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 --> 00:01:02.579 we're sparking Welcome back to the Bullvine Podcast, 00:01:02.799 --> 00:01:05.040 where we cut through dairy industry noise to 00:01:05.040 --> 00:01:07.060 get you the insights that actually matter for 00:01:07.060 --> 00:01:09.920 your operation. And today, we're diving deep 00:01:09.920 --> 00:01:12.260 into a feature piece that's been generating some 00:01:12.260 --> 00:01:17.260 serious buzz. Really getting folks talking. Yeah, 00:01:17.359 --> 00:01:20.120 it really is. This one's got layers. And some, 00:01:20.219 --> 00:01:22.920 frankly, shocking quantification that is going 00:01:22.920 --> 00:01:25.180 to make you rethink how you've been approaching 00:01:25.180 --> 00:01:27.739 your bottom line. We are talking about money 00:01:27.739 --> 00:01:29.540 that is disappearing from your farm before you 00:01:29.540 --> 00:01:31.620 even get your milk check. That's right. We are 00:01:31.620 --> 00:01:34.180 tackling that persistent grinding frustration 00:01:34.180 --> 00:01:37.000 every dairyman and woman feels. You know, when 00:01:37.000 --> 00:01:39.099 your cows are healthy, your quality is excellent, 00:01:39.260 --> 00:01:42.340 your costs are, well, high. And yet the market 00:01:42.340 --> 00:01:45.200 price for milk just refuses to budge. It feels 00:01:45.200 --> 00:01:46.680 like you're fighting with one hand tied behind 00:01:46.680 --> 00:01:49.000 your back. It really does. Absolutely. A Wisconsin 00:01:49.000 --> 00:01:51.599 dairyman really nailed the core issue for us 00:01:51.599 --> 00:01:53.920 when he said, and I quote, I can handle weather 00:01:53.920 --> 00:01:56.439 variability, disease cycles, and even normal 00:01:56.439 --> 00:01:58.099 market cycles. We've done that for generations. 00:01:58.659 --> 00:02:01.060 What's impossible to navigate is when other governments 00:02:01.060 --> 00:02:03.599 are actively supporting our competitors. That 00:02:03.599 --> 00:02:05.379 quote just sums it up perfectly, doesn't it? 00:02:05.459 --> 00:02:07.239 Yeah. It highlights that feeling of fighting 00:02:07.239 --> 00:02:09.360 an invisible enemy. Exactly. You know, you can 00:02:09.360 --> 00:02:11.539 invest in genetics, you can tighten up your feed 00:02:11.539 --> 00:02:13.599 conversion range, maybe improve your parlor efficiency, 00:02:13.840 --> 00:02:15.800 all things you can control on your farm. Right. 00:02:15.960 --> 00:02:18.419 But how in the world do you design an operation 00:02:18.419 --> 00:02:21.199 to compete with the treasury of the European 00:02:21.199 --> 00:02:25.699 Union or the People's Republic of China? Well, 00:02:25.819 --> 00:02:28.159 the answer, as the data shows. Yeah, the answer 00:02:28.159 --> 00:02:30.419 is you can't. It's just not possible based on 00:02:30.419 --> 00:02:32.840 this. And the data we have here provides a truly 00:02:32.840 --> 00:02:34.780 shocking quantification of that frustration. 00:02:35.240 --> 00:02:37.539 This isn't just a feeling, it's a measurable 00:02:37.539 --> 00:02:40.930 financial loss. Cornell's Andrew Novakovich and 00:02:40.930 --> 00:02:44.069 his team ran some really comprehensive modeling. 00:02:44.389 --> 00:02:46.289 Novakovich, yeah, he does solid work. He does. 00:02:46.389 --> 00:02:48.990 And it suggests foreign subsidies might be extracting 00:02:48.990 --> 00:02:53.050 approximately $90 to $100 per cow annually from 00:02:53.050 --> 00:02:55.389 U .S. operations just through persistent price 00:02:55.389 --> 00:02:58.289 suppression. Wait, $90 to $100 per cow. That 00:02:58.289 --> 00:03:00.969 sounds, well, it sounds high, even for a cynical 00:03:00.969 --> 00:03:03.349 farmer like me. I know, right? But let's put 00:03:03.349 --> 00:03:05.409 that into barn level terms for you, the listener. 00:03:05.930 --> 00:03:09.069 For a standard 500 cow dairy, which is still 00:03:09.069 --> 00:03:11.710 the backbone in many states, we're talking about 00:03:11.710 --> 00:03:15.449 $45 ,000 to $50 ,000 in potential annual revenue 00:03:15.449 --> 00:03:18.330 that just vanishes. Poof. Gone. It just never 00:03:18.330 --> 00:03:20.689 shows up in the milk check. Never shows up. And 00:03:20.689 --> 00:03:24.289 here's the crucial detail. It's not a management 00:03:24.289 --> 00:03:27.169 error on your part. You can't stop this loss 00:03:27.169 --> 00:03:30.509 by changing your milking procedure or lowering 00:03:30.509 --> 00:03:34.389 your component score. It is a structural leak. 00:03:34.969 --> 00:03:37.210 built right into the global system. And what's 00:03:37.210 --> 00:03:39.270 key, as the source material points out, is the 00:03:39.270 --> 00:03:41.530 consistency of this loss. It holds across the 00:03:41.530 --> 00:03:43.289 board. Right. Whether you're running a smaller 00:03:43.289 --> 00:03:45.449 200 -cow pasture operation up in the Northeast, 00:03:45.729 --> 00:03:48.590 maybe dealing with those thin organic margins. 00:03:48.889 --> 00:03:50.729 Yeah, tough business. Or if you're milking 2 00:03:50.729 --> 00:03:53.430 ,500 head in a big, high -volume dry lot out 00:03:53.430 --> 00:03:56.870 West, that price suppression is remarkably consistent. 00:03:57.189 --> 00:03:59.530 Which is why this issue is systemic. It impacts 00:03:59.530 --> 00:04:01.849 every single segment of the U .S. dairy economy. 00:04:02.030 --> 00:04:04.430 Every single one. Absolutely. And the stakes 00:04:04.430 --> 00:04:06.629 couldn't be higher. We are currently losing, 00:04:06.770 --> 00:04:09.530 on average, three dairy farms every single day. 00:04:09.669 --> 00:04:12.909 Three a day. Just think about that. If that $90 00:04:12.909 --> 00:04:16.149 to $100 per cow is the tipping point for solvency 00:04:16.149 --> 00:04:19.250 for some operations, and for many it is, then 00:04:19.250 --> 00:04:22.949 this foreign subsidy mechanism is directly accelerating 00:04:22.949 --> 00:04:25.769 the industry's consolidation. No question. So 00:04:25.769 --> 00:04:27.769 today we're going to break down the exact... 00:04:28.089 --> 00:04:31.189 you know, complex bureaucratic mechanisms creating 00:04:31.189 --> 00:04:33.230 this tilted playing field. Yeah. And we're going 00:04:33.230 --> 00:04:36.350 to quantify what it is costing you cow by cow, 00:04:36.550 --> 00:04:38.829 hundredweight by hundredweight. Okay. Let's unpack 00:04:38.829 --> 00:04:41.269 this core problem then. Let's start by quantifying 00:04:41.269 --> 00:04:44.230 that hidden tax. Right. The hidden tax. I like 00:04:44.230 --> 00:04:47.269 that term. The actual price suppression is subtle. 00:04:47.370 --> 00:04:49.829 You know, it's often masked by the normal, often 00:04:49.829 --> 00:04:52.629 wild volatility we see daily in dairy commodities. 00:04:52.629 --> 00:04:55.230 One day it's up 50 cents. The next week it's 00:04:55.230 --> 00:04:58.629 down 75. Exactly. Yeah. Roller coaster. But when 00:04:58.629 --> 00:05:01.290 the economists flatten out the averages and look 00:05:01.290 --> 00:05:03.769 at the structural impact, they were able to put 00:05:03.769 --> 00:05:07.829 a solid number on it. $0 .05 to $0 .40 per hundredweight 00:05:07.829 --> 00:05:10.569 suppression. Okay. $0 .35 to $0 .40. I need to 00:05:10.569 --> 00:05:13.730 anchor that number in reality, though. Most farmers 00:05:13.730 --> 00:05:16.329 don't feel a $0 .35 hit on a single country. 