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 --> 00:01:03.229 we're sparking Welcome back to the Bullvine Podcast, 00:01:03.369 --> 00:01:05.069 where we cut through the dairy industry noise 00:01:05.069 --> 00:01:07.109 to get you the insights that actually matter 00:01:07.109 --> 00:01:09.469 for your operation. If you're tired of the fluff 00:01:09.469 --> 00:01:11.969 and just want the hard numbers, you are in the 00:01:11.969 --> 00:01:15.150 right place. And today we are doing something 00:01:15.150 --> 00:01:17.430 a little bit different. Usually we're digging 00:01:17.430 --> 00:01:19.950 into a genetics report or a new piece of tech. 00:01:20.069 --> 00:01:23.069 But today we're essentially looking at a crime 00:01:23.069 --> 00:01:26.250 scene. A crime scene. Yeah. That is. That's a 00:01:26.250 --> 00:01:29.079 dramatic way to start, even for you. Is it, though? 00:01:29.260 --> 00:01:30.980 I mean, honestly, when I look at the numbers 00:01:30.980 --> 00:01:32.920 we've got on the desk, it's not that far off. 00:01:33.239 --> 00:01:36.099 We're watching the slow death of a business model 00:01:36.099 --> 00:01:38.019 that, you know, most of our listeners have bet 00:01:38.019 --> 00:01:40.159 their entire lives on. OK, that's a fair point. 00:01:40.280 --> 00:01:42.099 I see where you're going. It's a crime scene 00:01:42.099 --> 00:01:44.379 because we're dissecting what we call the volume 00:01:44.379 --> 00:01:47.120 trap. And we've got two stacks of paper here. 00:01:47.439 --> 00:01:51.200 In this hand, I've got the USDA numbers for 2026, 00:01:51.519 --> 00:01:54.159 the North American reality. And in this hand, 00:01:54.180 --> 00:01:56.640 there's a feature piece called gold medal margins. 00:01:57.180 --> 00:02:00.280 The Italian Value Model for Dairy Profits. And 00:02:00.280 --> 00:02:02.640 that title alone, I think, is going to make some 00:02:02.640 --> 00:02:05.260 people uncomfortable. The Italian Value Model. 00:02:05.459 --> 00:02:08.500 It sounds like something you'd buy at a boutique, 00:02:08.500 --> 00:02:11.620 not something you'd run a farm on. I love this 00:02:11.620 --> 00:02:15.259 topic, though. The timing is just perfect. Because 00:02:15.259 --> 00:02:17.879 right now, the eyes of the whole world are turning 00:02:17.879 --> 00:02:20.639 toward the Milano -Cortina region in Italy for 00:02:20.639 --> 00:02:23.039 the Winter Olympics. Everyone's watching these 00:02:23.039 --> 00:02:25.659 athletes chase gold medals. Right, but while 00:02:25.659 --> 00:02:27.939 those skiers are flying down the slopes, the 00:02:27.939 --> 00:02:30.979 dairy farmers in that exact same region, I mean 00:02:30.979 --> 00:02:33.259 literally in the valleys right below the ski 00:02:33.259 --> 00:02:35.800 runs, they're winning a completely different 00:02:35.800 --> 00:02:40.099 game. They are pulling in 22 .8 billion euros 00:02:40.099 --> 00:02:43.080 from less milk. From less milk. Well, farmers 00:02:43.080 --> 00:02:44.719 over here are stuck on what I always call the 00:02:44.719 --> 00:02:47.180 hamster wheel of more cows, thinner checks. Well, 00:02:47.199 --> 00:02:48.939 today we're cutting through all that noise. I 00:02:48.939 --> 00:02:50.979 was looking at the February WASDE numbers. And 00:02:50.979 --> 00:02:53.199 let me tell you, the math isn't math -in for 00:02:53.199 --> 00:02:55.620 a lot of operations right now. It really, really 00:02:55.620 --> 00:02:58.800 isn't. So today's deep dive is a direct comparison. 00:02:59.599 --> 00:03:02.740 We're putting the U .S. and Canadian volume first 00:03:02.740 --> 00:03:06.240 model in the ring against the Italian value added 00:03:06.240 --> 00:03:09.060 model, specifically looking at the Parmigiano 00:03:09.060 --> 00:03:11.979 -Reggiano and Grana Padano zones. OK, so let's 00:03:11.979 --> 00:03:13.740 set the stage a little bit before we get into 00:03:13.740 --> 00:03:16.000 the heavy hitting. Why does this matter right 00:03:16.000 --> 00:03:18.560 now? Because I think a lot of listeners are looking 00:03:18.560 --> 00:03:20.460 at their milk checks and feeling a little bit. 00:03:20.830 --> 00:03:22.949 I don't know, gaslit. Is that the right word? 00:03:23.069 --> 00:03:24.849 That is absolutely the right word. Look at the 00:03:24.849 --> 00:03:28.169 context. The USDA February WASDE projection just 00:03:28.169 --> 00:03:32.009 came out. They're pegging the 2026 all milk price 00:03:32.009 --> 00:03:36.610 at what? $18 .95 per hundredweight? $18 .95. 