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 --> 00:01:03.320 we're sparking Welcome to the Bullvine Podcast, 00:01:03.759 --> 00:01:06.079 where we tell you the truths the dairy industry 00:01:06.079 --> 00:01:09.459 doesn't want you to hear. I'm your host, and 00:01:09.459 --> 00:01:11.780 today we're diving into something that's going 00:01:11.780 --> 00:01:14.579 to make a lot of people uncomfortable. If you 00:01:14.579 --> 00:01:17.519 can't write a $3 million check tomorrow, you 00:01:17.519 --> 00:01:20.819 might already be extinct. The industry just hasn't 00:01:20.819 --> 00:01:24.519 told you yet. Today's episode exposes the $11 00:01:24.519 --> 00:01:31.890 billion betrayal happening right now. while selling 00:01:31.890 --> 00:01:35.790 you $650 ,000 solutions that guarantee bankruptcy. 00:01:36.409 --> 00:01:39.549 What you're about to hear includes actual math 00:01:39.549 --> 00:01:42.989 that proves 60 to 70 % of dairy farmers would 00:01:42.989 --> 00:01:45.989 be wealthier selling tomorrow than milking another 00:01:45.989 --> 00:01:49.290 day. We'll reveal why North Dakota went from 00:01:49.290 --> 00:01:53.849 1 ,810 dairy farms to just 24, and why your state 00:01:53.849 --> 00:01:57.629 is next. This is information your banker, your 00:01:57.629 --> 00:02:00.010 co -op, and your processor never want you to 00:02:00.010 --> 00:02:02.849 hear. because your losses are subsidizing their 00:02:02.849 --> 00:02:06.129 entire business model. Let's dive in. Welcome 00:02:06.129 --> 00:02:08.889 back to the Deep Dive, where we use raw industry 00:02:08.889 --> 00:02:12.370 analysis and sources like the bullvine to cut 00:02:12.370 --> 00:02:14.310 through the noise and get you the insights that 00:02:14.310 --> 00:02:17.129 actually matter for your operation. And today, 00:02:17.310 --> 00:02:21.469 we're diving deep into a feature piece that's 00:02:21.469 --> 00:02:24.669 been generating some serious buzz, really hitting 00:02:24.669 --> 00:02:27.330 home across the industry. Yeah, this article, 00:02:27.509 --> 00:02:30.250 The Engineered Extinction of Family Dairy, it's 00:02:30.250 --> 00:02:32.189 not just looking back, is it? It feels like a 00:02:32.189 --> 00:02:34.810 forecast. It really does. It's got layers and, 00:02:34.870 --> 00:02:37.590 frankly, some surprises that are going to force 00:02:37.590 --> 00:02:41.389 producers, folks on the ground, to rethink fundamental 00:02:41.389 --> 00:02:45.310 approaches to investment and, well, farm viability 00:02:45.310 --> 00:02:48.349 itself. Absolutely. Our mission today is to unpack 00:02:48.349 --> 00:02:51.289 the staggering financial and structural betrayals 00:02:51.289 --> 00:02:53.449 happening right now in real time. Within the 00:02:53.449 --> 00:02:55.710 dairy supply chain. We're going to show you exactly 00:02:55.710 --> 00:02:57.729 why the conventionalism about scaling, about 00:02:57.729 --> 00:03:00.650 technology, even about organic markets, why it's 00:03:00.650 --> 00:03:02.830 potentially setting up family dairies for what 00:03:02.830 --> 00:03:05.629 this source material explicitly calls an engineered 00:03:05.629 --> 00:03:07.729 failure. And I can tell you the farmer reaction 00:03:07.729 --> 00:03:09.770 I'm hearing, it isn't really shock. It's more 00:03:09.770 --> 00:03:13.569 like confirmation. The content here is, yeah, 00:03:13.629 --> 00:03:17.000 it's jarring, but it speaks to this. deep, uncomfortable 00:03:17.000 --> 00:03:19.379 truth that a lot of folks have felt brewing for 00:03:19.379 --> 00:03:22.400 a long time. It really does. It forces every 00:03:22.400 --> 00:03:25.099 producer to look at their operation, not through, 00:03:25.139 --> 00:03:28.219 you know, tradition or sentiment, but through 00:03:28.219 --> 00:03:31.759 a cold, hard financial lens. Asking that tough 00:03:31.759 --> 00:03:35.580 question, am I an economic asset here or am I 00:03:35.580 --> 00:03:38.300 becoming a liability that the system, well, needs 00:03:38.300 --> 00:03:41.580 to liquidate? Let's start right there with the 00:03:41.580 --> 00:03:44.270 core message that defines the urgency. Because 00:03:44.270 --> 00:03:46.270 this isn't about 20 years down the road, is it? 00:03:46.270 --> 00:03:48.289 This is about the next 24 months. That's happening 00:03:48.289 --> 00:03:50.770 fast. The article's brutal context setting is 00:03:50.770 --> 00:03:53.669 basically this. If you can't write a check for 00:03:53.669 --> 00:03:56.490 $3 million tomorrow, consolidation might have 00:03:56.490 --> 00:03:58.990 already marked your operation for exit. $3 million. 00:03:59.370 --> 00:04:01.090 Just pause on that number. That's the new price 00:04:01.090 --> 00:04:02.969 of entry, it seems, into this industrialized 00:04:02.969 --> 00:04:05.590 dairy system. It's a staggering benchmark. And 00:04:05.590 --> 00:04:08.090 it's driven, like you said, by the urgency. But 00:04:08.090 --> 00:04:10.620 there are these two... uh really contradictory 00:04:10.620 --> 00:04:13.360 data points that expose the whole thing the whole 00:04:13.360 --> 00:04:16.500 engineered extinction idea right let's lay those 00:04:16.500 --> 00:04:18.680 out on one hand you've got the massive structural 00:04:18.680 --> 00:04:21.819 investment the idfa the international dairy foods 00:04:21.819 --> 00:04:25.139 association they're tracking over 11 billion 00:04:25.139 --> 00:04:28.620 dollars in new processing capacity 11 billion 00:04:28.620 --> 00:04:31.699 yeah being built across the country through 2028 00:04:31.699 --> 00:04:35.540 we're talking huge drying facilities, high -tech 00:04:35.540 --> 00:04:38.180 bottling lines, specialty protein plants. This 00:04:38.180 --> 00:04:40.199 isn't small potatoes. This is a statement, right? 00:04:40.300 --> 00:04:43.519 It's permanent industrialization. Exactly. But 00:04:43.519 --> 00:04:45.939 then here's the critical contradiction, the piece 00:04:45.939 --> 00:04:48.560 that makes that whole $11 billion investment 00:04:48.560 --> 00:04:52.519 look almost predatory. Which is? USDA milk production 00:04:52.519 --> 00:04:55.040 is actually trending down slightly, yeah, maybe 00:04:55.040 --> 00:04:57.040 off by about a quarter of a percent this year, 00:04:57.100 --> 00:04:58.819 but the trend line is clear. It's shrinking. 00:04:59.259 --> 00:05:01.560 So hang on, processors are building these massive 00:05:01.560 --> 00:05:04.199 high overhead factories while the raw material 00:05:04.199 --> 00:05:07.000 supply is actually getting smaller. Precisely. 