Breaking free from the chains of the past Where
truth moves faster than a Holstein calf No law
waiting on some printed page We're charting new
ground in the digital age From genomic codes
to robot facts We cut through the noise, no hold
them back not your daddy's dairy news tonight
we're sparking Welcome back to the Bullvine Podcast,
where we cut through dairy industry noise to
get you the insights that actually matter for
your operation. And today, we're diving deep
into a feature piece that's been generating some
serious buzz. Really getting folks talking. Yeah,
it really is. This one's got layers. And some,
frankly, shocking quantification that is going
to make you rethink how you've been approaching
your bottom line. We are talking about money
that is disappearing from your farm before you
even get your milk check. That's right. We are
tackling that persistent grinding frustration
every dairyman and woman feels. You know, when
your cows are healthy, your quality is excellent,
your costs are, well, high. And yet the market
price for milk just refuses to budge. It feels
like you're fighting with one hand tied behind
your back. It really does. Absolutely. A Wisconsin
dairyman really nailed the core issue for us
when he said, and I quote, I can handle weather
variability, disease cycles, and even normal
market cycles. We've done that for generations.
What's impossible to navigate is when other governments
are actively supporting our competitors. That
quote just sums it up perfectly, doesn't it?
Yeah. It highlights that feeling of fighting
an invisible enemy. Exactly. You know, you can
invest in genetics, you can tighten up your feed
conversion range, maybe improve your parlor efficiency,
all things you can control on your farm. Right.
But how in the world do you design an operation
to compete with the treasury of the European
Union or the People's Republic of China? Well,
the answer, as the data shows. Yeah, the answer
is you can't. It's just not possible based on
this. And the data we have here provides a truly
shocking quantification of that frustration.
This isn't just a feeling, it's a measurable
financial loss. Cornell's Andrew Novakovich and
his team ran some really comprehensive modeling.
Novakovich, yeah, he does solid work. He does.
And it suggests foreign subsidies might be extracting
approximately $90 to $100 per cow annually from
U .S. operations just through persistent price
suppression. Wait, $90 to $100 per cow. That
sounds, well, it sounds high, even for a cynical
farmer like me. I know, right? But let's put
that into barn level terms for you, the listener.
For a standard 500 cow dairy, which is still
the backbone in many states, we're talking about
$45 ,000 to $50 ,000 in potential annual revenue
that just vanishes. Poof. Gone. It just never
shows up in the milk check. Never shows up. And
here's the crucial detail. It's not a management
error on your part. You can't stop this loss
by changing your milking procedure or lowering
your component score. It is a structural leak.
built right into the global system. And what's
key, as the source material points out, is the
consistency of this loss. It holds across the
board. Right. Whether you're running a smaller
200 -cow pasture operation up in the Northeast,
maybe dealing with those thin organic margins.
Yeah, tough business. Or if you're milking 2
,500 head in a big, high -volume dry lot out
West, that price suppression is remarkably consistent.
Which is why this issue is systemic. It impacts
every single segment of the U .S. dairy economy.
Every single one. Absolutely. And the stakes
couldn't be higher. We are currently losing,
on average, three dairy farms every single day.
Three a day. Just think about that. If that $90
to $100 per cow is the tipping point for solvency
for some operations, and for many it is, then
this foreign subsidy mechanism is directly accelerating
the industry's consolidation. No question. So
today we're going to break down the exact...
you know, complex bureaucratic mechanisms creating
this tilted playing field. Yeah. And we're going
to quantify what it is costing you cow by cow,
hundredweight by hundredweight. Okay. Let's unpack
this core problem then. Let's start by quantifying
that hidden tax. Right. The hidden tax. I like
that term. The actual price suppression is subtle.
You know, it's often masked by the normal, often
wild volatility we see daily in dairy commodities.
One day it's up 50 cents. The next week it's
down 75. Exactly. Yeah. Roller coaster. But when
the economists flatten out the averages and look
at the structural impact, they were able to put
a solid number on it. $0 .05 to $0 .40 per hundredweight
suppression. Okay. $0 .35 to $0 .40. I need to
anchor that number in reality, though. Most farmers
don't feel a $0 .35 hit on a single country.
No, not really. They feel a cumulative weight
of that on the entire herd over the whole year.
