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. This one's got layers and some structural
surprises that are going to make you, the farmer,
rethink how you've been approaching profitability
and critically value capture. Okay, let's unpack
this core paradox. Yeah. Because it really is
something. We are looking at two beverages sitting
right next to each other in the same grocery
store cooler. One is basically sugar water, right?
fortified with carbonation and flavoring. The
other is complete nutrient -dense milk protein,
calcium, essential vitamins, real nutrition.
Yet the core question is staggering. How is Coca
-Cola's product capturing 60 to 70 cents of every
retail dollar spent? Yeah. While milk, our arguably
superior product, is struggling to capture maybe
30 to 49 cents. That gap, that 70 -30 split you
mentioned, isn't just an economic curiosity.
It is... the entire game right now. It really
is. We need to understand this fundamental structural
and, you know, business model difference to even
begin to fix our side of the equation. Because
right now we are looking at a system built for
commodities that's dairy competing directly against
systems built for global, unshakable, proprietary
brands cope. It's an asymmetric fight, really.
This deep dives matters right now because that
widening gap, it reflects these deep structural
advantages that Frankly, dairy has to counter
before the cost of inaction becomes, well, fatal.
We can't just sit around and wait for the commodity
price cycle to spin back up. Those cycles are
becoming shorter, less predictable. We have to
build permanent resilience. We are dissecting
a system that rewards complexity in production,
which, let's face it, is what dairy excels at.
We're good at making milk. But rewards simplicity
and singular brand loyalty in retail, which is
what we fundamentally lack as an industry. And
if you're asking what's truly at stake for your
operation, it's survival. Plain and simple. The
source material suggests a very harsh, but I
think essential metric. If your farm's percentage
of retail value capture is below 35%, you are
statistically stuck in the commodity trap. You
are a price taker, not a price maker. End of
story. That 35 % marker is... critical. It really
is. That difference moving from 35 percent to
even, say, 45 percent. That's the difference
between making those critical long term investments,
facility upgrades, new genetics, maybe technology
versus just treading water. Yeah. You know, managing
debt. Trying to keep the lights on. It's the
difference between planning for the next generation
and just worrying about the next quarter's milk
check. Exactly. But here's where we pivot, because
it's not all existential dread. It can't be.
The focus of this research is on specific, proven
strategies things people are doing right now,
from genetics management to innovative processor
arrangements that are already delivering Coke
-like stability and margins to successful dairy
operations. Yeah. It is possible. Absolutely.
And we are going to dive into one strategy. beef
on dairy that is currently promising $70 ,000
or more. $70 ,000. In extra annual revenue for
minimal capital outlay, we're talking maybe $2
,000 in additional semen costs. Yeah, the ROI
is huge there. That's a return on investment
that transforms cash flow almost immediately.
And before we get too deep into the solutions,
we absolutely must talk about the ticking clock.
There is a looming technology threat. precision
fermentation that the sources peg as having roughly
an 18 -month countdown window. 18 months? That's
not long. No, it's not. This is the period during
which we must make decisive structural moves
before the underlying equity in our current commodity
models just evaporates completely. The time for
just thinking about it is over. Okay. Let's get
into it then. Yeah. So let's start by defining
this chasm using the specific data points that
jumped out of the research. Right. We have this
profound paradox. Coke sells a product that is
87 % cheap ingredients, water and flavoring,
basically. Water and sugar, mostly. Dairy sells
complete nutrition. Yet. Coca -Cola is capturing
consistently between 60 and 70 percent of the
retail dollar. 60 to 70. And if we look at the
USDA data cited, specifically that March 2025
analysis, dairy is only securing between 30 and
49 percent of that retail dollar. Even at the
absolute high end, 49%, we are substantially
behind Coke's low end. It's not just a slight
difference. It's a structural misalignment. It's
massive. Absolutely. Let's quantify this for
the listener. Put some real numbers on it. Yeah.
When consumers are paying, say, $4 .48 for a
typical gallon of milk at the store. Okay. The
producer, the farmer, is receiving about $1 .97.
