:25.210 a fundamental recalibration of what value means 00:23:25.210 --> 00:23:27.869 in a gallon of milk. So the core insight here 00:23:27.869 --> 00:23:30.029 is... For years, volume was often king. Now the 00:23:30.029 --> 00:23:32.569 market is screaming for quality components. It's 00:23:32.569 --> 00:23:34.529 telling us that a truly efficient cow isn't just 00:23:34.529 --> 00:23:37.990 making more milk, but richer milk. Got it. It's 00:23:37.990 --> 00:23:41.049 clear adapting to the new pricing is vital. But 00:23:41.049 --> 00:23:44.029 so is making smart decisions about your operation's 00:23:44.029 --> 00:23:47.109 overall efficiency, right? Absolutely. The economic 00:23:47.109 --> 00:23:49.950 pressure is forcing real decisions on tech investments. 00:23:50.490 --> 00:23:53.029 The article really digs into what actually pays 00:23:53.029 --> 00:23:55.519 back. Which is the key question, isn't it? Which 00:23:55.519 --> 00:23:58.019 technologies genuinely move the needle in this 00:23:58.019 --> 00:24:01.599 new reality, not just fancy gadgets? Precisely. 00:24:01.599 --> 00:24:04.799 The article pinpoints a few key innovations that 00:24:04.799 --> 00:24:06.859 aren't just nice -to -haves anymore. They're 00:24:06.859 --> 00:24:09.539 offering tangible returns, becoming critical 00:24:09.539 --> 00:24:11.839 for survival in this high -pressure environment. 00:24:12.180 --> 00:24:14.339 Okay, give us some verified examples. Automated 00:24:14.339 --> 00:24:17.180 feeding systems. They're about a $150 ,000 investment 00:24:17.180 --> 00:24:20.460 for many operations. Steep upfront cost. But 00:24:20.460 --> 00:24:22.619 they can deliver an impressive 18 -month payback. 00:24:23.000 --> 00:24:25.140 That's verified at multiple Wisconsin operations. 00:24:25.539 --> 00:24:28.039 18 months. Okay. And it's not just saving labor. 00:24:28.339 --> 00:24:31.039 No, it's about precision. Consistent feed delivery, 00:24:31.279 --> 00:24:33.660 optimized rations for different groups, real 00:24:33.660 --> 00:24:35.940 -time monitoring of intake that improves feed 00:24:35.940 --> 00:24:38.200 efficiency and herd health significantly. But 00:24:38.200 --> 00:24:40.680 there's a catch, right? Size matters. Yeah. The 00:24:40.680 --> 00:24:43.059 key requirement for economic viability is a minimum 00:24:43.059 --> 00:24:46.839 of 500 cows. You need that scale to spread the 00:24:46.839 --> 00:24:49.740 investment cost effectively. Okay. 500 cows minimum. 00:24:49.859 --> 00:24:53.380 What else? Rumination monitoring. Right. Quality 00:24:53.380 --> 00:24:56.859 systems cost around $75 per cow. But a University 00:24:56.859 --> 00:25:00.500 of Wisconsin study, 500 cows, showed health issues 00:25:00.500 --> 00:25:04.420 identified 3 .2 days earlier. 3 .2 days earlier? 00:25:04.579 --> 00:25:07.180 That's huge in catching problems. Invaluable. 00:25:07.240 --> 00:25:09.759 Means you intervene before a sick cow really 00:25:09.759 --> 00:25:12.519 crashes. Leads to dramatically reduced vet bills, 00:25:12.759 --> 00:25:15.000 less medication, better repro performance because 00:25:15.000 --> 00:25:16.740 cows aren't falling off their lactation curve. 