WEBVTT 00:00:11.720 --> 00:00:15.060 Breaking free from the chains of the past Where 00:00:15.060 --> 00:00:18.820 truth moves faster than a Holstein calf No law 00:00:18.820 --> 00:00:21.660 waiting on some printed page We're charting new 00:00:21.660 --> 00:00:25.300 ground in the digital age From genomic codes 00:00:25.300 --> 00:00:29.120 to robot facts We cut through the noise, no hold 00:00:29.280 --> 00:00:32.460 them back not your daddy's dairy news tonight 00:00:32.460 --> 00:01:03.320 we're sparking Welcome back to the Bullvine Podcast, 00:01:03.479 --> 00:01:05.620 where we cut through dairy industry noise to 00:01:05.620 --> 00:01:07.700 get you the insights that actually matter for 00:01:07.700 --> 00:01:10.760 your operation. We are focused purely on the 00:01:10.760 --> 00:01:14.120 numbers, the data, and the reality that hits 00:01:14.120 --> 00:01:16.319 your bottom line. Absolutely. We've synthesized 00:01:16.319 --> 00:01:18.219 a massive stack of source material this week, 00:01:18.280 --> 00:01:21.140 articles, research papers, and proprietary notes, 00:01:21.280 --> 00:01:24.819 all pointing to one unavoidable conclusion. And 00:01:24.819 --> 00:01:27.280 today, we are diving deep into that conclusion. 00:01:28.030 --> 00:01:30.569 the complete redefinition of dairy breeding strategy. 00:01:30.870 --> 00:01:33.769 We're breaking down the economics behind optimizing 00:01:33.769 --> 00:01:36.829 beef on dairy genetics, an analysis we've titled 00:01:36.829 --> 00:01:39.549 the half million dollar swing. That figure of 00:01:39.549 --> 00:01:41.930 half million dollars is not clickbait. Not at 00:01:41.930 --> 00:01:43.629 all. It's the difference between two balance 00:01:43.629 --> 00:01:46.849 sheets for a standard 500 -cow dairy. When you 00:01:46.849 --> 00:01:48.510 look at the source material we've aggregated, 00:01:48.650 --> 00:01:52.030 the economics are so unambiguous that this stops 00:01:52.030 --> 00:01:54.730 being a claim and starts being, well, a mathematical 00:01:54.730 --> 00:01:56.870 imperative. You're right. You simply cannot afford 00:01:56.870 --> 00:01:59.569 not to engage with this strategy. It's an imperative 00:01:59.569 --> 00:02:04.269 driven by cold, hard ROI. The core context here 00:02:04.269 --> 00:02:07.010 for you, the listener, is that breeding decisions 00:02:07.010 --> 00:02:11.030 are no longer about brand identity. or you know 00:02:11.030 --> 00:02:13.629 long -standing breed loyalty not anymore they 00:02:13.629 --> 00:02:16.110 have been stripped down to a purely segmented 00:02:16.110 --> 00:02:20.150 profit -driven system focused entirely on maximizing 00:02:20.150 --> 00:02:22.650 return on investment per breeding unit and we 00:02:22.650 --> 00:02:24.909 are far past the early adopter phase which is 00:02:24.909 --> 00:02:28.069 crucial 72 percent of u .s farms have already 00:02:28.069 --> 00:02:30.770 made this pivot incorporating beef genetics into 00:02:30.770 --> 00:02:33.490 their strategy 72 i mean just let that sink in 00:02:33.490 --> 00:02:35.750 yeah that means if you're still running a traditional 00:02:35.750 --> 00:02:38.050 closed loop system you are now operating in the 00:02:38.050 --> 00:02:40.620 minority and you are actively exposing yourself 00:02:40.620 --> 00:02:44.159 to a huge market inefficiency. The stakes are 00:02:44.159 --> 00:02:46.759 enormous because the fundamental calf value gap 00:02:46.759 --> 00:02:49.919 has widened to a, well, an unprecedented degree. 00:02:50.139 --> 00:02:52.080 Yeah. We are talking about the difference between 00:02:52.080 --> 00:02:55.319 a median dairy bull calf, which might track around, 00:02:55.460 --> 00:02:59.300 what, $875 today? If you're lucky. Right. And 00:02:59.300 --> 00:03:01.900 a high quality preconditioned beef cross calf 00:03:01.900 --> 00:03:05.759 selling for $1 ,450, sometimes even up to $1 00:03:05.759 --> 00:03:09.099 ,700 on a reliable contract. That's a premium 00:03:09.099 --> 00:03:12.020 that falls right into the $500 to $700 range. 00:03:12.300 --> 00:03:15.500 Per calf. Per calf. And when an operation fails 00:03:15.500 --> 00:03:18.819 to capture that margin, they are in effect leaving 00:03:18.819 --> 00:03:21.280 hundreds of thousands of dollars just sitting 00:03:21.280 --> 00:03:23.800 on the table every single year. Exactly. And 00:03:23.800 --> 00:03:25.699 it's not just a revenue problem. It's a cost 00:03:25.699 --> 00:03:28.979 control issue. Because of this widespread pivot, 00:03:29.099 --> 00:03:31.199 the replacement heifer market is now historically 00:03:31.199 --> 00:03:34.259 tight. We're seeing Springer prices routinely 00:03:34.259 --> 00:03:38.259 hit $4 ,000 or more. $4 ,000, wow. So the operations 00:03:38.259 --> 00:03:40.639 that aren't aggressively managing their replacement 00:03:40.639 --> 00:03:43.039 rate through the segmentation are now vulnerable 00:03:43.039 --> 00:03:46.539 to, I mean, massive capital expense risks. This 00:03:46.539 --> 00:03:48.500 brings us to the provocative point we teased. 00:03:48.599 --> 00:03:52.840 If 72 % of the industry has shifted to beef on 00:03:52.840 --> 00:03:55.319 dairy, where are the replacements coming from? 00:03:55.439 --> 00:03:57.449 Right, who's making them? They're being supplied 00:03:57.449 --> 00:04:01.550 primarily by the remaining 28 % of farms still 00:04:01.550 --> 00:04:04.810 engaged in traditional dairy breeding. This analysis 00:04:04.810 --> 00:04:08.629 suggests that those 28 % are effectively subsidizing 00:04:08.629 --> 00:04:11.289 the high replacement heifer market for everyone 00:04:11.289 --> 00:04:13.569 else. They are. They're generating the supply 00:04:13.569 --> 00:04:16.009 of dairy heifers that keeps the market balanced 00:04:16.009 --> 00:04:19.329 enough for the 72 % to buy their few necessary 00:04:19.329 --> 00:04:22.110 replacements. And at the same time. While simultaneously 00:04:22.110 --> 00:04:25.689 sacrificing that $500 to $700 premium on every 00:04:25.689 --> 00:04:29.250 single dairy bull calf they produce, it's a mathematically 00:04:29.250 --> 00:04:32.399 punishing position to be in. It's brutal. We're 00:04:32.399 --> 00:04:34.360 going to dig into the hard math that justifies 00:04:34.360 --> 00:04:38.819 the $340 ,000 to $500 ,000 swing for a 500 cow 00:04:38.819 --> 00:04:42.379 operation in meticulous detail. We are. But first, 00:04:42.500 --> 00:04:44.720 we have to grasp the magnitude of the philosophical 00:04:44.720 --> 00:04:47.600 and technological shift that made this economic 00:04:47.600 --> 00:04:51.819 strategy not just viable, but mandatory. For 00:04:51.819 --> 00:04:55.019 generations, the identity of a dairy farmer was 00:04:55.019 --> 00:04:57.500 intrinsically tied to the breed they milked. 00:04:57.769 --> 00:04:59.990 Oh, absolutely. You were a Holstein producer 00:04:59.990 --> 00:05:03.050 focused on maximum volume or a Jersey producer 00:05:03.050 --> 00:05:05.709 focused on component density and feed efficiency. 