Right. If you do that quick math, we are sitting
at roughly 44 % capture. Now. 44 % sounds respectable
compared to the 30 % low at. Yeah, it sounds
okay on its own. But this calculation only addresses
the producer's share of the final price. It completely
glosses over the radically different operating
cost structure for the processors upstream. Ah,
yes, the processor peak. Which is the immediate
market for the raw product you're selling. This
is where the farmer perspective comes in. And
you have to stop and say, wait a minute, their
cost structure must be fundamentally inverted
from ours. It has to be. The research from the
Cornell Program on Dairy Markets and Policy is
stunning here. Really lays it out. Think about
Coca -Cola. Their raw materials, the syrup concentrate,
the sugar, the flavorings, represent just 5 %
of their total revenue. 5 %? Just 5 cents on
the dollar? 5%. The rest is marketing, distribution,
overhead, and profit. Lots of profit. Okay, so
5 % for Coke's inputs. Now, for the dairy processors
who are buying our raw milk, what does that input
cost look like for them? Raw milk purchases for
the typical processor eat up about 50%. 50 half.
50%, half of their total operating costs. Let
that sink in. Wow. The dairy processor starts
the race with a 50 % cost burden right out of
the gate compared to Coke's 5%. This tenfold
difference is massive, and it defines the profitability
ceiling for the entire supply chain. It just
does. So the processors have almost no wiggle
room. Exactly. We're talking maybe... 2 % to
3 % margin difference for them, how can they
possibly increase the amount they pay producers
significantly while still maintaining their own
profitability in this cutthroat commodity market?
They can't. That 5 % versus 50 % comparison,
I think that's the single most important metric
in this entire deep dive. It really frames the
whole problem. It shows why the commodity market
is inherently punitive for dairy. If the processor
is already paying half their revenue for input,
They cannot afford the massive unified marketing
budget that Coke can. Nope. They cannot afford
the risk of long -term capital investments that
don't pay off immediately. The risk is too high.
And this structural difference means the commodity
market relentlessly punishes any operation that
lacks differentiation or scale. Who does that
hit hardest? I would argue it's the mid -sized
dairies, you know, the ones running 100 to 500
cows. Yeah, the ones caught in the middle. They
don't have the sheer scale of the massive Western
operations to achieve those crucial $14 to $16
per hundred weight cost efficiencies that allow
path one, the go big path, to survive. Right.
And they often lack the proximity or maybe the
infrastructure or just the flexibility to immediately
jump into those high value local premium markets
that the smaller farms are carving out. Exactly.
They're caught in the middle, still dependent
on the volatile commodity price, and they're
the ones forced to confront this crossroads most
urgently. The status quo is just economically
unsustainable for that group. Something has to
change. OK, let's pivot to the why. Why does
Koch enjoy this, you know, dominant position?
We need to challenge the conventional wisdom
that says we can ever truly compete head to head
on the national stage when these structural realities
exist. It might not be possible. First, logistics.
This is honestly the genius of their business
model. It really is. They ship concentrated syrup.
They call it the concentration secret. And it
is a secret weapon. Shipping the concentrate
eliminates 87 % of the product weight from their
shipping and storage costs. 87%. That's almost
everything. Think about that. They make the syrup
concentrate in a centralized location, send it
out, and the bottlers simply add the two cheapest
components, water and carbonation, at the destination.
Right near the consumer. It's radical simplification,
and it completely bypasses the most expensive
parts of the dairy supply chain. And the brutal
truth for dairy, milk is 87 % water too, but
we can't ship it concentrated. Not easily, anyway.
Nope. It is heavy, it's perishable, and it requires
continuous, extremely expensive refrigeration.
The cold chain. That cold chain cost is the silent
margin killer. It just eats away at profit. The
University of Wisconsin Center for Dairy Research
quantified this. We're talking 10 to 15 cents
per gallon. Per gallon. Daily. just for continuous
storage and cooling daily if milk sits in a distribution
center or on a truck for just a week waiting
for turnover that's already shamed off over a
dollar per gallon in added expense that coca
-cola simply doesn't have to bear for the vast
majority of its supply chain that adds up incredibly
quickly and shaves off value capture right in
the middle long before the producer sees a check
it's gone logistics is one huge thing but then
there's the marketing and brand power oh yeah
The brand. When one singular brand rules the
global market, you get the power of concentrated
spending. MediaRadar tracked Coca -Cola's marketing
spend for 2023 at $4 .24 billion annually. Billion.