That's where it hurts. When we use USDA data
for the standard production average, let's use
240 hundredweight annually per cow. That's a
pretty common number. That's about right. You
can see how quickly this compounds. Multiply
that 35 to 40 cent impact by 240 and you are
immediately looking at 85 to 95 dollars missing
per cow every single year. 85 to 95 bucks per
cow. That is why we call it the vanishing dairy
dollar. It just disappears. And the numbers scale
up so quickly, which is why the impact is felt
so differently depending on your farm's structure.
Totally. If you're a 200 -tow operation, that's,
what, $17 ,000 to $19 ,000 missing annually?
$17 ,000 to $19 ,000. Okay, think about what
that covers. That's enough to cover the labor
costs for one full -time employee for several
months. Or maybe the annual maintenance on your
primary loader. Or that TMR mixer repair you've
been putting off. Yeah, exactly. It's the difference
between replacing a critical piece of equipment
or, you know, duct taping it back together for
another year. We've all been there. Scale that
to a mid -sized 500 cow dairy. Now you're looking
at $42 ,500 to $47 ,500 missing. $42 ,000 to
$47 ,000. And a 1 ,000 cow operation is losing
$85 ,000 to $95 ,000. And for a larger 2 ,500
cow facility. That lost balloons. It's anywhere
from $212 ,000 to $237 ,000 annually. Just gone.
Quarter million bucks, basically. Vanished. Now,
a producer might look at those massive numbers
and say, well, you know, the market fluctuates
anyway. I've seen worse swings. Sure, we've all
weathered storms. But here's the perspective
check that really drives home the crisis. Most
operations, even in truly good years, are running
profit margins. That is, the actual money left
over after all expenses and owner draws of maybe
$200 to $400 per cow, maybe. Yeah, that's a good
year. A really good year. If that $90 to $100
loss per cow is accurate. Which the data suggests
it is. You need to realize that this structural
disadvantage represents 25 % to nearly 50 % of
your entire potential profit margin. Wow. Okay,
stop right there. 25 to 50 % of the profit. Yeah.
Gone. That's not a fluctuation you can manage
by getting an extra tenth of a point on components.
That is the difference between genuine, sustainable
profitability and constantly struggling just
to break even. It's the entire cushion. gone.
It's the margin you need to handle that unforeseen
jump in soybean prices. Exactly. Or the sudden
need for a replacement silo unloader that just
died. Yeah. That money is the difference between
solvency and chronic stress on the balance sheet.
And ultimately, that's the capital you rely on.
for repairs, for modernization. And for convincing
the next generation that the dairy is actually
a viable business for them to take on. That's
huge. It really is. Without that margin, the
future looks pretty bleak. So we've established
the cost, a devastating $9 ,200 per cow annually.
But that number is just the symptom. Right. Now
let's go to the root cause. How are global competitors
able to undercut us by that crucial $35, $40
per hundred weight? Yeah. How's it actually happening?
It's not just one government. We have two very
different but equally powerful mechanisms at
play globally. First, there's the behemoth of
the European Union intervention system. Ah, yes.
The EU intervention. This is kind of the historical
distortion, the one that makes everyone scratch
their heads because it's so bureaucratic. So
complex. But it's brutally effective at setting
a global floor price. Precisely. The EU uses
an intervention purchasing system. When prices
for key products, specifically butter and skim
milk powder drop to a predetermined intervention
price threshold. Which they set themselves. Which
they set themselves, yes. The EU bureaucracy
steps in and buys up massive volumes of that
product, just takes it off the market and puts
it into storage, government storage. And the
key detail that needs to be understood here is
the trigger. This isn't spontaneous, right? They
have these price thresholds set. And once the
market dips beneath that level. Usually sustained
for a specific period, the EU is basically obligated
to buy. By removing hundreds of thousands of
metric tons of product, they literally prevent
the global market from finding its natural clearing
price. They artificially hold prices above where
they would naturally settle. Essentially, they
are creating a subsidized floor under their own
producers. They're ensuring their farmers rarely
suffer a prolonged collapse in commodity pricing.
Which sounds nice for them. But because the EU
is such a massive global player in exporting
milk powder and butter, that floor affects every
producer on the planet, including you listening
in Wisconsin or California or anywhere else in
the U .S. Right. Their floor becomes our ceiling
in a way. And this system has historical precedent,
too. We've all heard the stories, right? The
butter mountain and the milk powder lake the
EU created decades ago. Oh, yeah. legendary stuff.