00:05:06.170 --> 00:05:09.449 That breed identity dictated your entire breeding 00:05:09.449 --> 00:05:12.250 plan. And that loyalty was powerful. It shaped 00:05:12.250 --> 00:05:14.850 conversations at industry gatherings, shows and 00:05:14.850 --> 00:05:17.930 sales for decades. The traditional necessity 00:05:17.930 --> 00:05:20.670 was simple. You had to breed almost every cow 00:05:20.670 --> 00:05:23.430 to a dairy sire. to generate enough female offspring 00:05:23.430 --> 00:05:25.790 to maintain your herd size. It was a closed loop. 00:05:25.949 --> 00:05:28.430 A closed loop driven by required replacement 00:05:28.430 --> 00:05:31.069 volume. But the core philosophical shift we've 00:05:31.069 --> 00:05:33.949 seen since, I don't know, the late 2010s is this. 00:05:34.610 --> 00:05:37.430 The question has moved entirely away from which 00:05:37.430 --> 00:05:40.160 breed is superior. Right. The only meaningful 00:05:40.160 --> 00:05:43.180 question remaining is what combination of genetics, 00:05:43.360 --> 00:05:46.199 whether purebred, crossbred or beef dairy, cross 00:05:46.199 --> 00:05:48.660 maximizes my operational return on investment? 00:05:48.839 --> 00:05:50.800 I find that shift so significant because it treats 00:05:50.800 --> 00:05:52.759 genetics not as a matter of tradition, but as 00:05:52.759 --> 00:05:55.420 a strategic capital allocation decision. It's 00:05:55.420 --> 00:05:57.779 a business decision. It is. We looked at the 00:05:57.779 --> 00:06:00.959 sources and found a fantastic anecdote. That 00:06:00.959 --> 00:06:04.240 Wisconsin producer who increased his total breeding 00:06:04.240 --> 00:06:09.439 budget to nearly $38 ,000 in 2024. Yeah. Which 00:06:09.439 --> 00:06:12.560 was six times what his father budgeted just five 00:06:12.560 --> 00:06:14.839 years earlier. Six times the investment, but 00:06:14.839 --> 00:06:16.500 they are treating it like an investment, not 00:06:16.500 --> 00:06:19.040 an expense. Exactly. This isn't just buying more 00:06:19.040 --> 00:06:22.100 semen. This is a complete systemic overhaul. 00:06:22.220 --> 00:06:26.160 That $38 ,000 budget. breaks down into incredibly 00:06:26.160 --> 00:06:29.500 precise strategic spending. OK, give us the breakdown, 00:06:29.620 --> 00:06:32.139 because $38 ,000 is a huge investment. You need 00:06:32.139 --> 00:06:34.600 to justify that efficiency. Absolutely. So the 00:06:34.600 --> 00:06:37.019 budget allocation was highly segmented. They 00:06:37.019 --> 00:06:39.540 spent roughly $7 ,000 to $8 ,000 on high merit 00:06:39.540 --> 00:06:41.899 sex dairy semen for their elite replacements. 00:06:42.100 --> 00:06:44.079 The best of the best. The best of the best. Then 00:06:44.079 --> 00:06:47.439 about $2 ,500 to $3 ,200 on high quality beef 00:06:47.439 --> 00:06:50.360 on dairy semen targeted for premium calf contracts. 00:06:51.120 --> 00:06:53.740 But the truly massive chunk, around $24 ,000, 00:06:54.060 --> 00:06:57.660 went into genomic testing. Wait, $24 ,000 just 00:06:57.660 --> 00:07:00.300 on testing? That's where the skepticism needs 00:07:00.300 --> 00:07:03.100 to come in. That's a huge outlay before a single 00:07:03.100 --> 00:07:05.720 pregnancy is even confirmed. It is. What exactly 00:07:05.720 --> 00:07:08.540 is that genomic testing budget covering? It can't 00:07:08.540 --> 00:07:11.620 just be standard GTPI scores. No, it's highly 00:07:11.620 --> 00:07:14.040 integrated. It covers basic parentage verification, 00:07:14.540 --> 00:07:17.420 sure. But more importantly, it covers comprehensive 00:07:17.420 --> 00:07:20.420 health and fertility panels. Like what? Like 00:07:20.420 --> 00:07:23.319 checking for bovine leukosis, virus resistance, 00:07:23.420 --> 00:07:26.759 or specific management traits. Most critically, 00:07:26.920 --> 00:07:29.360 it allows them to Rank the replacement candidates 00:07:29.360 --> 00:07:32.759 precisely using sophisticated indexes like net 00:07:32.759 --> 00:07:35.639 merit, dairy wellness profit, and the health 00:07:35.639 --> 00:07:38.600 trait index. So they aren't just selecting. They're 00:07:38.600 --> 00:07:41.100 culling with surgical precision. That's the perfect 00:07:41.100 --> 00:07:43.040 way to put it. So the farmer's realization was 00:07:43.040 --> 00:07:45.579 that he was spending six times more, but he was 00:07:45.579 --> 00:07:48.459 measuring profitability, net profit per stall, 00:07:48.699 --> 00:07:51.120 and return on that specific genetic investment, 00:07:51.199 --> 00:07:53.319 not just pounds of milk shipped. Right. That 00:07:53.319 --> 00:07:56.019 makes the breeding program a profit center, not 00:07:56.019 --> 00:07:58.269 just a necessary cost center. That's the key 00:07:58.269 --> 00:08:00.829 metric. The old benchmark was pounds of milk. 00:08:00.990 --> 00:08:04.430 The new modern metric is net profit per stall 00:08:04.430 --> 00:08:07.209 derived from component revenue, lower placement 00:08:07.209 --> 00:08:10.509 cost, and high calf sale value. And when you 00:08:10.509 --> 00:08:13.290 start measuring those right outcomes, the switch 00:08:13.290 --> 00:08:16.089 to utilizing beef genetics becomes an obvious 00:08:16.089 --> 00:08:19.069 mathematically derived decision. And the fact 00:08:19.069 --> 00:08:22.069 that 72 % of dairy farms have already adopted 00:08:22.069 --> 00:08:24.810 beef genetics proves that commercial reality 00:08:24.810 --> 00:08:28.550 and economic pressure will always, always overcome 00:08:28.550 --> 00:08:31.870 breed tradition. But this reality was fundamentally 00:08:31.870 --> 00:08:34.990 enabled by one technological breakthrough. That's 00:08:34.990 --> 00:08:37.769 sexed semen. Without reliable gender -selected 00:08:37.769 --> 00:08:40.169 semen technology, this whole segmented approach 00:08:40.169 --> 00:08:42.809 is simply impossible. You need to be confident 00:08:42.809 --> 00:08:45.169 that when you breed your best cows, you are reliably 00:08:45.169 --> 00:08:47.370 producing future herd replacements. The numbers 00:08:47.370 --> 00:08:49.809 on adoption are just staggering. Gender -selected 00:08:49.809 --> 00:08:52.230 semen now accounts for 61 % of all dairy breeding 00:08:52.230 --> 00:08:56.190 decisions in the U .S. 61 %? That is 9 .9 million... 00:08:56.200 --> 00:08:57.940 units sold domestically, according to the latest 00:08:57.940 --> 00:09:01.740 NAAB report, at a 16 .1 million total units. 00:09:01.960 --> 00:09:05.019 And just five years ago, that share was closer 00:09:05.019 --> 00:09:08.820 to, what, 35 %? Yeah, around there. That exponential 00:09:08.820 --> 00:09:11.820 surge is the engine that drives this entire financial 00:09:11.820 --> 00:09:15.360 strategy. When you can consistently achieve 90 00:09:15.360 --> 00:09:18.299 % or greater heifer conception rates on your 00:09:18.299 --> 00:09:23.480 top -tier genetics using sexed semen, You immediately 00:09:23.480 --> 00:09:26.000 solve your replacement problem using a smaller 00:09:26.000 --> 00:09:28.539 proportion of your herd. That immediately frees 00:09:28.539 --> 00:09:30.039 up the rest of the herd for profit generation. 00:09:30.980 --> 00:09:34.059 This is where we transition into the implementation 00:09:34.059 --> 00:09:38.000 strategy, the segmented herd approach. Defining 00:09:38.000 --> 00:09:40.100 the segmented herd approach requires precision. 00:09:40.340 --> 00:09:42.779 It's not, you know, plain English. It's stratified 00:09:42.779 --> 00:09:45.039 management effort and capital allocation. Right. 00:09:45.179 --> 00:09:47.460 You stop viewing all cows as equal candidates 00:09:47.460 --> 00:09:49.799 for your most valuable genetics. We're not using 00:09:49.799 --> 00:09:52.399 $35 sex semen on a cow with average genetics, 00:09:52.700 --> 00:09:55.059 poor fertility history, and a high projected 00:09:55.059 --> 00:09:57.620 culling risk, hoping for a mediocre replacement. 