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.
The No BS Zone for Dairy Insights. Exactly. This
is the place where we try to cut through all
the noise, the PR releases, the industry fluff,
all of it to get you the insights that actually
matter for your operation. Right. If you're listening
to this, chances are you're in the cab of a tractor
or maybe you're in the office. Staring at a milk
check that just doesn't look quite right. Either
way, you're in the right place. This is the No
BS Zone. That's right. We're not here to tell
you everything is sunny when it's, you know,
pouring rain outside. We are here to look at
the bottom line. Yeah. To question the hype.
Yeah. And to figure out how to keep the lights
on and the cows fed. Exactly. And today we are
doing a deep dive into a feature piece that it
hit my desk earlier this week. And honestly,
it kept me up at night. Oh, yeah. The title is
The Vanishing Frontier, North Dakota's Dairy
Processing Collapse. The Vanishing Frontier.
Wow. That sounds like a history lesson about
the Wild West or something. It does, right? Yeah,
like we're going to talk about wagon trains and
dysentery. No, it sounds like some documentary
on the History Channel, but let me correct you
on that immediately. This is not a history lesson.
Okay. This is a diagnostic tool for every single
dairy farmer in America. I don't care if you're
in North Dakota. Wisconsin, Texas, or New York,
this matters. Okay, so play devil's advocate
here for a second. Why does a farmer mulking,
say, 500 cows in upstate New York care what's
happening in North Dakota? It feels a world away.
Because what's happening in North Dakota right
now, and I mean right now, this week, Thursday,
February 12th, 2026. It is a blueprint of structural
failure. Oh, blueprint. It's a collapse of infrastructure
that serves as a big flashing warning light on
the dashboard for the entire industry. It's about
physics. Physics. Yeah, the physics of milk movement
and processing. And those physics, they apply
absolutely everywhere. All right, let's set the
stakes here then, because I read through this
report and the numbers are... Well, they're terrifying.
We are talking about a state that went from having
0 ,810 dairy farms in 1987 to just 18 grade A
dairies today. 18? Just let that sink in for
a second. From over 1 ,800? down to 18. That
is a 99 % collapse. It is. That's not a decline.
That's not a market correction. That is an extinction
event. It is. That's the meteor hitting the pasture.
It really is. And the reason we're talking about
it isn't to mourn the past. It's because the
source material makes a very, very provocative
point. It argues that you can be a top tier manager
inside the fence. You can have the best genetics,
the best fee efficiency, perfect protocols. But
if the outside the fence structure breaks. The
processing, the hauling. Exactly. If that breaks,
you are still doomed. That is a hard pill to
swallow. We're taught from the time we're in
4 -H that if you work harder, you'll make it.
If you manage better, if you get up earlier than
the neighbor, you survive. We believe in the
meritocracy of the barn. And today, we are going
to dismantle that myth. We're going to look at
why working harder is no longer the answer when
the map itself changes against you. Okay. So
let's get into it. Where do we start? Let's start
with the raw data, the timeline of this crash.
Yeah, lay it out. You said 8 ,810 farms in 1987.
That feels like a lifetime ago. It does. And,
you know, by 2022, that number had already dropped
to 107. Which is already a huge drop. That's
sort of what we've seen everywhere with consolidation,
right? Right, that's a familiar story. But the
really scary part is the acceleration at the
very end. From 107 in 2022... to just 18 in early
2026 whoa wait so in the last four years basically
in the last four years that's that's a free fall
that's losing nearly 90 of what was left in just
48 months precisely and to put a human face on
this because it's not just numbers on a page
the article focuses on the hola family They run
Northern Lights Dairy near Mandon, North Dakota.
Right. And this is important. Northern Lights
isn't some small hobby farm. This isn't a guy
milking 40 cows in a tie stall barn from 1950
with a bucket. Not at all. This is a 1 ,000 cow
operation. It's fifth generation. They are high
tech. I mean, they're using fiber -connected
monitoring technology on their entire herd. Jennifer
Hall, she's the calving manager. She oversees...
Three to four bursts a day, sometimes up to 15.