00:05:16.529 --> 00:05:18.910 No, not really. They feel a cumulative weight 00:05:18.910 --> 00:05:21.689 of that on the entire herd over the whole year. 00:05:21.889 --> 00:05:25.209 That's where it hurts. When we use USDA data 00:05:25.209 --> 00:05:27.850 for the standard production average, let's use 00:05:27.850 --> 00:05:31.269 240 hundredweight annually per cow. That's a 00:05:31.269 --> 00:05:32.930 pretty common number. That's about right. You 00:05:32.930 --> 00:05:35.209 can see how quickly this compounds. Multiply 00:05:35.209 --> 00:05:39.509 that 35 to 40 cent impact by 240 and you are 00:05:39.509 --> 00:05:42.889 immediately looking at 85 to 95 dollars missing 00:05:42.889 --> 00:05:47.589 per cow every single year. 85 to 95 bucks per 00:05:47.589 --> 00:05:49.790 cow. That is why we call it the vanishing dairy 00:05:49.790 --> 00:05:52.879 dollar. It just disappears. And the numbers scale 00:05:52.879 --> 00:05:55.079 up so quickly, which is why the impact is felt 00:05:55.079 --> 00:05:57.240 so differently depending on your farm's structure. 00:05:57.500 --> 00:05:59.959 Totally. If you're a 200 -tow operation, that's, 00:05:59.959 --> 00:06:03.660 what, $17 ,000 to $19 ,000 missing annually? 00:06:03.860 --> 00:06:06.279 $17 ,000 to $19 ,000. Okay, think about what 00:06:06.279 --> 00:06:08.259 that covers. That's enough to cover the labor 00:06:08.259 --> 00:06:10.819 costs for one full -time employee for several 00:06:10.819 --> 00:06:12.980 months. Or maybe the annual maintenance on your 00:06:12.980 --> 00:06:15.519 primary loader. Or that TMR mixer repair you've 00:06:15.519 --> 00:06:17.889 been putting off. Yeah, exactly. It's the difference 00:06:17.889 --> 00:06:20.250 between replacing a critical piece of equipment 00:06:20.250 --> 00:06:22.689 or, you know, duct taping it back together for 00:06:22.689 --> 00:06:24.709 another year. We've all been there. Scale that 00:06:24.709 --> 00:06:27.930 to a mid -sized 500 cow dairy. Now you're looking 00:06:27.930 --> 00:06:32.389 at $42 ,500 to $47 ,500 missing. $42 ,000 to 00:06:32.389 --> 00:06:36.810 $47 ,000. And a 1 ,000 cow operation is losing 00:06:36.810 --> 00:06:41.089 $85 ,000 to $95 ,000. And for a larger 2 ,500 00:06:41.089 --> 00:06:44.240 cow facility. That lost balloons. It's anywhere 00:06:44.240 --> 00:06:48.959 from $212 ,000 to $237 ,000 annually. Just gone. 00:06:49.160 --> 00:06:51.519 Quarter million bucks, basically. Vanished. Now, 00:06:51.540 --> 00:06:53.120 a producer might look at those massive numbers 00:06:53.120 --> 00:06:55.040 and say, well, you know, the market fluctuates 00:06:55.040 --> 00:06:57.120 anyway. I've seen worse swings. Sure, we've all 00:06:57.120 --> 00:06:59.060 weathered storms. But here's the perspective 00:06:59.060 --> 00:07:01.079 check that really drives home the crisis. Most 00:07:01.079 --> 00:07:03.819 operations, even in truly good years, are running 00:07:03.819 --> 00:07:06.620 profit margins. That is, the actual money left 00:07:06.620 --> 00:07:09.459 over after all expenses and owner draws of maybe 00:07:09.459 --> 00:07:12.540 $200 to $400 per cow, maybe. Yeah, that's a good 00:07:12.540 --> 00:07:14.759 year. A really good year. If that $90 to $100 00:07:14.759 --> 00:07:17.240 loss per cow is accurate. Which the data suggests 00:07:17.240 --> 00:07:20.050 it is. You need to realize that this structural 00:07:20.050 --> 00:07:24.110 disadvantage represents 25 % to nearly 50 % of 00:07:24.110 --> 00:07:27.170 your entire potential profit margin. Wow. Okay, 00:07:27.209 --> 00:07:30.050 stop right there. 25 to 50 % of the profit. Yeah. 00:07:30.370 --> 00:07:33.910 Gone. That's not a fluctuation you can manage 00:07:33.910 --> 00:07:36.910 by getting an extra tenth of a point on components. 00:07:37.290 --> 00:07:40.470 That is the difference between genuine, sustainable 00:07:40.470 --> 00:07:43.329 profitability and constantly struggling just 00:07:43.329 --> 00:07:45.990 to break even. It's the entire cushion. gone. 00:07:46.170 --> 00:07:48.810 It's the margin you need to handle that unforeseen 00:07:48.810 --> 00:07:51.329 jump in soybean prices. Exactly. Or the sudden 00:07:51.329 --> 00:07:53.730 need for a replacement silo unloader that just 00:07:53.730 --> 00:07:56.290 died. Yeah. That money is the difference between 00:07:56.290 --> 00:07:58.790 solvency and chronic stress on the balance sheet. 00:07:58.889 --> 00:08:01.129 And ultimately, that's the capital you rely on. 00:08:01.339 --> 00:08:04.000 for repairs, for modernization. And for convincing 00:08:04.000 --> 00:08:05.839 the next generation that the dairy is actually 00:08:05.839 --> 00:08:07.860 a viable business for them to take on. That's 00:08:07.860 --> 00:08:10.199 huge. It really is. Without that margin, the 00:08:10.199 --> 00:08:12.120 future looks pretty bleak. So we've established 00:08:12.120 --> 00:08:15.279 the cost, a devastating $9 ,200 per cow annually. 00:08:15.540 --> 00:08:18.279 But that number is just the symptom. Right. Now 00:08:18.279 --> 00:08:21.300 let's go to the root cause. How are global competitors 00:08:21.300 --> 00:08:25.740 able to undercut us by that crucial $35, $40 00:08:25.740 --> 00:08:28.759 per hundred weight? Yeah. How's it actually happening? 00:08:29.199 --> 00:08:32.450 It's not just one government. We have two very 00:08:32.450 --> 00:08:35.730 different but equally powerful mechanisms at 00:08:35.730 --> 00:08:39.210 play globally. First, there's the behemoth of 00:08:39.210 --> 00:08:41.610 the European Union intervention system. Ah, yes. 00:08:41.789 --> 00:08:44.210 The EU intervention. This is kind of the historical 00:08:44.210 --> 00:08:45.870 distortion, the one that makes everyone scratch 00:08:45.870 --> 00:08:47.730 their heads because it's so bureaucratic. So 00:08:47.730 --> 00:08:50.269 complex. But it's brutally effective at setting 00:08:50.269 --> 00:08:53.529 a global floor price. Precisely. The EU uses 00:08:53.529 --> 00:08:56.529 an intervention purchasing system. When prices 00:08:56.529 --> 00:08:59.669 for key products, specifically butter and skim 00:08:59.669 --> 00:09:02.649 milk powder drop to a predetermined intervention 00:09:02.649 --> 00:09:04.429 price threshold. Which they set themselves. Which 00:09:04.429 --> 00:09:06.669 they set themselves, yes. The EU bureaucracy 00:09:06.669 --> 00:09:10.389 steps in and buys up massive volumes of that 00:09:10.389 --> 00:09:12.610 product, just takes it off the market and puts 00:09:12.610 --> 00:09:14.889 it into storage, government storage. And the 00:09:14.889 --> 00:09:16.850 key detail that needs to be understood here is 00:09:16.850 --> 00:09:19.309 the trigger. This isn't spontaneous, right? They 00:09:19.309 --> 00:09:21.529 have these price thresholds set. And once the 00:09:21.529 --> 00:09:24.889 market dips beneath that level. Usually sustained 00:09:24.889 --> 00:09:28.309 for a specific period, the EU is basically obligated 00:09:28.309 --> 00:09:31.429 to buy. By removing hundreds of thousands of 00:09:31.429 --> 00:09:34.490 metric tons of product, they literally prevent 00:09:34.490 --> 00:09:36.929 the global market from finding its natural clearing 00:09:36.929 --> 00:09:39.950 price. They artificially hold prices above where 00:09:39.950 --> 00:09:42.509 they would naturally settle. Essentially, they 00:09:42.509 --> 00:09:45.750 are creating a subsidized floor under their own 00:09:45.750 --> 00:09:48.330 producers. They're ensuring their farmers rarely 00:09:48.330 --> 00:09:50.870 suffer a prolonged collapse in commodity pricing. 