00:25:16.880 --> 00:25:19.299 Makes sense. Okay, what about the big one, robotic 00:25:19.299 --> 00:25:22.490 milking? Bigger investment, yeah. Around $250 00:25:22.490 --> 00:25:25.410 ,000 per unit. Needs to have a 70 -cal minimum 00:25:25.410 --> 00:25:27.930 per robot for the economics to pencil out. But 00:25:27.930 --> 00:25:29.789 there's a reality check the article mentions. 00:25:29.890 --> 00:25:32.170 Yeah. Labor savings only really work if you can 00:25:32.170 --> 00:25:34.509 actually reduce staff hours or effectively reallocate 00:25:34.509 --> 00:25:37.069 that labor, not just move people around to supervise 00:25:37.069 --> 00:25:38.950 robots. Good point. And there was another critical 00:25:38.950 --> 00:25:41.690 detail about failures. Right. Often overlooked. 00:25:41.930 --> 00:25:44.849 62 % of robotic milking system failures are linked 00:25:44.849 --> 00:25:47.710 to underpowered electrical infrastructure. 62%. 00:25:47.710 --> 00:25:50.609 Because of electricity. Yeah. It's like a $15 00:25:50.609 --> 00:25:54.490 ,000 preventable issue, but it can derail a six 00:25:54.490 --> 00:25:56.789 -figure investment if you don't proactively check 00:25:56.789 --> 00:25:59.269 and upgrade your power supply. Wow. So the key 00:25:59.269 --> 00:26:01.450 isn't just the tech itself. It's the execution, 00:26:01.849 --> 00:26:04.170 the training, making sure your existing setup 00:26:04.170 --> 00:26:07.230 can handle it. Diligent execution, proper training, 00:26:07.430 --> 00:26:09.450 robust infrastructure. That's the difference 00:26:09.450 --> 00:26:11.690 maker. Okay. What's fascinating, too, is how 00:26:11.690 --> 00:26:14.890 programs once considered maybe optional safety 00:26:14.890 --> 00:26:18.680 nets are now looking essential. DMC. Exactly. 00:26:18.940 --> 00:26:21.400 With this level of market volatility, the Dairy 00:26:21.400 --> 00:26:24.279 Margin Coverage Program, DMC, it acts as that 00:26:24.279 --> 00:26:27.059 vital federal insurance policy, right? Protects 00:26:27.059 --> 00:26:29.440 you when milk prices fall below feed costs. Used 00:26:29.440 --> 00:26:31.700 to be seen as maybe just a nice to have. Now 00:26:31.700 --> 00:26:33.789 it's essential risk management. Look at its 2025 00:26:33.789 --> 00:26:36.910 performance so far. May margin was $10 .40 per 00:26:36.910 --> 00:26:40.789 100 night. June hit $11 .15. July was $10 .85. 00:26:41.150 --> 00:26:43.309 Okay, so producers enrolled at the higher levels. 00:26:43.529 --> 00:26:46.569 Those at the $9 .50 per 100 weight coverage level 00:26:46.569 --> 00:26:48.210 have actually been getting consistent payments 00:26:48.210 --> 00:26:51.009 since April. Providing a crucial financial lifeline 00:26:51.009 --> 00:26:53.849 during all this uncertainty. Absolutely. And 00:26:53.849 --> 00:26:57.670 with 2026 enrollment opening January 29th, the 00:26:57.670 --> 00:27:00.200 article really stresses. Higher coverage levels 00:27:00.200 --> 00:27:02.740 are cost -effective insurance. It's not just 00:27:02.740 --> 00:27:05.099 being conservative anymore. But didn't DMC fail 00:27:05.099 --> 00:27:07.579 to trigger payments for many during the initial 00:27:07.579 --> 00:27:09.700 crisis? Why was that? Yeah, that's a key point. 