00:05:07.000 --> 00:05:09.120 And that shrinking supply, it means one thing 00:05:09.120 --> 00:05:12.139 for the folks who put up that $11 billion. They 00:05:12.139 --> 00:05:15.000 have to capture every last drop of the existing 00:05:15.000 --> 00:05:17.459 milk just to justify the cost of that infrastructure. 00:05:17.980 --> 00:05:20.300 Okay. And that leads right to the most provocative 00:05:20.300 --> 00:05:22.279 point you mentioned earlier, the one that's hard 00:05:22.279 --> 00:05:24.579 to swallow. Yeah, the idea that the industry 00:05:24.579 --> 00:05:26.899 actually needs farmers to keep losing money. 00:05:27.639 --> 00:05:31.230 Slowly. Why? Why would the system want me to 00:05:31.230 --> 00:05:33.970 fail slowly? It sounds counterintuitive. Because 00:05:33.970 --> 00:05:36.589 slow failure keeps the volume flowing at a cheap 00:05:36.589 --> 00:05:38.870 price while the system retools itself for the 00:05:38.870 --> 00:05:41.529 mega -dairies. It prevents a sudden supply shock. 00:05:41.829 --> 00:05:44.009 You're still supplying the milk they need, even 00:05:44.009 --> 00:05:46.310 if it's killing your equity. I keep thinking 00:05:46.310 --> 00:05:48.290 about that quote from the Iowa farmer in the 00:05:48.290 --> 00:05:51.110 piece. The one about the robots? Yeah. Runs about 00:05:51.110 --> 00:05:54.509 300 head, typical multi -generation family farm. 00:05:54.750 --> 00:05:58.819 He said, I just spent $650 ,000 on robots, and 00:05:58.819 --> 00:06:01.139 I think I just financed my own funeral. Wow. 00:06:01.259 --> 00:06:03.800 That just encapsulates the entire dilemma, doesn't 00:06:03.800 --> 00:06:06.139 it? It really does. You invest what little capital 00:06:06.139 --> 00:06:08.339 you have left, hoping technology will save you. 00:06:08.439 --> 00:06:10.660 But that investment just puts you deeper in debt 00:06:10.660 --> 00:06:13.399 to a system that doesn't really want you long 00:06:13.399 --> 00:06:15.660 term. And it locks you in, right? Ensures you 00:06:15.660 --> 00:06:17.720 can't pivot or sell easily when the real crisis 00:06:17.720 --> 00:06:20.899 hits. Exactly. You financed your own exit barrier. 00:06:21.339 --> 00:06:24.139 Okay, let's unpack this $11 billion betrayal 00:06:24.139 --> 00:06:25.959 because that's really what it feels like, this 00:06:25.959 --> 00:06:29.199 massive investment in processing capacity. It 00:06:29.199 --> 00:06:32.459 is emphatically not for the average family farm. 00:06:32.579 --> 00:06:35.139 No, it's engineered specifically for their replacement 00:06:35.139 --> 00:06:38.259 by industrial scale operations. It's a fundamental 00:06:38.259 --> 00:06:41.399 shift. Driven by the sheer mechanics of these 00:06:41.399 --> 00:06:44.199 new billion -dollar plants. Absolutely. Take 00:06:44.199 --> 00:06:47.639 that $650 million Fair Life plant in Webster, 00:06:47.720 --> 00:06:50.560 New York. Governor Hochul was celebrating a big 00:06:50.560 --> 00:06:53.379 economic development win. Sure. Ribbon cuttings 00:06:53.379 --> 00:06:55.620 and all that. But if you read between the lines... 00:06:55.839 --> 00:06:57.699 Talk to the engineers who design these places. 00:06:58.259 --> 00:07:00.899 They are built exclusively for mega dairies. 00:07:00.920 --> 00:07:03.759 They have to be. And we're not talking just large 00:07:03.759 --> 00:07:06.259 dairies in the old sense. We mean operations 00:07:06.259 --> 00:07:08.879 that can deliver tanker after tanker of identical 00:07:08.879 --> 00:07:12.459 milk. 204 .7. Identical is the key word. Consistency 00:07:12.459 --> 00:07:15.339 and butterfat protein. The solids. They need 00:07:15.339 --> 00:07:18.800 less than 2 % variation day in, day out. Think 00:07:18.800 --> 00:07:20.720 about that. If you're running 300 cows, testing 00:07:20.720 --> 00:07:22.899 components maybe once a month, dealing with seasonal 00:07:22.899 --> 00:07:25.019 feed changes. Yeah. You're just noising their 00:07:25.019 --> 00:07:27.329 system. You're not even on their radar. Their 00:07:27.329 --> 00:07:29.829 supply chain is built for industrial uniformity, 00:07:29.870 --> 00:07:33.449 because the machinery in that $650 million plant, 00:07:33.850 --> 00:07:37.189 it can't handle inconsistency. It can't handle 00:07:37.189 --> 00:07:39.610 downtime. The engineering demands volume, sure, 00:07:39.750 --> 00:07:43.250 but also chemical predictability, day after day. 00:07:43.470 --> 00:07:46.209 And that volume requirement alone acts as a filter, 00:07:46.310 --> 00:07:48.509 doesn't it? Absolutely. A 300 -cal operation, 00:07:48.829 --> 00:07:50.990 maybe you fill one tanker every day, maybe every 00:07:50.990 --> 00:07:54.259 other day. These plants need... 20, 30, 40 tankers 00:07:54.259 --> 00:07:56.500 constantly flowing in. Plus the logistics cost. 00:07:56.860 --> 00:07:59.639 Sending a tanker 100 miles to pick up 18 ,000 00:07:59.639 --> 00:08:02.620 pounds is way more expensive per 100 weight than 00:08:02.620 --> 00:08:05.439 sending it 10 miles for 80 ,000 pounds from one 00:08:05.439 --> 00:08:07.600 spot. The small farm just becomes too expensive 00:08:07.600 --> 00:08:09.959 to haul from, even if the milk itself is fine. 00:08:10.079 --> 00:08:11.699 And you see the results everywhere. The article 00:08:11.699 --> 00:08:13.939 points to North Dakota. That timeline, it's gut 00:08:13.939 --> 00:08:18.160 -wrenching. 1 ,810 dairy farms in 1987. Now. 00:08:18.259 --> 00:08:22.170 The latest census. 24 left. 24 from over 1800. 00:08:22.410 --> 00:08:24.269 That's yeah, that's an extinction event. And 00:08:24.269 --> 00:08:26.470 it happened because consolidation created these 00:08:26.470 --> 00:08:29.689 regional single buyer monopolies that just choked 00:08:29.689 --> 00:08:32.149 out the smaller suppliers over time. OK, wait, 00:08:32.250 --> 00:08:34.029 wait. This brings us back to that contradiction. 