So they're dialed in. They are modern, efficient,
and they know what they are doing. They are doing
everything that consultants, the magazines, everyone
tells you to do. But here's the crisis. Here's
the crisis. Because the local processing capacity
has just evaporated. They are currently hauling
their milk five hours, one way to Perham, Minnesota.
Five hours, one way. Every truck, multiple times
a day. Can you imagine the logistics of that?
I can't. I really can't. I mean, just start with
the basics. The fuel costs alone have got to
be astronomical. Forget about it. This is where
I tear on the trucks. You're putting thousands
of miles on them every single week. And driver
retention. Oh, good luck. Try to find guys willing
to make that 10 -hour round trip run every single
day, day in, day out. You are essentially...
hauling water across state lines for five hours
just to find a home for it. Your profit margin
is just, it's burning up on the interstate. It
is. And that leads to the quote from the halls
that really just chilled me. They told a reporter,
and this is a direct quote, we don't know what
we're going to do. Wow. That hits hard. It does.
When you have a 1 ,000 cow dairy, a family legacy
going back generations, all the technology in
the world, and your honest answer is, I don't
know. That tells you the system is broken. That's
not a failure of management. That is a failure
of the map. A failure of the map. That is the
perfect way to put it. And it brings us to our
first... Major concept for this deep dive, the
good manager myth. Yeah. Let's unpack this because
in the coffee shop, the talk is always, well,
if he went under, he must not have been watching
his inputs or he over leveraged on that new track.
We love to blame the guy who failed. We do. We
love to blame the individual because, you know,
it makes us feel safe. If failure is a choice,
then success must also be a choice. Right. That
won't happen to me because I'm smarter. Exactly.
But the bull bind analysis here really challenges
that. It separates the business into two distinct
zones, inside the fence and outside the fence.
Okay, lay it out. So inside the fence is what
we control. Precisely. Inside the fence. is genetics
it's your feed efficiency it's cow comfort it's
your labor protocols it's keeping your somatic
cell count low it's getting cows bred back on
time all the stuff we spend 99 of our time thinking
about the day -to -day and the hollis they are
crushing it inside the fence they are by all
accounts doing everything right but outside the
fence that's the wild west That's the stuff that
happens to you, not by you. Outside the fence
is your basis. It's plant closures. It's make
allowance hikes from the USDA. It's route economics.
It's federal policy. The stuff that feels completely
out of your hands. And the argument here, the
core argument, is that you cannot breed your
way to cheaper diesel. I love that line. You
can't breed your way to cheaper diesel. That
says it all. You can have the highest producing
cows in the county pushing 100, 110 pounds a
day. But if the truck has to drive 300 miles
one way, that efficiency is gone. It's just,
it's eaten up by the asphalt. It evaporates.
And we saw this happen in real time in North
Dakota with the plant closures. This is the timeline
that broke the state's back. Okay, walk us through
it. In September 2023, Prairie Farms in Bismarck
closed their processing facility. That was a
big one. That was the main class I destination
for a huge chunk of the state, central and western
North Dakota. It was the anchor. Yeah. And when
that... It was like the anchor just came loose.
It converted to a distribution only facility.
So suddenly there's nowhere for that fluid milk
to go locally. Then it gets worse. Of course
it does. Less than a year later, August 2024,
DFA closes the Pollock, South Dakota plant. And
that was the backup. That was plan B for a lot
of those farms. That was the backup. So now you
have no primary and you have no backup. The result,
milk that used to travel. maybe dozens of miles,
is now traveling hundreds. Yeah, there was another
example in the source about a producer named
Hank. When Prairie Farms closed, his milk got
rerouted 151 miles down to Pollock. Before Pollock
closed. Right, before Pollock closed. And that
came with an immediate surcharge, 55 cents per
hundredweight. 55 cents, just gone with the snap
of a finger. That is pure margin destruction.
Absolutely. And it gets worse. Yeah. He had to
buy... brand new bulk tank just to survive the
new schedule changes because it couldn't pick
him up as often. So he had to spend capital.
He had to spend tens of thousands of dollars
on capital just to make less money. That is the
definition of a bad business move, but he had
no choice. It's investing in survival, not growth.