00:27:09.819 --> 00:27:13.460 It relies on national averages. So strong cheese 00:27:13.460 --> 00:27:16.059 and butter sales to other markets, plus lower 00:27:16.059 --> 00:27:19.140 national feed costs, kept the national all -milk 00:27:19.140 --> 00:27:21.619 price and the overall margin relatively high. 00:27:21.960 --> 00:27:24.819 even while whey and lactose were collapsing for 00:27:24.819 --> 00:27:27.779 specific producers or regions. Exactly. The national 00:27:27.779 --> 00:27:30.579 average inadvertently masked that targeted pain. 00:27:30.819 --> 00:27:33.740 The margins stayed above the $9 .50 trigger for 00:27:33.740 --> 00:27:36.259 many, even when individual farms were really 00:27:36.259 --> 00:27:38.180 hurting from those specific market collapses. 00:27:38.440 --> 00:27:40.839 Highlights a structural issue, maybe. Can't respond 00:27:40.839 --> 00:27:43.519 well to nuanced, localized shocks. Seems that 00:27:43.519 --> 00:27:46.200 way. Okay, so this raises the big question. If 00:27:46.200 --> 00:27:48.690 China is effectively off the table, Maybe for 00:27:48.690 --> 00:27:50.650 good. Where do we go next? Market diversification. 00:27:50.910 --> 00:27:52.910 The article really hammers this. We need to be 00:27:52.910 --> 00:27:56.069 aggressive. Identifying key growth areas. Where 00:27:56.069 --> 00:27:58.930 are they? Southeast Asia. Markets like Vietnam, 00:27:59.190 --> 00:28:02.509 Malaysia, Thailand, the Philippines. Rising middle 00:28:02.509 --> 00:28:05.680 class, growing demand for dairy. Makes sense. 00:28:05.759 --> 00:28:08.200 What else? Latin America is showing immense promise. 00:28:08.420 --> 00:28:10.900 And Mexico, of course, continues to be our biggest 00:28:10.900 --> 00:28:13.000 single customer. What were the Mexico numbers 00:28:13.000 --> 00:28:16.359 again? $2 .47 billion in U .S. dairy purchased 00:28:16.359 --> 00:28:21.099 in 2024. That's 29 % of our total exports. Huge! 00:28:21.519 --> 00:28:25.059 29%. Wow. And Central America, too. Yeah, smaller 00:28:25.059 --> 00:28:27.779 markets like Costa Rica, Guatemala, El Salvador, 00:28:28.039 --> 00:28:30.880 they're showing promise, too. Record import values 00:28:30.880 --> 00:28:33.279 for U .S. dairy, indicating growing demand there. 00:28:33.420 --> 00:28:35.440 And it's not just international, right? What 00:28:35.440 --> 00:28:37.900 about domestic? Crucial point. Domestic market 00:28:37.900 --> 00:28:40.259 development is gaining huge importance. Over 00:28:40.259 --> 00:28:43.220 $8 billion in new U .S. processing capacity is 00:28:43.220 --> 00:28:45.940 scheduled to come online through 2027. $8 billion 00:28:45.940 --> 00:28:48.559 in new processing. That's massive. Creates massive 00:28:48.559 --> 00:28:50.960 opportunities for producers who can deliver consistent 00:28:50.960 --> 00:28:53.160 quality and, again, those specific components 00:28:53.160 --> 00:28:55.400 these new plants need for manufactured products. 00:28:55.579 --> 00:28:57.299 Especially the higher value protein and butterfat 00:28:57.299 --> 00:28:59.779 streams. Exactly. It's a clear signal. Focus 00:28:59.779 --> 00:29:02.400 inward as well as outward. Okay, connecting this 00:29:02.400 --> 00:29:04.869 to the bigger picture. This doesn't sound like 00:29:04.869 --> 00:29:07.190 just a temporary blip. It feels like it's signaling 00:29:07.190 --> 00:29:10.349 permanent foundational changes in global dairy 00:29:10.349 --> 00:29:12.950 trade. I think that's the core message. Trade 00:29:12.950 --> 00:29:16.089 experts see basically three main scenarios for 00:29:16.089 --> 00:29:18.710 