That was a direct result of this system. And
it's not just us, the external critics pointing
this out. The EU's own court of auditors. Their
own auditors. Their own people called this system
destabilizing and market distorting back in 2021.
They estimated the cost of maintaining this supply
management structure runs into the billions of
euros annually. Billions. And closer to home,
Mark Stevenson at the University of Wisconsin
estimates that these EU interventions are costing
U .S. dairy producers hundreds of millions of
dollars annually in lost competitiveness. Hundreds
of millions. Just from that one mechanism. Okay,
so that's the EU mechanism. A structural price
floor that basically sets the global expectation
artificially high. Then you have the Chinese
mechanism. Completely different beast. Completely
different, but just as lethal to our competitiveness
because it focuses right on the point of sale.
This is where they use export subsidies disguised
as tax breaks, essentially giving their processors
a massive government -funded discount to offer
international buyers. It's sneaky. It is. They
offer VAT rebates, value -added taxed processors
exporting dairy from these special economic zones.
And VAT is a big deal over there. Huge. We are
talking about rebates ranging from 8 to 13 percent
back. And this isn't some old forgotten policy.
It was recently expanded through their State
Council Directive 2024 -15. Okay, so that directive
signals it's a targeted, formalized policy expansion.
Aim squarely at increasing their dairy export
growth. They're doubling down. Exactly. They
want a bigger piece of the pie. So let's put
that into plain English for the farmer listening.
Let's say a U .S. processor bids $100 per unit
for milk powder in a market like Saudi Arabia.
Okay. The Chinese competitor can effectively
bid... What, 87 to 92 tolls for that exact same
powder? And their processor is still getting
the same effective revenue back home. Why? Because
the government picks up the 8 to 13 % difference
through the rebate. It gives them an automatic
government -funded 8 to 13 % price advantage
instantly when bidding against U .S. suppliers
in key global markets like Nigeria, Mexico, or
Saudi Arabia. And this advantage has absolutely
nothing to do with whether the Chinese farm is
more efficient or has better components or has
a lower cost of production. Zero. It's pure policy
leverage, government muscle. The Idaho producer
quoted in the source material summed up the sheer
frustration perfectly. He said, we can match
anybody on production metrics. Our feed conversion
is world class. Our genetics are top tier. Things
we control. Things we control. But when their
government picks up 8, 13 % of the tab, that's
a whole different ballgame. And that is the harsh
reality check. It really is. We are not losing
on quality or efficiency. We are losing because
we're competing with the national budget. not
another farm business. Now we shift from the
theory and the policy down to the ground level.
Let's move to the Michigan case study. Ah, Michigan.
Yeah, this hits close to home for a lot of folks
in the Midwest. This is where the loss of specific
export contracts was directly documented by a
major dairy cooperative, turning that abstract
$0 .35 per hundred eight loss into a brutal drop
in the actual milk check. This is where the abstraction
of global trade becomes a very real pay cut.
You see it on the statement. The Michigan co
-ops lost significant contracts for dairy commodities
when Algerian buyers shifted their sourcing.
Moved from the U .S. to Europe. Now that seems
like a normal market shift on paper, right? Buyer
changes supplier. Happens all the time. But the
analysis proves it was entirely structural. It
wasn't about price based on efficiency. So why
did they switch? This is where that trade structure
tangle becomes crystal clear. It exposes how
different policies layer on top of each other
to create an impossible situation. The reason
those Algerian buyers shifted is that the EU
has a comprehensive trade agreement with Algeria.
It allows European dairy products to enter Algeria
duty -free. Zero tariffs. Zip. Zero tariffs for
the EU. And for us. Meanwhile, U .S. exports
face tariffs of 25 % or more to enter that exact
same market. 25%. So, hold on. We're already
competing with the EU's domestic price floor,
which artificially depresses the starting global
price. Right. Step one disadvantage. And then
we stack a 25 % tariff on top of our price just
to get into the country. Correct. We literally
cannot compete. It's impossible. The European
powder is delivered at prices the U .S. cannot
possibly match, even if we were the most efficient
producer in the entire world. The economic consequences
are immediate and severe. When those export contracts
vanish and these contracts absorb a significant
volume of milk from member farms. Crucial volume.
The co -op suddenly has all this excess product.