00:09:58.000 --> 00:10:00.399 No, that's a total waste of capital and reproductive 00:10:00.399 --> 00:10:02.879 time. So the segmentation involves a minimum 00:10:02.879 --> 00:10:07.350 of three tiers. Right. tier one the top 15 to 00:10:07.350 --> 00:10:10.950 20 percent of cows these are high genetic merit 00:10:10.950 --> 00:10:14.070 animals confirmed by genomics with excellent 00:10:14.070 --> 00:10:15.990 health and fertility records they're the future 00:10:15.990 --> 00:10:19.309 of your herd exactly they receive the most expensive 00:10:19.309 --> 00:10:22.190 sex dairy semen to produce your elite replacements 00:10:22.190 --> 00:10:26.090 this ensures generational progress okay then 00:10:26.090 --> 00:10:30.779 tier two The bottom tier. Yeah. Maybe 25 to 35 00:10:30.779 --> 00:10:33.200 percent of the herd. And these are cows with 00:10:33.200 --> 00:10:36.120 lower genomic scores, older animals, or those 00:10:36.120 --> 00:10:38.419 with underlying health or fertility issues that 00:10:38.419 --> 00:10:40.899 make them culling risks in the near future. So 00:10:40.899 --> 00:10:43.080 they are the profit generation tier. That's it. 00:10:43.240 --> 00:10:46.159 They receive high quality beef genetics to produce 00:10:46.159 --> 00:10:48.779 a high value feeder calf. And critically, tier 00:10:48.779 --> 00:10:51.679 three. the middle 45 to 60 percent this is the 00:10:51.679 --> 00:10:54.740 flexibility tier they are healthy cows good producers 00:10:54.740 --> 00:10:57.779 but not elite their breeding decision is entirely 00:10:57.779 --> 00:11:00.299 dynamic it's optimized based on your current 00:11:00.299 --> 00:11:02.740 replacement inventory and pregnancy rate trends 00:11:02.740 --> 00:11:05.159 so if you're forecasting a heifer shortage three 00:11:05.159 --> 00:11:08.179 years out you might use conventional dairy semen 00:11:08.179 --> 00:11:10.519 here but if your replacement inventory is flush 00:11:10.519 --> 00:11:13.000 you use beef genetics for that added revenue 00:11:13.000 --> 00:11:16.549 that flexibility is key A 500 -cow operation 00:11:16.549 --> 00:11:20.750 needs about 110 replacement heifers annually 00:11:20.750 --> 00:11:23.870 to maintain herd size and account for culling. 00:11:23.889 --> 00:11:26.230 If you can achieve that required number consistently 00:11:26.230 --> 00:11:29.909 with sect semen on just 150 cows, you've suddenly 00:11:29.909 --> 00:11:33.389 designated 350 other breedings purely for market 00:11:33.389 --> 00:11:36.899 value. Maximizing that $500 to $700 calf premium. 00:11:37.120 --> 00:11:39.779 And that market value, that premium, is exactly 00:11:39.779 --> 00:11:42.659 what we need to rigorously quantify next, because 00:11:42.659 --> 00:11:45.259 that gap is the core financial mechanism of the 00:11:45.259 --> 00:11:48.240 half -million -dollar swing. Let's drill down 00:11:48.240 --> 00:11:50.320 into the financial specifics, because the difference 00:11:50.320 --> 00:11:52.159 between an efficient farm and an inefficient 00:11:52.159 --> 00:11:54.860 one is laid bare in the breeding program ledger. 00:11:54.940 --> 00:11:57.559 Yep. University of Wisconsin -Madison research, 00:11:57.779 --> 00:12:00.460 led by Dr. Victor Cabrera's team, provided the 00:12:00.460 --> 00:12:03.120 benchmark data for this massive calf value gap. 00:12:03.360 --> 00:12:05.840 They did. They documented that pure dairy bull 00:12:05.840 --> 00:12:08.460 calves, which historically had minimal value 00:12:08.460 --> 00:12:10.980 or were even a net liability. Sometimes you couldn't 00:12:10.980 --> 00:12:13.240 give them away. Exactly. Now bring a median of 00:12:13.240 --> 00:12:15.860 $750 to $1 ,000 at auction, and that's for a 00:12:15.860 --> 00:12:18.019 standard dairy bull calf. But the beef cross 00:12:18.019 --> 00:12:21.120 calves. These are not average calves. These are 00:12:21.120 --> 00:12:24.539 often preconditioned, uniform calves from specific 00:12:24.539 --> 00:12:27.960 sire lines, like highly rated Angus or cemental 00:12:27.960 --> 00:12:30.100 crosses. And they command a massive premium. 00:12:30.440 --> 00:12:34.899 $1 ,250 up to $1 ,700 per head, often secured 00:12:34.899 --> 00:12:37.879 via forward contracts with large feedlots. That 00:12:37.879 --> 00:12:42.440 $500 to $700 premium is pure revenue gain derived 00:12:42.440 --> 00:12:45.220 directly from one strategic choice. The type 00:12:45.220 --> 00:12:47.759 of semen you use. That's it. Let's calculate 00:12:47.759 --> 00:12:50.759 the real world impact. For a standard 500 cow 00:12:50.759 --> 00:12:54.120 operation, assuming a, what, 65 to 70 percent 00:12:54.120 --> 00:12:56.559 calving rate, you're likely generating around 00:12:56.559 --> 00:12:59.820 350 or more non -replacement calves that you're 00:12:59.820 --> 00:13:01.440 selling off into the market every year. Yeah, 00:13:01.480 --> 00:13:03.580 that sounds about right. If those 350 calves 00:13:03.580 --> 00:13:06.480 were standard dairy bulls, even at the high estimate 00:13:06.480 --> 00:13:10.059 of $1 ,000 per head, that's $350 ,000 in revenue. 00:13:10.639 --> 00:13:13.379 It covers some bills, but it's not transformative. 00:13:14.059 --> 00:13:17.740 Not at all. Now, if those 350 calves are high 00:13:17.740 --> 00:13:20.179 -quality beef crosses and we take a conservative 00:13:20.179 --> 00:13:23.059 average of $14 .50 per head right in the middle 00:13:23.059 --> 00:13:25.759 of the documented range, that revenue jumps to 00:13:25.759 --> 00:13:30.960 $507 ,500. Wait. Just that single switch changing 00:13:30.960 --> 00:13:35.159 the semen type for 350 cows generated over $157 00:13:35.159 --> 00:13:38.039 ,000 in additional annual revenue. It's incredible. 00:13:38.159 --> 00:13:40.320 And that's before we even account for the massive 00:13:40.320 --> 00:13:43.600 savings on the capital expenditure side. Replacement 00:13:43.600 --> 00:13:46.419 heifers. The replacement heifer math is where 00:13:46.419 --> 00:13:48.820 the economics become completely unavoidable. 00:13:48.879 --> 00:13:52.019 Yeah. You are gaining massive revenue on the 00:13:52.019 --> 00:13:54.740 calf side and slashing massive capital costs 00:13:54.740 --> 00:13:57.029 on the replacement side. This is the definition 00:13:57.029 --> 00:13:59.970 of optimized efficiency. So let's rigorously 00:13:59.970 --> 00:14:02.049 walk through the full comparison for that 500 00:14:02.049 --> 00:14:04.730 cow operation. This is the swing math, and we 00:14:04.730 --> 00:14:06.970 need to look at net position, factoring in breeding 00:14:06.970 --> 00:14:09.309 costs, calf revenue, and replacement purchases. 00:14:10.070 --> 00:14:13.879 Okay, let's do it. Scenario 1. The traditional, 00:14:14.000 --> 00:14:17.159 not optimized approach. This operation is still 00:14:17.159 --> 00:14:19.559 using conventional semen heavily, maybe a little 00:14:19.559 --> 00:14:22.000 bit of sex semen, and hasn't fully committed 00:14:22.000 --> 00:14:25.259 to genomic testing. Right. They aim for self 00:14:25.259 --> 00:14:28.840 -sufficiency. But high culling rates, often 35 00:14:28.840 --> 00:14:32.159 to 40 percent in older purebred volume herds, 00:14:32.179 --> 00:14:35.299 force them to buy replacements. So in this scenario, 00:14:35.519 --> 00:14:38.399 the breeding budget is low, maybe $12 ,000 annually. 