the future, and the article is blunt. None of 00:29:18.710 --> 00:29:21.089 them get us back to exactly where we were before 00:29:21.089 --> 00:29:23.029 April. Okay, what are the scenarios? Scenario 00:29:23.029 --> 00:29:27.109 one, a trade deal. Maybe 25 % probability. Tariffs 00:29:27.109 --> 00:29:30.630 eventually drop to, say, 15 -25%. It's okay. 00:29:30.829 --> 00:29:33.970 But we'd likely only see a partial Chinese market 00:29:33.970 --> 00:29:36.990 recovery. Brazil, New Zealand. They'd probably 00:29:36.990 --> 00:29:38.750 keep most of the share they just gained. The 00:29:38.750 --> 00:29:41.069 trust is too broken. Right. Okay, scenario two. 00:29:41.269 --> 00:29:44.740 Extended standoff. 60 % probability the most 00:29:44.740 --> 00:29:47.819 likely. Current 125 % tariffs stick around for 00:29:47.819 --> 00:29:50.099 two or more years. This becomes the new normal. 00:29:50.299 --> 00:29:53.019 Pretty much. U .S. dairy permanently pivots to 00:29:53.019 --> 00:29:55.880 Southeast Asia, domestic whey applications. China 00:29:55.880 --> 00:29:58.460 is basically considered a lost cause for commodity 00:29:58.460 --> 00:30:00.779 exports in this scenario. Wow. Okay. And the 00:30:00.779 --> 00:30:03.720 third? Broader escalation. Least likely, maybe 00:30:03.720 --> 00:30:07.140 15 % probability, but the worst outcome. triggers 00:30:07.140 --> 00:30:10.019 an economic recession hitting global demand for 00:30:10.019 --> 00:30:12.720 everything, including dairy. That's a sobering 00:30:12.720 --> 00:30:15.259 outlook, isn't it? The idea that, yeah, we might 00:30:15.259 --> 00:30:17.140 never truly get back to where we were. It really 00:30:17.140 --> 00:30:19.000 is. And what's fascinating about these scenarios, 00:30:19.380 --> 00:30:22.839 they seem to underscore fundamental shifts that 00:30:22.839 --> 00:30:25.259 are already happening. Shifts producers need 00:30:25.259 --> 00:30:28.019 to see as permanent, not temporary. Like what? 00:30:28.380 --> 00:30:30.920 What are these permanent shifts? Well, permanent 00:30:30.920 --> 00:30:33.559 sourcing shifts, for one. The U .S. has largely 00:30:33.559 --> 00:30:36.440 lost its reliable supplier status in China. We 00:30:36.440 --> 00:30:38.519 talked about that trust issue. Right. Chinese 00:30:38.519 --> 00:30:41.339 buyers are actively shifting to the EU, New Zealand, 00:30:41.460 --> 00:30:44.359 for the long term, cementing new supply chains 00:30:44.359 --> 00:30:46.579 that will be incredibly hard to break back into. 00:30:46.700 --> 00:30:49.640 That loss of trust will take years, maybe decades, 00:30:49.680 --> 00:30:52.180 to fix, no matter what happens politically. Exactly. 00:30:52.559 --> 00:30:54.720 Then there's the clear rise of regional trade 00:30:54.720 --> 00:30:57.500 blocs. The volatility with China makes agreements 00:30:57.500 --> 00:31:00.839 like USMCA strategically much more important. 