00:09:51.049 --> 00:09:52.970 Which sounds nice for them. But because the EU 00:09:52.970 --> 00:09:55.549 is such a massive global player in exporting 00:09:55.549 --> 00:09:58.970 milk powder and butter, that floor affects every 00:09:58.970 --> 00:10:01.190 producer on the planet, including you listening 00:10:01.190 --> 00:10:03.889 in Wisconsin or California or anywhere else in 00:10:03.889 --> 00:10:06.429 the U .S. Right. Their floor becomes our ceiling 00:10:06.429 --> 00:10:09.230 in a way. And this system has historical precedent, 00:10:09.289 --> 00:10:11.210 too. We've all heard the stories, right? The 00:10:11.210 --> 00:10:13.590 butter mountain and the milk powder lake the 00:10:13.590 --> 00:10:17.159 EU created decades ago. Oh, yeah. legendary stuff. 00:10:17.419 --> 00:10:19.440 That was a direct result of this system. And 00:10:19.440 --> 00:10:21.399 it's not just us, the external critics pointing 00:10:21.399 --> 00:10:24.360 this out. The EU's own court of auditors. Their 00:10:24.360 --> 00:10:27.220 own auditors. Their own people called this system 00:10:27.220 --> 00:10:30.600 destabilizing and market distorting back in 2021. 00:10:31.440 --> 00:10:34.019 They estimated the cost of maintaining this supply 00:10:34.019 --> 00:10:36.559 management structure runs into the billions of 00:10:36.559 --> 00:10:40.279 euros annually. Billions. And closer to home, 00:10:40.440 --> 00:10:42.399 Mark Stevenson at the University of Wisconsin 00:10:42.399 --> 00:10:45.059 estimates that these EU interventions are costing 00:10:45.059 --> 00:10:47.940 U .S. dairy producers hundreds of millions of 00:10:47.940 --> 00:10:50.399 dollars annually in lost competitiveness. Hundreds 00:10:50.399 --> 00:10:52.860 of millions. Just from that one mechanism. Okay, 00:10:52.940 --> 00:10:55.659 so that's the EU mechanism. A structural price 00:10:55.659 --> 00:10:57.960 floor that basically sets the global expectation 00:10:57.960 --> 00:11:00.059 artificially high. Then you have the Chinese 00:11:00.059 --> 00:11:02.600 mechanism. Completely different beast. Completely 00:11:02.600 --> 00:11:05.200 different, but just as lethal to our competitiveness 00:11:05.200 --> 00:11:07.019 because it focuses right on the point of sale. 00:11:07.389 --> 00:11:09.750 This is where they use export subsidies disguised 00:11:09.750 --> 00:11:12.190 as tax breaks, essentially giving their processors 00:11:12.190 --> 00:11:15.190 a massive government -funded discount to offer 00:11:15.190 --> 00:11:17.870 international buyers. It's sneaky. It is. They 00:11:17.870 --> 00:11:21.450 offer VAT rebates, value -added taxed processors 00:11:21.450 --> 00:11:24.110 exporting dairy from these special economic zones. 00:11:24.330 --> 00:11:27.830 And VAT is a big deal over there. Huge. We are 00:11:27.830 --> 00:11:30.830 talking about rebates ranging from 8 to 13 percent 00:11:30.830 --> 00:11:33.769 back. And this isn't some old forgotten policy. 00:11:34.409 --> 00:11:36.250 It was recently expanded through their State 00:11:36.250 --> 00:11:39.850 Council Directive 2024 -15. Okay, so that directive 00:11:39.850 --> 00:11:43.009 signals it's a targeted, formalized policy expansion. 00:11:43.309 --> 00:11:46.509 Aim squarely at increasing their dairy export 00:11:46.509 --> 00:11:48.769 growth. They're doubling down. Exactly. They 00:11:48.769 --> 00:11:50.509 want a bigger piece of the pie. So let's put 00:11:50.509 --> 00:11:52.029 that into plain English for the farmer listening. 00:11:52.250 --> 00:11:55.330 Let's say a U .S. processor bids $100 per unit 00:11:55.330 --> 00:11:58.629 for milk powder in a market like Saudi Arabia. 00:11:58.830 --> 00:12:00.929 Okay. The Chinese competitor can effectively 00:12:00.929 --> 00:12:04.450 bid... What, 87 to 92 tolls for that exact same 00:12:04.450 --> 00:12:06.649 powder? And their processor is still getting 00:12:06.649 --> 00:12:09.870 the same effective revenue back home. Why? Because 00:12:09.870 --> 00:12:12.309 the government picks up the 8 to 13 % difference 00:12:12.309 --> 00:12:14.389 through the rebate. It gives them an automatic 00:12:14.389 --> 00:12:17.389 government -funded 8 to 13 % price advantage 00:12:17.389 --> 00:12:20.309 instantly when bidding against U .S. suppliers 00:12:20.309 --> 00:12:23.129 in key global markets like Nigeria, Mexico, or 00:12:23.129 --> 00:12:25.269 Saudi Arabia. And this advantage has absolutely 00:12:25.269 --> 00:12:26.929 nothing to do with whether the Chinese farm is 00:12:26.929 --> 00:12:29.190 more efficient or has better components or has 00:12:29.190 --> 00:12:32.019 a lower cost of production. Zero. It's pure policy 00:12:32.019 --> 00:12:34.299 leverage, government muscle. The Idaho producer 00:12:34.299 --> 00:12:36.799 quoted in the source material summed up the sheer 00:12:36.799 --> 00:12:40.019 frustration perfectly. He said, we can match 00:12:40.019 --> 00:12:42.759 anybody on production metrics. Our feed conversion 00:12:42.759 --> 00:12:46.320 is world class. Our genetics are top tier. Things 00:12:46.320 --> 00:12:48.440 we control. Things we control. But when their 00:12:48.440 --> 00:12:51.840 government picks up 8, 13 % of the tab, that's 00:12:51.840 --> 00:12:54.700 a whole different ballgame. And that is the harsh 00:12:54.700 --> 00:12:57.279 reality check. It really is. We are not losing 00:12:57.279 --> 00:13:00.080 on quality or efficiency. We are losing because 00:13:00.080 --> 00:13:02.309 we're competing with the national budget. not 00:13:02.309 --> 00:13:04.429 another farm business. Now we shift from the 00:13:04.429 --> 00:13:06.529 theory and the policy down to the ground level. 00:13:06.669 --> 00:13:09.309 Let's move to the Michigan case study. Ah, Michigan. 00:13:09.629 --> 00:13:12.009 Yeah, this hits close to home for a lot of folks 00:13:12.009 --> 00:13:14.330 in the Midwest. This is where the loss of specific 00:13:14.330 --> 00:13:17.570 export contracts was directly documented by a 00:13:17.570 --> 00:13:20.490 major dairy cooperative, turning that abstract 00:13:20.490 --> 00:13:23.549 $0 .35 per hundred eight loss into a brutal drop 00:13:23.549 --> 00:13:26.230 in the actual milk check. This is where the abstraction 00:13:26.230 --> 00:13:28.769 of global trade becomes a very real pay cut. 00:13:28.909 --> 00:13:31.330 You see it on the statement. The Michigan co 00:13:31.330 --> 00:13:33.669 -ops lost significant contracts for dairy commodities 00:13:33.669 --> 00:13:36.649 when Algerian buyers shifted their sourcing. 