00:14:38.679 --> 00:14:41.360 They sell their dairy bull calves for, let's 00:14:41.360 --> 00:14:45.960 say, $100. But due to inefficiency, not enough 00:14:45.960 --> 00:14:48.919 high -quality heifers, they have to buy 30 to 00:14:48.919 --> 00:14:52.360 40 replacements annually at $4 ,000 per springer. 00:14:52.460 --> 00:14:54.299 Which is the going rate. That's a purchase cost 00:14:54.299 --> 00:14:57.820 of $120 ,000 to $160 ,000. Okay, so if we run 00:14:57.820 --> 00:15:00.740 the math, take the calf revenue, subtract the 00:15:00.740 --> 00:15:03.179 $12 ,000 breeding budget, and subtract the, say, 00:15:03.259 --> 00:15:06.320 $140 ,000 in purchase cost. Yeah. The net... 00:15:06.559 --> 00:15:08.360 Financial position on their breeding and replacement 00:15:08.360 --> 00:15:10.600 program is somewhere between a small loss of 00:15:10.600 --> 00:15:14.399 $12 ,000 and a modest gain of $28 ,000. It's 00:15:14.399 --> 00:15:16.899 essentially a break -even proposition, a lot 00:15:16.899 --> 00:15:20.200 of work for not much gain. Exactly. Now for scenario 00:15:20.200 --> 00:15:24.659 two. The optimized segmented herd approach. They 00:15:24.659 --> 00:15:27.419 are utilizing the full strategy. Sexed dairy 00:15:27.419 --> 00:15:30.480 on the top 20%, high -quality beef on the remainder, 00:15:30.659 --> 00:15:34.299 and that $38 ,000 breeding budget covering genomic 00:15:34.299 --> 00:15:36.720 testing and consulting. So the breeding budget 00:15:36.720 --> 00:15:40.019 jumps to $38 ,000, yes, but the payoff is immediate. 00:15:40.299 --> 00:15:44.279 They produce... 350 beef cross calves, bringing 00:15:44.279 --> 00:15:49.480 in between $437 ,000 and $595 ,000. Wow. And 00:15:49.480 --> 00:15:51.340 because they are successfully breeding their 00:15:51.340 --> 00:15:54.100 highest genetic merit animals with sex semen, 00:15:54.240 --> 00:15:56.600 their internal replacement needs drop drastically. 00:15:56.879 --> 00:15:59.460 They only need to buy 10 to 15 outside replacements. 00:15:59.580 --> 00:16:01.720 Get that. Costing a manageable $40 ,000 to $60 00:16:01.720 --> 00:16:04.279 ,000. So when we run those numbers, high beef 00:16:04.279 --> 00:16:07.299 calf revenue, subtract the higher $38 ,000 breeding 00:16:07.299 --> 00:16:09.559 budget and subtract the significantly lower, 00:16:09.659 --> 00:16:12.529 say, $50 ,000. replacement cost. The net breeding 00:16:12.529 --> 00:16:15.049 and replacement position lands squarely between 00:16:15.049 --> 00:16:19.090 a positive $340 ,000 and a positive $495 ,000. 00:16:19.330 --> 00:16:21.990 That is the half million dollar swing. That's 00:16:21.990 --> 00:16:25.190 it. That calculation proves the point. The annual 00:16:25.190 --> 00:16:27.129 difference in economic performance between those 00:16:27.129 --> 00:16:30.450 two common management styles is $340 ,000 to 00:16:30.450 --> 00:16:33.850 $500 ,000 plus. It's not just an improvement. 00:16:34.490 --> 00:16:37.669 It transforms the breeding program from a liability 00:16:37.669 --> 00:16:41.690 or a break -even operation into a massive, consistent 00:16:41.690 --> 00:16:44.490 revenue stream. Transformative is the right word. 00:16:44.669 --> 00:16:48.250 But we cannot focus solely on calf sales. The 00:16:48.250 --> 00:16:50.370 main source of revenue is still the milk check, 00:16:50.549 --> 00:16:53.529 and that genetic strategy must still drive profitable 00:16:53.529 --> 00:16:56.340 milk production. Which today means components. 00:16:56.679 --> 00:16:59.220 It absolutely means components. As Corey Geiger 00:16:59.220 --> 00:17:01.659 from CoBank has pointed out, under modern multiple 00:17:01.659 --> 00:17:05.059 component pricing programs, roughly 90 % of the 00:17:05.059 --> 00:17:07.539 entire milk check value is allocated based on 00:17:07.539 --> 00:17:10.160 butterfat and protein content. Right. Volume 00:17:10.160 --> 00:17:12.980 is now secondary to quality. So let's put specific 00:17:12.980 --> 00:17:15.920 dollar values on genetic component selection. 00:17:16.319 --> 00:17:19.930 We analyze the milk pay data. When butterfat 00:17:19.930 --> 00:17:24.690 is generating $2 .66 per pound and protein $2 00:17:24.690 --> 00:17:29.029 .48 per pound, if an operation genetically improves 00:17:29.029 --> 00:17:34.369 their butterfat from 3 .90 to 4 .25%, that adds 00:17:34.369 --> 00:17:37.210 $0 .93 per hundredweight to their revenue. And 00:17:37.210 --> 00:17:40.769 if they boost their protein from 3 .16 to 3 .32, 00:17:41.049 --> 00:17:43.630 that's another 40 cents per hundredweight. So 00:17:43.630 --> 00:17:46.730 combined through genetic selection, that is $1 00:17:46.730 --> 00:17:49.690 .33 per hundredweight revenue increase applied 00:17:49.690 --> 00:17:52.849 across the entire milk pool. That's huge. On 00:17:52.849 --> 00:17:55.829 a 1 ,000 -cow dairy. shipping 80 pounds per cow 00:17:55.829 --> 00:17:58.589 per day, that $1 .33 per hundredweight difference 00:17:58.589 --> 00:18:02.210 translates to $13 ,300 in annual revenue. Just 00:18:02.210 --> 00:18:04.369 from genetics. Just by optimizing genetics for 00:18:04.369 --> 00:18:07.109 components. And that is before considering quality 00:18:07.109 --> 00:18:10.009 premiums. Right, because specific regional processors 00:18:10.009 --> 00:18:12.490 are offering component premiums that further 00:18:12.490 --> 00:18:15.490 incentivize this focus. Curtis Jarretts from 00:18:15.490 --> 00:18:18.470 Compure Financial noted that upper Midwest processors 00:18:18.470 --> 00:18:21.789 are routinely offering quality premiums, around 00:18:21.789 --> 00:18:24.849 85 cents per hundredweight. specifically rewarding 00:18:24.849 --> 00:18:28.049 consistent high component volume. So that means 00:18:28.049 --> 00:18:31.170 component focus adds nearly $2 per hundredweight 00:18:31.170 --> 00:18:34.329 in some areas. Therefore, the takeaway is absolute. 00:18:35.000 --> 00:18:37.259 Your breeding decisions, even for your replacement 00:18:37.259 --> 00:18:40.500 stock selected via sexed semen, must prioritize 00:18:40.500 --> 00:18:43.319 component traits like fat and protein yield or 00:18:43.319 --> 00:18:46.119 indexes like CFP. Whether you choose jerseys, 00:18:46.200 --> 00:18:48.339 Holstein's aggressively selected for component 00:18:48.339 --> 00:18:51.160 indexes or specific crossbreds known for high 00:18:51.160 --> 00:18:54.240 components like Montbéliard. Ignoring component 00:18:54.240 --> 00:18:56.740 trends means willfully foregoing massive revenue. 00:18:56.900 --> 00:18:59.140 It's a dual strategy, right? Component genetics 00:18:59.140 --> 00:19:02.200 to maximize 90 % of the milk check and beef on 00:19:02.200 --> 00:19:04.799 dairy genetics on the bottom half to max. the 00:19:04.799 --> 00:19:07.779 remaining 10 % derived from calf value. You have 00:19:07.779 --> 00:19:10.099 to do both. Okay, we've established that the 00:19:10.099 --> 00:19:12.400 economic incentive is overwhelming. Yeah. But 00:19:12.400 --> 00:19:15.460 we are the Bullvine Podcast, and we have to challenge 00:19:15.460 --> 00:19:18.700 the hype. We need to hit the reality check presented 00:19:18.700 --> 00:19:21.440 to the source material, the genomics paradox. 00:19:21.880 --> 00:19:24.200 This is a fascinating and crucial disconnect. 