And this brings us to the segment of the discussion
where we have to follow the money. We need to
talk about the geography penalty. It's a real
penalty. The data shows that hauling charges
in the upper Midwest jumped 30 percent. 30 percent.
2023 to 2024. The average is now nearly 80 cents
per hundred weight. And we have to be clear,
that's the average. Averages lie. Yeah, they
do. North Dakota has the highest hauling charge
in all of Federal Order 30. If you are the halls
hauling five hours to Minnesota, you are way,
way above that average. Oh, you're not paying
80 cents. You might be looking at $1 .50, maybe
$2 hauling. Easily. And it creates a negative
basis that you just can't climb out of. You're
starting the race 10 yards behind everyone else
every single month. Your neighbor down in Wisconsin
or Michigan might be paying 50 cents and you're
paying triple that. You can't outmanage that
spread. Impossible. And then just to, you know.
kick you while you were down. We have to talk
about make allowances. Oh, boy. The regulatory
hit. This is the stuff that makes farmers eyes
glaze over. But it's literally picking your pocket
every single day. It is. So this happened back
in June 2025. The USDA adjusted the make allowances.
And let's just break that down real simple. It's
basically the credit processors get to cover
their costs of turning milk into cheese, butter
or powder. Right. And let's be crystal clear
on this. When the processor gets a bigger allowance,
the farmer gets a smaller check. It's a zero
-sum game within the pricing formula. Exactly.
So the cheesemake allowance went up 25 .8%. Wow.
Butter, up 32 .5%. And powder, up... A staggering
42 .6%. That is massive. That's not an adjustment.
That is a fundamental shift of wealth from the
farm gate to the processing plant. It is. And
the impact, the bottom line impact, is that it
directly reduces the Class 3 price paid to farmers.
And remember, in January 2026, the Class 3 price
was already low. It was $14 .59. So you take
a low price, you subtract a higher make allowance,
and then you subtract a massive hauling fee.
Yeah. What is left? Dust. Red ink. Yeah. That's
what's left. You are paying for the privilege
of milking cows. And that leads us to the next
big data point, the scale gap. This is another
set of numbers from the USDA that we really need
to highlight because it's brutal. This is the
part of the show that usually makes the small
guys turn off the radio, but don't. You need
to hear this. The math does not care about your
feelings. It does not. Herds with fewer than
50 cows have a total economic production cost
of $42 .70 per hundredweight. $42 .70 for a product
you're maybe getting $15 for. Right. Now, herds
with more than 2 ,000 cows, their production
cost is $19 .14. That is a gap. Just do the math.
That's a gap of $23 .56 per hundredweight. $23.
Yeah. That gap is wider than the entire profit
margin for most farms, even in a boom year. It
is impossible to compete with that kind of spread
if you are purely a commodity producer. You're
not just playing a different game. You're playing
a different sport on a different planet. You
really are. And the profitability stats, they
back it up completely. The source says 89 % of
dairies with over 1 ,000 cows usually report
positive net returns. Okay, so nearly 9 out of
10 are in the black. Compare that to herds with
fewer than 100 cows. Only 11 % of them report
positive returns. 11%. So basically, if you were
small, you are statistically very likely to be
losing equity every year. And if you are big,
you are statistically likely to be building it.
That is what drives consolidation more than anything
else. It's not a conspiracy. No. It's just economies
of scale on steroids. So we have identified the
problem. The infrastructure collapsed. The cost
skyrocketed. The regulatory environment got tougher.
But some people are still milking cows in North
Dakota. The survivors. Let's talk about them.
The article outlines three basic models for survival
in this new reality. Right. And survivor model
number one is the scaled conventional. That's
the halls. The ones we've been talking about.
And as we said, they're hanging on by a thread.