00:08:34.450 --> 00:08:37.129 Building 11 billion dollars in capacity while 00:08:37.129 --> 00:08:40.029 supply is shrinking. That should honestly terrify 00:08:40.029 --> 00:08:42.210 every producer listening. What's the implication 00:08:42.210 --> 00:08:45.769 then? Well, these new plants, they're only profitable 00:08:45.769 --> 00:08:48.629 if they run. near full capacity, right? Like 00:08:48.629 --> 00:08:52.610 above 75 % utilization, ideally, if supply is 00:08:52.610 --> 00:08:55.250 declining overall. They become desperately reliant 00:08:55.250 --> 00:08:57.889 on the few remaining large suppliers to keep 00:08:57.889 --> 00:09:00.450 the machines running. Exactly. Which means those 00:09:00.450 --> 00:09:03.090 giant operations gain massive leverage. They 00:09:03.090 --> 00:09:05.090 can almost name their price eventually. But the 00:09:05.090 --> 00:09:07.250 smaller producers, they lose all leverage. That's 00:09:07.250 --> 00:09:09.389 where the single buyer monopoly really bites. 00:09:09.610 --> 00:09:12.090 Like Mike Gunther. That Nebraska farmer mentioned 00:09:12.090 --> 00:09:14.309 in the piece, he said if there's only one buyer 00:09:14.309 --> 00:09:16.929 in a 100 -mile radius, your physical assets, 00:09:17.250 --> 00:09:20.110 your parlor, barns, tank, become worth almost 00:09:20.110 --> 00:09:22.629 nothing if you try to sell. Why is that? Explain 00:09:22.629 --> 00:09:25.529 that bit. Because the regional processor, the 00:09:25.529 --> 00:09:27.789 only buyer, they don't need your assets. They 00:09:27.789 --> 00:09:30.350 just need your mill volume once they've secured 00:09:30.350 --> 00:09:32.250 enough volume from the mega dairies. They have 00:09:32.250 --> 00:09:34.889 zero incentive to buy your smaller, maybe less 00:09:34.889 --> 00:09:38.159 efficient parlor or barn setup. Right. The value 00:09:38.159 --> 00:09:39.940 of your assets gets destroyed because there's 00:09:39.940 --> 00:09:41.940 no competitive market left to sell them into. 00:09:42.159 --> 00:09:45.100 They only hold value if another dairy farmer 00:09:45.100 --> 00:09:47.879 buys them to keep dairying. And that $11 billion 00:09:47.879 --> 00:09:50.899 investment is systematically eliminating that 00:09:50.899 --> 00:09:53.159 potential buyer pool. Precisely. So that $11 00:09:53.159 --> 00:09:55.980 billion, it's not building a future for dairy. 00:09:56.139 --> 00:09:58.940 It's building a future for the maybe 300 farms 00:09:58.940 --> 00:10:01.399 left standing when the dust settles. The ones 00:10:01.399 --> 00:10:03.639 with the capital and scale to meet those industrial 00:10:03.639 --> 00:10:07.340 demands. 200 and four head in uniformity. Okay, 00:10:07.399 --> 00:10:09.580 let's pivot. Let's talk about the two biggest 00:10:09.580 --> 00:10:12.480 pieces of, well, conventional wisdom being sold 00:10:12.480 --> 00:10:15.320 to mid -sized farmers right now. Automation and 00:10:15.320 --> 00:10:18.620 organic. The supposed saviors. Yeah, and often, 00:10:18.740 --> 00:10:21.440 frankly, they feel more like traps designed to 00:10:21.440 --> 00:10:23.860 generate revenue for the input guys, not long 00:10:23.860 --> 00:10:25.799 -term solvency for the farmer. We hear it constantly, 00:10:25.940 --> 00:10:28.399 right? You must automate to survive. You can't 00:10:28.399 --> 00:10:30.879 find labor. But is crushing debt actually better 00:10:30.879 --> 00:10:34.019 than just making a clean exit tomorrow? That's 00:10:34.019 --> 00:10:36.049 the hard question. Let's challenge that conventional 00:10:36.049 --> 00:10:38.409 wisdom with the hard data on robots. What does 00:10:38.409 --> 00:10:41.889 it really cost? We're talking typically $650 00:10:41.889 --> 00:10:44.629 ,000 for a system. And that's just the robots 00:10:44.629 --> 00:10:46.889 themselves. Doesn't include barn modifications, 00:10:47.149 --> 00:10:49.789 maybe electrical upgrades. So easily three quarters 00:10:49.789 --> 00:10:52.750 of a million all in, sometimes more. Yeah. And 00:10:52.750 --> 00:10:55.110 that often means an annual loan payment, maybe 00:10:55.110 --> 00:10:58.169 over seven years, of nearly $100 ,000. A hundred 00:10:58.169 --> 00:10:59.929 grand a year. Okay. And what are you getting 00:10:59.929 --> 00:11:02.230 for that? What are the actual savings? The numbers 00:11:02.230 --> 00:11:04.169 from the Wisconsin Dairy Centers, they show the 00:11:04.379 --> 00:11:07.980 Best case labor savings. The absolute fairy tale 00:11:07.980 --> 00:11:11.120 scenario where everything runs perfectly is only 00:11:11.120 --> 00:11:15.179 about $38 ,000 a year. $38 ,000. That's it. That 00:11:15.179 --> 00:11:16.960 assumes you replace two full -time people, which 00:11:16.960 --> 00:11:19.379 isn't always even possible. Exactly. You still 00:11:19.379 --> 00:11:21.720 need management, feeding, cleaning. So you're 00:11:21.720 --> 00:11:24.860 paying $100 ,000 a year to save maybe $38 ,000. 00:11:25.019 --> 00:11:27.200 That math doesn't work. And that's before you 00:11:27.200 --> 00:11:29.620 account for the hidden costs. The new overhead. 00:11:29.820 --> 00:11:31.970 Like what? High specialized maintenance contracts. 00:11:32.210 --> 00:11:34.909 Yeah. Mandatory software licenses. You need specialized 00:11:34.909 --> 00:11:37.850 techs who charge, what, $150 an hour? And they 00:11:37.850 --> 00:11:39.490 might have to drive 300 miles to get to you. 00:11:39.629 --> 00:11:41.889 Right. My cousin in Minnesota, he put robots 00:11:41.889 --> 00:11:44.370 in. They were down three times just since August. 00:11:44.470 --> 00:11:47.710 That's lost production, missed checks, plus the 00:11:47.710 --> 00:11:50.389 repair bills. And those bills eat up that marginal 00:11:50.389 --> 00:11:53.830 $38 ,000 saving real fast, even before you think 00:11:53.830 --> 00:11:55.750 about the loan payment itself. Okay, the sales 00:11:55.750 --> 00:11:57.929 reps, they'll promise a production bump, right? 00:11:58.149 --> 00:12:01.269 Better components, maybe? Sure. Maybe you net 00:12:01.269 --> 00:12:04.769 an extra $20 ,000 to $50 ,000 in milk sales in 00:12:04.769 --> 00:12:07.340 a really good year. Yeah. Even if you add that 00:12:07.340 --> 00:12:09.799 to the labor savings. You're still rarely covering 00:12:09.799 --> 00:12:12.299 the principal on that $100 ,000 loan payment. 00:12:12.480 --> 00:12:15.299 No. You've basically just traded manageable labor 00:12:15.299 --> 00:12:19.399 headaches for unmanageable crushing debt. And 00:12:19.399 --> 00:12:21.429 it locks you in. You have to keep operating for 00:12:21.429 --> 00:12:23.490 five, seven years just to try and pay the damn 00:12:23.490 --> 00:12:25.730 thing off. This hits the core flaw, the scale 00:12:25.730 --> 00:12:27.929 efficiency point we always talk about, the 2 00:12:27.929 --> 00:12:30.629 ,000 cow operations. They get these savings automatically. 