00:03:36.610 --> 00:03:39.009 Okay. I can almost hear the collective groan 00:03:39.009 --> 00:03:40.870 from every tractor cab listening to this right 00:03:40.870 --> 00:03:42.699 now. But here's the kicker. This is the part 00:03:42.699 --> 00:03:44.599 that really gets me. We pulled the analysis from 00:03:44.599 --> 00:03:46.740 the bullvine and we looked at the farm doc data 00:03:46.740 --> 00:03:50.580 out of Illinois. The full cost break games. And 00:03:50.580 --> 00:03:53.319 I mean, full cost, you know. So not just a feed 00:03:53.319 --> 00:03:55.800 bill. No, no. We're talking living expenses, 00:03:55.960 --> 00:03:59.319 paying family labor, a real market rate, debt 00:03:59.319 --> 00:04:02.139 service, replacing that worn out skid steer that's 00:04:02.139 --> 00:04:04.939 on its last legs. All of it. All of it. Those 00:04:04.939 --> 00:04:07.680 break homes are sitting somewhere between 1950 00:04:07.680 --> 00:04:11.539 and 2050 per hundred weight. So do the math for 00:04:11.539 --> 00:04:14.580 me. If I'm a standard midsize herd, let's say 00:04:14.580 --> 00:04:18.019 250 cows, and I'm hitting the midpoint of that 00:04:18.019 --> 00:04:20.720 break -even range. You are staring down a projected 00:04:20.720 --> 00:04:25.079 loss of roughly $63 ,000 for the year 2026. Wow. 00:04:25.259 --> 00:04:27.480 And that's if everything goes right, you know? 00:04:27.560 --> 00:04:30.139 That's if the weather holds, the cows breed back 00:04:30.139 --> 00:04:32.399 on the first try, and nothing major breaks down. 00:04:32.579 --> 00:04:34.949 That's a lot of red ink. It's basically a full 00:04:34.949 --> 00:04:37.470 -time job that costs you money to keep. And the 00:04:37.470 --> 00:04:39.610 craziest part is the industry's response to this 00:04:39.610 --> 00:04:43.209 seems to be just expand. The U .S. herd is projected 00:04:43.209 --> 00:04:46.850 to be up another 211 ,000 cows in 2025. Exactly. 00:04:47.009 --> 00:04:48.810 Margins are getting thinner, so the advice is 00:04:48.810 --> 00:04:50.709 add more cows to try and make up the difference 00:04:50.709 --> 00:04:52.730 on volume. It is the classic definition of the 00:04:52.730 --> 00:04:54.810 volume trap. It's running faster and faster just 00:04:54.810 --> 00:04:57.089 to stay in the exact same place. And that is 00:04:57.089 --> 00:05:00.199 precisely why. This Italian comparison is so 00:05:00.199 --> 00:05:02.319 fascinating because everyone in North America 00:05:02.319 --> 00:05:04.220 thinks the only answer is get big or get out. 00:05:04.519 --> 00:05:07.439 But today we are going to look at a country where 00:05:07.439 --> 00:05:09.620 the number of dairy farms actually increased 00:05:09.620 --> 00:05:12.339 because they figured out how to make small scale 00:05:12.339 --> 00:05:14.459 pay. And we have to touch on the Canadian paradox, 00:05:14.540 --> 00:05:17.740 too, because our friends to the north, they have 00:05:17.740 --> 00:05:20.699 the quota, they have the scarcity, but they aren't 00:05:20.699 --> 00:05:23.480 seeing that massive premium in the same way. 00:05:23.500 --> 00:05:25.310 It's a different animal. All right, let's get 00:05:25.310 --> 00:05:27.370 into it. Segment one, let's really define this 00:05:27.370 --> 00:05:29.029 volume trap. We've got to identify the problem 00:05:29.029 --> 00:05:31.209 before we can even think about fixing it. You 00:05:31.209 --> 00:05:33.269 mentioned the hamster wheel. Yeah. So lay out 00:05:33.269 --> 00:05:36.350 the U .S. data for us. What are we looking at 00:05:36.350 --> 00:05:39.250 for 2026 production? It's just, it's still climbing. 