It has to be sold domestically, maybe at a lower
price, or stored, which costs money. Either way,
it drives down the overall blend price for every
member. And Phil Durst from Michigan State Extension,
he's tracked this impact, right? Yes, he has.
His work shows that when a co -op loses those
critical export contracts, milk prices can drop
more than a dollar per hundredweight for the
member farms. More than a dollar per hundredweight.
A buck drop in the blend price is catastrophic.
I mean, that's just... Devastating. It forces
producers to make immediate drastic choices.
Calling 10 to 15 percent of the herd is a common
response just to survive the cash flow crisis.
Selling off good cows just to stay afloat. Exactly.
And if the co -op can't find a home for the volume
long term, it threatens the viability of the
processing plant itself. Which removes a huge
local market for producers in that area. It's
a domino effect. A devastating one. And once
again, we come back to the quality paradox. That
Michigan producer, who was ultimately hurt by
these foreign trade policies, was doing everything
right on the farm. Yeah, the quote was something
like, Our somatic cell count runs under 150 ,000
consistently. Our components are excellent and
we're on top of herd health. Doing everything
by the book. Top -notch management. But then
they said, but being good at your job has limits
when the playing field's this tilted. That just
says it all, doesn't it? It's a perfect illustration
that excellence in farming is not enough to survive
structural economic warfare. You can't manage
your way out of this specific problem. This constant
hidden $9 ,100 per cow loss fundamentally changes
the capital crisis for every farm, regardless
of size. It really changes investment viability.
Which is probably the most concerning long -term
implication. Because that dictates who survives
the next decade, who can reinvest, who can modernize.
This is the lending problem, and it directly
relates to financial literacy or maybe just the
hard reality of bankrolls. We all know that agricultural
lenders base their decisions on debt service
coverage ratios, right? DSCR. DSCR. Yeah, the
bank lives and dies by that number. Hold on.
Let's just quickly define DSCR for the listener.
Because while they deal with lenders daily, they
might not know the exact term or how it's calculated.
Good idea. DSCR is essentially how many times
your net operating income covers your required
debt payments for the year. So if a lender requires
a DSCR of, say, 1 .25. Which is pretty standard.
It means for every dollar you owe them in payments
that year, you must prove you are earning $1
.25 in net operating income before those payments.
Exactly. Lenders use a tight margin there. They
need that cushion. So if that $45 ,000 for a
500 -cow dairy is missing annually. due to this
price suppression we're talking about. Right,
that $90 per cow. That revenue leak drastically
shrinks your net operating income. And because
of those DSCR rules and the leverage requirements
banks have, that missing $45 ,000 can easily
translate to $200 ,000 less total borrowing capacity
on a major capital project. 200 grand less borrowing
power. The bank just says, look, we see the missing
margin, we see the risk from these trade issues,
and we just can't take that risk. $200 ,000 less
borrowing capacity might not sound like a lot
in, you know, corporate America. Pocket change
for some companies. What about a farm? That is
the new $400 ,000 parlor upgrade becoming a $200
,000 patchwork repair job. Or that's the difference
between being able to modernize your manure management
system and suddenly falling behind on environmental
regulations. Huge difference. And the case study
of the 3200 Cal Operator near Tulare, California
proves this with hard numbers. Quantifiable metrics.
Right. The one looking at robotic. Second up
operator. Right. She was analyzing a robotic
milking system upgrade, a massive capital expense,
obviously, but one meant to ensure long -term
efficiency and, frankly, appeal to the next generation
workforce. Big investment, big potential payoff.
So she calculated the internal rate of return,
the IRR. And for those unfamiliar, the internal
rate of return, IRR, is just the expected annual
rate of profit you get back expressed as a percentage.
relative to the initial capital investment. It's
what banks use to see if an investment is actually
worthwhile financially. Correct. Her analysis
showed that the difference between current subsidized
pricing, the reality today, and a scenario with
even partial relief from foreign subsidies. Just
getting some of that $1 .35 back. Yeah. Just
part of it. That difference changed the IRR on
the robotic parlor by nearly 40%. 40%. Wow. The
subsidy pressure made the projected profitability
look thin and highly risky over the 10 -year
lifespan of a loan. And that 40 % shift in IRR
was the literal difference between her lender
approving the project under favorable terms.
Giving her the green light. And denying it altogether.