00:31:00.980 --> 00:31:04.259 Even with its own ongoing disputes. Right. They 00:31:04.259 --> 00:31:07.160 become anchors in an unpredictable global sea. 00:31:07.460 --> 00:31:12.420 And the crisis is forcing a new priority. Supply 00:31:12.420 --> 00:31:15.220 chain resilience over pure efficiency. Explain 00:31:15.220 --> 00:31:17.500 that. For decades, it was all about lowest cost, 00:31:17.599 --> 00:31:20.200 right? Yeah. Often relying on one huge cheap 00:31:20.200 --> 00:31:23.430 end market like China. For whey. Optimized for 00:31:23.430 --> 00:31:26.210 efficiency above all else. But the crisis showed 00:31:26.210 --> 00:31:28.589 the catastrophic flaw in that. Now, the priority 00:31:28.589 --> 00:31:31.910 is diversification, redundancy. Even if it costs 00:31:31.910 --> 00:31:34.049 a bit more. It's about protecting against future 00:31:34.049 --> 00:31:36.690 shocks. Makes sense. Building in buffers. We're 00:31:36.690 --> 00:31:38.930 also seeing acceleration of value -added products 00:31:38.930 --> 00:31:41.170 over commodities. The cheese and butterfat success 00:31:41.170 --> 00:31:43.490 versus the whey lactose collapse. Clear mandate. 00:31:43.910 --> 00:31:46.589 Move up the value chain. Reinforced by those 00:31:46.589 --> 00:31:49.089 FMMO changes we talked about. Make more profitable 00:31:49.089 --> 00:31:51.519 products from our milk. And finally. consolidation. 00:31:51.779 --> 00:31:53.960 This whole situation will likely speed up the 00:31:53.960 --> 00:31:56.779 ongoing trend. Fewer but larger farms. We've 00:31:56.779 --> 00:31:59.119 seen that already. Since 2017 alone, the U .S. 00:31:59.119 --> 00:32:02.319 lost nearly 16 ,000 dairy farms while increasing 00:32:02.319 --> 00:32:04.740 total milk production. Right. And the geographic 00:32:04.740 --> 00:32:08.079 concentration towards regions with lower costs, 00:32:08.119 --> 00:32:10.960 better market access, that'll continue. Puts 00:32:10.960 --> 00:32:13.819 immense pressure on smaller, maybe less adaptable 00:32:13.819 --> 00:32:16.539 operations. Okay. So that's a lot of complex 00:32:16.539 --> 00:32:18.839 dynamics, big shifts. What does it all mean for 00:32:18.839 --> 00:32:22.519 you, the listener? Right now. This fall. The 00:32:22.519 --> 00:32:25.059 article lays out a clear, immediate action plan 00:32:25.059 --> 00:32:28.279 for fall 2025. Let's hear it. What should producers 00:32:28.279 --> 00:32:30.720 be doing right now, September through November? 00:32:31.059 --> 00:32:33.259 Assess your risk. That's step one. Call your 00:32:33.259 --> 00:32:36.519 processor. Today. Get specific answers. Exactly. 00:32:36.640 --> 00:32:38.660 What percentage of your milk goes to those China 00:32:38.660 --> 00:32:41.180 -bound products? How has your pay price formula 00:32:41.180 --> 00:32:43.640 changed since April? What's their backup plan 00:32:43.640 --> 00:32:46.000 for whey marketing? Know your specifics. That's 00:32:46.000 --> 00:32:48.779 your baseline. Then step two. Yeah. Lockdown 00:32:48.779 --> 00:32:52.380 2026. Get your DMC enrollment sorted. Deadlines 00:32:52.380 --> 00:32:56.059 January 29th. Secure feed contracts for Q1 2026. 00:32:56.339 --> 00:32:58.619 Try to mitigate that input volatility. And talk 00:32:58.619 --> 00:33:00.839 to your banker. Solidify banking relationships 00:33:00.839 --> 00:33:03.099 for operating credit. Especially with Cornell 00:33:03.099 --> 00:33:06.380 projecting $6 billion in cumulative losses. Lenders 00:33:06.380 --> 00:33:08.160 are watching this closely. Good point. Okay, 00:33:08.200 --> 00:33:10.019 and through the end of the year. Strategic moves. 