00:05:39.370 --> 00:05:42.769 We're looking at production hitting 234 .1 billion 00:05:42.769 --> 00:05:45.529 pounds in 2026. I mean, we are just flooding 00:05:45.529 --> 00:05:48.449 the world of milk. But the income overfeed costs 00:05:48.449 --> 00:05:51.310 are tightening. They're squeezing down to around 00:05:51.310 --> 00:05:54.930 $11 .40 per hundredweight. And, you know, the 00:05:54.930 --> 00:05:56.689 usual argument here is, well, the big guys are 00:05:56.689 --> 00:05:58.949 fine. The mega dairies are efficient. It's just 00:05:58.949 --> 00:06:01.050 the small farms that are hurting. That's the 00:06:01.050 --> 00:06:03.529 myth. That is the lie we tell ourselves to sleep 00:06:03.529 --> 00:06:06.470 at night. But look at the USDA's cost of production 00:06:06.470 --> 00:06:10.209 data. Even the so -called efficiency kings, you 00:06:10.209 --> 00:06:13.189 know, the herds with 2 ,000 plus cows, the guys 00:06:13.189 --> 00:06:15.410 with the rotaries and perfect feed efficiency, 00:06:15.810 --> 00:06:20.750 their full economic cost is $19 .14 per hundredweight. 00:06:20.949 --> 00:06:23.110 Wait, hang on, stop right there. So if the projected 00:06:23.110 --> 00:06:27.389 price from the USDA is $18 .95. Even the 2 ,000 00:06:27.389 --> 00:06:30.329 cow herds are barely breaking even. On a full 00:06:30.329 --> 00:06:32.970 economic basis, they are technically underwater. 00:06:33.470 --> 00:06:35.509 So they might be cash flowing. Oh, yeah, they're 00:06:35.509 --> 00:06:37.750 cash flowing. But are they generating a true 00:06:37.750 --> 00:06:40.389 economic profit? Are they actually building wealth 00:06:40.389 --> 00:06:42.670 or are they just treading water? The numbers 00:06:42.670 --> 00:06:45.230 say they're treading water. That is just wild. 00:06:45.350 --> 00:06:47.629 It basically means the entire industry from the 00:06:47.629 --> 00:06:50.850 50 cow tea stall to the 5000 cow mega dairy in 00:06:50.850 --> 00:06:54.290 Idaho is operating on these razor thin, almost 00:06:54.290 --> 00:06:56.750 non -existent margins. And the volatility is 00:06:56.750 --> 00:06:58.550 the other thing that just kills you. Oh, absolutely. 00:06:58.670 --> 00:07:01.949 The price dropped from 1925 in November. down 00:07:01.949 --> 00:07:05.529 to 1825 in January, and now it's bounced back 00:07:05.529 --> 00:07:10.069 to 1895 in February. For an average family farm, 00:07:10.250 --> 00:07:14.649 that's a $70 ,000 whipsaw over just four months. 00:07:14.930 --> 00:07:17.050 You can't budget on a roller coaster like that. 00:07:17.490 --> 00:07:20.329 How do you plan an expansion or even just a simple 00:07:20.329 --> 00:07:23.069 renovation when your revenue line looks like 00:07:23.069 --> 00:07:25.810 an EKG readout? It's impossible. And this brings 00:07:25.810 --> 00:07:27.769 up that whole concept of phantom profitability. 00:07:28.009 --> 00:07:30.089 I think a lot of farmers, you know, they might 00:07:30.089 --> 00:07:31.649 look at their checkbook and say, hey, there's 00:07:31.649 --> 00:07:34.029 money in the account. I'm OK. Right. They see 00:07:34.029 --> 00:07:35.889 a positive balance and they think they're winning. 00:07:36.189 --> 00:07:38.889 But are they actually covering depreciation? 00:07:38.910 --> 00:07:41.470 Are they putting money aside to replace assets? 00:07:41.629 --> 00:07:43.750 Are they paying themselves a market wage for 00:07:43.750 --> 00:07:46.329 their labor and management? Usually the answer 00:07:46.329 --> 00:07:50.100 to all of those is no. Exactly. They are eating 00:07:50.100 --> 00:07:52.019 their equity just to stay in business. They're 00:07:52.019 --> 00:07:54.279 cannibalizing the farm to keep the farm going. 00:07:54.519 --> 00:07:56.480 It's like burning the furniture to heat the house. 00:07:56.540 --> 00:07:57.959 Eventually you're going to run out of chairs. 00:07:58.399 --> 00:08:01.519 Exactly. And that is the crime scene. Okay, so 00:08:01.519 --> 00:08:03.579 that's the gloom and doom. Now let's pivot and 00:08:03.579 --> 00:08:06.199 look at the gold medal data, the Italian contrast. 