00:13:36.909 --> 00:13:39.350 Moved from the U .S. to Europe. Now that seems 00:13:39.350 --> 00:13:42.190 like a normal market shift on paper, right? Buyer 00:13:42.190 --> 00:13:44.690 changes supplier. Happens all the time. But the 00:13:44.690 --> 00:13:47.470 analysis proves it was entirely structural. It 00:13:47.470 --> 00:13:49.850 wasn't about price based on efficiency. So why 00:13:49.850 --> 00:13:52.809 did they switch? This is where that trade structure 00:13:52.809 --> 00:13:55.899 tangle becomes crystal clear. It exposes how 00:13:55.899 --> 00:13:58.139 different policies layer on top of each other 00:13:58.139 --> 00:14:01.200 to create an impossible situation. The reason 00:14:01.200 --> 00:14:03.879 those Algerian buyers shifted is that the EU 00:14:03.879 --> 00:14:06.340 has a comprehensive trade agreement with Algeria. 00:14:06.399 --> 00:14:09.740 It allows European dairy products to enter Algeria 00:14:09.740 --> 00:14:14.559 duty -free. Zero tariffs. Zip. Zero tariffs for 00:14:14.559 --> 00:14:18.659 the EU. And for us. Meanwhile, U .S. exports 00:14:18.659 --> 00:14:22.220 face tariffs of 25 % or more to enter that exact 00:14:22.220 --> 00:14:25.279 same market. 25%. So, hold on. We're already 00:14:25.279 --> 00:14:27.059 competing with the EU's domestic price floor, 00:14:27.220 --> 00:14:29.340 which artificially depresses the starting global 00:14:29.340 --> 00:14:31.720 price. Right. Step one disadvantage. And then 00:14:31.720 --> 00:14:34.480 we stack a 25 % tariff on top of our price just 00:14:34.480 --> 00:14:36.980 to get into the country. Correct. We literally 00:14:36.980 --> 00:14:39.240 cannot compete. It's impossible. The European 00:14:39.240 --> 00:14:41.360 powder is delivered at prices the U .S. cannot 00:14:41.360 --> 00:14:43.840 possibly match, even if we were the most efficient 00:14:43.840 --> 00:14:46.379 producer in the entire world. The economic consequences 00:14:46.379 --> 00:14:49.460 are immediate and severe. When those export contracts 00:14:49.460 --> 00:14:52.000 vanish and these contracts absorb a significant 00:14:52.000 --> 00:14:54.820 volume of milk from member farms. Crucial volume. 00:14:55.279 --> 00:14:57.580 The co -op suddenly has all this excess product. 00:14:57.860 --> 00:15:00.100 It has to be sold domestically, maybe at a lower 00:15:00.100 --> 00:15:03.259 price, or stored, which costs money. Either way, 00:15:03.360 --> 00:15:05.820 it drives down the overall blend price for every 00:15:05.820 --> 00:15:08.419 member. And Phil Durst from Michigan State Extension, 00:15:08.620 --> 00:15:10.419 he's tracked this impact, right? Yes, he has. 00:15:10.580 --> 00:15:12.960 His work shows that when a co -op loses those 00:15:12.960 --> 00:15:15.720 critical export contracts, milk prices can drop 00:15:15.720 --> 00:15:17.600 more than a dollar per hundredweight for the 00:15:17.600 --> 00:15:19.799 member farms. More than a dollar per hundredweight. 00:15:19.879 --> 00:15:22.960 A buck drop in the blend price is catastrophic. 00:15:23.279 --> 00:15:25.830 I mean, that's just... Devastating. It forces 00:15:25.830 --> 00:15:28.090 producers to make immediate drastic choices. 00:15:28.669 --> 00:15:31.529 Calling 10 to 15 percent of the herd is a common 00:15:31.529 --> 00:15:34.330 response just to survive the cash flow crisis. 00:15:34.610 --> 00:15:36.970 Selling off good cows just to stay afloat. Exactly. 00:15:37.110 --> 00:15:39.610 And if the co -op can't find a home for the volume 00:15:39.610 --> 00:15:42.450 long term, it threatens the viability of the 00:15:42.450 --> 00:15:45.710 processing plant itself. Which removes a huge 00:15:45.710 --> 00:15:48.210 local market for producers in that area. It's 00:15:48.210 --> 00:15:51.299 a domino effect. A devastating one. And once 00:15:51.299 --> 00:15:54.019 again, we come back to the quality paradox. That 00:15:54.019 --> 00:15:56.500 Michigan producer, who was ultimately hurt by 00:15:56.500 --> 00:15:59.240 these foreign trade policies, was doing everything 00:15:59.240 --> 00:16:01.059 right on the farm. Yeah, the quote was something 00:16:01.059 --> 00:16:04.960 like, Our somatic cell count runs under 150 ,000 00:16:04.960 --> 00:16:07.700 consistently. Our components are excellent and 00:16:07.700 --> 00:16:09.899 we're on top of herd health. Doing everything 00:16:09.899 --> 00:16:12.529 by the book. Top -notch management. But then 00:16:12.529 --> 00:16:15.129 they said, but being good at your job has limits 00:16:15.129 --> 00:16:17.470 when the playing field's this tilted. That just 00:16:17.470 --> 00:16:19.929 says it all, doesn't it? It's a perfect illustration 00:16:19.929 --> 00:16:22.850 that excellence in farming is not enough to survive 00:16:22.850 --> 00:16:25.610 structural economic warfare. You can't manage 00:16:25.610 --> 00:16:28.830 your way out of this specific problem. This constant 00:16:28.830 --> 00:16:33.029 hidden $9 ,100 per cow loss fundamentally changes 00:16:33.029 --> 00:16:35.009 the capital crisis for every farm, regardless 00:16:35.009 --> 00:16:37.590 of size. It really changes investment viability. 00:16:37.889 --> 00:16:39.629 Which is probably the most concerning long -term 00:16:39.629 --> 00:16:42.299 implication. Because that dictates who survives 00:16:42.299 --> 00:16:45.460 the next decade, who can reinvest, who can modernize. 00:16:45.600 --> 00:16:47.539 This is the lending problem, and it directly 00:16:47.539 --> 00:16:50.659 relates to financial literacy or maybe just the 00:16:50.659 --> 00:16:53.399 hard reality of bankrolls. We all know that agricultural 00:16:53.399 --> 00:16:55.820 lenders base their decisions on debt service 00:16:55.820 --> 00:16:59.279 coverage ratios, right? DSCR. DSCR. Yeah, the 00:16:59.279 --> 00:17:01.019 bank lives and dies by that number. Hold on. 00:17:01.039 --> 00:17:03.019 Let's just quickly define DSCR for the listener. 00:17:03.259 --> 00:17:05.859 Because while they deal with lenders daily, they 00:17:05.859 --> 00:17:08.200 might not know the exact term or how it's calculated. 00:17:08.539 --> 00:17:11.230 Good idea. DSCR is essentially how many times 00:17:11.230 --> 00:17:14.329 your net operating income covers your required 00:17:14.329 --> 00:17:17.650 debt payments for the year. So if a lender requires 00:17:17.650 --> 00:17:21.970 a DSCR of, say, 1 .25. Which is pretty standard. 00:17:22.109 --> 00:17:24.549 It means for every dollar you owe them in payments 00:17:24.549 --> 00:17:27.210 that year, you must prove you are earning $1 00:17:27.210 --> 00:17:30.029 .25 in net operating income before those payments. 00:17:30.089 --> 00:17:32.589 Exactly. Lenders use a tight margin there. They 00:17:32.589 --> 00:17:35.549 need that cushion. So if that $45 ,000 for a 00:17:35.549 --> 00:17:39.099 500 -cow dairy is missing annually. due to this 00:17:39.099 --> 00:17:40.579 price suppression we're talking about. Right, 00:17:40.660 --> 00:17:44.000 that $90 per cow. That revenue leak drastically 00:17:44.000 --> 00:17:47.059 shrinks your net operating income. And because 00:17:47.059 --> 00:17:49.559 of those DSCR rules and the leverage requirements 00:17:49.559 --> 00:17:53.259 banks have, that missing $45 ,000 can easily 00:17:53.259 --> 00:17:56.720 translate to $200 ,000 less total borrowing capacity 00:17:56.720 --> 00:18:00.440 on a major capital project. 