00:33:10.740 --> 00:33:14.559 Component optimization genetics. Nutrition. Quality 00:33:14.559 --> 00:33:17.829 monitoring systems. Yeah. And... Make proven 00:33:17.829 --> 00:33:19.990 technology investments. Things with a verified 00:33:19.990 --> 00:33:23.029 payback, like we discussed. Automated feed, health 00:33:23.029 --> 00:33:25.289 monitoring, repro management platforms. Right. 00:33:25.289 --> 00:33:27.390 It's about proactive management, not reactive. 00:33:27.690 --> 00:33:30.549 Taking control where you can, instead of just 00:33:30.549 --> 00:33:32.990 waiting for external forces to decide your future. 00:33:33.210 --> 00:33:35.349 Well said. Look, this isn't weather or disease, 00:33:35.650 --> 00:33:37.829 right? It's political volatility. That makes 00:33:37.829 --> 00:33:40.509 long -term planning incredibly difficult. Understatement 00:33:40.509 --> 00:33:42.829 of the year. But the operations that are thriving, 00:33:42.990 --> 00:33:45.190 or at least navigating this successfully right 00:33:45.190 --> 00:33:48.079 now. They aren't waiting for Washington to fix 00:33:48.079 --> 00:33:50.259 it. They're taking action themselves. The article 00:33:50.259 --> 00:33:52.640 really brings it home by recapping three things 00:33:52.640 --> 00:33:56.140 successful producers are doing. One, maximizing 00:33:56.140 --> 00:33:59.140 efficiency with proven tech that delivers a clear 00:33:59.140 --> 00:34:04.059 ROI, not just shiny objects. Two, actively optimizing 00:34:04.059 --> 00:34:08.059 components for December's FMMO pricing changes. 00:34:08.300 --> 00:34:10.159 Understanding those updates are a game changer 00:34:10.159 --> 00:34:12.420 for profitability. Right. Getting ready for that 00:34:12.420 --> 00:34:15.199 shift. And three, building financial reserves. 00:34:16.240 --> 00:34:18.719 Navigating continued volatility requires a strong 00:34:18.719 --> 00:34:21.320 balance sheet. That's your best defense. Cash 00:34:21.320 --> 00:34:24.579 is king, especially now. The era of single market 00:34:24.579 --> 00:34:28.320 optimization. Truly over. Fee deficiency isn't 00:34:28.320 --> 00:34:31.380 a nice to have anymore. It's survival. Component 00:34:31.380 --> 00:34:34.340 optimization isn't next year's strategy. It's 00:34:34.340 --> 00:34:37.000 this December's reality. The rules changed back 00:34:37.000 --> 00:34:39.099 in April. Those nine days changed the rules. 00:34:39.550 --> 00:34:41.949 And your decisions this fall will determine which 00:34:41.949 --> 00:34:44.289 side of dairy's new reality your operation lands 00:34:44.289 --> 00:34:47.150 on. Stay sharp, stay flexible, keep your eyes 00:34:47.150 --> 00:34:50.210 on the next move. Powerful stuff. So after digesting 00:34:50.210 --> 00:34:52.710 all of that, what's the single key takeaway? 00:34:52.909 --> 00:34:54.510 What's the most important thing for a farmer 00:34:54.510 --> 00:34:57.429 listening today? Yeah, boiling it down, the article's 00:34:57.429 --> 00:34:59.550 key takeaways are really clear, really immediate. 00:34:59.590 --> 00:35:02.110 They push us towards decisive action right now. 00:35:02.210 --> 00:35:04.530 Okay, number one. Diversify your export channels. 