00:08:06.720 --> 00:08:09.420 Because this article claims they are winning 00:08:09.420 --> 00:08:12.019 by doing the absolute opposite of what we're 00:08:12.019 --> 00:08:14.899 doing. The numbers are staggering. In Italy, 00:08:15.000 --> 00:08:18.660 the dairy industry revenue grew at a 1 .5 % compound 00:08:18.660 --> 00:08:22.660 annual growth rate from 2020 to 2025. But here's 00:08:22.660 --> 00:08:28.839 the key part. Milk volume dropped by 0 .7%. Revenue 00:08:28.839 --> 00:08:32.120 up, volume down. That is the holy grail. That's 00:08:32.120 --> 00:08:34.080 the definition of working smarter, not harder. 00:08:34.259 --> 00:08:37.269 It is. And get this. The number of Italian dairy 00:08:37.269 --> 00:08:39.490 businesses actually increased during that time 00:08:39.490 --> 00:08:43.129 to about 4 ,043. That never happens. When was 00:08:43.129 --> 00:08:44.629 the last time you heard of the number of dairy 00:08:44.629 --> 00:08:46.549 farms actually going up in a developed nation? 00:08:46.710 --> 00:08:48.929 Never. The story is always consolidation, consolidation, 00:08:49.169 --> 00:08:51.129 consolidation. You hear about farms selling out 00:08:51.129 --> 00:08:52.850 every single week. Not new ones starting up. 00:08:52.970 --> 00:08:55.110 Right. But the heavy hitter here, the real powerhouse, 00:08:55.309 --> 00:08:58.309 is Parmigiano -Reggiano. The turnover for that 00:08:58.309 --> 00:09:01.990 consortium alone hit 3 .2 billion euros in 2024. 00:09:02.549 --> 00:09:04.429 Okay, I have to play skeptic for a second here. 00:09:04.529 --> 00:09:07.059 Go for it. Because I know what some of our listeners, 00:09:07.200 --> 00:09:08.840 especially the hard -nosed economists, are thinking. 00:09:08.960 --> 00:09:11.580 It's Italy. It's romantic. It's all about tourism. 00:09:12.500 --> 00:09:15.519 Is this just because tourists want to eat fancy 00:09:15.519 --> 00:09:18.360 cheese while they're on vacation in Rome? Is 00:09:18.360 --> 00:09:20.299 this some kind of Mickey Mouse economy based 00:09:20.299 --> 00:09:22.559 on people taking selfies with a wheel of cheese? 00:09:22.860 --> 00:09:24.919 That's a fair question, and I expected you to 00:09:24.919 --> 00:09:27.000 push back on that. It's the obvious first thought, 00:09:27.059 --> 00:09:29.820 but the data says no. It's not just tourism. 00:09:30.019 --> 00:09:32.519 Not even close. Look at the exports. Italian 00:09:32.519 --> 00:09:35.620 cheese export volume was up 2 .2%, which is, 00:09:35.679 --> 00:09:37.700 you know, it's decent. Okay, pretty good. But 00:09:37.700 --> 00:09:41.340 the value of those exports, up 20 .4%. Whoa. 00:09:41.580 --> 00:09:43.500 Okay, so they're selling just a little bit more 00:09:43.500 --> 00:09:46.240 cheese, but for a whole lot more money. Precisely. 00:09:46.830 --> 00:09:50.289 The U .S. alone bought 16 ,000 tons of it in 00:09:50.289 --> 00:09:54.470 2024, which was up 13 .4%. This isn't just people 00:09:54.470 --> 00:09:56.610 eating cheese in Venice. This is a structural 00:09:56.610 --> 00:09:58.570 price premium that travels across the ocean. 00:09:58.830 --> 00:10:02.110 A consumer in Chicago or Tokyo is walking past 00:10:02.110 --> 00:10:04.450 the local commodity cheddar and paying double 00:10:04.450 --> 00:10:07.429 for that Italian seal of authenticity. So what 00:10:07.429 --> 00:10:09.730 they've really done is decommoditize their milk. 00:10:09.929 --> 00:10:12.929 They aren't selling milk as a fluid commodity 00:10:12.929 --> 00:10:15.669 anymore. They're selling... Something else entirely. 00:10:15.990 --> 00:10:18.549 100%. They're selling heritage, they're selling 00:10:18.549 --> 00:10:20.909 a specific guaranteed quality, and they're selling 00:10:20.909 --> 00:10:23.470 scarcity. Okay, let's follow the money then. 00:10:23.610 --> 00:10:27.230 How does this premium actually stick? How does 00:10:27.230 --> 00:10:30.309 it get from the consumer in Chicago back to the 00:10:30.309 --> 00:10:32.909 farmer in Italy? Because usually if a product 00:10:32.909 --> 00:10:36.539 gets that expensive, someone undercuts you. or 00:10:36.539 --> 00:10:38.879 the market floods with cheap knockoffs. If I 00:10:38.879 --> 00:10:42.200 start selling hay for 400 bucks a ton, my neighbor 00:10:42.200 --> 00:10:44.679 starts selling it for 350. Right. And the article 00:10:44.679 --> 00:10:46.980 breaks it down into these three core pillars. 