Or, as the article puts it, hanging on by the
freight bill. They're doing everything right
inside the fence, but they're on the wrong zip
code. They're on the wrong side of the map. They
looked at on -farm processing. That's usually
the first thing people say, right? Oh, just bottle
your own milk. Cut out the middleman. Just build
a plant like it's a shed. Right. Just put up
a few walls and, you know, start bottling. It's
so naive. It is. The Hollas, they actually looked
at it. They researched it. And their conclusion
was that it was extremely expensive. I bet it
was. The state of North Dakota, to their credit,
they have some grants. There's Senate Bill 2342,
but the cap on it is $10 million. Which sounds
like a lot of money to a regular person. It sounds
like a fortune. But in the world of modern dairy
processing, $10 million. Yeah. That's nothing.
That's the parking lot and the foundation, maybe.
It's only 5 % of the cost for a major efficient
facility. So it doesn't even move the needle.
It doesn't bridge the gap. So the Hollas are
stuck in this limbo. They're too big to be a
small niche hobby farm, but they're completely
isolated from the industrial processing corridor.
Which brings us directly to survivor model number
two, the industrial entrant. And this is Riverview
LLP. Right. Now, this can be a controversial
topic for some, but we have to look at it objectively
from a business standpoint. You have to. Riverview
is a different beast entirely. They're based
in Morris, Minnesota, but they are developing
two massive new sites in eastern North Dakota.
And when you say massive, you mean? We're talking
a 25 ,000 head facility and another 12 ,500 head
facility. 25 ,000 heads, that is a city of cows.
It is. It's an industrial operation. And the
investment is around $270 million. But here's
the key. Notice where they are building. Eastern
North Dakota. Right on the I -29 corridor. They
are not building out in the processing desert
where the Hollies are. Not a chance. They are
building specifically where they can integrate
with the existing processing corridor. These
aren't family farms in the traditional sense.
They are industrial units designed from the ground
up to fit the outside -the -fence math perfectly.
They have the scale to demand better freight
rates. Or even own their own trucking. They have
the volume to negotiate with processors from
a position of strength. They fit the structural
reality. They aren't victims of the geography.
They are leveraging it. Exactly. They're not
just showing up to the party. They are bringing
their own ecosystem with them. Right. Then there's
survivor model number three, the niche. The direct
-to -consumer crowd. The homesteaders, you could
almost call them. North Dakota passed a bill,
House Bill 1515, which allows for the sale of
raw milk directly from the farm. And the article
says there are about 23 farms doing this now.
And look, it works for them. They completely
bypass the federal pricing system. They bypass
the freight costs. They set their own price and
sell it directly to a neighbor who wants raw
milk. It's a closed loop. But, and I have to
be the skeptic here, is this a solution for the
industry? No. Absolutely not. It's a wonderful
solution for 23 families. Maybe it'll be a solution
for 50 families eventually. But you cannot process
the volume of milk the United States produces
by selling raw milk out of the back of a barn.
It's a lifeboat, not a cruise ship. That is a
great analogy. It saves a few people who are
in the water, but it doesn't save the fleet.
It's not a systemic fix for the vanishing frontier.
Not even close. So we've looked at North Dakota
in a microscope, but I know listeners in Wisconsin,
Pennsylvania, New York, they're thinking, well,
that's sad for them, but I'm fine. I've got three
plants within 50 miles of my farm. Right. That's
a North Dakota problem. And that is the dangerous
thinking we need to correct right now. Let's
zoom out to the future implications. This is
not just a North Dakota story. No, it is not.
Look at Wisconsin, America's dairy land. They
lost nearly half their dairy farms in a single
decade. Half. In the heart of dairy country.
The U .S. as a whole lost about 15 ,800 farms
between 2017 and 2022. Which is a staggering
number. But then it got worse. We lost another
8 ,400 between 2022 and 2025. The trend line
is clear. It's not flattening out. It's getting
steeper. It's accelerating. And there's another
technical term we have to touch on that's making
this worse, and that's depooling. Ugh, yeah.
It's another one of those things that sounds
complicated, but it hurts your wallet directly.
Very directly. When the price spread between
Class 3 milk, which is for cheese, and Class
4 milk for butter and powder gets really wide.
Which it has been. Processors de -pool. Basically,
they find a loophole to opt out of the federal
pool because the math works out better for them.