00:19:24.759 --> 00:19:27.380 Genomic selection was the great hope of the industry, 00:19:27.500 --> 00:19:30.059 introduced around, what, 2008? Yeah, about then. 00:19:30.380 --> 00:19:33.299 By cutting the generation interval, genetic potential 00:19:33.299 --> 00:19:36.559 for milk yield should have skyrocketed. The AIE 00:19:36.559 --> 00:19:38.799 analysis confirmed that the potential genetic 00:19:38.799 --> 00:19:42.700 improvement accelerated by 60 to 70%. Yet the 00:19:42.700 --> 00:19:45.240 actual farm -level milk yield growth remained 00:19:45.240 --> 00:19:49.420 stubbornly flat at 1 .3 % annually. Which is 00:19:49.420 --> 00:19:51.420 the same rate of progress we were seeing before 00:19:51.420 --> 00:19:54.359 genomic selection became widespread. So why the 00:19:54.359 --> 00:19:57.119 massive gap between potential... and reality. 00:19:57.339 --> 00:19:59.640 That is the core question. We invested billions 00:19:59.640 --> 00:20:02.039 in genomics and the average cow on the average 00:20:02.039 --> 00:20:04.119 farm isn't delivering the expected performance 00:20:04.119 --> 00:20:06.740 leap. And I'm skeptical that this can simply 00:20:06.740 --> 00:20:08.880 be blamed on lazy management. It's not about 00:20:08.880 --> 00:20:12.019 being lazy. It's about limits with the AAEA termed 00:20:12.019 --> 00:20:14.880 management constraints. Right. Genetics can only 00:20:14.880 --> 00:20:16.859 express themselves under optimal conditions. 00:20:17.450 --> 00:20:20.630 If you purchase the best genetics, but your facility 00:20:20.630 --> 00:20:23.690 design limits feed bunk access, your power throughput 00:20:23.690 --> 00:20:26.809 causes stress, or your labor constraints mean 00:20:26.809 --> 00:20:29.529 TMR delivery is inconsistent. You've created 00:20:29.529 --> 00:20:32.589 a physical ceiling on performance. Exactly. You've 00:20:32.589 --> 00:20:34.910 bought a Ferrari engine and installed it in a 00:20:34.910 --> 00:20:37.630 pickup truck chassis. Great analogy. The engine 00:20:37.630 --> 00:20:40.470 is capable, but the chassis limits its speed. 00:20:41.609 --> 00:20:43.930 Furthermore, we must recognize the biological 00:20:43.930 --> 00:20:46.569 cost of this accelerated selection. Which is 00:20:46.569 --> 00:20:49.450 inbreeding. The data shows that inbreeding is 00:20:49.450 --> 00:20:52.069 accumulating faster under intense genomic selection 00:20:52.069 --> 00:20:55.009 because the pool of elite sires is narrowing. 00:20:55.349 --> 00:20:58.890 That accumulation has measurable negative implications, 00:20:59.210 --> 00:21:01.390 particularly for fertility and overall health 00:21:01.390 --> 00:21:03.720 traits, which are harder to select for. And this 00:21:03.720 --> 00:21:05.980 brings us back to profitability, not just volume. 00:21:06.140 --> 00:21:08.279 The Canadian research we reviewed found that 00:21:08.279 --> 00:21:10.539 operations focusing exclusively on higher milk 00:21:10.539 --> 00:21:12.420 production, ignoring the long -term health and 00:21:12.420 --> 00:21:14.740 fertility costs, showed a net negative genetic 00:21:14.740 --> 00:21:17.559 trend for overall economic efficiency. That is 00:21:17.559 --> 00:21:20.759 deeply concerning. If your annual genetic improvement 00:21:20.759 --> 00:21:24.519 is averaging around 2%, but your costs for managing 00:21:24.519 --> 00:21:27.319 health issues are critically, your replacement 00:21:27.319 --> 00:21:29.599 costs are rising at 10 % annually. You're going 00:21:29.599 --> 00:21:32.579 backwards. You are actively eroding your margins. 00:21:33.200 --> 00:21:36.859 despite owning genetically superior cows. Genomics 00:21:36.859 --> 00:21:39.160 gives you a better animal, but it doesn't solve 00:21:39.160 --> 00:21:41.539 the management bottleneck or the cost inflation 00:21:41.539 --> 00:21:45.029 problem. So genomic testing is absolutely essential 00:21:45.029 --> 00:21:47.829 for informed culling and selecting the top 20%. 00:21:47.829 --> 00:21:50.670 But the farmer needs to rigorously audit that 00:21:50.670 --> 00:21:53.569 $24 ,000 testing budget against their current 00:21:53.569 --> 00:21:57.009 operational limitations. If labor is your limiting 00:21:57.009 --> 00:22:00.130 factor, $24 ,000 might be better spent on retention 00:22:00.130 --> 00:22:03.269 bonuses than on maximizing an unreachable genetic 00:22:03.269 --> 00:22:06.210 score. Let's pivot to the institutional response 00:22:06.210 --> 00:22:09.549 to this economic shift, the quiet crisis at the 00:22:09.549 --> 00:22:11.910 breed associations. Yeah. If identity is out 00:22:11.910 --> 00:22:14.509 and value is in, what happens to the keepers 00:22:14.509 --> 00:22:16.769 of the pedigree? The numbers are unambiguous. 00:22:17.009 --> 00:22:19.190 Yeah. Holstein registrations, the core product 00:22:19.190 --> 00:22:21.930 of the largest association, decreased 8 % in 00:22:21.930 --> 00:22:24.529 2023. Just in one year. And look back at that 00:22:24.529 --> 00:22:28.539 $38 ,000 commercial breeding budget. The fees 00:22:28.539 --> 00:22:31.259 paid to the breed association represent less 00:22:31.259 --> 00:22:34.680 than 1%, sometimes only $200 to $400 of the total 00:22:34.680 --> 00:22:37.259 spend. So when your primary value proposition 00:22:37.259 --> 00:22:39.640 is selling a paper pedigree, and the commercial 00:22:39.640 --> 00:22:42.420 market is solely focused on selling genetic value 00:22:42.420 --> 00:22:45.599 and utility, the traditional model is facing 00:22:45.599 --> 00:22:48.400 an existential crisis of relevance. Right. The 00:22:48.400 --> 00:22:51.099 farmer is saying, I care about the economic traits, 00:22:51.180 --> 00:22:53.799 not the bloodlines. But we have to look at their 00:22:53.799 --> 00:22:56.509 efforts to adapt. We cited the counter -argument 00:22:56.509 --> 00:22:59.609 offered by Holstein USA CEO Lindsay Worden. We 00:22:59.609 --> 00:23:02.849 did. She acknowledged the decrease in full registrations, 00:23:02.849 --> 00:23:05.569 which is logical, right? Fewer dairy heifers 00:23:05.569 --> 00:23:07.730 are being born due to the beef on dairy pivot. 00:23:08.200 --> 00:23:10.279 But she points to growth in basic identification 00:23:10.279 --> 00:23:12.819 programs. Official identifications, which are 00:23:12.819 --> 00:23:16.059 just basic ear tags, sire and dam data, and lifetime 00:23:16.059 --> 00:23:19.500 tracking, were up 16 % in 2024. And the cheaper 00:23:19.500 --> 00:23:22.240 basic ID program grew 10%. So her argument is 00:23:22.240 --> 00:23:24.500 that they are pivoting from being pedigree registrars 00:23:24.500 --> 00:23:27.279 to being data and service integrators. If they 00:23:27.279 --> 00:23:30.259 can streamline systems to offer efficient, automated 00:23:30.259 --> 00:23:33.220 tracking services for massive commercial herds, 00:23:33.220 --> 00:23:36.220 some milking 10 ,000 cows, they still provide 00:23:36.220 --> 00:23:38.279 a foundational piece of the genetic program, 00:23:38.579 --> 00:23:41.359 even if the farmer doesn't pay for the full registration 00:23:41.359 --> 00:23:44.880 paper. But Jake, does a 16 % rise in basic ear 00:23:44.880 --> 00:23:48.019 tags justify the existence of these massive organizations 00:23:48.019 --> 00:23:50.579 if the core registration revenue is collapsing? 