00:12:30.730 --> 00:12:32.769 Right, through their sheer size, their management 00:12:32.769 --> 00:12:34.830 structure, their ability to negotiate labor, 00:12:35.049 --> 00:12:37.809 automate feed and manure handling efficiently 00:12:37.809 --> 00:12:40.269 across the whole system. So the smaller producers 00:12:40.269 --> 00:12:42.169 are paying three quarters of a million dollars 00:12:42.169 --> 00:12:44.269 the price of a decent chunk of land, remember, 00:12:44.450 --> 00:12:48.289 to achieve what the big guys basically get for 00:12:48.289 --> 00:12:52.059 free. through economies of scale. It's an unsustainable 00:12:52.059 --> 00:12:55.179 cost structure. It feels designed to keep small 00:12:55.179 --> 00:12:57.379 farms operating just long enough to generate 00:12:57.379 --> 00:12:59.720 loan interest for the banks, not long enough 00:12:59.720 --> 00:13:03.659 to achieve real generational viability. Okay, 00:13:03.720 --> 00:13:06.399 what about the other savior, the organic route? 00:13:06.740 --> 00:13:09.500 Ah, the organic mess. So many mid -sized producers 00:13:09.500 --> 00:13:12.120 tried that pivot, right? premium market strategy. 00:13:12.419 --> 00:13:14.620 Only to find the door slammed shut when they 00:13:14.620 --> 00:13:16.480 finally qualified. We were at that meeting in 00:13:16.480 --> 00:13:18.620 Vermont last month, heard Ed Mulpey from the 00:13:18.620 --> 00:13:20.679 Northeast Organic Group. He laid it out plain. 00:13:21.139 --> 00:13:23.600 We've been underwater on cost of production since 00:13:23.600 --> 00:13:26.529 2018. Six years. Losing money even in the quote 00:13:26.529 --> 00:13:28.710 -unquote premium market. Because the cost of 00:13:28.710 --> 00:13:30.870 certified organic feed went through the roof. 00:13:31.009 --> 00:13:33.289 And the trap is multi -layered, isn't it? There's 00:13:33.289 --> 00:13:35.370 the transition first. Yeah, the three -year transition. 00:13:35.590 --> 00:13:38.409 You're paying those crazy high organic feed prices, 00:13:38.710 --> 00:13:42.750 $300, $350 a ton for corn, maybe more. While 00:13:42.750 --> 00:13:44.590 you're still getting conventional milk prices, 00:13:44.870 --> 00:13:48.049 you're guaranteed to lose money for three solid 00:13:48.049 --> 00:13:50.370 years just to qualify. Burning equity the whole 00:13:50.370 --> 00:13:54.340 time. And then, if you make it through... You 00:13:54.340 --> 00:13:56.659 hit the market closure problem. The processors 00:13:56.659 --> 00:13:59.500 just cherry pick who they want based on, guess 00:13:59.500 --> 00:14:02.039 what, volume. Same as the conventional guys. 00:14:02.279 --> 00:14:05.139 Remember that case study? The Wisconsin producer 00:14:05.139 --> 00:14:08.139 Smart Operator finished her transition last spring, 00:14:08.320 --> 00:14:12.740 doing about 18 ,000 pounds a day. Ed? Rejected. 00:14:13.149 --> 00:14:16.230 By Organic Valley, by Horizon, they told her 00:14:16.230 --> 00:14:19.169 they demand producers guarantee a 30 ,000 pounds 00:14:19.169 --> 00:14:22.049 daily minimum. So it's the exact same pattern, 00:14:22.110 --> 00:14:24.470 wealth extraction. Everyone made money except 00:14:24.470 --> 00:14:26.840 the farmer. The certification consultants got 00:14:26.840 --> 00:14:29.539 their fees, maybe 10K to 50K. The feed companies 00:14:29.539 --> 00:14:31.940 locked in those high margin organic contracts. 00:14:32.179 --> 00:14:34.299 And the farmer got more debt and a certified 00:14:34.299 --> 00:14:36.279 product nobody would actually buy at a price 00:14:36.279 --> 00:14:38.980 that covered the costs. It's brutal. Okay, this 00:14:38.980 --> 00:14:40.379 is where we need to get uncomfortable. We need 00:14:40.379 --> 00:14:42.200 to talk about the co -ops, the structure that 00:14:42.200 --> 00:14:44.840 was intended to protect farmers. The co -op betrayal, 00:14:45.120 --> 00:14:47.440 as the article puts it. Yeah, we have to challenge 00:14:47.440 --> 00:14:50.419 this idea that they represent all members equally 00:14:50.419 --> 00:14:53.440 anymore. Because they're economic entities built 00:14:53.440 --> 00:14:56.519 on volume. And that volume is increasingly controlled 00:14:56.519 --> 00:14:58.960 by their largest members, who often sit on the 00:14:58.960 --> 00:15:00.559 boards. So they're not really just collective 00:15:00.559 --> 00:15:03.159 bargaining units anymore, are they? No. They've 00:15:03.159 --> 00:15:06.279 evolved into these massive, vertically integrated 00:15:06.279 --> 00:15:09.679 logistics and manufacturing firms. Their primary 00:15:09.679 --> 00:15:12.419 duty now feels like keeping their own plants 00:15:12.419 --> 00:15:14.620 running at volume. You just need to look at the 00:15:14.620 --> 00:15:17.620 history. Remember the DFA antitrust case back 00:15:17.620 --> 00:15:21.100 in 2015? They settled for $50 million, plus the 00:15:21.100 --> 00:15:23.840 Dean Foods settlement, another $30 million. Yeah, 00:15:23.899 --> 00:15:25.860 I remember covering those hearings. The accusations 00:15:25.860 --> 00:15:28.700 were serious market manipulation, restricting 00:15:28.700 --> 00:15:31.179 competition, especially in the Southeast and 00:15:31.179 --> 00:15:33.179 Midwest. And the source material points out that 00:15:33.179 --> 00:15:36.019 those types of practices or things derived from 00:15:36.019 --> 00:15:38.309 them. They're basically just standard operating 00:15:38.309 --> 00:15:40.990 procedure now because the whole structure rewards 00:15:40.990 --> 00:15:43.490 volume control above all else. And look how they 00:15:43.490 --> 00:15:45.649 lock you in, those contract penalties. Right. 00:15:45.789 --> 00:15:48.909 Milk supply contracts often need 12, even 24 00:15:48.909 --> 00:15:51.309 months notice if you want to leave. And they 00:15:51.309 --> 00:15:53.929 dangle these loyalty bonuses in front of you. 00:15:54.029 --> 00:15:56.769 Which instantly convert to exit penalties if 00:15:56.769 --> 00:15:59.289 you try to switch processors. It's basically 00:15:59.289 --> 00:16:03.200 deferred equity they hold hostage. Exactly. Held 00:16:03.200 --> 00:16:05.019 hostage to make sure you keep supplying them 00:16:05.019 --> 00:16:07.679 for two years, even if a much better offer comes 00:16:07.679 --> 00:16:10.460 along down the road. I heard about an Ohio farmer 00:16:10.460 --> 00:16:13.139 found a competitor offering 50 cents more per 00:16:13.139 --> 00:16:15.740 hundredweight. That's significant money, right? 