With the B. That's unified marketing for one
brand family, pushing one clear emotional message
globally. Happiness. Nostalgia. Okay, now compare
that to the, was it $420 million collected by
the mandatory checkoff program last year? $420
million. Wait, so... Coke is spending 10 times
what the entire U .S. dairy industry is collecting
for promotion. 10 times. Exactly. And that $420
million isn't unified, which is the other critical
point. Right. That's key, too. It's spread across
competing fluid milk promotions, regional cheese
campaigns, butter, yogurt, often with different
regions vying for different messaging, sometimes
even competing against each other. So we're fighting
a coordinated global $4 billion marketing army
with scattered platoons totaling $420 million.
Yeah. The fight is. structurally uneven before
it even starts. And the final piece of the structural
advantage is the proprietary formula scarcity.
Ah, the secret formula. Coca -Cola keeps incredibly
tight control over its concentrate formula. Nobody
else can make exactly what they make. That's
a barrier to entry, a huge one. Milk is the opposite.
There is no proprietary formula. Milk from a
Holstein in Idaho is functionally, chemically,
the same as milk from a Holstein in New York.
It's fungible. We are all producing the same
basic fungible commodity. There's no secret ingredient.
This brings us to the bull vines analytical core,
right, where we look at the philosophical underpinning
of the difference. Dr. Andrew Novakovich planted
perfectly when he said Coca -Cola created scarcity
around abundance. Scarcity around abundance.
I like that. They took common ingredients you
can find anywhere. Sugar, water. flavors, and
made them exclusive through a secret process
and relentless, overwhelming marketing. And we
in dairy are plagued by abundance without any
scarcity. That complete lack of differentiation
means we have no pricing power. None. We are
constantly vulnerable to the lowest cost producer
or the next technological leap that makes milk
cheaper. We saw the ultimate consequence of this
market vulnerability with the collapse of Dean
Foods back in November 2019. Yeah, that was a
shocker. They achieved massive scale over 100
plants at their peak, which conventional wisdom
says should provide unbeatable efficiency. Scale
should win, right? Right. That's what we're always
told. Get bigger, get more efficient. But wait,
if scale is all about efficiency, why didn't
Dean's 100 plants give them the negotiating power
they needed to survive? What happened there?
Because their entire foundation was built on
sand. When the bankruptcy documents came out,
the brutal truth was that they had zero consumer
brand loyalty. Zero. Wow. They were solely focused
on the commodity volume supplying private label.
When Walmart, their major customer, decided to
build its own processing plant. Pulled the rug
out. Dean lost major supply contracts overnight
and collapsed immediately. Scale wasn't enough
without value capture and brand power. It meant
nothing without loyalty. It's sobering, isn't
it? Imagine achieving that kind of scale 100
plants only to realize your entire foundation
was built on customer indifference. It's a fundamental
lesson for every dairy farmer listening. Volume
alone without a strategy for value capture is
a dangerously precarious foundation. You need
more than just pounds of milk. So we've established
the chasm and the structural reasons why it exists.
It's pretty clear. Now let's pivot to the solutions.
The three strategies identified in the source
material that are actually delivering Coke -like
stability or sustainable profitability in the
dairy world right now. Yeah, let's talk about
what is working. We're talking beef on dairy,
premium storytelling, and strategic processor
partnerships. Hashtag, tag, tag, tag, beef on
dairy, the simplification model. Let's start
here because this is the most immediate, simple,
and frankly effective strategy available right
now for a lot of farms. Cook is win. Yeah. This
is dairy's version of simplification. You're
leveraging your entire existing infrastructure,
your cows, your breeding program, your housing,
your parlor, and simply changing one input, the
semen you use. And the data supports the massive
adoption of this simplification model. The American
Farm Bureau Federation showed in its October
data that 81 percent, 81 percent, of U .S. dairy
herds now use beef semen. That's nearly four
out of five operations. So if you're not in that
81%, you are clearly leaving serious money on
the table without needing massive capital expenditure.