00:23:51.099 --> 00:23:53.359 That's the billion -dollar question. The question 00:23:53.359 --> 00:23:56.160 remains whether they can evolve fast enough from 00:23:56.160 --> 00:23:58.660 selling breed identity to selling genetic data 00:23:58.660 --> 00:24:01.299 utility before commercial providers completely 00:24:01.299 --> 00:24:03.980 take over the data tracking role. And right now, 00:24:04.099 --> 00:24:06.559 the utility is being found in vigor and component 00:24:06.559 --> 00:24:09.420 traits driven by structured cross -breeding programs. 00:24:09.839 --> 00:24:12.380 Exactly. This isn't just about throwing random 00:24:12.380 --> 00:24:15.319 semen at a cow and hoping for hybrid vigor. We're 00:24:15.319 --> 00:24:18.000 talking about systematic, documented approaches, 00:24:18.279 --> 00:24:21.009 like the ProCross system. A three -way rotation 00:24:21.009 --> 00:24:24.109 using Holston, Viking Red, and Montbeliard genetics. 00:24:24.509 --> 00:24:26.890 And the data backing this up is irrefutable. 00:24:27.250 --> 00:24:29.849 The long -term University of Minnesota study 00:24:30.190 --> 00:24:32.470 headed by researchers like Hazel, Hines, and 00:24:32.470 --> 00:24:36.890 Hansen, tracked 3 ,550 cows and demonstrated 00:24:36.890 --> 00:24:40.089 significant economic advantages for the crossbreds 00:24:40.089 --> 00:24:43.130 over pure Holsteins. They did. Specifically, 00:24:43.369 --> 00:24:46.269 the crossbreds were more fertile, had fewer services 00:24:46.269 --> 00:24:48.730 per conception, and returned to peak production 00:24:48.730 --> 00:24:51.009 faster after calving. But let's focus on the 00:24:51.009 --> 00:24:54.130 bottom line. The crossbreds had a 13 % higher 00:24:54.130 --> 00:24:58.079 daily profit. 13%. And the replacement rate data 00:24:58.079 --> 00:25:01.240 is astonishing. The crossbreds required a replacement 00:25:01.240 --> 00:25:04.559 rate of 30 .1%, while the pure Holsteins tracked 00:25:04.559 --> 00:25:08.140 at 39 .3%. That's a nearly 10 -point difference 00:25:08.140 --> 00:25:10.339 in culling rate. Which means the crossbred operation 00:25:10.339 --> 00:25:12.619 is retaining animals for an entire additional 00:25:12.619 --> 00:25:15.380 year on average. Think about that capital efficiency. 00:25:15.950 --> 00:25:19.170 On a 500 -cow dairy, that nine -coin difference 00:25:19.170 --> 00:25:22.329 translates to 45 fewer replacement heifers you 00:25:22.329 --> 00:25:24.490 need to raise or purchase annually. That is a 00:25:24.490 --> 00:25:27.210 massive, tangible control on capital expense 00:25:27.210 --> 00:25:30.089 that compounds over time. And we are seeing this 00:25:30.089 --> 00:25:34.089 implemented at massive scale. The Dornacker Prairies, 00:25:34.170 --> 00:25:37.450 a 360 -cow dairy in Wisconsin, is leveraging 00:25:37.450 --> 00:25:40.549 ProCross genetics alongside robotic milking systems. 00:25:40.789 --> 00:25:43.289 And they are hitting exceptional component levels. 00:25:43.630 --> 00:25:47.809 4 .6 % fat, 3 .6 % protein, and simultaneously 00:25:47.809 --> 00:25:50.789 rearing and selling high -value DairyCross beef 00:25:50.789 --> 00:25:53.049 calves. They are the living embodiment of the 00:25:53.049 --> 00:25:55.630 dual strategy. They are. And globally, it's the 00:25:55.630 --> 00:25:59.589 default. In large California dairies, 81 % reported 00:25:59.589 --> 00:26:03.019 using beef semen. Nationally, nearly 4 million 00:26:03.019 --> 00:26:06.380 crossbred calves were born in 2024, with projections 00:26:06.380 --> 00:26:09.619 aiming for 6 million by 2026. It's the new commercial 00:26:09.619 --> 00:26:12.559 default, driven by the math. But we must be fair 00:26:12.559 --> 00:26:15.140 to the focused purebred programs. The goal isn't 00:26:15.140 --> 00:26:17.759 necessarily crossbreeding. The goal is profitability. 00:26:18.420 --> 00:26:21.119 Highly focused purebred operations are also thriving, 00:26:21.259 --> 00:26:23.380 particularly those selling into high -component 00:26:23.380 --> 00:26:25.859 premium markets. Take Jersey producers, for example. 00:26:25.980 --> 00:26:29.119 In 2024, they achieved record production, 20 00:26:29.119 --> 00:26:34.259 ,719 pounds of milk with 5 .08 % fat and 3 .77 00:26:34.259 --> 00:26:37.200 % protein. Those component numbers are phenomenal 00:26:37.200 --> 00:26:40.500 and translate directly into premium milk checks. 00:26:40.740 --> 00:26:43.259 So for those operations, the key is aggressive 00:26:43.259 --> 00:26:46.160 selection for productive life, fertility, and 00:26:46.160 --> 00:26:48.380 health treat indexes within the purebred population, 00:26:48.559 --> 00:26:51.740 combined with rigorous culling based on genomic 00:26:51.740 --> 00:26:54.359 testing. The success isn't about the breed. It's 00:26:54.359 --> 00:26:57.119 about the pragmatic economic alignment of the 00:26:57.119 --> 00:26:59.259 genetic program with management capacity and 00:26:59.259 --> 00:27:01.799 market demand. We've established that the swing 00:27:01.799 --> 00:27:04.039 is real and the strategy is profitable today, 00:27:04.240 --> 00:27:07.079 but we have to address the long -term consequence 00:27:07.079 --> 00:27:10.680 of this widespread pivot, the replacement heifer 00:27:10.680 --> 00:27:13.380 time bomb. This is the critical sobering data 00:27:13.380 --> 00:27:16.539 that every listener must internalize. Because 00:27:16.539 --> 00:27:20.069 72 % of breedings are now diverted to beef, Replacement 00:27:20.069 --> 00:27:22.309 heifer inventories are plummeting to historic 00:27:22.309 --> 00:27:24.710 lows. We've already mentioned the Springer prices 00:27:24.710 --> 00:27:27.829 hitting $4 ,000, sometimes topping $4 ,500 in 00:27:27.829 --> 00:27:29.710 specific markets. Like the upper Midwest and 00:27:29.710 --> 00:27:32.210 California. And the CoBank data is incredibly 00:27:32.210 --> 00:27:34.829 sobering on the timeline. Inventories are not 00:27:34.829 --> 00:27:37.430 projected to rebound until 2027 at the earliest. 00:27:37.710 --> 00:27:40.849 We are locked into a severe multi -year shortage. 00:27:41.450 --> 00:27:44.269 They modeled the combined deficit for 2025 and 00:27:44.269 --> 00:27:48.170 2026, projecting nearly 800 ,000 fewer dairy 00:27:48.170 --> 00:27:50.690 replacements than the industry needs to maintain 00:27:50.690 --> 00:27:55.500 its current herd size and culling rate. And specifically, 00:27:55.779 --> 00:27:59.440 the deficit in 2026 is projected to be $440 ,000 00:27:59.440 --> 00:28:02.940 head compared to 2025 inventory levels. That 00:28:02.940 --> 00:28:05.779 deficit means intense competition for any available 00:28:05.779 --> 00:28:08.220 heifer, driving prices further up and making 00:28:08.220 --> 00:28:10.500 the strategic decision to raise your own high 00:28:10.500 --> 00:28:13.089 -quality replacements. More valuable than ever 00:28:13.089 --> 00:28:15.170 before. Yeah. Mike Hutchins from the University 00:28:15.170 --> 00:28:17.029 of Illinois wasn't exaggerating when he said 00:28:17.029 --> 00:28:20.190 farmers are already hoarding older, otherwise 00:28:20.190 --> 00:28:23.230 cullible cows just to maintain herd size flexibility. 00:28:23.650 --> 00:28:25.910 And this shortage is where the unforgiving biology 00:28:25.910 --> 00:28:28.289 of cattle dictates your capital expenditure. 00:28:28.589 --> 00:28:31.529 30 month biology. From breeding to first lactation. 