00:16:16.159 --> 00:16:19.100 Could cover his family living for a month. Yeah, 00:16:19.159 --> 00:16:21.320 huge difference. But the co -op, when he told 00:16:21.320 --> 00:16:23.370 him he wanted to switch. They said the extra 00:16:23.370 --> 00:16:25.629 hauling fees, which they controlled, would cost 00:16:25.629 --> 00:16:28.210 him 70 cents more. So they wiped out the advantage, 00:16:28.450 --> 00:16:31.190 used their control over logistics to keep him 00:16:31.190 --> 00:16:33.330 trapped in their pricing structure. It's all 00:16:33.330 --> 00:16:35.830 about supply chain dominance. And the board structure, 00:16:36.070 --> 00:16:37.590 that really tells the tale. You've got to look 00:16:37.590 --> 00:16:39.629 past the official press releases. What did your 00:16:39.629 --> 00:16:42.649 colleague find covering those DFA meetings? At 00:16:42.649 --> 00:16:45.690 one regional meeting, get this, 8 out of the 00:16:45.690 --> 00:16:48.509 12 board members were shipping over 50 ,000 pounds 00:16:48.509 --> 00:16:51.899 a day themselves. Mega operations. Eight out 00:16:51.899 --> 00:16:54.639 of 12. So what does that concentration of power 00:16:54.639 --> 00:16:56.620 mean for the farmer listening who's shipping, 00:16:56.740 --> 00:17:00.700 say, 15 ,000 pounds? It means the board is, effectively, 00:17:01.039 --> 00:17:04.700 managing the decline of small farms while protecting 00:17:04.700 --> 00:17:07.180 the profitability and stability of their own 00:17:07.180 --> 00:17:09.839 massive operations. Their fiduciary duty seems 00:17:09.839 --> 00:17:12.119 to have shifted, away from equal representation 00:17:12.119 --> 00:17:14.559 for all members, towards just managing volume 00:17:14.559 --> 00:17:17.339 and scale, which primarily benefits themselves. 00:17:17.619 --> 00:17:20.000 They're market managers now, not traditional 00:17:20.000 --> 00:17:22.279 cooperative representatives. And this leads to 00:17:22.279 --> 00:17:24.900 that really tough economic realization we touched 00:17:24.900 --> 00:17:27.400 on earlier. The system needs you to fail slowly. 00:17:28.039 --> 00:17:31.019 Banks, co -ops, processors, they all need that 00:17:31.019 --> 00:17:34.259 sustained volume. And the banks, they need active 00:17:34.259 --> 00:17:36.539 loans on their books. I remember that farm credit 00:17:36.539 --> 00:17:38.559 loan officer admitting it in the piece. They'd 00:17:38.559 --> 00:17:41.279 rather restructure a bad loan five times, adding 00:17:41.279 --> 00:17:43.819 interest and fees each time, mind you. Then report 00:17:43.819 --> 00:17:46.000 a foreclosure. Right. The foreclosure forces 00:17:46.000 --> 00:17:48.799 them to recognize a full loss on that asset immediately. 00:17:49.079 --> 00:17:51.430 Hurts the bank's balance sheet. But restructuring, 00:17:51.450 --> 00:17:53.109 it keeps the farmer technically operational, 00:17:53.410 --> 00:17:55.690 keeps the milk flowing cheap to the plant. And 00:17:55.690 --> 00:17:57.690 keeps the interest revenue ticking for the lender. 00:17:58.349 --> 00:18:01.269 So they actually need farmers to keep operating, 00:18:01.329 --> 00:18:04.529 even at a loss. Your negative equity burn rate, 00:18:04.589 --> 00:18:07.369 your slow financial death. That's what keeps 00:18:07.369 --> 00:18:09.470 their loan portfolios looking healthy on paper 00:18:09.470 --> 00:18:12.190 and keeps those processing plants supplied with 00:18:12.190 --> 00:18:15.869 cheap milk. You are, in effect, subsidizing the 00:18:15.869 --> 00:18:18.589 entire consolidation system just by staying in 00:18:18.589 --> 00:18:22.490 business. Wow. OK, so if the co -op structure 00:18:22.490 --> 00:18:25.269 and the debt are the current mechanisms extracting 00:18:25.269 --> 00:18:28.819 value. Let's look ahead. The future threat that 00:18:28.819 --> 00:18:31.279 targets the very value of milk components themselves. 00:18:31.660 --> 00:18:34.480 Lab -run proteins. Precision fermentation. If 00:18:34.480 --> 00:18:36.579 consolidation is the hammer, this feels like 00:18:36.579 --> 00:18:39.059 the nail in the coffin for traditional dairy 00:18:39.059 --> 00:18:41.440 profitability. Because farmers focus on that 00:18:41.440 --> 00:18:43.980 bulk tank price, right? But they forget that 00:18:43.980 --> 00:18:46.299 it's the high value of functional specialty proteins 00:18:46.299 --> 00:18:48.680 that caseins the way isolates that have historically 00:18:48.680 --> 00:18:51.759 subsidized the cheap commodity milk price. allowed 00:18:51.759 --> 00:18:53.720 it to stay competitive. And that subsidy, it's 00:18:53.720 --> 00:18:55.480 being targeted directly by synthetic biology. 00:18:55.839 --> 00:18:57.980 The data is already here. Leprino Foods, they 00:18:57.980 --> 00:19:00.079 control something like 85 % of the U .S. pizza 00:19:00.079 --> 00:19:02.180 cheese market, French. Huge player. They partnered 00:19:02.180 --> 00:19:04.480 with that Dutch company, Foodative, just this 00:19:04.480 --> 00:19:08.619 past July, July 2024, to produce lab -grown casein 00:19:08.619 --> 00:19:11.039 using precision fermentation. And this isn't 00:19:11.039 --> 00:19:13.220 just R &D anymore. They're planning to produce 00:19:13.220 --> 00:19:16.539 hundreds of thousands of tons starting next year. 00:19:17.140 --> 00:19:20.019 Casein specifically. Which is crucial for things 00:19:20.019 --> 00:19:22.619 like non -melting cheese, infant formula, high 00:19:22.619 --> 00:19:25.140 -end protein shakes, the high -margin stuff. 00:19:25.339 --> 00:19:27.779 Exactly. The margin drivers for the whole industry. 00:19:28.000 --> 00:19:29.819 Now, the economics are interesting. Right now, 00:19:29.960 --> 00:19:32.440 yeah, lab proteins cost maybe two to five times 00:19:32.440 --> 00:19:35.420 more than real dairy. But that's now. The scale 00:19:35.420 --> 00:19:38.240 -up curve for synthetic biology is deep. Costs 00:19:38.240 --> 00:19:40.400 are dropping fast. And the projections. They 00:19:40.400 --> 00:19:42.539 should scare every dairy producer. They're projecting 00:19:42.539 --> 00:19:45.720 lab proteins will capture... maybe 15 % of the 00:19:45.720 --> 00:19:49.099 high -value protein market by 2030? 