00:35:04.630 --> 00:35:07.530 Now. Way down 70 % to China. You need to encourage 00:35:07.530 --> 00:35:09.829 your processors to look hard at Southeast Asia, 00:35:09.949 --> 00:35:12.190 Latin America. They're still hungry for U .S. 00:35:12.190 --> 00:35:14.349 products. Huge growth potential there. Don't 00:35:14.349 --> 00:35:17.010 rely on one basket. Okay. Number two. Push that 00:35:17.010 --> 00:35:18.989 protein percentage. We said it before, but that 00:35:18.989 --> 00:35:23.630 0 .15 % bump, that's potentially $22 ,500 extra 00:35:23.630 --> 00:35:27.010 annually for a 300 -cow herd. Focus your genetics, 00:35:27.090 --> 00:35:29.409 your nutrition protocols on protein right now. 00:35:29.610 --> 00:35:32.369 Get aligned with those new FMMO realities coming 00:35:32.369 --> 00:35:34.769 in December. Capture that value. Number three. 00:35:35.150 --> 00:35:38.570 Invest in tech that pays back. Precision feeding, 00:35:38.789 --> 00:35:41.909 rumination monitors. They're showing real 10 00:35:41.909 --> 00:35:45.570 % feed efficiency gains. That's $200, $400 per 00:35:45.570 --> 00:35:48.389 cow yearly. But remember the caveat. Right. Remember 00:35:48.389 --> 00:35:50.929 the 500 cow minimum for the economics on automated 00:35:50.929 --> 00:35:53.030 feeding to really work. Generally speaking, do 00:35:53.030 --> 00:35:55.409 your own math. Okay. Number four, lock down your 00:35:55.409 --> 00:35:58.849 2026 inputs. Today. Feed costs are volatile. 00:35:59.150 --> 00:36:02.190 DMC enrollment opens January 29th. Secure those 00:36:02.190 --> 00:36:03.949 contracts, get that coverage before uncertainty 00:36:03.949 --> 00:36:06.369 hits your margins even harder. Don't wait. And 00:36:06.369 --> 00:36:09.190 finally, master the December rule changes. Those 00:36:09.190 --> 00:36:12.269 FMMO updates are boosting component values. Operations 00:36:12.269 --> 00:36:14.269 optimizing protein and butterfat will capture 00:36:14.269 --> 00:36:16.670 those premiums. Others will simply miss out on 00:36:16.670 --> 00:36:18.809 a significant opportunity. It's a clear choice, 00:36:18.909 --> 00:36:21.809 really. So, as you step off this deep dive, head 00:36:21.809 --> 00:36:25.429 back out to the farm. Ask yourself. Is your operation 00:36:25.429 --> 00:36:28.949 optimized for yesterday's dairy world? Or is 00:36:28.949 --> 00:36:31.550 it truly poised for the permanent shifts that 00:36:31.550 --> 00:36:33.829 those nine days in April unleashed? That's the 00:36:33.829 --> 00:36:35.929 question. The answer won't just define your next 00:36:35.929 --> 00:36:37.909 quarter. It might define the next generation 00:36:37.909 --> 00:36:40.889 of American dairy. Powerful insights. A lot to 00:36:40.889 --> 00:36:43.050 think about there. Definitely. And that's all 00:36:43.050 --> 00:36:45.269 the time we have for today's Deep Dive. For more 00:36:45.269 --> 00:36:47.230 articles and insights like this one, be sure 00:36:47.230 --> 00:36:51.239 to visit www .thebullvine .com. And don't forget 00:36:51.239 --> 00:36:53.199 to follow us wherever you get your audio. Join 00:36:53.199 --> 00:36:55.639 the conversation online. Thanks so much for listening. 00:36:55.860 --> 00:36:58.380 That wraps up this episode of the Bullvine Podcast. 00:36:58.840 --> 00:37:01.099 If you found it valuable, share it with your 00:37:01.099 --> 00:37:03.340 fellow farmers and keep the conversation going. 00:37:03.880 --> 00:37:06.920 Remember, knowledge is your best tool in these 00:37:06.920 --> 00:37:10.579 challenging times. Until next time, keep innovating 00:37:10.579 --> 00:37:20.900 and keep the milk flowing. Thank you.