200 grand less borrowing 00:18:00.440 --> 00:18:02.680 power. The bank just says, look, we see the missing 00:18:02.680 --> 00:18:04.660 margin, we see the risk from these trade issues, 00:18:04.779 --> 00:18:07.599 and we just can't take that risk. $200 ,000 less 00:18:07.599 --> 00:18:09.799 borrowing capacity might not sound like a lot 00:18:09.799 --> 00:18:12.180 in, you know, corporate America. Pocket change 00:18:12.180 --> 00:18:14.619 for some companies. What about a farm? That is 00:18:14.619 --> 00:18:18.680 the new $400 ,000 parlor upgrade becoming a $200 00:18:18.680 --> 00:18:22.019 ,000 patchwork repair job. Or that's the difference 00:18:22.019 --> 00:18:24.140 between being able to modernize your manure management 00:18:24.140 --> 00:18:26.539 system and suddenly falling behind on environmental 00:18:26.539 --> 00:18:29.240 regulations. Huge difference. And the case study 00:18:29.240 --> 00:18:31.680 of the 3200 Cal Operator near Tulare, California 00:18:31.680 --> 00:18:34.720 proves this with hard numbers. Quantifiable metrics. 00:18:35.059 --> 00:18:36.880 Right. The one looking at robotic. Second up 00:18:36.880 --> 00:18:39.490 operator. Right. She was analyzing a robotic 00:18:39.490 --> 00:18:42.309 milking system upgrade, a massive capital expense, 00:18:42.509 --> 00:18:45.029 obviously, but one meant to ensure long -term 00:18:45.029 --> 00:18:47.990 efficiency and, frankly, appeal to the next generation 00:18:47.990 --> 00:18:50.789 workforce. Big investment, big potential payoff. 00:18:51.089 --> 00:18:53.150 So she calculated the internal rate of return, 00:18:53.269 --> 00:18:55.789 the IRR. And for those unfamiliar, the internal 00:18:55.789 --> 00:18:58.849 rate of return, IRR, is just the expected annual 00:18:58.849 --> 00:19:01.670 rate of profit you get back expressed as a percentage. 00:19:02.170 --> 00:19:04.750 relative to the initial capital investment. It's 00:19:04.750 --> 00:19:07.250 what banks use to see if an investment is actually 00:19:07.250 --> 00:19:09.789 worthwhile financially. Correct. Her analysis 00:19:09.789 --> 00:19:12.549 showed that the difference between current subsidized 00:19:12.549 --> 00:19:17.809 pricing, the reality today, and a scenario with 00:19:17.809 --> 00:19:20.130 even partial relief from foreign subsidies. Just 00:19:20.130 --> 00:19:22.809 getting some of that $1 .35 back. Yeah. Just 00:19:22.809 --> 00:19:25.950 part of it. That difference changed the IRR on 00:19:25.950 --> 00:19:29.750 the robotic parlor by nearly 40%. 40%. Wow. The 00:19:29.750 --> 00:19:31.670 subsidy pressure made the projected profitability 00:19:31.670 --> 00:19:34.430 look thin and highly risky over the 10 -year 00:19:34.430 --> 00:19:37.430 lifespan of a loan. And that 40 % shift in IRR 00:19:37.430 --> 00:19:39.589 was the literal difference between her lender 00:19:39.589 --> 00:19:41.769 approving the project under favorable terms. 00:19:41.910 --> 00:19:43.690 Giving her the green light. And denying it altogether. 00:19:43.849 --> 00:19:46.500 Full stop. No loan. It demonstrates that the 00:19:46.500 --> 00:19:49.880 economic viability of modernizing U .S. dairies 00:19:49.880 --> 00:19:53.279 is being directly manipulated by foreign policy 00:19:53.279 --> 00:19:56.799 happening thousands of miles away. It handcuffs 00:19:56.799 --> 00:19:58.799 our ability to invest and remain competitive. 00:19:59.079 --> 00:20:01.299 Simple as that. And if you can't invest, you 00:20:01.299 --> 00:20:03.799 can't modernize. And if you can't modernize, 00:20:03.799 --> 00:20:05.819 the farm becomes less appealing to the next generation. 00:20:06.119 --> 00:20:08.940 Exactly. Iowa State Extension data has tracked 00:20:08.940 --> 00:20:12.109 this correlation clearly. When margins look persistently 00:20:12.109 --> 00:20:14.450 thin and the debt load required to take over 00:20:14.450 --> 00:20:16.970 the operation remains incredibly high. Which 00:20:16.970 --> 00:20:19.930 it always is. The kids with ag degrees, they 00:20:19.930 --> 00:20:21.670 start looking elsewhere. They look at secure 00:20:21.670 --> 00:20:24.670 salary jobs with Land O 'Lakes corporate or maybe 00:20:24.670 --> 00:20:27.109 equipment dealers instead of taking on multimillion 00:20:27.109 --> 00:20:29.750 dollars in farm debt for what looks like a structurally 00:20:29.750 --> 00:20:32.250 handicapped business. It is a completely rational. 00:20:32.990 --> 00:20:34.930 economic choice for them to make, even if it 00:20:34.930 --> 00:20:36.650 feels heartbreaking for the retiring generation 00:20:36.650 --> 00:20:39.490 watching the farm legacy potentially end. Absolutely 00:20:39.490 --> 00:20:41.809 rational. If the business is starly designed, 00:20:41.910 --> 00:20:43.930 through no fault of your own, to only achieve 00:20:43.930 --> 00:20:46.650 thin margins, why would you shoulder the immense 00:20:46.650 --> 00:20:50.150 debt burden and the 247 demands of farming? It's 00:20:50.150 --> 00:20:52.950 a tough sell. So if the current structural leakage 00:20:52.950 --> 00:20:56.619 continues, where is this heading? The long view, 00:20:56.779 --> 00:20:59.859 based on current trends and projections, is frankly 00:20:59.859 --> 00:21:02.819 sobering. Yeah, the numbers aren't pretty. USDA 00:21:02.819 --> 00:21:05.839 data shows we've plummeted from over 70 ,000 00:21:05.839 --> 00:21:09.660 dairy farms back in 2003. 70 ,000. To only about 00:21:09.660 --> 00:21:13.839 26 ,500 today. That historical rate of loss is 00:21:13.839 --> 00:21:16.200 just staggering when you think about it. And 00:21:16.200 --> 00:21:18.319 the projections don't offer much relief, do they? 00:21:18.519 --> 00:21:20.809 No. Not really. Marin Bozic at the University 00:21:20.809 --> 00:21:23.869 of Minnesota, his modeling projects that if current 00:21:23.869 --> 00:21:26.410 structural disadvantages persist. If nothing 00:21:26.410 --> 00:21:29.190 changes. We could drop to between 17 ,000 and 00:21:29.190 --> 00:21:33.049 20 ,000 operations by 2035. 17 to 20 ,000. That 00:21:33.049 --> 00:21:35.210 means losing another quarter to a third of our 00:21:35.210 --> 00:21:37.549 remaining dairies in just over a decade. It's 00:21:37.549 --> 00:21:40.410 a massive potential loss. And critically, the 00:21:40.410 --> 00:21:42.490 loss isn't going to be evenly distributed across 00:21:42.490 --> 00:21:44.769 the country. No, this is where regional disparity 00:21:44.769 --> 00:21:47.150 is projected to accelerate dramatically. Traditional 00:21:47.150 --> 00:21:49.000 dairy states in the Northeast. they could see 00:21:49.000 --> 00:21:51.119 losses over 50 to 60 percent of their remaining 00:21:51.119 --> 00:21:54.589 farms. 