00:28:31.569 --> 00:28:33.750 It means your aggressive beef on dairy breeding 00:28:33.750 --> 00:28:36.490 decision today locks in your replacement economics 00:28:36.490 --> 00:28:40.539 for 2028 and 2029. So if you overcommit to beef 00:28:40.539 --> 00:28:42.799 now, you will be paying top dollar for replacements 00:28:42.799 --> 00:28:45.259 three years from now. No way around it. This 00:28:45.259 --> 00:28:47.339 is why Dr. Cabrera's research is so crucial, 00:28:47.500 --> 00:28:50.059 emphasizing the need for reproductive flexibility. 00:28:51.019 --> 00:28:53.980 For operations to maintain the option to shift 00:28:53.980 --> 00:28:56.819 genetics and avoid future shortages, they need 00:28:56.819 --> 00:28:59.539 consistently high pregnancy rates. Ideally, 28 00:28:59.539 --> 00:29:02.880 to 30 percent. If you fall below that, every 00:29:02.880 --> 00:29:05.500 breeding becomes a critical, non -negotiable 00:29:05.500 --> 00:29:08.680 step toward heifer generation. You lose all flexibility. 00:29:09.160 --> 00:29:11.660 So what are the mitigation strategies being deployed 00:29:11.660 --> 00:29:14.160 now? First and foremost, extending productive 00:29:14.160 --> 00:29:16.970 life. Keeping those genetically superior healthy 00:29:16.970 --> 00:29:20.309 cows for four or five lactations reduces replacement 00:29:20.309 --> 00:29:23.569 needs by 20 to 30 % immediately. It makes your 00:29:23.569 --> 00:29:26.289 existing inventory last longer. Second is hyper 00:29:26.289 --> 00:29:28.559 -precision breeding. Using genomic testing to 00:29:28.559 --> 00:29:31.940 identify the absolute top 15 to 20 percent and 00:29:31.940 --> 00:29:34.059 committing your most expensive sex semen only 00:29:34.059 --> 00:29:36.039 to those animals. You are optimizing efficiency, 00:29:36.359 --> 00:29:38.740 not volume, on the replacement side. And third. 00:29:39.059 --> 00:29:41.720 Accelerating development efficiency. Farmers 00:29:41.720 --> 00:29:44.559 are pushing to achieve first calving at 22 or 00:29:44.559 --> 00:29:47.400 23 months rather than the traditional 24 to 26. 00:29:47.819 --> 00:29:50.359 Shaving two or three months off that non -productive 00:29:50.359 --> 00:29:53.559 period significantly cuts down the cost of rearing 00:29:53.559 --> 00:29:55.799 the replacement and delivers a return sooner. 00:29:56.140 --> 00:29:59.200 And we're also seeing a massive increase in custom 00:29:59.200 --> 00:30:01.920 heifer raising partnerships, offloading that 00:30:01.920 --> 00:30:04.660 immense management and a feed burden to specialists. 00:30:05.039 --> 00:30:07.759 But let's switch to the other major risk, beef 00:30:07.759 --> 00:30:10.759 market volatility. The half million dollar strategy 00:30:10.759 --> 00:30:13.700 hinges entirely on that five to seven hundred 00:30:13.700 --> 00:30:16.359 dollar premium holding up. And beef is notoriously 00:30:16.359 --> 00:30:19.240 volatile. It is. And the source material gave 00:30:19.240 --> 00:30:21.880 us a clear warning sign. The sharp market correction 00:30:21.880 --> 00:30:25.240 we saw in October 2025. Right. Crossburn CAF 00:30:25.240 --> 00:30:29.180 values dropped 11 .5 % in just 12 days. That 00:30:29.180 --> 00:30:31.299 volatility showed how quickly the premium can 00:30:31.299 --> 00:30:34.200 erode. So if you were banking on a $1 ,600 CAF 00:30:34.200 --> 00:30:36.900 and it suddenly sells for $1 ,400, your margin 00:30:36.900 --> 00:30:39.809 disappears fast. This volatility necessitates 00:30:39.809 --> 00:30:42.450 a robust risk management strategy, and thankfully, 00:30:42.569 --> 00:30:45.190 the industry is adapting quickly. As of July 00:30:45.190 --> 00:30:48.789 1, 2025, the USDA introduced the Livestock Risk 00:30:48.789 --> 00:30:51.009 Protection Program's unborn calves coverage. 00:30:51.049 --> 00:30:53.190 And that's specifically applicable to beef on 00:30:53.190 --> 00:30:56.700 dairy crosses. It is. This tool is a game changer 00:30:56.700 --> 00:30:58.900 because it's a federally subsidized insurance 00:30:58.900 --> 00:31:02.299 program. It allows the dairy producer to purchase 00:31:02.299 --> 00:31:05.059 price protection before the calf is even conceived. 00:31:05.420 --> 00:31:07.880 So you can lock in a floor price. Up to $1 ,200 00:31:07.880 --> 00:31:10.339 per calf, depending on the coverage level you 00:31:10.339 --> 00:31:12.700 choose and the current market conditions. Okay, 00:31:12.740 --> 00:31:14.619 explain how that practically works for the listener. 00:31:14.839 --> 00:31:17.880 If I'm planning my breedings for October, how 00:31:17.880 --> 00:31:20.380 do I use LRP to protect the revenue I'm hoping 00:31:20.380 --> 00:31:23.569 for 18 months later? You purchase the coverage 00:31:23.569 --> 00:31:26.150 based on the expected birth date of the calf. 00:31:26.390 --> 00:31:28.690 The coverage price is set using national market 00:31:28.690 --> 00:31:31.170 indexes for beef, fee or cattle, and the government 00:31:31.170 --> 00:31:34.089 subsidizes a portion of the premium, often between 00:31:34.089 --> 00:31:37.549 13 and 20%. And if the market price falls below 00:31:37.549 --> 00:31:40.549 your insured price when the cat is ready for 00:31:40.549 --> 00:31:43.000 sale. The insurance pays the difference, protecting 00:31:43.000 --> 00:31:46.039 that margin. That October 2025 correction made 00:31:46.039 --> 00:31:48.500 this tool essential for any operation relying 00:31:48.500 --> 00:31:51.319 on beef calf revenue. Beyond insurance, other 00:31:51.319 --> 00:31:54.220 mitigation strategies are vital. Forward contracting 00:31:54.220 --> 00:31:57.079 is critical. Securing a price with a feedlot 00:31:57.079 --> 00:31:59.940 buyer when prices are favorable rather than relying 00:31:59.940 --> 00:32:02.500 on auction day volatility. And diversification 00:32:02.500 --> 00:32:06.000 of beef genetics. Yes. Don't rely solely on one 00:32:06.000 --> 00:32:09.180 sire breed. Use a mix of high -indexing Angus, 00:32:09.259 --> 00:32:11.839 Cemental, Limousine, and even some specialty 00:32:11.839 --> 00:32:15.140 crosses. This avoids reliance on a single market 00:32:15.140 --> 00:32:17.740 segment and provides more consistency for the 00:32:17.740 --> 00:32:19.740 buyer. And the most important mitigation tool 00:32:19.740 --> 00:32:22.160 remains flexibility. It always comes back to 00:32:22.160 --> 00:32:25.599 this. Maintaining that high 28 % to 30 % pregnancy 00:32:25.599 --> 00:32:28.240 rate allows you to pivot quickly. So if beef 00:32:28.240 --> 00:32:31.240 markets drop 15 % and replacement prices start 00:32:31.240 --> 00:32:33.799 dipping below $3 ,500. You have the operational 00:32:33.799 --> 00:32:36.299 flexibility to immediately shift more of your 00:32:36.299 --> 00:32:39.099 middle tier cows back to conventional dairy breeding 00:32:39.099 --> 00:32:41.420 to protect your replacement inventory and milk 00:32:41.420 --> 00:32:44.500 check margin. Rigidity equals exposure. The ability 00:32:44.500 --> 00:32:47.019 to change direction enabled by strong reproductive 00:32:47.019 --> 00:32:50.519 performance is the single greatest risk mitigation 00:32:50.519 --> 00:32:53.480 tool in the modern dairy operation. All right, 00:32:53.500 --> 00:32:55.339 Jake, let's bring this entire deep dive home. 00:32:55.480 --> 00:32:57.380 We've covered the half million dollar swing, 00:32:57.579 --> 00:33:00.319 the genetic paradox and the time bomb we're facing 00:33:00.319 --> 00:33:04.799 in 2027. A farmer just finished milking and is 00:33:04.799 --> 00:33:07.759 driving to the feed store right now. What are 00:33:07.759 --> 00:33:10.400 the three non -negotiable takeaways they need 00:33:10.400 --> 00:33:12.619 to implement in their operation? Number one is 00:33:12.619 --> 00:33:14.779 always the foundation, reproductive performance. 