Full stop. No loan. It demonstrates that the
economic viability of modernizing U .S. dairies
is being directly manipulated by foreign policy
happening thousands of miles away. It handcuffs
our ability to invest and remain competitive.
Simple as that. And if you can't invest, you
can't modernize. And if you can't modernize,
the farm becomes less appealing to the next generation.
Exactly. Iowa State Extension data has tracked
this correlation clearly. When margins look persistently
thin and the debt load required to take over
the operation remains incredibly high. Which
it always is. The kids with ag degrees, they
start looking elsewhere. They look at secure
salary jobs with Land O 'Lakes corporate or maybe
equipment dealers instead of taking on multimillion
dollars in farm debt for what looks like a structurally
handicapped business. It is a completely rational.
economic choice for them to make, even if it
feels heartbreaking for the retiring generation
watching the farm legacy potentially end. Absolutely
rational. If the business is starly designed,
through no fault of your own, to only achieve
thin margins, why would you shoulder the immense
debt burden and the 247 demands of farming? It's
a tough sell. So if the current structural leakage
continues, where is this heading? The long view,
based on current trends and projections, is frankly
sobering. Yeah, the numbers aren't pretty. USDA
data shows we've plummeted from over 70 ,000
dairy farms back in 2003. 70 ,000. To only about
26 ,500 today. That historical rate of loss is
just staggering when you think about it. And
the projections don't offer much relief, do they?
No. Not really. Marin Bozic at the University
of Minnesota, his modeling projects that if current
structural disadvantages persist. If nothing
changes. We could drop to between 17 ,000 and
20 ,000 operations by 2035. 17 to 20 ,000. That
means losing another quarter to a third of our
remaining dairies in just over a decade. It's
a massive potential loss. And critically, the
loss isn't going to be evenly distributed across
the country. No, this is where regional disparity
is projected to accelerate dramatically. Traditional
dairy states in the Northeast. they could see
losses over 50 to 60 percent of their remaining
farms. 50 to 60 percent. Gone. The upper Midwest
might drop 40 to 55 percent. These are the areas
dominated by those crucial midsize family operations.
The 200 to 1 ,000 cow dairies. The backbone.
But the large scale, western and southern states,
they keep growing. They keep absorbing the volume.
Right. This is the brutal truth of economics
of scale. At the 3 ,000 plus cow scale, you have
lower per unit fixed costs, better risk distribution.
It allows them to sometimes absorb these competitive
disadvantages better than a mid -scale 300 to
1 ,000 cow dairy. That $90 to $100 per cow loss
we talked about, it's an existential threat to
the mid -size operation because it eats up their
entire potential margin. Wipes it out. But it's
just a significant inconvenience, maybe a controllable
cost factor for the mega dairy that can operate
on sheer volume efficiency. BOSIC's modeling
emphasizes that these trade -related factors
are accelerating consolidation by an estimated
15%. 25 % beyond what natural market evolution
would dictate. That's a key point. Look, consolidation
due to technology, genetics, better management,
that's always going to happen. It's part of business
evolution. But this accelerated loss, it's driven
by distortion, not necessarily superior farming
or efficiency on the part of the survivors. It's
basically a policy failure leading to unnecessary
farm loss. We're losing good farms because the
game is rigged. But there is a powerful contrarian
lesson here, something that should give us hope
and maybe some guidance. OK, I like hope. What
is it? The U .S. Apple producers, they face similar,
really aggressive Chinese subsidy competition
a few years back. It threatened to swamp their
global market share. Right. I remember that.
Apples were getting hammered. They got organized.
They documented the economic harm precisely.
farm by farm, region by region, and they advocated
relentlessly for trade remedies. And that led
to the implementation of Section 301 tariffs,
right? Exactly. For those unfamiliar, Section
301 refers to a section of the U .S. Trade Act.
It basically allows the U .S. trade representative
to investigate and, if warranted, retaliate against
unfair foreign trade practices. It's a powerful
policy mechanism we already have. A tool in the
toolbox. And the result for apples. Within two
years of implementation, U .S. Apple exports
to key Asian markets recovered by nearly 30 percent.