00:10:47.120 --> 00:10:49.320 And this is really the playbook. First, you have 00:10:49.320 --> 00:10:51.759 geographic scarcity. That's the PDO, the protected 00:10:51.759 --> 00:10:53.899 designation of origin. Right. So you legally 00:10:53.899 --> 00:10:56.000 cannot make something and call it Parmigiano 00:10:56.000 --> 00:10:59.799 -Reggiano unless your cows are in that specific 00:10:59.799 --> 00:11:02.539 region of Italy eating that specific forage. 00:11:02.879 --> 00:11:05.799 Correct. It's not just a brand name. It's enshrined 00:11:05.799 --> 00:11:08.779 in European law. It creates a legal monopoly 00:11:08.779 --> 00:11:12.679 on the name and the process. And the data on 00:11:12.679 --> 00:11:15.559 this is incredible. PDO products, on average, 00:11:15.740 --> 00:11:20.860 get a 2 .23 times value premium over non -GI 00:11:20.860 --> 00:11:23.980 products. So more than double the value. Just 00:11:23.980 --> 00:11:26.360 for having that geographic seal. Just for that. 00:11:26.419 --> 00:11:27.960 But it's not just about drawing a circle on a 00:11:27.960 --> 00:11:29.620 map, right? You can't just do that and expect 00:11:29.620 --> 00:11:31.379 money to fall from the sky. Right. There has 00:11:31.379 --> 00:11:33.399 to be organization behind it. And that's pillar 00:11:33.399 --> 00:11:36.879 number two, the consortiums. The Parmigiano Consortium 00:11:36.879 --> 00:11:42.120 has a budget of 51 .5 million euros. 51 .5 million. 00:11:42.220 --> 00:11:45.159 That is a massive war chest that's bigger than 00:11:45.159 --> 00:11:47.919 the GDP of some small island nations. They are 00:11:47.919 --> 00:11:49.950 the marketing department. An individual farmer 00:11:49.950 --> 00:11:51.769 doesn't have to worry about branding their milk 00:11:51.769 --> 00:11:53.690 because the consortium is doing it at a global 00:11:53.690 --> 00:11:56.529 scale. They're the ones fighting the legal battles 00:11:56.529 --> 00:11:59.429 against copycats, running the TV ads, and sending 00:11:59.429 --> 00:12:01.389 inspectors out to check the quality on every 00:12:01.389 --> 00:12:03.730 farm. And the third pillar. This is the one that 00:12:03.730 --> 00:12:05.370 really hurts when you compare it to the U .S. 00:12:05.370 --> 00:12:08.950 system. It's the link. There's direct link. Farmgate 00:12:08.950 --> 00:12:11.370 prices in Italy rise when the price of the cheese 00:12:11.370 --> 00:12:14.070 rises. Okay, let's really unpack this. Because 00:12:14.070 --> 00:12:17.039 in the U .S. we have the FMMO. the federal milk 00:12:17.039 --> 00:12:20.139 marketing orders. And frankly, most farmers need 00:12:20.139 --> 00:12:22.399 a PhD just to understand their own milk check. 00:12:23.100 --> 00:12:25.600 It's intentionally complex. Oh, it is. In the 00:12:25.600 --> 00:12:28.100 U .S., we pool it. My high -component milk from 00:12:28.100 --> 00:12:30.259 my Jersey herd gets dumped into the same pool 00:12:30.259 --> 00:12:32.220 as my neighbor's lower -component Holstein milk. 00:12:32.440 --> 00:12:34.960 It all becomes generic. And even if the price 00:12:34.960 --> 00:12:37.720 of cheddar cheese on the CME skyrockets, the 00:12:37.720 --> 00:12:39.919 processor is guaranteed what's called a make 00:12:39.919 --> 00:12:42.340 allowance. And by the way, that make allowance 00:12:42.340 --> 00:12:45.419 is set to rise to over 25 cents a pound in June 00:12:45.419 --> 00:12:48.059 2025. Stop right there. Explain make allowance 00:12:48.059 --> 00:12:50.019 to me like I'm five years old. Why does that 00:12:50.019 --> 00:12:52.240 specific thing matter so much to a farmer's bottom 00:12:52.240 --> 00:12:54.700 line? Okay, simple analogy. Think of a pizza. 00:12:54.820 --> 00:12:56.960 The processor, the guy making the cheese, gets 00:12:56.960 --> 00:12:59.320 to eat his slices of the pizza first. The government 00:12:59.320 --> 00:13:01.480 guarantees him enough slices to cover all his 00:13:01.480 --> 00:13:04.059 costs. The boiler, the labor, the packaging, 00:13:04.279 --> 00:13:06.720 that guaranteed portion is the make allowance. 00:13:07.080 --> 00:13:09.139 Okay, so he's always fed. He always eats first. 