Okay, let's break down the economics in detail
because we threw out that $70 ,000 extra revenue
figure. We need to show how that works. Okay,
let's take a common industry scenario. A 200
cow herd. Pretty typical size. A conservative
strategy would be to breed the bottom third,
maybe genetically or just older cows, say 66
cows, to beef genetics. Eve cross calves are
averaging around $480 this spring. Pretty strong
market. Compare that to a typical Holstein bull
calf bringing in maybe $110 on a good day. That's
a net difference of $370 per calf. Significant.
Right. Now, factoring in a strong 90 % calf survival
rate, which is reasonable, you have roughly 60
saleable beef -dairy cross calves from those
66 breedings. 60 calves times that $370 difference
equals $22 ,200 in extra revenue. $22 ,000 just
from changing semen on a third of the herd. Just
from that one breeding decision per year. Wait,
I thought we said $70 ,000. Where does that number
come from? Ah, good question. That 22k calculation
assumes you are still raising all your own replacements
from the other two -thirds of the herd. The figure
of $70 ,000 comes from slightly larger operations,
say 400 cows breeding, maybe 40 % or even 50
% of the herd to beef. This allows them to fully
outsource heifer development and focus only on
the core milking animals. They buy their replacements
instead of raising them. Ah, so the $70 year
includes the savings from not raising heifers.
Exactly. For many operations, the true value
capture comes from that simplification reducing
the capital cost, the labor, the feed, and the
risk associated with raising replacements. they
don't actually need to maintain herd size if
they use sexed semen effectively on the top end.
But even at $22 ,200 for a 200 -cow herd, that's
an immediate massive cash flow injection for
maybe $2 ,000 in additional semen costs. Maybe.
The cost -benefit ratio is profoundly favorable.
It's almost a no -brainer. And it's not just
about the gross price. It's about strategic market
timing, too. Sandy Larson from UW -Madison Extension
made a great point that taxing these beef -on
-dairy breedings for spring calving aligns perfectly
with when beef markets typically peak. So you
can leverage those seasonal fluctuations. Smart.
Sell when demand is highest. And we shouldn't
overlook government aid that can support the
shift towards simplification. The USDA's NRCS
Environmental Quality Incentives Program, or
EQIP, is specifically designed to cover up to
75 % of costs for certain practices that support
these kinds of transitions. Can you give us an
example of what qualifies under EQIP for this?
Absolutely. If a farmer is using beef on dairy
as part of a larger plan to transition away from
intensive confinement toward more efficient rotational
grazing, maybe integrating the beef crosses differently.
or if they are implementing new manure management
systems that are better suited for integrating
a small beef component alongside the dairy, EQIP
can help cover the structural costs of that change,
like fencing or watering systems. So it de -risks
the initial shift. Exactly. It allows producers
to de -risk the initial shift, recognizing that
this simplification strategy can also be environmentally
sound, which NRCS likes. Hashtag, tag, tag, tag,
premium storytelling. Selling value, not specs.
Okay, the second strategy. This is taking a page
right out of the Coca -Cola marketing playbook.
Stop selling milk specs, you know, fat, protein,
solids, and start selling feelings and values.
Yeah, the intangibles. Coke sells happiness and
nostalgia. Dairy needs to sell environmental
stewardship, animal welfare, local connection,
authenticity. That Vermont producer example in
the research really stuck with me because she...
fundamentally changed her product offering without
changing the milk itself all that much. How'd
she do it? She spent six years transitioning
her operation to certified organic, which involved,
the article said, approximately $45 ,000 in accumulated
certification and infrastructure costs over that
period. Not insignificant, but spread out. Okay,
so $45 ,000 investment over six years. What was
the return on that investment? Her key realization
was this. She stopped selling a gallon of white
liquid and started selling a relationship with
the land and the cows. Telling the story. Exactly.
Her customers are buying into the farm's values,
local sourcing, environmental stewardship, the
family farming tradition, animal care. It created
consumer -driven scarcity. They can only buy
her story, her values in her region. And this
market is no longer a tiny niche, right? No way.
The Organic Trade Association data confirms these
story -driven premium markets are growing 7 %
to 9 % annually. outpacing the flat commodity
market. Seven to nine percent growth is huge.