30 percent recovery. That's huge. It leveled
the playing field just enough for efficiency
and quality to win again. It proves that policy
can, in fact, change the trajectory and potentially
prevent this projected 25, 33 percent loss of
our dairy farms. It's not inevitable if we fight
back smart. OK, so knowing all this. The structural
disadvantage, the hidden cost, the potential
policy solution. What are producers actually
doing right now to survive? What strategies are
working on the ground? The source material suggests
three primary strategies are emerging, and they
are not mutually exclusive. People are trying
different combinations. Okay, what strategy do
you want? Strategy one is what we call the make
the scale decision. Basically, if you are between,
say, 500 and 1000 cows, you're currently in the
most vulnerable crosshairs financially. The squeeze
zone. Exactly. Some producers in that zone are
aggressively borrowing, leveraging up to scale
past 1500 or maybe 2000 cows. They're essentially
betting that sheer volume can overcome the per
cow subsidy impact. That's an immense gamble,
though. You are leveraging your balance sheet
to the absolute max to survive a hostile market.
Betting on the eventual recovery of trade policy.
While relying purely on economies of scale to
survive the meantime. That's high risk, high
reward. A lot of sleepless nights there. Absolutely.
But there's a necessary, often painful flip side
to that decision. Choosing an orderly exit while
you still have equity left in the operation.
Getting out while the getting's good, so to speak.
The Pennsylvania dairyman put it bluntly, and
I want to reflect on the emotional weight of
this decision for a moment. He said, I can get
$1 ,500 per head in an orderly sale today. Wait
three years if margins stay compressed and the
bank gets nervous. Maybe it's $800 in a fire
sale. That's a huge difference. That $700 per
head difference translates to a $350 ,000 difference
on just 500 cows. So making that strategic exit
becomes a valid, hard -headed business decision,
even though it's gut -wrenching. It's forced
by external policy. Yeah, that's not a business
decision you want to make. It's a legacy decision
forced upon you. Okay, what's strategy two? The
second strategy is finding premium markets. We
see operations working hard to capture certified
organic, A2A2, or specific grass -fed premiums,
trying to build a margin big enough to simply
ignore the subsidized conventional commodity
market. trying to find a niche outside the main
battlefield. I appreciate the Vermont organic
producer example they cited, but man, it shows
how demanding this path is. It's not easy. They
faced 18 months of disrupted cash flow during
the transition, over $280 ,000 in market development
costs. And they're capped at 400 cows due to
pasture availability and certification requirements.
It works for them because they are close to major
consumer hubs like Boston, right? That allows
them to actually demand and get that premium
price. Location, location, location. But USDA
data confirms this path is only viable for maybe
10 to 15 percent of operations nationally. You
need the right land, the right resources, the
right climate, and critically, the right location
near willing consumers. It's not a solution for
everyone. Definitely not. Which brings us to
the third strategy, which is potentially the
most powerful because it helps everyone, regardless
of size or location, getting organized and speaking
up. Ah, the advocacy route. Yes. Producers are
moving away from just generic complaints, you
know. Milk prices stink. They're using real hard
data to document the specific economic harm these
trade policies are causing. Because generic complaints
don't move policy, do they? Not at all. Specific
spreadsheets, lost contract documents, regional
impact studies, that's what gets attention. The
Wisconsin Dairy Business Association is the perfect
example of effective organization here. Absolutely.
They aggregated member data showing over $45
million in annual trade -related losses across
their membership. $45 million. When you walk
into a congressional office with $45 million
in documented economic harm impacting their constituents,
people listen. Policy attention follows fast.
And we saw the immediate success back in Michigan,
connecting back to that case study. Producers
armed with documentation of lost contracts, the
specific price impacts on their milk checks,
they met directly with Congress. Laid it all
out. And they secured co -sponsorship for trade
enforcement legislation within three months.
Three months. That proves it right there. Specific,
actionable, aggregated data is the single most
important tool farmers have right now to fight
this structural problem. You got to organize
and bring the proof. OK, let's unpack this and
get to the actionable insights. Let's make this
real. You finished morning milking. You're driving
to the feed store focused on what matters right
now for your operation. What are the three things
you absolutely need to know from this deep dive?
All right. Three takeaways. The first thing you
need to do. like this week, is document your
pressure. You need to gather data that proves
your struggle is structural, not just operational
mismanagement. Document your pressure. Okay,
what do you mean by that, practically speaking?
What does the bank actually need to see? How
do you document it? Okay, first, talk to your
local farm credit or your lender immediately.