00:13:09.629 --> 00:13:11.529 If the pizza gets smaller because the market 00:13:11.529 --> 00:13:14.230 price drops, the processor still gets his guaranteed 00:13:14.230 --> 00:13:17.730 number of slices. So, who starves? The farmer. 00:13:17.870 --> 00:13:20.289 The farmer gets whatever crusts and crumbs are 00:13:20.289 --> 00:13:23.570 left over. The U .S. system, deliberately, by 00:13:23.570 --> 00:13:26.370 design, severs the link between my specific milk 00:13:26.370 --> 00:13:29.490 quality and the end product's value. The processor 00:13:29.490 --> 00:13:32.590 is insulated from risk. The farmer is completely 00:13:32.590 --> 00:13:34.940 exposed to it. That is the crucial difference. 00:13:35.139 --> 00:13:38.179 In Italy, if Parmigiano is selling for 13 euros 00:13:38.179 --> 00:13:40.879 a kilo, the farmer sees that money flow back 00:13:40.879 --> 00:13:43.429 to them. In the U .S., if cheto prices go up, 00:13:43.490 --> 00:13:45.830 the processor covers their guaranteed margin, 00:13:45.990 --> 00:13:48.610 and the farmer gets, well, whatever the complicated 00:13:48.610 --> 00:13:50.850 FMMO formula spits out at the end of the month. 00:13:51.049 --> 00:13:53.690 Exactly. We are incentivized to produce generic 00:13:53.690 --> 00:13:56.409 white fluid at the lowest possible cost. They 00:13:56.409 --> 00:13:58.889 are incentivized to produce a very specific ingredient 00:13:58.889 --> 00:14:02.129 for a luxury product. In Italy, the farmer and 00:14:02.129 --> 00:14:03.889 the cheesemaker are in the same boat, rowing 00:14:03.889 --> 00:14:06.450 in the same direction. In the U .S., the cheesemaker 00:14:06.450 --> 00:14:08.649 is on a yacht, and the farmer is swimming behind 00:14:08.649 --> 00:14:11.440 it, trying not to drown. Okay, so we can't all 00:14:11.440 --> 00:14:13.799 just pack up and move to Italy. I mean, the pasta 00:14:13.799 --> 00:14:15.679 is great, but the commute would be terrible. 00:14:16.159 --> 00:14:18.519 So let's talk about some case studies and examples 00:14:18.519 --> 00:14:21.299 that are closer to home. What about North American 00:14:21.299 --> 00:14:24.500 attempts at this value -added model? There are 00:14:24.500 --> 00:14:26.480 some really bright spots, for sure, but they 00:14:26.480 --> 00:14:29.080 all come with some pretty big caveats. Let's 00:14:29.080 --> 00:14:32.700 take Jasper Hill Farm in Vermont. A legend. If 00:14:32.700 --> 00:14:34.299 you're into cheese, you know the name Jasper 00:14:34.299 --> 00:14:37.139 Hill. Absolutely. And they pay their partner 00:14:37.139 --> 00:14:39.639 farms roughly three times the commodity price 00:14:39.639 --> 00:14:42.580 for their milk. Three times. That's not just 00:14:42.580 --> 00:14:44.179 a little better. That's life -changing money. 00:14:44.399 --> 00:14:47.399 It is. Mateo Keller, one of the founders, has 00:14:47.399 --> 00:14:49.240 said that a family can make a good living with 00:14:49.240 --> 00:14:52.179 25 to 30 cows under their model. Think about 00:14:52.179 --> 00:14:54.860 that. 25 cows supporting a family in the year 00:14:54.860 --> 00:14:59.159 2026. That sounds like a dream. It does. But, 00:14:59.320 --> 00:15:02.080 and there's always a but. Here it comes. It took 00:15:02.080 --> 00:15:04.320 them 20 years to build that brand and that infrastructure. 00:15:04.620 --> 00:15:07.019 They have a massive debt load from building their 00:15:07.019 --> 00:15:09.320 aging caves. And here's the really wild part. 00:15:09.620 --> 00:15:11.820 They have a housing crisis for their employees 00:15:11.820 --> 00:15:14.639 because Vermont is so full of second homes owned 00:15:14.639 --> 00:15:17.419 by people from New York and Boston. Kaler has 00:15:17.419 --> 00:15:20.120 had to personally buy 11 properties just to have 00:15:20.120 --> 00:15:22.720 places for his staff to live. So it's not just 00:15:22.720 --> 00:15:25.879 make good cheese and get rich. It's... build 00:15:25.879 --> 00:15:28.080 a massive multi -million dollar infrastructure, 00:15:28.639 --> 00:15:31.879 take on huge personal risk, and then also become 00:15:31.879 --> 00:15:34.580 a real estate mogul and property manager on the 00:15:34.580 --> 