We are projecting this premium market segment
could hit between 3 .2 and 5 .4 billion dollars
by the early 2030s. That's serious money. And
these are the operations getting those really
high prices. These are the operations getting
$35 to $50 per hundredweight compared to the
20 to 22 commodity price floor, sometimes even
higher for direct market. They are achieving
this premium because they have successfully created
a kind of consumer -driven scarcity. They are
the only ones telling that specific verifiable
story to that specific consumer base that cares
about it. We see clear regional examples of how
this adaptation works against local liabilities,
too, like down in the southeast. Yeah, the heat
stress issue. Where heat stress naturally knocks
production down by 25 % or more in conventional
herds during the summer. Some producers switched
to grass -fed systems with heat -tolerant breeds.
They didn't view it as a production loss. They
framed the story around resilient, heat -adapted
genetics and a pasture -based system that their
local consumer base valued highly, turning a
negative into a positive. And the result was
tangible. They secured $3 to $4 per hundredweight
premiums through regional retail partnerships,
allowing them to offset that natural production
drop while capturing significant value. They
made more money with less milk, essentially.
Similarly, look west at places like Colorado
and New Mexico, where water is the primary scarcity.
Big issue there. Farmers are monetizing water
conservation efforts, documenting the use of
advanced drip irrigation for feed, recycling,
parlor water. They make it part of their brand.
And retailers are actively seeking them out because
they offer a supply chain solution with a powerful
sustainability story. They're turning the liability
of water scarcity into a marketing asset that
commands a premium. Hashtag, hashtag, hashtag
processor partnerships, creating scarcity of
chaos. Okay, the third strategy. This one focuses
on distribution and risk management, mirroring
that Coca -Cola bottler model we talked about.
Right. Coke makes the concentrate. The bottlers
handle the messy, capital -intensive logistics
locally. For dairy, this translates to strategic
processor partnerships. This is the critical
option for the mid -to -large operation that
doesn't want to become a retailer or a marketing
agency itself. They want to focus on milk and
cows. The Idaho example in the research is perfect.
Larger operations there are securing $1 .50 over
Class III, pricing through long -term contracts
with regional cheese processors. Okay, for the
listener who might not be immersed in the complex
milk pricing formulas every day, can you quickly
define Class 3 and explain why a premium over
that benchmark matters so much? Sure. Class 3
is the price calculated based primarily on the
wholesale value of cheese blocks and dry whey.
It is essentially the volatile commodity baseline
price for milk used in cheese. It pounces around
a lot. Okay. A $1 .50 premium over that index
might not sound like the $50 per hundred weight
that the boutique farms are getting by selling
stories. Oh, it's much smaller. But the true
value isn't just the premium itself. It's the
predictability and stability it provides over
multiple years. Exactly. Predictability is a
form of value capture that allows for stable
investment. That's the key. When you know you're
getting at least $1 .50 above the market minimum
for the next three to five years, you can budget
for that new barn, you can plan for genetic upgrades,
you can access better financing terms from the
bank. It removes the market chaos. You're not
riding that class three roller coaster month
to month. And if you want the ultimate example
of stability through structural discipline, we
have to at least mention the Canadian supply
management system. Ah, yes. The Canadian model.
Always comes up. Producers there capture only
about 29 percent of the retail value, which is
actually less than the U .S. average. Right.
A lower percentage capture. But they operate
under a predictable cost of production pricing.
It was adjusted by 2 .3 percent this year based
on their input costs. The price might be lower
overall, but the income is basically guaranteed.
And the result of that pricing predictability
is stark. Statistics Canada reports virtually
zero dairy farm bankruptcies in the last five
years. Compare that to the U .S. It's a completely
different model for risk management. Total stability.
But we can't just blindly praise it. We have
to acknowledge the tradeoff, the downside. Canadian
producers view their quota, the right to produce
milk, as a capital asset that appreciates 4 to
6 percent annually for decades, which is great
for existing farms holding that quota. Builds
massive equity. But that quota represents a massive
barrier to entry. The capital cost to buy quota
alone makes it nearly impossible for the next
generation of farmers or new farmers to start
up without inheriting it or having massive capital.
Isn't that trading long -term stability for existing
players for potential short -term stagnation
and lack of new blood? It absolutely is. And
that's the strategic choice every region, every
country has to make. There's no perfect system.