Right. If they can keep the money instead of
sharing it in the pool, they will. That's just
business. I don't blame them. But it destabilizes
the pricing for everyone else. It does. We saw
a gap of over $4 per hundredweight recently between
the two classes. And that creates huge winners
and losers based purely on which plant you happen
to ship to, not on how good your milk is or how
efficient your farm is. It turns marketing your
milk into a lottery. And looking ahead at the
2026 outlook. Well, it doesn't look like a recovery
year is on the horizon. Not at all. Class 3 is
expected to average around $17 .05, which is
down over 7 % from the previous year. And Class
4 is even worse. Down 17%. So prices are dropping,
costs are staying high, and the structural map
is continuing to shrink. My prediction is that
2026 will be the year that the outside -the -fence
math becomes undeniable for a lot of people,
not just in North Dakota. It's going to be a
reckoning year. The math always... Always wins
in the end. It does. Now let's get into the contrarian
takes. This is the part of the deep dive where
we say the things that people whisper at the
feed store but don't say out on the microphone.
The taboo stuff. This is stuff that makes Thanksgiving
dinner really awkward. Let's start with the big
one. Succession. Or maybe we should call it exiting.
Oof. Yeah. In a tight -knit dairy community,
selling the cows, it carries a real stigma. It's
seen as failure. It feels like failure. It feels
like you let grandpa down. It feels like you
are the one in a long line of generations who
dropped the torch. It does. But here is the contrarian
view from the bull vine. Sometimes, saving the
dairy actually destroys the family equity. I
have seen this happen way too many times. A family
keeps milking, keeps borrowing against the land,
burning up that land equity to pay the feed bill.
Hoping next year is better. Just one more cycle,
they always say. The prices have to come back.
And eventually, the bank takes it all. The cows,
the equipment, and the land. Everything is gone.
The families who exited before their equity was
all burned up, they're the ones who actually
saved their land. They're the ones who are still
farming. Maybe they're cropping now. Maybe they're
running beef cattle. But they still own the ground
that's been in their family for 100 years. That's
the hard truth. Sometimes the best way to honor
the legacy is to preserve the wealth and the
asset, the land, not the specific activity of
milking cows twice a day. It's about being a
steward of the asset, not just a laborer in the
barn. Another contrarian take. Processing investment.
This idea that farmers should just band together
and build their own plant to solve the problem.
It's a trap. A dangerous, expensive trap. Why
do you say that so confidently? Because... Unless
you have massive, massive volume and density
of milk in a small area, you cannot compete.
The Hollis, a 1 ,000 cow modern dairy, considered
it and couldn't make a pencil. Right. If they
can't make a pencil, a group of 60 cow dairies
definitely can't. You need scale. Without that
volume, your per unit processing cost is way
too high. And the big guys, the Walmarts, the
Kroger's, the massive co -ops, they will undercut
you on the shelf every single day of the week.
Just simple, brutal economics. So unless you
are forming a massive new generation co -op like
a Glanbia or a Foremost, trying to go it alone
is incredibly risky. You are jumping out of the
frying pan and into the fire. So the hard truth
that nobody wants to say is that the era of widespread
family scale commodity dairy in remote regions.
It might just be over. Yeah. The vanishing frontier
is real. It's receding. And if you are standing
on that frontier, you need to know that it's
moving away from you. You need to know if you're
standing on an island that is slowly sinking
into the sea. All right. We have painted a pretty
stark picture here. But we promised actionable
insights. We are the bullvine. We don't just
complain. We try to offer solutions. So a farmer
just finished milking. They're driving to the
feed store and they're feeling a pit in their
stomach after listening to this. What do they
need to do? Give me three things. Okay, let's
break this down into actionable steps. Immediate,
medium term, and long term. I like it. Insight
number one, immediate. This week. What do they
do when they get back to the farm office? This
week, you need to do a diagnostic check. And
that means you need to calculate your true all
-in cost. And you have to be brutally honest
about this number. Don't lie to yourself to make
the numbers look better. Brutally honest. Take
your family labor. Pay yourself and your family
a real wage on paper. If you had to hire someone
to do your job, what would it actually cost?