00:33:15.440 --> 00:33:18.200 It is the gatekeeper to the entire optimized 00:33:18.200 --> 00:33:21.420 strategy. Without it, the whole system collapses 00:33:21.420 --> 00:33:24.220 into high replacement costs. Takeaway one, your 00:33:24.220 --> 00:33:26.920 pregnancy rate is the gatekeeper. Immediate action 00:33:26.920 --> 00:33:29.880 this week. Pull your 12 -month rolling pregnancy 00:33:29.880 --> 00:33:32.059 rate trend. You need to know that number cold 00:33:32.059 --> 00:33:34.799 and compare it against industry benchmarks. Medium 00:33:34.799 --> 00:33:37.440 -term strategy, three to six months. If that 00:33:37.440 --> 00:33:40.319 rate is tracking below 28%, you must focus every 00:33:40.319 --> 00:33:42.460 available reproductive resource there first. 00:33:42.920 --> 00:33:45.660 Beef on dairy segmentation is a waste of capital 00:33:45.660 --> 00:33:47.839 if poor fertility means you still have a replacement 00:33:47.839 --> 00:33:50.440 shortage. Long -term positioning, one to two 00:33:50.440 --> 00:33:52.960 years. Maintain a reproductive performance that 00:33:52.960 --> 00:33:55.859 gives you 30 % plus flexibility. That buffer 00:33:55.859 --> 00:33:58.559 is your insurance policy, allowing you to quickly 00:33:58.559 --> 00:34:00.640 shift genetics based on the volatile beef market 00:34:00.640 --> 00:34:02.920 and future co -bank heifer inventory forecasts, 00:34:03.240 --> 00:34:06.480 protecting your 2028 -2029 replacement supply. 00:34:06.799 --> 00:34:09.360 Takeaway two must be about the ledger. You can't 00:34:09.360 --> 00:34:11.360 capture the swing if you don't know your true 00:34:11.360 --> 00:34:14.219 costs and local values. Absolutely. Takeaway 00:34:14.219 --> 00:34:16.619 two, run your own numbers. Don't trust averages. 00:34:17.179 --> 00:34:20.039 Immediate action this week. Calculate your true 00:34:20.039 --> 00:34:22.559 cost per replacement heifer. The source material 00:34:22.559 --> 00:34:24.980 proved that many operations underestimate this 00:34:24.980 --> 00:34:29.239 cost by $500 to $800 per head because they fail 00:34:29.239 --> 00:34:31.900 to include comprehensive feed, labor, veterinary, 00:34:32.000 --> 00:34:34.900 and overhead costs until calving. Get a detailed, 00:34:35.079 --> 00:34:37.179 fully burdened figure. Medium -term strategy, 00:34:37.480 --> 00:34:39.820 three to six months. Get current local quotes 00:34:39.820 --> 00:34:42.179 for high -quality, preconditioned beef cross 00:34:42.179 --> 00:34:45.360 calves. Don't rely on national auxin data? Know 00:34:45.360 --> 00:34:47.360 exactly what local buyers are paying $1 ,250 00:34:47.360 --> 00:34:49.860 to $1 ,700 for quality crosses in your region. 00:34:50.199 --> 00:34:53.280 Then, run the full 500 cow comparison with your 00:34:53.280 --> 00:34:56.659 actual production figures to determine the precise 00:34:56.659 --> 00:35:00.639 $340 ,000 to $500 ,000 swing for your specific 00:35:00.639 --> 00:35:03.139 operation. Long -term positioning, one to two 00:35:03.139 --> 00:35:06.039 years. Base all bull selection dairy or beef 00:35:06.039 --> 00:35:09.260 on components to maximize the 90 % of your milk 00:35:09.260 --> 00:35:12.059 check tied to quality. Every breeding decision 00:35:12.059 --> 00:35:15.119 must either deliver component value or a high 00:35:15.119 --> 00:35:17.639 -value calf. And finally, you have to protect 00:35:17.639 --> 00:35:20.280 that massive calf premium. You cannot afford 00:35:20.280 --> 00:35:22.579 to lose the critical margin to market volatility 00:35:22.579 --> 00:35:25.619 or unexpected price corrections. Takeaway three, 00:35:25.800 --> 00:35:28.420 protect the premium. Immediate action this week. 00:35:28.579 --> 00:35:30.679 Contact your crop insurance agent and inquire 00:35:30.679 --> 00:35:34.739 specifically about the new USDA LRP unborn calves 00:35:34.739 --> 00:35:37.539 coverage. Understand how you can lock in price 00:35:37.539 --> 00:35:40.239 protection up to $1 ,200 per calf right now. 00:35:40.519 --> 00:35:43.369 Medium term strategy, three to six months. If 00:35:43.369 --> 00:35:45.329 you haven't adopted a segmented approach, start 00:35:45.329 --> 00:35:47.969 a pilot program immediately. Use sex semen on 00:35:47.969 --> 00:35:50.269 the top 20 % and beef genetics on the bottom 00:35:50.269 --> 00:35:52.349 20 % of breedings to see how it integrates with 00:35:52.349 --> 00:35:54.409 your existing labor and management protocols 00:35:54.409 --> 00:35:56.809 before a wholesale shift. Yeah, test it out. 00:35:56.929 --> 00:36:00.119 Long term positioning, one to two years. Use 00:36:00.119 --> 00:36:03.099 genomic testing strategically for precise culling 00:36:03.099 --> 00:36:06.539 and parented verification. That $24 ,000 budget 00:36:06.539 --> 00:36:10.039 must deliver ROI by eliminating marginal animals 00:36:10.039 --> 00:36:12.300 and identifying the elite. But recognize that 00:36:12.300 --> 00:36:14.619 management constraints limit genetic expression. 00:36:14.800 --> 00:36:18.280 Don't overinvest in potential that your facility 00:36:18.280 --> 00:36:21.380 or labor situation can't deliver. The economic 00:36:21.380 --> 00:36:25.500 logic of the $340 ,000 to $500 ,000 plus annual 00:36:25.500 --> 00:36:28.320 swing is now the dominant force in the dairy 00:36:28.320 --> 00:36:31.289 industry. The math is simple capital allocation. 00:36:31.710 --> 00:36:34.070 And the choice today is whether you adapt your 00:36:34.070 --> 00:36:36.210 breeding program to capture that immense profit 00:36:36.210 --> 00:36:39.150 or whether you remain in the 28 % who are unwittingly 00:36:39.150 --> 00:36:41.130 subsidizing the tight replacement heifer market 00:36:41.130 --> 00:36:43.590 for everyone else. The era of breeding based 00:36:43.590 --> 00:36:46.690 on tradition is over. We are in the era of ruthless 00:36:46.690 --> 00:36:49.309 economic breeding. For producers willing to run 00:36:49.309 --> 00:36:51.250 the comprehensive numbers and adapt their management 00:36:51.250 --> 00:36:53.550 to meet the genetic potential they buy, that 00:36:53.550 --> 00:36:55.570 half -million -dollar opportunity is absolutely 00:36:55.570 --> 00:36:58.179 real. This has been another deep dive from the 00:36:58.179 --> 00:37:00.639 Bullvine podcast. For more straight talking industry 00:37:00.639 --> 00:37:03.559 analysis and the no BS insights you need to manage 00:37:03.559 --> 00:37:07.820 your operation, head to www .thebullvine .com. 00:37:08.199 --> 00:37:10.960 Subscribe wherever you get podcasts. We're out 00:37:10.960 --> 00:37:12.960 with new episodes every day and upcoming topics. 00:37:13.000 --> 00:37:15.079 We'll be drilling deeper into the actual feed 00:37:15.079 --> 00:37:17.039 and forage outlook for the coming season and 00:37:17.039 --> 00:37:18.980 crucial strategies for managing that persistent 00:37:18.980 --> 00:37:21.320 heifer shortage we know is going to run right 00:37:21.320 --> 00:37:23.599 through 2027. We'll see you next time.