Yeah. But the lesson holds true across all these
models. Creating scarcity, whether it's scarcity
of products, scarcity of brand, or scarcity of
market chaos through long -term contracts, is
fundamental to capturing and retaining value
in this industry. You need some kind of barrier.
Okay, now let's synthesize these findings into
the three definitive structural paths that the
sources identified for different farm sizes.
It's crucial to realize that survival isn't about
choosing one single best path. It's about aligning
your operation with the one that fits your scale,
your resources, and your geography. This is the
scale game, pure and simple. These operations
mimic Koch's strategy of concentrating production
to achieve unparalleled low costs. Get big or
get out. essentially. They're achieving benchmark
costs of $14 to $16 per hundredweight because
they leverage aggressive economies of scale in
feed purchasing, specialized labor management,
high -throughput parlors, and facility amortization
over many, many cows. But this path requires
specialization in management, not just owning
more cows. It requires extreme data analysis.
Oh yeah, data is king here. Tracking feed efficiency
down to the last gram, precise labor management
schedules, sophisticated environmental controls,
for barns. You aren't just farming. You are managing
a complex industrial scale data center that happens
to produce milk. And the market validates this
path. Rabobank and the USDA project that these
massive operations, 500 cows and up, really more
like a thousand plus these days, will produce
60 to 65 percent of the U .S. milk supply by
2030. 60 to 65 percent. Wow. They survive by
dominating the lowest cost position in the commodity
pool. Effectively forcing smaller, less efficient
producers out of the market who can't hit those
cost numbers. This is the Kraft Soda analogy.
If you can't beat Coke on volume, you beat them
on identity and uniqueness. Exactly. Smaller
dairies, specifically those in the 40 to 200
cow range, they can't compete on cost with Path
1. So they compete fiercely on value and narrative.
They sell identity. not just nutrients. This
requires building authentic, verifiable stories
around A2 genetics, grass -fed certification,
organic, maybe hyper -local identity, specific
animal welfare practices. This is how they hit
that $35 to $50 per hundredweight premium, or
even more with direct sales. They create a loyal
consumer base that is willing to pay significantly
more for the story and the values behind the
gallon than the basic specs of the milk itself.
But Path 2 demands a completely different skill
set from the farmer, doesn't it? Totally different.
You have to master consumer -facing compliance,
small -batch packaging rules, direct -to -consumer
logistics, if you go that route, food safety
regs, and sophisticated digital marketing, social
media, websites, farmer's markets. You have to
become a retailer and a brand manager first and
a farmer second, almost. Pretty much. This path
is high reward, potentially very profitable,
but it's also high risk if marketing and dealing
with the public isn't your strength. It takes
a certain personality. Okay, path three. This
path is for the mid to large operation, the 800
to maybe 2 ,500 cow segment, that focuses purely
on production excellence and efficiency, but
wisely avoids the massive capital expenditure
and risk of building and maintaining processing
infrastructure themselves. They're the ideal
Coke bottler model in dairy. They stick to their
knitting. They focus on what they do best, producing
a consistent, high -quality supply of milk efficiently.
By securing guaranteed premiums that $1 .50 or
more over Class III pricing through partnerships,
they manage their risk without having to take
on the liabilities, the debt, and the market
headaches of running a processing plant. It's
a pure focus on production efficiency married
to supply chain predictability. It makes sense
for a lot of farms in that size range. This path
keeps the midsize farm viable because it removes
the uncertainty of the volatile spot market.
Their job is clear. Deliver a predictable supply
that meets certain quality specs. And the processor's
job is clear. Handle the marketing, the logistics,
the product development. It's a mutual risk management
agreement that benefits both parties if structured
correctly. Now we have to talk about the huge
elephant in the room. The thing that puts an
expiration date on standing still. Precision
fermentation. Yeah, the disruptor. This is a
technology that is coming for both the dairy
industry and the beverage industry, potentially.
And it will fundamentally change the calculation
of commodity value. It changes the game. This
is the technology threat that the 18 -month survival
window we mentioned earlier is based upon. Companies
like Perfect Day, Future Cow, others, they are
producing molecularly identical proteins, whey,
casein, all the components you need to make dairy
products through microbial fermentation, basically
using microbes like yeast or fungi in tanks.