15%. And 00:19:49.099 --> 00:19:51.500 when those functional ingredients, the specialty 00:19:51.500 --> 00:19:54.000 casings, the specific whey proteins, when they 00:19:54.000 --> 00:19:57.019 shift to a reliable, consistent, lab -based supply 00:19:57.019 --> 00:20:00.240 chain, what's left for traditional dairies? Just 00:20:00.240 --> 00:20:02.019 the cheap commodity stuff, right? Fluid milk, 00:20:02.200 --> 00:20:04.319 basic cheddar, butter, the products with the 00:20:04.319 --> 00:20:06.890 absolute thinnest, most volatile margins. The 00:20:06.890 --> 00:20:09.269 high margin components that kept the whole system 00:20:09.269 --> 00:20:11.950 afloat are being systematically stripped away 00:20:11.950 --> 00:20:15.829 by labs, highly controlled, geographically independent 00:20:15.829 --> 00:20:18.549 labs. Which explains why processors are building 00:20:18.549 --> 00:20:21.569 $11 billion in new infrastructure now. They're 00:20:21.569 --> 00:20:23.750 getting ready for a future where they only need 00:20:23.750 --> 00:20:27.109 the absolute cheapest commodity milk from the 00:20:27.109 --> 00:20:29.630 biggest, most reliable suppliers. To serve the 00:20:29.630 --> 00:20:31.799 basic volume market. Well, they source their 00:20:31.799 --> 00:20:34.160 high profit specialty ingredients from labs or 00:20:34.160 --> 00:20:36.759 imports. The consolidation timeline is accelerating 00:20:36.759 --> 00:20:38.859 because of these tech disruptions. Absolutely. 00:20:38.920 --> 00:20:40.980 Connect the dots. Operations with a thousand 00:20:40.980 --> 00:20:43.680 plus cows now control about two thirds of U .S. 00:20:43.700 --> 00:20:46.259 milk production. That's up massively from barely 00:20:46.259 --> 00:20:48.599 half back in 2017. So we're not just heading 00:20:48.599 --> 00:20:50.960 towards consolidation. We are smack in the middle 00:20:50.960 --> 00:20:54.079 of a huge engineered restructuring. The International 00:20:54.079 --> 00:20:56.660 Farm Comparison Network. They project the U .S. 00:20:56.660 --> 00:20:59.380 will be down to maybe 18 ,000 total dairy farms 00:20:59.380 --> 00:21:03.240 by 2030. 18 ,000. Down from, what was it, just 00:21:03.240 --> 00:21:06.059 a decade or two ago? Well over 100 ,000. Yeah. 00:21:06.319 --> 00:21:08.920 That future looks exactly like the poultry industry, 00:21:09.099 --> 00:21:11.420 doesn't it? Vertical integration, contract production, 00:21:11.759 --> 00:21:14.279 three or four giant companies controlling everything. 00:21:14.660 --> 00:21:17.380 Okay, but just when the mega dairies think they've 00:21:17.380 --> 00:21:20.940 achieved perfect, untouchable scale. There's 00:21:20.940 --> 00:21:23.579 a curse ball. A biological wild card. One that 00:21:23.579 --> 00:21:25.500 threatens to turn that scale efficiency into 00:21:25.500 --> 00:21:29.220 a huge liability overnight. H5N1. avian influenza 00:21:29.220 --> 00:21:31.660 in dairy cattle. We're seeing it spread significantly 00:21:31.660 --> 00:21:34.799 now. Infected herds confirmed in, what, 17 states? 00:21:35.180 --> 00:21:38.900 California alone had over 475 confirmed cases 00:21:38.900 --> 00:21:41.799 reported. This isn't just a localized blip anymore. 00:21:42.000 --> 00:21:44.579 It feels like a systemic risk, especially to 00:21:44.579 --> 00:21:46.579 that industrialized model. And the vulnerability 00:21:46.579 --> 00:21:49.559 is the scale. The CDC research suggests it can 00:21:49.559 --> 00:21:51.660 spread through milking equipment. Think about 00:21:51.660 --> 00:21:54.220 a 2 ,500 cow operation. One machine touching 00:21:54.220 --> 00:21:57.329 every single cow. Shared labor crews moving between 00:21:57.329 --> 00:21:59.809 barns. They're essentially petri dishes, like 00:21:59.809 --> 00:22:02.069 the article says. A small exposure can become 00:22:02.069 --> 00:22:05.710 a massive herd infection incredibly fast. Jeopardizing 00:22:05.710 --> 00:22:08.950 the very volume that $650 million processor needs. 00:22:09.269 --> 00:22:12.589 The system built for tiny 2 % component variation. 00:22:12.970 --> 00:22:16.150 It cannot tolerate a sudden 20 % drop in milk 00:22:16.150 --> 00:22:19.519 volume because half the herd is sick. Nope. Meanwhile, 00:22:19.720 --> 00:22:22.240 that little 50 -cow farm everyone wrote off as 00:22:22.240 --> 00:22:25.059 non -viable, suddenly they have strategic isolation, 00:22:25.480 --> 00:22:28.440 less cow movement, less contact, smaller equipment 00:22:28.440 --> 00:22:30.680 batches. It's a biological advantage, ironically, 00:22:30.799 --> 00:22:33.160 but as the source cautions, and we have to emphasize 00:22:33.160 --> 00:22:36.079 this, Bird flu is not a business plan. You can't 00:22:36.079 --> 00:22:38.599 bank on a pandemic saving your farm. So if the 00:22:38.599 --> 00:22:40.819 writing is on the wall from consolidation, from 00:22:40.819 --> 00:22:43.720 technology, from market access, We have to talk 00:22:43.720 --> 00:22:46.299 about the hardest reality, the exit math. The 00:22:46.299 --> 00:22:48.339 math nobody in the industry wants to show you 00:22:48.339 --> 00:22:50.799 because it involves comparing a strategic exit 00:22:50.799 --> 00:22:53.799 now versus delaying. And it's all about preserving 00:22:53.799 --> 00:22:55.660 your family's wealth. We need to talk about the 00:22:55.660 --> 00:22:57.900 equity burn rate. Explain that. What is the equity 00:22:57.900 --> 00:23:00.240 burn rate? It's the amount of your actual personal 00:23:00.240 --> 00:23:02.799 wealth, the value tied up in your land, your 00:23:02.799 --> 00:23:05.180 cows, your equipment that is literally dissolving, 00:23:05.180 --> 00:23:08.079 disappearing. Every single year you stay in operation 00:23:08.079 --> 00:23:10.480 while losing money. Okay, let's use that common 00:23:10.480 --> 00:23:13.519 scenario from the article. A 200 -cow farm losing 00:23:13.519 --> 00:23:16.400 $75 ,000 a year after accounting for family living 00:23:16.400 --> 00:23:18.819 expenses. And that's probably living pretty lean. 00:23:19.000 --> 00:23:22.000 Right. If they tough it out, stay stubborn, keep 00:23:22.000 --> 00:23:24.039 going for five more years, hoping things turn 00:23:24.039 --> 00:23:27.839 around, they burn through $375 ,000 in equity. 