Tell them what's going on. The source material
shows that several bankers inform the researchers
they are much more flexible with loan covenants,
maybe offering extensions or refinancing, when
producers can demonstrate that documented market
distortions are the primary driver. So things
like specific commodity price suppression numbers
for your region or known contract losses by your
co -op. Exactly. Prove it's the market, not just
you having a bad year with high somatic cell
counts or poor feed conversion. But more importantly,
don't go it alone. Work with your neighbors,
your local producer groups. Aggregate specific
data on contracts lost or price impacts across
multiple farms. Power in numbers. Absolutely.
Ten farms speaking together with unified data
carry exponential weight compared to ten individual
complaints. Gather those co -op loss notices.
Find specific regional market analysis reports
that show the price spread between U .S. and
EU product and key export markets. Build a case
file. That's brilliant advice. Use the documented
structural problem as a shield, or at least leverage
with your lender. Okay, now, medium term. What's
the strategy for the next three to six months
as you maybe prepare for year -end review? Rethink
your breakeven analysis. This is crucial. When
you're evaluating your operation's financial
health, run two detailed breakeven scenarios.
Two scenarios. Yeah, scenario one. Under current
subsidized conditions, the reality we live in
now. Scenario two. Assuming potential trade improvements,
what if you got back just part of that loss margin?
So maybe gaining back just, say, $0 .20 per hundred.
Exactly. Something modest but meaningful. If
your farm is struggling now, but the numbers
show it would be profitable with those modest
price improvements, then you know the problem
is primarily structural, not operational. Okay.
And knowing that? Knowing that frees you up mentally
and strategically. You can focus your energy
on policy advocacy, on long -term capital planning,
rather than constantly tearing apart management
practices that might actually be perfectly fine
or even excellent. That analysis alone could
change a farmer's entire outlook from feeling
defeated to feeling strategic. That's powerful.
Finally, looking long -term, what's the positioning
strategy for the next year or two, especially
regarding major capital investments? Investment
modeling has to become mandatory. non -negotiable
do not approve a major investment a robotic system
a new barn a major manure system upgrade unless
you model three distinct financial scenarios
for it three scenarios for every big purchase
three scenario one baseline using current depressed
prices. Scenario two, partial improvement, maybe
assuming a plus Z dollars under $7 rate price
lift through initial trade action. And scenario
three, normalized pricing, projecting a plus
$1 .40 settlement improvement, assuming full
policy success eventually happens. And the rule
is, only proceed with investments that pencil
out. that work financially in at least two of
those three scenarios. This ensures you are making
resilient investments, investments that don't
depend entirely on the status quo remaining terrible
forever, but also don't bet the farm on policy
changing overnight. It builds in resilience.
That's a very practical risk management approach
for capital spending in this environment. Excellent.
This has been a massive deep dive into a really
difficult topic, hasn't it? And the final provocative
thought I want to leave you with. It goes back
to that old timer quote we started with. Yeah.
Managing weather, disease, and market cycles
is dairy farming. That is what you sign up for.
It's part of the job description. It is. But
competing against foreign treasuries, against
government policy designed to undercut you, that's
not something you fix just by working harder
or buying better genetics. This fight is bigger
than your fence lines. This is about whether
your farm town keeps its feed mill, its vet clinic,
its school, its tax base, the whole rural infrastructure.
It truly is about the whole ecosystem. But the
good news, the hopeful note, is that policy can
change the trajectory. Texas A &M modeling suggests
that if trade adjustments, similar to those achieved
for the apple producers, are successfully implemented
for dairy, we could see initial price improvements
starting in maybe 12 to 18 months, leading to
more comprehensive relief in two to three years.
That's not instantaneous, but it's a realistic
timeline for policy impact. And that relief could
preserve several thousand dairy operations through
2035. Farms that would otherwise be lost purely
to this structural distortion. It's worth fighting
for. Absolutely worth fighting for. This has
been another deep dive from the Bullvine podcast.
If this kind of analysis helps your operation,
head over to www. thebullvine .com. We've got
more articles that tell you what's really happening
in dairy. No BS. And seriously, subscribe wherever
you get your deep dives, your podcasts. We're
releasing insights twice weekly now, and trust
me, you don't want to miss what we've got coming
next week. We're digging into the surprising
correlation between somatic cell count and equipment
financing terms, and how lenders are starting
to use that data against you in ways you might
not expect. Thank you.