Like brewing beer, almost. Kind of, yeah. To
manufacture milk components without the gal.
And these aren't just lab experiments anymore,
right? They're commercial products. Exactly.
Perfect Day's proteins are already used in Brave
Robot ice cream, Modern Kitchen cream cheese.
You can find them stocked on shelves at Whole
Foods and other regional retailers. Right now,
it's here. And the consumer readiness is startling.
The Journal of Food Science and Technology study
showed 78 .8 % of consumers are willing to try
these products. Nearly 80%. With 70%. intending
to buy regularly they don't seem to have the
ick factor that maybe some earlier plant -based
alternatives did because they're chemically identical
and we can't overlook their marketing weapon
sustainability this is huge for them huge UC
Davis analysis shows this fermentation process
results in 72 to 97 % lower greenhouse gas emissions
and 81 to 99 % less water use compared to traditional
dairy production. That gives them a massive fact
-based marketing advantage in a climate -conscious
consumer market. How do we compete with those
numbers? But here is the critical distinction
brought up by Leonardo Vieira of Future Cow.
That ties us back to Coca -Cola. This is key.
He noted that technology can match dairy proteins
or Coca -Cola flavor compounds with the same
efficiency. Science can replicate both. But Coke's
brand equity and proprietary formula protect
them. They've built consumer loyalty barriers,
that emotional connection that technology struggles
to cross easily. People want Coke, not just Cola
flavor. Our commodity status, however, offers
no such protection. None at all. If you are selling
generic milk and the consumer cannot differentiate
your milk protein from the milk protein synthesized
in a bioreactor that boasts 90 % lower water
use and might be 20 % cheaper at the store. Which
one wins? The cheaper, more sustainable option
wins. Period. Especially with younger consumers.
This is why value capture and branding are now
existential requirements, not just nice -to -haves.
This brings us to the hard deadline. The sources
indicate precision fermentation is scheduled
to launch commercially in large -scale facilities
between 2026 and 2028. That's just around the
corner. We are in an 18 -month window, roughly,
where decisive moves matter most. Farms that
are making these structural strategic shifts
now, choosing a path, building value, show an
85 % survival probability in the face of this
disruption, according to the analysis. 85 % if
you act now. And those waiting. waiting for commodity
markets to magically improve. What's their number?
They show a 25 % survival probability. 25%. That's
grim. It is. The reality is that... Your farm's
equity, the underlying value of your land, your
herd, your business model, is actively evaporating
while you delay making those tough decisions.
The market is already pricing in this disruption.
So let's challenge the popular industry narrative
that dominates every farm meeting, every coffee
shop conversation, the obsession with production
volume. Yeah, pounds shipped, cows milked, herd
averages. It's all about more milk. But what
if volume is a secondary or even dangerous metric
to lead with? What if focusing only on volume
is digging our own grave? That's the contrarian
take we need to hammer home. The key metric isn't
just volume. It's tracking the percentage of
retail value captured. Exactly. It's not about
how much milk you produce in total. It's about
how much of the end consumer's dollar you actually
command and keep. If you do the math on your
operation, figure out what the consumer pays
and what you get back. And that number is below
35%. That critical 35 % line. You are definitively
stuck in the commodity trap, no matter how much
milk you ship. You might be the most efficient,
high -producing operation in the county. But
if you're not capturing value beyond the bare
minimum commodity price, you're constantly vulnerable
to market swings, technological disruption like
we just discussed, and the 50 % raw material
cost burden of your downstream processors who
have no room to pay you more. This requires producers
to ask fundamental questions about differentiation.
Can you create any kind of scarcity around your
product? Anything at all. Is it geographic? Is
it a unique attribute like A2 or organic? Is
it verifiable superior production excellence
that a partner will pay for? If you can't answer
that with a clear yes, you have no leverage.
You are fungible. You're replaceable. And finally,
we have to look at operational focus. This ties
into the paths. Are you trying to do everything
yourself? Yeah. The farmer trying to be CEO,
CFO, herdsman, agronomist, mechanic, marketer.
Right. Raising replacements, growing all your
own feed, milking, maybe dabbling in processing,
trying to market, operations, trying to do everything,
are rarely excelling at anything. We should echo
the idea. Coca -Cola doesn't grow sugar cane.