00:23:28.039 --> 00:23:33.000 Poof. Gone. $375 ,000. Yeah. So maybe they end 00:23:33.000 --> 00:23:35.859 up with $1 .1 million left in total liquidation 00:23:35.859 --> 00:23:38.779 value after five years if they invest that at 00:23:38.779 --> 00:23:41.380 a conservative 4 % return. That gives them about 00:23:41.380 --> 00:23:44.359 $45 ,000 a year in retirement income, assuming 00:23:44.359 --> 00:23:47.039 they pay off all the remaining debt first. $45 00:23:47.039 --> 00:23:49.779 ,000 a year. Now compare that. What if they exit 00:23:49.779 --> 00:23:53.000 today? with their full $1 .5 million asset value 00:23:53.000 --> 00:23:54.900 still intact because they didn't burn through 00:23:54.900 --> 00:23:58.980 that $375K. That same 4 % yield gets them $60 00:23:58.980 --> 00:24:02.339 ,000 annually. $60 ,000 versus $45 ,000. That 00:24:02.339 --> 00:24:05.259 is $15 ,000 more every single year for the rest 00:24:05.259 --> 00:24:07.420 of their lives. That is the true cost of waiting 00:24:07.420 --> 00:24:09.740 five years. And nobody, not the bank, not the 00:24:09.740 --> 00:24:11.480 co -op, is going to run that calculation for 00:24:11.480 --> 00:24:13.819 you. Never. Because they profit from your delay. 00:24:14.400 --> 00:24:17.380 Your slow burn subsidizes. And that ties into 00:24:17.380 --> 00:24:19.920 the contrarian exit strategy mentioned, selling 00:24:19.920 --> 00:24:22.980 assets separately. Yeah. Appraisers suggest this 00:24:22.980 --> 00:24:25.460 consistently. Sell the land to crop farmers that 00:24:25.460 --> 00:24:28.359 will often pay top dollar. Sell the cows strategically, 00:24:28.720 --> 00:24:31.720 maybe timing it with strong class three futures 00:24:31.720 --> 00:24:34.440 when demand is higher. Sell the equipment at 00:24:34.440 --> 00:24:36.700 auction. Why is that better than just selling 00:24:36.700 --> 00:24:39.519 the whole dairy as a turnkey operation? Because 00:24:39.519 --> 00:24:41.720 selling it as a single dairy unit means the buyer 00:24:41.720 --> 00:24:43.759 has to take on all the problems we just discussed. 00:24:43.940 --> 00:24:46.619 The debt, the labor, the volume issues, the market 00:24:46.619 --> 00:24:49.039 access. It limits your buyer pool dramatically. 00:24:49.339 --> 00:24:51.960 But selling the components separately. Appraisers 00:24:51.960 --> 00:24:55.000 estimate you can yield 30 % to 50 % more total 00:24:55.000 --> 00:24:57.079 wealth than selling the struggling unit whole. 00:24:57.519 --> 00:24:59.839 You might need to stage it over 18 -24 months 00:24:59.839 --> 00:25:02.640 for tax reasons, but the bottom line is often 00:25:02.640 --> 00:25:04.819 clear. You're worth more disassembled than you 00:25:04.819 --> 00:25:07.720 are as a struggling operation. Sad. but often 00:25:07.720 --> 00:25:09.900 true financially. Okay, so let's give a listener 00:25:09.900 --> 00:25:11.759 a checklist. If you're hearing this, feeling 00:25:11.759 --> 00:25:14.940 that knot in your stomach, what are the red flags? 00:25:15.119 --> 00:25:17.380 The signs that you absolutely need to be seriously 00:25:17.380 --> 00:25:19.779 considering a strategic exit now? All right, 00:25:19.779 --> 00:25:22.660 number one, you're losing more than $50 ,000 00:25:22.660 --> 00:25:25.279 a year after accounting for real family living 00:25:25.279 --> 00:25:28.839 costs, not just depreciation games, real cash 00:25:28.839 --> 00:25:32.779 loss. Number two. You're over 55, maybe even 00:25:32.779 --> 00:25:36.240 over 50, with no clear funded succession plan 00:25:36.240 --> 00:25:38.759 in place. This isn't a business you can just 00:25:38.759 --> 00:25:41.119 hand down anymore without millions in investment. 00:25:41.420 --> 00:25:44.200 Three, your debt to asset ratio is creeping over 00:25:44.200 --> 00:25:47.079 60%. That puts you in serious danger territory 00:25:47.079 --> 00:25:48.900 with the bank if there's any market hiccup or 00:25:48.900 --> 00:25:51.940 bad crop year. Four. There's only one processor, 00:25:52.160 --> 00:25:55.359 one milk check within a 50 or maybe even 75 mile 00:25:55.359 --> 00:25:57.599 radius. That's the single buyer monopoly trap. 00:25:57.700 --> 00:26:00.200 It kills your asset value. Five. You know you 00:26:00.200 --> 00:26:02.059 need half a million dollars or more in upgrades, 00:26:02.259 --> 00:26:04.079 manure handling, compliance, parlor updates, 00:26:04.200 --> 00:26:06.559 but you simply cannot afford it. If you can't 00:26:06.559 --> 00:26:08.720 afford to improve, you're actively managing decline. 00:26:09.039 --> 00:26:11.640 And finally, the lifestyle one. Working 80 plus 00:26:11.640 --> 00:26:13.460 hours a week, haven't had a real vacation in 00:26:13.460 --> 00:26:15.400 three years. That's not a business model. That's 00:26:15.400 --> 00:26:17.779 burnout waiting to happen. And burnout leads 00:26:17.779 --> 00:26:21.109 to bad decisions. It does. And the final warning, 00:26:21.210 --> 00:26:24.029 the overarching one, is that 24 -month countdown. 00:26:24.509 --> 00:26:27.769 That $11 billion in processing overcapacity will 00:26:27.769 --> 00:26:30.029 hit the market. It will pressure prices downward, 00:26:30.250 --> 00:26:34.089 likely by 2027, as plants scramble for milk to 00:26:34.089 --> 00:26:36.250 fill their capacity. So the decision is coming 00:26:36.250 --> 00:26:39.769 one way or another. Farmers have maybe two years, 00:26:39.809 --> 00:26:42.109 maybe less, to make it themselves. Before the 00:26:42.109 --> 00:26:44.170 market forces it on them and likely destroys 00:26:44.170 --> 00:26:46.390 a huge chunk of their remaining equity in the 00:26:46.390 --> 00:26:48.829 process. Which brings us back to that absolutely 00:26:48.829 --> 00:26:51.250 staggering statistic from the analysis. Yeah, 00:26:51.269 --> 00:26:53.250 the hardest truth. Looking purely at the financial 00:26:53.250 --> 00:26:56.049 data, the source concluded that 60 to 70 percent 00:26:56.049 --> 00:26:58.349 of current dairy farmers would likely be better 00:26:58.349 --> 00:27:00.829 off financially by selling tomorrow. 