50 to 60 percent. Gone. The upper Midwest 00:21:54.589 --> 00:21:57.470 might drop 40 to 55 percent. These are the areas 00:21:57.470 --> 00:22:00.650 dominated by those crucial midsize family operations. 00:22:00.849 --> 00:22:03.710 The 200 to 1 ,000 cow dairies. The backbone. 00:22:04.029 --> 00:22:06.970 But the large scale, western and southern states, 00:22:07.130 --> 00:22:09.589 they keep growing. They keep absorbing the volume. 00:22:09.730 --> 00:22:12.190 Right. This is the brutal truth of economics 00:22:12.190 --> 00:22:15.329 of scale. At the 3 ,000 plus cow scale, you have 00:22:15.329 --> 00:22:18.529 lower per unit fixed costs, better risk distribution. 00:22:19.480 --> 00:22:22.460 It allows them to sometimes absorb these competitive 00:22:22.460 --> 00:22:25.960 disadvantages better than a mid -scale 300 to 00:22:25.960 --> 00:22:29.259 1 ,000 cow dairy. That $90 to $100 per cow loss 00:22:29.259 --> 00:22:31.359 we talked about, it's an existential threat to 00:22:31.359 --> 00:22:33.299 the mid -size operation because it eats up their 00:22:33.299 --> 00:22:35.759 entire potential margin. Wipes it out. But it's 00:22:35.759 --> 00:22:38.559 just a significant inconvenience, maybe a controllable 00:22:38.559 --> 00:22:41.240 cost factor for the mega dairy that can operate 00:22:41.240 --> 00:22:43.799 on sheer volume efficiency. BOSIC's modeling 00:22:43.799 --> 00:22:45.900 emphasizes that these trade -related factors 00:22:45.900 --> 00:22:48.200 are accelerating consolidation by an estimated 00:22:48.200 --> 00:22:51.470 15%. 25 % beyond what natural market evolution 00:22:51.470 --> 00:22:53.730 would dictate. That's a key point. Look, consolidation 00:22:53.730 --> 00:22:56.029 due to technology, genetics, better management, 00:22:56.150 --> 00:22:57.750 that's always going to happen. It's part of business 00:22:57.750 --> 00:23:01.089 evolution. But this accelerated loss, it's driven 00:23:01.089 --> 00:23:03.950 by distortion, not necessarily superior farming 00:23:03.950 --> 00:23:06.630 or efficiency on the part of the survivors. It's 00:23:06.630 --> 00:23:08.549 basically a policy failure leading to unnecessary 00:23:08.549 --> 00:23:11.849 farm loss. We're losing good farms because the 00:23:11.849 --> 00:23:14.960 game is rigged. But there is a powerful contrarian 00:23:14.960 --> 00:23:17.039 lesson here, something that should give us hope 00:23:17.039 --> 00:23:19.059 and maybe some guidance. OK, I like hope. What 00:23:19.059 --> 00:23:22.819 is it? The U .S. Apple producers, they face similar, 00:23:22.900 --> 00:23:25.539 really aggressive Chinese subsidy competition 00:23:25.539 --> 00:23:28.279 a few years back. It threatened to swamp their 00:23:28.279 --> 00:23:30.259 global market share. Right. I remember that. 00:23:30.319 --> 00:23:32.039 Apples were getting hammered. They got organized. 00:23:32.079 --> 00:23:34.720 They documented the economic harm precisely. 00:23:35.359 --> 00:23:38.460 farm by farm, region by region, and they advocated 00:23:38.460 --> 00:23:40.779 relentlessly for trade remedies. And that led 00:23:40.779 --> 00:23:43.059 to the implementation of Section 301 tariffs, 00:23:43.240 --> 00:23:45.400 right? Exactly. For those unfamiliar, Section 00:23:45.400 --> 00:23:48.119 301 refers to a section of the U .S. Trade Act. 00:23:48.299 --> 00:23:50.480 It basically allows the U .S. trade representative 00:23:50.480 --> 00:23:54.240 to investigate and, if warranted, retaliate against 00:23:54.240 --> 00:23:57.460 unfair foreign trade practices. It's a powerful 00:23:57.460 --> 00:23:59.880 policy mechanism we already have. A tool in the 00:23:59.880 --> 00:24:03.289 toolbox. And the result for apples. Within two 00:24:03.289 --> 00:24:06.029 years of implementation, U .S. Apple exports 00:24:06.029 --> 00:24:09.269 to key Asian markets recovered by nearly 30 percent. 00:24:09.390 --> 00:24:12.109 30 percent recovery. That's huge. It leveled 00:24:12.109 --> 00:24:13.890 the playing field just enough for efficiency 00:24:13.890 --> 00:24:17.130 and quality to win again. It proves that policy 00:24:17.130 --> 00:24:19.990 can, in fact, change the trajectory and potentially 00:24:19.990 --> 00:24:23.650 prevent this projected 25, 33 percent loss of 00:24:23.650 --> 00:24:26.390 our dairy farms. It's not inevitable if we fight 00:24:26.390 --> 00:24:30.009 back smart. OK, so knowing all this. The structural 00:24:30.009 --> 00:24:33.049 disadvantage, the hidden cost, the potential 00:24:33.049 --> 00:24:36.250 policy solution. What are producers actually 00:24:36.250 --> 00:24:38.809 doing right now to survive? What strategies are 00:24:38.809 --> 00:24:41.150 working on the ground? The source material suggests 00:24:41.150 --> 00:24:44.309 three primary strategies are emerging, and they 00:24:44.309 --> 00:24:46.630 are not mutually exclusive. People are trying 00:24:46.630 --> 00:24:48.430 different combinations. Okay, what strategy do 00:24:48.430 --> 00:24:50.579 you want? Strategy one is what we call the make 00:24:50.579 --> 00:24:53.140 the scale decision. Basically, if you are between, 00:24:53.220 --> 00:24:56.700 say, 500 and 1000 cows, you're currently in the 00:24:56.700 --> 00:24:59.119 most vulnerable crosshairs financially. The squeeze 00:24:59.119 --> 00:25:01.640 zone. Exactly. Some producers in that zone are 00:25:01.640 --> 00:25:03.859 aggressively borrowing, leveraging up to scale 00:25:03.859 --> 00:25:07.220 past 1500 or maybe 2000 cows. They're essentially 00:25:07.220 --> 00:25:09.539 betting that sheer volume can overcome the per 00:25:09.539 --> 00:25:12.059 cow subsidy impact. That's an immense gamble, 00:25:12.119 --> 00:25:14.700 though. You are leveraging your balance sheet 00:25:14.700 --> 00:25:18.000 to the absolute max to survive a hostile market. 00:25:18.359 --> 00:25:20.940 Betting on the eventual recovery of trade policy. 00:25:21.140 --> 00:25:23.720 While relying purely on economies of scale to 00:25:23.720 --> 00:25:26.180 survive the meantime. That's high risk, high 00:25:26.180 --> 00:25:28.819 reward. A lot of sleepless nights there. Absolutely. 00:25:29.079 --> 00:25:32.799 But there's a necessary, often painful flip side 00:25:32.799 --> 00:25:36.130 to that decision. Choosing an orderly exit while 00:25:36.130 --> 00:25:37.990 you still have equity left in the operation. 00:25:38.349 --> 00:25:40.650 Getting out while the getting's good, so to speak. 