00:15:36.639 side. Right. It's an incredibly high barrier 00:15:36.639 --> 00:15:38.519 to entry. And then you've got Uplands Cheese 00:15:38.519 --> 00:15:40.980 in Wisconsin, another fantastic example. Same 00:15:40.980 --> 00:15:44.000 deal. Their wholesale price is four times commodity 00:15:44.000 --> 00:15:46.480 cheddar. We're talking $10 a pound versus $2 00:15:46.480 --> 00:15:48.919 .50. But they're extremely seasonal, right? Pasture 00:15:48.919 --> 00:15:51.299 only, which means limited volume. You can't just 00:15:51.299 --> 00:15:53.279 scale that up to feed the world. You can't graze 00:15:53.279 --> 00:15:56.059 cows in three feet of Wisconsin snow in January. 00:15:56.139 --> 00:15:59.279 It's a niche, not a national solution. Okay, 00:15:59.340 --> 00:16:01.120 now here's where I want to bring up the contrarian 00:16:01.120 --> 00:16:04.019 take, the Canadian paradox, because you and I 00:16:04.019 --> 00:16:06.840 talk about this a lot. Canada has supply management. 00:16:06.980 --> 00:16:10.200 They have quotas. Isn't that by definition organized 00:16:10.200 --> 00:16:13.100 scarcity? Isn't that basically what the Italians 00:16:13.100 --> 00:16:15.379 are doing? You would think so. I mean, on the 00:16:15.379 --> 00:16:17.759 surface, it's the same foundational principle 00:16:17.759 --> 00:16:21.399 as the PDO. Limit the supply to match the demand 00:16:21.399 --> 00:16:24.679 to support the price. But the outcome and the 00:16:24.679 --> 00:16:27.440 philosophy behind it are totally different. How 00:16:27.440 --> 00:16:30.799 so? Why aren't Canadian dairy farmers all driving 00:16:30.799 --> 00:16:34.139 Ferraris? Because Canada has scarcity for stability. 00:16:34.659 --> 00:16:37.580 Italy has scarcity for value. Okay, that's a 00:16:37.580 --> 00:16:39.419 cute distinction. Walk me through what that means 00:16:39.419 --> 00:16:41.879 on the ground. In Canada, the quota is incredibly 00:16:41.879 --> 00:16:45.379 expensive. We're talking $24 ,000 to $56 ,000 00:16:45.379 --> 00:16:48.059 per kilogram of butterfat, depending on the province. 00:16:48.419 --> 00:16:50.659 But that investment buys you the right to produce 00:16:50.659 --> 00:16:53.179 milk at a regulated floor price. It guarantees 00:16:53.179 --> 00:16:55.240 you won't lose your shirt. So it's safety net. 00:16:55.440 --> 00:16:58.139 It's a very expensive safety net. But it doesn't 00:16:58.139 --> 00:17:00.460 incentivize you to make a Mercedes -Benz product. 00:17:01.230 --> 00:17:04.549 just guarantees a decent, stable price for a 00:17:04.549 --> 00:17:06.710 Honda Civic product. It removes the downside 00:17:06.710 --> 00:17:09.210 risk, but it also caps the upside potential. 00:17:09.569 --> 00:17:12.150 It's a defensive wall, not an offensive weapon. 00:17:12.450 --> 00:17:14.750 Perfectly put. And the data shows that consolidation 00:17:14.750 --> 00:17:18.049 is still happening there too. Canadian farm numbers 00:17:18.049 --> 00:17:22.450 dropped 24 % between 2012 and 2022. It's slower 00:17:22.450 --> 00:17:25.089 than in the U .S. for sure, but the trend is 00:17:25.089 --> 00:17:27.470 exactly the same. And here's the real kicker. 00:17:27.589 --> 00:17:31.009 CETA. The trade agreement with Europe. This is 00:17:31.009 --> 00:17:34.150 where the whole paradox really bites them. Sida 00:17:34.150 --> 00:17:36.390 allowed a certain amount of European cheese to 00:17:36.390 --> 00:17:39.170 come into Canada duty -free. Right. So now the 00:17:39.170 --> 00:17:41.269 Canadian consumer walks into the grocery store. 