60 to 70 00:27:00.829 --> 00:27:03.650 percent. That's devastating. It is. But it's 00:27:03.650 --> 00:27:05.609 the honest financial translation. So what's the 00:27:05.609 --> 00:27:08.230 real role of the small or mid -sized family farmer 00:27:08.230 --> 00:27:10.549 right now in this system? What is it? You're 00:27:10.549 --> 00:27:12.250 not really a dairy farmer in the traditional 00:27:12.250 --> 00:27:15.180 sense anymore. You're becoming an unwitting participant 00:27:15.180 --> 00:27:18.759 in your own wealth extraction. Your losses are, 00:27:18.900 --> 00:27:21.839 in a way, necessary to subsidize the industry's 00:27:21.839 --> 00:27:24.900 transition to this vertically integrated megafarm 00:27:24.900 --> 00:27:27.220 model. The only power you have left is deciding 00:27:27.220 --> 00:27:29.460 when that extraction stops. Exactly. To protect 00:27:29.460 --> 00:27:31.539 the decades of wealth your family built before 00:27:31.539 --> 00:27:33.640 it disappears. Okay, let's make this actionable 00:27:33.640 --> 00:27:35.759 then. Farmers just finished milking, driving 00:27:35.759 --> 00:27:37.920 to the feed store, mind reeling from all this. 00:27:38.960 --> 00:27:41.000 What are the three concrete things they need 00:27:41.000 --> 00:27:43.859 to act on? Okay, number one, immediate action, 00:27:43.900 --> 00:27:46.799 like this week. Calculate your actual equity 00:27:46.799 --> 00:27:49.910 burn rate. Wow. Don't just use the accountant's 00:27:49.910 --> 00:27:52.829 P &L with depreciation. Look at your actual change 00:27:52.829 --> 00:27:55.670 in net worth year over year, accounting for operating 00:27:55.670 --> 00:27:59.269 losses after family living. Use that $75 ,000 00:27:59.269 --> 00:28:03.009 annual loss, destroying $375 ,000 equity example 00:28:03.009 --> 00:28:05.910 as a benchmark. Is your personal cost of waiting 00:28:05.910 --> 00:28:08.769 $50K, $100K, $150Ks in destroyed wealth every 00:28:08.769 --> 00:28:11.170 year? Get that number. Confront it. Okay, medium 00:28:11.170 --> 00:28:13.630 term. Next three to six months, what's the strategy? 00:28:13.910 --> 00:28:16.029 Stop automatically buying the industry's solutions 00:28:16.029 --> 00:28:18.089 like those expensive robots. If your long -term 00:28:18.089 --> 00:28:20.750 plan isn't rock solid, run the numbers. Compare 00:28:20.750 --> 00:28:23.190 five years of that $100 ,000 robot loan payment 00:28:23.190 --> 00:28:25.450 versus maybe five years of paying higher wages 00:28:25.450 --> 00:28:27.630 to keep good human labor, which is actually the 00:28:27.630 --> 00:28:29.650 cheaper way to bridge the gap while you figure 00:28:29.650 --> 00:28:32.289 out the next step. And if you do choose to scale 00:28:32.289 --> 00:28:35.529 up, then you need a crystal clear, fully funded 00:28:35.529 --> 00:28:38.630 path to that $3 million capital mark and getting 00:28:38.630 --> 00:28:41.509 over 1 ,000 cows. Because that's the minimum 00:28:41.509 --> 00:28:43.970 threshold this new $11 billion infrastructure 00:28:43.970 --> 00:28:46.630 is actually being built for. Anything less is 00:28:46.630 --> 00:28:49.609 likely delaying the inevitable. Got it. And long 00:28:49.609 --> 00:28:52.049 -term positioning, thinking next one to two years. 00:28:52.470 --> 00:28:54.910 Engage an appraiser. Engage a financial advisor. 00:28:55.289 --> 00:28:57.970 But critically, find ones who are willing to 00:28:57.970 --> 00:29:00.369 run the exit math, selling assets separately, 00:29:00.650 --> 00:29:03.569 staging the sale for tax efficiency versus the 00:29:03.569 --> 00:29:05.750 staying in math. You need that direct comparison. 00:29:06.190 --> 00:29:08.109 And you have to make the decision before that 00:29:08.109 --> 00:29:10.710 processing overcapacity hits and potentially 00:29:10.710 --> 00:29:13.829 crashes prices by 2027. Exactly. Don't let the 00:29:13.829 --> 00:29:15.779 market decide your fate for you. Take control 00:29:15.779 --> 00:29:18.180 of the exit if that's the right path. Powerful 00:29:18.180 --> 00:29:21.640 stuff. Hard truths today. Indeed. This has been 00:29:21.640 --> 00:29:23.779 another deep dive based on the kind of raw analysis 00:29:23.779 --> 00:29:26.559 you find at The Bullvine. If this no BS approach 00:29:26.559 --> 00:29:28.440 helps your operation, definitely head over to 00:29:28.440 --> 00:29:31.440 www .thebullvine .com. There are more articles 00:29:31.440 --> 00:29:33.039 there telling you what's really happening behind 00:29:33.039 --> 00:29:35.589 the scenes in dairy. And seriously, subscribe 00:29:35.589 --> 00:29:37.690 wherever you get your deep dives or podcasts. 00:29:38.029 --> 00:29:40.109 We're putting out episodes twice weekly now, 00:29:40.230 --> 00:29:42.369 digging into these critical issues. And trust 00:29:42.369 --> 00:29:44.670 me, you do not want to miss what we've got coming 00:29:44.670 --> 00:29:47.430 next week. We're diving into the regulatory hurdles 00:29:47.430 --> 00:29:50.609 around farm transition planning. And specifically, 00:29:50.670 --> 00:29:53.470 the potential liability and frankly, the insurance 00:29:53.470 --> 00:29:57.089 nightmares related to this H5N1 wildcard and 00:29:57.089 --> 00:29:59.130 what it could mean for those highly leveraged 00:29:59.130 --> 00:30:01.309 mega dairies. It's going to be interesting. Looking 00:30:01.309 --> 00:30:03.269 forward to it. We'll see you then. What you just 00:30:03.269 --> 00:30:06.269 heard changes everything. The decision is coming 00:30:06.269 --> 00:30:09.170 whether you're ready or not. You've got 24 months 00:30:09.170 --> 00:30:12.190 before overcapacity crashes prices and forces 00:30:12.190 --> 00:30:15.390 mass consolidation. Here's what you need to do 00:30:15.390 --> 00:30:18.789 right now. First, run the exit math we discussed. 00:30:19.150 --> 00:30:22.130 If you're losing $75 ,000 annually, calculate 00:30:22.130 --> 00:30:25.009 what five more years costs versus exiting today. 00:30:25.529 --> 00:30:28.369 Second, look at your co -op board. Count how 00:30:28.369 --> 00:30:31.190 many are running mega operations. They're managing 00:30:31.190 --> 00:30:35.000 your decline. not representing you. Third, and 00:30:35.000 --> 00:30:37.799 most importantly, share this episode with every 00:30:37.799 --> 00:30:40.740 dairy farmer you know. They deserve the truth, 00:30:40.940 --> 00:30:44.400 even if it's painful. Visit thebullvine .com 00:30:44.400 --> 00:30:47.160 for the full article with all the numbers and 00:30:47.160 --> 00:30:49.680 sources we discussed today. And if you're one 00:30:49.680 --> 00:30:51.319 of the farmers who needs to make a decision, 00:30:51.559 --> 00:30:54.019 don't wait for the industry to make it for you. 00:30:54.220 --> 00:30:57.480 Subscribe to The Bullvine Podcast wherever. you 00:30:57.480 --> 00:30:59.940 get your podcasts. We're the only publication 00:30:59.940 --> 00:31:02.880 telling dairy farmers the truth about their future. 00:31:03.299 --> 00:31:05.960 Remember, you're not just a dairy farmer anymore. 00:31:06.200 --> 00:31:09.039 You're an unwitting participant in your own wealth 00:31:09.039 --> 00:31:12.319 extraction. The only question is whether you'll 00:31:12.319 --> 00:31:15.759 recognize it in time. This is The Bullvine, and 00:31:15.759 --> 00:31:17.460 the decision is yours to make.