00:25:40.789 --> 00:25:42.809 The Pennsylvania dairyman put it bluntly, and 00:25:42.809 --> 00:25:44.529 I want to reflect on the emotional weight of 00:25:44.529 --> 00:25:46.910 this decision for a moment. He said, I can get 00:25:46.910 --> 00:25:50.450 $1 ,500 per head in an orderly sale today. Wait 00:25:50.450 --> 00:25:52.829 three years if margins stay compressed and the 00:25:52.829 --> 00:25:55.869 bank gets nervous. Maybe it's $800 in a fire 00:25:55.869 --> 00:25:59.569 sale. That's a huge difference. That $700 per 00:25:59.569 --> 00:26:02.589 head difference translates to a $350 ,000 difference 00:26:02.589 --> 00:26:05.829 on just 500 cows. So making that strategic exit 00:26:05.829 --> 00:26:08.029 becomes a valid, hard -headed business decision, 00:26:08.170 --> 00:26:10.309 even though it's gut -wrenching. It's forced 00:26:10.309 --> 00:26:12.390 by external policy. Yeah, that's not a business 00:26:12.390 --> 00:26:14.170 decision you want to make. It's a legacy decision 00:26:14.170 --> 00:26:16.930 forced upon you. Okay, what's strategy two? The 00:26:16.930 --> 00:26:19.910 second strategy is finding premium markets. We 00:26:19.910 --> 00:26:22.230 see operations working hard to capture certified 00:26:22.230 --> 00:26:26.089 organic, A2A2, or specific grass -fed premiums, 00:26:26.089 --> 00:26:28.329 trying to build a margin big enough to simply 00:26:28.329 --> 00:26:30.369 ignore the subsidized conventional commodity 00:26:30.369 --> 00:26:33.680 market. trying to find a niche outside the main 00:26:33.680 --> 00:26:36.640 battlefield. I appreciate the Vermont organic 00:26:36.640 --> 00:26:39.480 producer example they cited, but man, it shows 00:26:39.480 --> 00:26:42.400 how demanding this path is. It's not easy. They 00:26:42.400 --> 00:26:44.579 faced 18 months of disrupted cash flow during 00:26:44.579 --> 00:26:47.900 the transition, over $280 ,000 in market development 00:26:47.900 --> 00:26:51.369 costs. And they're capped at 400 cows due to 00:26:51.369 --> 00:26:53.650 pasture availability and certification requirements. 00:26:53.930 --> 00:26:56.529 It works for them because they are close to major 00:26:56.529 --> 00:26:58.829 consumer hubs like Boston, right? That allows 00:26:58.829 --> 00:27:00.730 them to actually demand and get that premium 00:27:00.730 --> 00:27:03.269 price. Location, location, location. But USDA 00:27:03.269 --> 00:27:05.630 data confirms this path is only viable for maybe 00:27:05.630 --> 00:27:08.490 10 to 15 percent of operations nationally. You 00:27:08.490 --> 00:27:10.150 need the right land, the right resources, the 00:27:10.150 --> 00:27:12.390 right climate, and critically, the right location 00:27:12.390 --> 00:27:15.289 near willing consumers. It's not a solution for 00:27:15.289 --> 00:27:17.839 everyone. Definitely not. Which brings us to 00:27:17.839 --> 00:27:19.799 the third strategy, which is potentially the 00:27:19.799 --> 00:27:22.160 most powerful because it helps everyone, regardless 00:27:22.160 --> 00:27:25.980 of size or location, getting organized and speaking 00:27:25.980 --> 00:27:29.180 up. Ah, the advocacy route. Yes. Producers are 00:27:29.180 --> 00:27:31.319 moving away from just generic complaints, you 00:27:31.319 --> 00:27:34.700 know. Milk prices stink. They're using real hard 00:27:34.700 --> 00:27:38.240 data to document the specific economic harm these 00:27:38.240 --> 00:27:40.759 trade policies are causing. Because generic complaints 00:27:40.759 --> 00:27:43.279 don't move policy, do they? Not at all. Specific 00:27:43.279 --> 00:27:45.960 spreadsheets, lost contract documents, regional 00:27:45.960 --> 00:27:48.140 impact studies, that's what gets attention. The 00:27:48.140 --> 00:27:50.539 Wisconsin Dairy Business Association is the perfect 00:27:50.539 --> 00:27:52.880 example of effective organization here. Absolutely. 00:27:52.980 --> 00:27:55.740 They aggregated member data showing over $45 00:27:55.740 --> 00:27:58.500 million in annual trade -related losses across 00:27:58.500 --> 00:28:01.519 their membership. $45 million. When you walk 00:28:01.519 --> 00:28:03.759 into a congressional office with $45 million 00:28:03.759 --> 00:28:07.259 in documented economic harm impacting their constituents, 00:28:07.619 --> 00:28:10.680 people listen. Policy attention follows fast. 00:28:11.039 --> 00:28:13.279 And we saw the immediate success back in Michigan, 00:28:13.299 --> 00:28:15.619 connecting back to that case study. Producers 00:28:15.619 --> 00:28:18.420 armed with documentation of lost contracts, the 00:28:18.420 --> 00:28:20.380 specific price impacts on their milk checks, 00:28:20.539 --> 00:28:23.279 they met directly with Congress. Laid it all 00:28:23.279 --> 00:28:25.859 out. And they secured co -sponsorship for trade 00:28:25.859 --> 00:28:27.759 enforcement legislation within three months. 00:28:28.240 --> 00:28:30.799 Three months. That proves it right there. Specific, 00:28:30.799 --> 00:28:34.140 actionable, aggregated data is the single most 00:28:34.140 --> 00:28:37.440 important tool farmers have right now to fight 00:28:37.440 --> 00:28:39.819 this structural problem. You got to organize 00:28:39.819 --> 00:28:42.160 and bring the proof. OK, let's unpack this and 00:28:42.160 --> 00:28:44.279 get to the actionable insights. Let's make this 00:28:44.279 --> 00:28:46.960 real. You finished morning milking. You're driving 00:28:46.960 --> 00:28:49.099 to the feed store focused on what matters right 00:28:49.099 --> 00:28:52.019 now for your operation. What are the three things 00:28:52.019 --> 00:28:54.440 you absolutely need to know from this deep dive? 00:28:54.640 --> 00:28:56.880 All right. Three takeaways. The first thing you 00:28:56.880 --> 00:29:00.099 need to do. like this week, is document your 00:29:00.099 --> 00:29:03.019 pressure. You need to gather data that proves 00:29:03.019 --> 00:29:05.720 your struggle is structural, not just operational 00:29:05.720 --> 00:29:08.240 mismanagement. Document your pressure. Okay, 00:29:08.279 --> 00:29:09.839 what do you mean by that, practically speaking? 00:29:10.019 --> 00:29:11.660 What does the bank actually need to see? How 00:29:11.660 --> 00:29:14.299 do you document it? Okay, first, talk to your 00:29:14.299 --> 00:29:16.420 local farm credit or your lender immediately. 00:29:17.000 --> 00:29:19.490 Tell them what's going on. The source material 00:29:19.490 --> 00:29:21.910 shows that several bankers inform the researchers 00:29:21.910 --> 00:29:24.410 they are much more flexible with loan covenants, 00:29:24.470 --> 00:29:27.289 maybe offering extensions or refinancing, when 00:29:27.289 --> 00:29:30.109 producers can demonstrate that documented market 00:29:30.109 --> 00:29:32.890 distortions are the primary driver. So things 00:29:32.890 --> 00:29:35.430 like specific commodity price suppression numbers 00:29:35.430 --> 00:29:38.349 for your region or known contract losses by your 00:29:38.349 --> 00:29:41.180 co -op. Exactly. Prove it's the market, not just 00:29:41.180 --> 00:29:42.900 you having a bad year with high somatic cell 00:29:42.900 --> 00:29:45.519 counts or poor feed conversion. But more importantly, 00:29:45.700 --> 00:29:47.900 don't go it alone. Work with your neighbors, 00:29:48.059 --> 00:29:50.750 your local producer groups. Aggregate specific 00:29:50.750 --> 00:29:53.849 data on contracts lost or price impacts across 00:29:53.849 --> 00:29:56.329 multiple farms. Power in numbers. Absolutely. 00:29:56.670 --> 00:29:58.769 Ten farms speaking together with unified data 00:29:58.769 --> 00:30:01.390 carry exponential weight compared to ten individual 00:30:01.390 --> 00:30:04.109 complaints. Gather those co -op loss notices. 