Right. Add your full debt service payment principle
and interest. Add your replacement costs for
heifers. Now. subtract that total cost from your
mailbox price. And stress that, your mailbox
price, the check you actually deposit, not the
class three price on the screen. Right. If that
final number is negative over a three to five
year average, you are in structural danger. You
are not just having a bad year. You have a broken
business model. And while you're at it, check
your freight exposure. Yes. Ask yourself one
simple, terrifying question. What happens if
my nearest plant closes tomorrow? If the honest
answer is I go broke, then you are critically
vulnerable. You need a contingency plan and you
need it now. Okay, that's this week. Insight
number two, medium term, let's say the next three
to six months. In the medium term, you need to
stress test your operation. You need to analyze
your debt service coverage ratio, your DSCR.
Give us the benchmark. What's the magic number
we're looking for? If your DSCR is below 1 .25
on average, you are on very thin ice. That means
for every dollar of debt payment, you only have
a dollar and a quarter of income to cover it.
There's no room for error. Now what's the stress
test part? Run a scenario. Go into your projections
and drop the milk price by $1 .50. Does your
DSCR drop below 1 .0? Meaning you can't even
make your payments. Exactly. If the answer is
yes, you are extremely vulnerable to a market
swing that you cannot control. And this is where
you have to sort your problems. Is it an inside
the fence problem or an outside the fence problem?
Yeah, back to that. You have to. If your somatic
cell count is high, fix it. That's inside the
fence. You can manage that. But if your basis
is negative $2 because you live in a processing
desert. That's outside the fence. You cannot
fix that with better teak dip. You have to recognize
the difference between problems you can manage
and problems you have to adapt to or escape from.
That's a huge point. Okay, insight number three,
long term. We're talking one to two years out.
Long term, you have to pick a path, stop drifting,
stop hoping. You have to make a conscious, deliberate
choice. And there are basically four paths. Okay,
path number one. Path one, scale, get bigger.
But, and this is a huge boat, only if you are
near processing infrastructure, do not get big
in a desert. That is just compounding the error.
It's like building a bigger boat with a bigger
hole in it. Exactly. Okay, path number two, niche.
The direct -to -consumer model. Right, but it
has to pay. You need to be able to deliver consistently
at least $8 per hundredweight above the commodity
price to cover the hassle. The hassle of marketing,
packaging, dealing with customers? All of it.
If you're not getting an $8 premium, it is probably
not worth a headache. Okay, path number three.
Path three, invest in processing. This is the
high -risk, high -capital path. The build -your
-own -plant idea. Right. This is only for the
really big players or massive, well -organized
co -ops. Be very, very careful here. For 99 %
of producers, this is not the right path. And
that leaves the last one, path number four. Path
four, the deliberate exit. The one nobody wants
to talk about. The one nobody wants to pick,
but it might be the smartest financial decision
you ever make. Sell the cows and the iron while
they still have value. Keep the land. Pivot to
something else. The key to all of these is to
decide. Decide before the bank decides for you.
Decide before the regulator decides for you.
Decide before the milk truck just stops showing
up. That is the ultimate takeaway here. Agency.
You have to take control of the decision, even
if that decision is to leave the industry with
your head held high and your equity intact. That's
it. Taking control of the exit is always, always
better than being forced out. This has been a
heavy deep dive, but a really necessary one.
The story of North Dakota isn't just about North
Dakota. No. It's about the physics of the dairy
industry in 2026. And gravity is winning. You
have to respect the gravity. You can't fight
it. Any final thoughts for the listener who's
maybe pulling into the feed store right now?
Just that quote from the Hollis. We don't know
what we are going to do. Don't let that be you.
Don't let yourself get to that point. Know what
you are going to do. Do the math. Look at the
map and make a plan today. Absolutely. Well,
that wraps up this deep dive. This has been another
Bullvine podcast from The Bullvine. For more
straight -talking industry analysis, head to
www .thebullvine .com. And subscribe wherever
you get your podcasts. We're out with new episodes
every day. Next time, we might look a little
closer at those specific hauling regulations
and what they could mean for producers in the
Northeast. Sounds like a plan. Stay safe out
there. And keep it honest.