They don't own farms. They don't. They focus
on what creates the most value, which is the
brand and the concentrate formula. Everything
else they outsource or partner on. For dairy,
that means focusing ruthlessly on superior production
efficiency, path one or three, or superior storytelling
and brand building, path two. Figure out what
you're truly best at, your core competency, and
seriously consider partnering or outsourcing
the rest. Focus is absolutely crucial for survival
in this environment, especially as technology
like precision fermentation forces costs down
relentlessly on the pure commodity side. You
can't be average at everything anymore. All right,
let's wrap this up with the actionable insight
segment. You, the farmer, just finished morning
milking. You're driving to the feed store, maybe
listening to this right now. Based on this entire
deep dive, what are the three tiered things you
absolutely need to know and execute starting
today? Okay, we need a clear tiered playbook.
And it's all focused on moving that value capture
percentage above the 35 % commodity line. That's
the goal. Focus. Immediate value capture. The
fastest, highest ROI move we discussed that people
can do right now. Action. If you are not already
doing so, implement a Beef on Dairy genetics
program. Today. Tomorrow. This is the quickest
path to serious immediate extra revenue. We calculated
$22 ,200 for a small herd just breeding the bottom
third, or potentially $70 ,000 plus for larger
ones focusing on replacement reduction strategies.
Minimal. Maybe $2 ,000 in additional semen costs
for that 200 cow example. It's a low -risk, high
-reward simplification strategy. Check with your
extension services like UW -Madison on the best
timing for breedings to hit the typical spring
beef market peaks for maximum value. Stop delaying
on this one immediately. It's found money. Okay,
focus. Differentiation and stability. This is
about building barriers to competition, insulating
yourself from that commodity volatility. What's
the move here? Action. You must stop selling
generic milk specs and start selling your farm's
unique story or secure guaranteed price stability
through partnership. Pick one. If you're that
midsize operation, 800 to 2 ,500 cows, likely
path three, actively investigate and work to
secure a processor partnership arrangement for
guaranteed premiums, that $1 .50 or more over
class three pricing. This is crucial risk management
and enables long -term capital planning. Start
those conversations now. And for the smaller
farms. If you are a smaller path to operation.
40 to 200 cows. Start building the narrative
now. Get certified organic. Transition to A2.
Document your grass -fed practices. Quantify
your water conservation. Do whatever fits your
farm and market to get you into that $35 to $50
per hundredweight premium market. Start documenting
your story. Building your website. Connecting
with potential customers or retailers today.
Don't wait. Finally, focus. Strategic alignment
and survival in the face of disruption. This
is about preparing for that technology future,
that 18 -month window. You need to honestly assess
your operation relative to the three definitive
paths. Go big on efficiency, build your premium
story, or partner strategically. Where do you
fit? Where can you fit? Calculate your percentage
of the retail dollar today. Know your number.
And then commit to a concrete plan that structurally
moves that number above the 35 % commodity line
over the next one, two years. And remember that
countdown. Absolutely. Remember, the 18 -month
countdown for precision fermentation is real.
It's coming. Standing still and just hoping for
the commodity price to save you is statistically
the riskiest strategy you can choose right now.
Your equity, your farm's future depends on making
a decisive move. Now, hashtag Enhanced Show Outro.
This has been another deep dive from the Bullvine
podcast. That gap between Coke's 70 % and our
30 -49 % value capture, it reflects fundamental
structural and business model differences that
aren't going away on their own. But understanding
those differences, like we talked about today,
is precisely how we build a resilient, profitable
business for the future. Knowledge is power here.
If this kind of hard -hitting, no BS analysis
helps your operation, head to www .thebullvine
.com for more articles that tell you what's really
happening in dairy. And seriously. Subscribe
wherever you get your deep dives, your podcasts.
We're releasing episodes twice weekly now, bringing
you this kind of analysis more often. And trust
me, you don't want to miss what we've got coming
next week about the true economic costs of robotic
milking versus conventional parlors. We're going
to dig into whether the ROI is truly there for
the average farm. Ooh, that's a hot one. Or if
the technology is sometimes just a massive capital
sink that only really benefits those huge operations
already on path one. That's a whole other structural
challenge we need to unpack. We will see you
next time.