00:30:04.250 --> 00:30:06.730 Find specific regional market analysis reports 00:30:06.730 --> 00:30:08.829 that show the price spread between U .S. and 00:30:08.829 --> 00:30:11.609 EU product and key export markets. Build a case 00:30:11.609 --> 00:30:14.460 file. That's brilliant advice. Use the documented 00:30:14.460 --> 00:30:17.200 structural problem as a shield, or at least leverage 00:30:17.200 --> 00:30:20.980 with your lender. Okay, now, medium term. What's 00:30:20.980 --> 00:30:23.079 the strategy for the next three to six months 00:30:23.079 --> 00:30:26.500 as you maybe prepare for year -end review? Rethink 00:30:26.500 --> 00:30:29.319 your breakeven analysis. This is crucial. When 00:30:29.319 --> 00:30:31.119 you're evaluating your operation's financial 00:30:31.119 --> 00:30:35.000 health, run two detailed breakeven scenarios. 00:30:35.359 --> 00:30:37.980 Two scenarios. Yeah, scenario one. Under current 00:30:37.980 --> 00:30:40.319 subsidized conditions, the reality we live in 00:30:40.319 --> 00:30:44.039 now. Scenario two. Assuming potential trade improvements, 00:30:44.259 --> 00:30:47.039 what if you got back just part of that loss margin? 00:30:47.240 --> 00:30:51.119 So maybe gaining back just, say, $0 .20 per hundred. 00:30:51.400 --> 00:30:53.980 Exactly. Something modest but meaningful. If 00:30:53.980 --> 00:30:55.720 your farm is struggling now, but the numbers 00:30:55.720 --> 00:30:57.799 show it would be profitable with those modest 00:30:57.799 --> 00:30:59.799 price improvements, then you know the problem 00:30:59.799 --> 00:31:02.140 is primarily structural, not operational. Okay. 00:31:02.160 --> 00:31:04.700 And knowing that? Knowing that frees you up mentally 00:31:04.700 --> 00:31:07.180 and strategically. You can focus your energy 00:31:07.180 --> 00:31:10.000 on policy advocacy, on long -term capital planning, 00:31:10.140 --> 00:31:12.400 rather than constantly tearing apart management 00:31:12.400 --> 00:31:14.640 practices that might actually be perfectly fine 00:31:14.640 --> 00:31:17.140 or even excellent. That analysis alone could 00:31:17.140 --> 00:31:18.980 change a farmer's entire outlook from feeling 00:31:18.980 --> 00:31:21.539 defeated to feeling strategic. That's powerful. 00:31:22.240 --> 00:31:25.180 Finally, looking long -term, what's the positioning 00:31:25.180 --> 00:31:27.440 strategy for the next year or two, especially 00:31:27.440 --> 00:31:29.900 regarding major capital investments? Investment 00:31:29.900 --> 00:31:32.940 modeling has to become mandatory. non -negotiable 00:31:32.940 --> 00:31:36.079 do not approve a major investment a robotic system 00:31:36.079 --> 00:31:39.859 a new barn a major manure system upgrade unless 00:31:39.859 --> 00:31:42.319 you model three distinct financial scenarios 00:31:42.319 --> 00:31:44.880 for it three scenarios for every big purchase 00:31:44.880 --> 00:31:48.099 three scenario one baseline using current depressed 00:31:48.099 --> 00:31:51.779 prices. Scenario two, partial improvement, maybe 00:31:51.779 --> 00:31:54.460 assuming a plus Z dollars under $7 rate price 00:31:54.460 --> 00:31:56.480 lift through initial trade action. And scenario 00:31:56.480 --> 00:31:58.900 three, normalized pricing, projecting a plus 00:31:58.900 --> 00:32:01.460 $1 .40 settlement improvement, assuming full 00:32:01.460 --> 00:32:03.859 policy success eventually happens. And the rule 00:32:03.859 --> 00:32:05.920 is, only proceed with investments that pencil 00:32:05.920 --> 00:32:08.589 out. that work financially in at least two of 00:32:08.589 --> 00:32:10.970 those three scenarios. This ensures you are making 00:32:10.970 --> 00:32:13.210 resilient investments, investments that don't 00:32:13.210 --> 00:32:15.450 depend entirely on the status quo remaining terrible 00:32:15.450 --> 00:32:18.450 forever, but also don't bet the farm on policy 00:32:18.450 --> 00:32:20.549 changing overnight. It builds in resilience. 00:32:20.869 --> 00:32:23.470 That's a very practical risk management approach 00:32:23.470 --> 00:32:26.569 for capital spending in this environment. Excellent. 00:32:26.650 --> 00:32:28.990 This has been a massive deep dive into a really 00:32:28.990 --> 00:32:32.509 difficult topic, hasn't it? And the final provocative 00:32:32.509 --> 00:32:34.839 thought I want to leave you with. It goes back 00:32:34.839 --> 00:32:36.779 to that old timer quote we started with. Yeah. 00:32:37.900 --> 00:32:40.279 Managing weather, disease, and market cycles 00:32:40.279 --> 00:32:43.150 is dairy farming. That is what you sign up for. 00:32:43.250 --> 00:32:45.589 It's part of the job description. It is. But 00:32:45.589 --> 00:32:47.809 competing against foreign treasuries, against 00:32:47.809 --> 00:32:51.170 government policy designed to undercut you, that's 00:32:51.170 --> 00:32:53.029 not something you fix just by working harder 00:32:53.029 --> 00:32:55.670 or buying better genetics. This fight is bigger 00:32:55.670 --> 00:32:57.490 than your fence lines. This is about whether 00:32:57.490 --> 00:33:00.130 your farm town keeps its feed mill, its vet clinic, 00:33:00.369 --> 00:33:03.710 its school, its tax base, the whole rural infrastructure. 00:33:04.069 --> 00:33:06.589 It truly is about the whole ecosystem. But the 00:33:06.589 --> 00:33:09.609 good news, the hopeful note, is that policy can 00:33:09.609 --> 00:33:12.920 change the trajectory. Texas A &M modeling suggests 00:33:12.920 --> 00:33:15.619 that if trade adjustments, similar to those achieved 00:33:15.619 --> 00:33:18.460 for the apple producers, are successfully implemented 00:33:18.460 --> 00:33:22.660 for dairy, we could see initial price improvements 00:33:22.660 --> 00:33:26.119 starting in maybe 12 to 18 months, leading to 00:33:26.119 --> 00:33:28.380 more comprehensive relief in two to three years. 00:33:28.660 --> 00:33:31.099 That's not instantaneous, but it's a realistic 00:33:31.099 --> 00:33:34.099 timeline for policy impact. And that relief could 00:33:34.099 --> 00:33:36.720 preserve several thousand dairy operations through 00:33:36.720 --> 00:33:40.019 2035. Farms that would otherwise be lost purely 00:33:40.019 --> 00:33:42.500 to this structural distortion. It's worth fighting 00:33:42.500 --> 00:33:44.740 for. Absolutely worth fighting for. This has 00:33:44.740 --> 00:33:46.740 been another deep dive from the Bullvine podcast. 00:33:47.200 --> 00:33:49.200 If this kind of analysis helps your operation, 00:33:49.440 --> 00:33:54.279 head over to www. thebullvine .com. We've got 00:33:54.279 --> 00:33:55.880 more articles that tell you what's really happening 00:33:55.880 --> 00:33:58.680 in dairy. No BS. And seriously, subscribe wherever 00:33:58.680 --> 00:34:01.039 you get your deep dives, your podcasts. We're 00:34:01.039 --> 00:34:03.119 releasing insights twice weekly now, and trust 00:34:03.119 --> 00:34:04.960 me, you don't want to miss what we've got coming 00:34:04.960 --> 00:34:06.900 next week. We're digging into the surprising 00:34:06.900 --> 00:34:09.400 correlation between somatic cell count and equipment 00:34:09.400 --> 00:34:11.480 financing terms, and how lenders are starting 00:34:11.480 --> 00:34:13.260 to use that data against you in ways you might 00:34:13.260 --> 00:34:21.530 not expect. Thank you.