00:17:41.450 --> 00:17:44.490 On the left, they see a block of generic Canadian 00:17:44.490 --> 00:17:46.829 cheddar produced under the protection of a quota 00:17:46.829 --> 00:17:49.950 system. On the right, they see a wedge of real 00:17:49.950 --> 00:17:52.910 Parmigiano -Reggiano protected by a powerful, 00:17:53.029 --> 00:17:55.509 world -renowned brand. Which one do you think 00:17:55.509 --> 00:17:56.789 they're buying for their dinner party? They're 00:17:56.789 --> 00:17:58.859 buying the brand. They're buying the story. Every 00:17:58.859 --> 00:18:01.420 time. So Canadian farmers are losing market share 00:18:01.420 --> 00:18:03.180 inside their own fortress because they have the 00:18:03.180 --> 00:18:05.619 scarcity, but they don't have the value proposition 00:18:05.619 --> 00:18:08.180 to go with it. It's so ironic. The European cheese 00:18:08.180 --> 00:18:10.880 is winning in the protected Canadian market because 00:18:10.880 --> 00:18:14.579 of its brand, while the Canadian milk is just 00:18:14.579 --> 00:18:18.859 milk. Exactly. And look, there are amazing outliers 00:18:18.859 --> 00:18:21.799 like Gunshill in Ontario who are doing incredible 00:18:21.799 --> 00:18:25.220 work with artisanal cheese, but they are succeeding. 00:18:25.960 --> 00:18:28.160 despite the system or around the edges of it, 00:18:28.259 --> 00:18:30.420 not because the system is designed to create 00:18:30.420 --> 00:18:34.079 a thousand guns hills. So, okay, we've identified 00:18:34.079 --> 00:18:36.160 the problem, this hamster wheel of volume. We've 00:18:36.160 --> 00:18:38.279 seen the promised land in Italy. We've seen the 00:18:38.279 --> 00:18:40.000 difficulties of trying to replicate it here. 00:18:40.279 --> 00:18:42.500 Let's talk about the future implications. The 00:18:42.500 --> 00:18:45.339 article outlines four distinct paths forward. 00:18:45.480 --> 00:18:48.259 And I like this because it's practical. It acknowledges 00:18:48.259 --> 00:18:49.960 that not everyone can just go out and build a 00:18:49.960 --> 00:18:51.920 cheese plant tomorrow. Yeah, we need solutions 00:18:51.920 --> 00:18:53.460 for the guy who isn't going to become a full 00:18:53.460 --> 00:18:55.730 -time cheesemaker. Let's break them down. Path 00:18:55.730 --> 00:18:58.910 number one, component optimization. The article 00:18:58.910 --> 00:19:01.490 calls this the band -aid. This is the low -hanging 00:19:01.490 --> 00:19:04.019 fruit. This is what every nutritionist and consultant 00:19:04.019 --> 00:19:06.359 tells you to do. Get your protein up. Get your 00:19:06.359 --> 00:19:09.599 fat up. The math shows that raising protein from, 00:19:09.619 --> 00:19:14.240 say, a 3 -1 to a 3 -4 for a 200 -cow herd, that's 00:19:14.240 --> 00:19:18.980 maybe an extra $8 ,640 a year in premiums. I 00:19:18.980 --> 00:19:20.960 mean, $8 ,000 is $8 ,000. That'll pay the electric 00:19:20.960 --> 00:19:22.980 bill for a month or two. But when you break it 00:19:22.980 --> 00:19:25.660 down per hundredweight, that's barely 18 cents. 00:19:26.460 --> 00:19:29.500 If your breaking gap is $1 .50 like we established 00:19:29.500 --> 00:19:32.019 at the beginning, earning an extra 18 cents is 00:19:32.019 --> 00:19:34.759 nice, but it doesn't solve the structural problem. 00:19:34.980 --> 00:19:36.940 It's like finding some change in the couch cushions 00:19:36.940 --> 00:19:38.380 when you're trying to pay the mortgage. It's 00:19:38.380 --> 00:19:40.220 exactly that. You should absolutely do it. Don't 00:19:40.220 --> 00:19:42.259 get me wrong. But don't fool yourself into thinking 00:19:42.259 --> 00:19:46.519 it saves the farm. Okay. Path number two. Farmstead 00:19:46.519 --> 00:19:48.950 cheese. This is what the article calls the heavy 00:19:48.950 --> 00:19:52.730 lift. This is the far move. You are looking at 00:19:52.730 --> 00:19:56.869 an investment of anywhere from $750 ,000 to $1 00:19:56.869 --> 00:20:01.109 .2 million to build a modern licensed creamery. 00:20:01.269 --> 00:20:04.069 Oof. That's a lot of zeros. That's a lot of debt. 00:20:04.269 --> 00:20:07.009 And the timeline to even break even is three 00:20:07.009 --> 00:20:09.269 to five years. You have to learn a whole new 00:20:09.269 --> 00:20:12.119 trade. You're not just a farmer anymore. Suddenly 00:20:12.119 --> 00:20:16.500 you're a manufacturer, a marketer, a food safety 00:20:16.500 --> 00:20:19.539 expert, a brand manager. So you need incredibly 00:20:19.539 --> 00:20:22.500 deep pockets just to get in the game. And you 00:20:22.500 --> 00:20:25.220 need a high tolerance for risk. The data shows 00:20:25.220 --> 00:20:28.599 that 24 % of artisan cheesemakers in the U .S. 00:20:28.599 --> 00:20:31.740 gross under $50 ,000 a year. So just because 00:20:31.740 --> 00:20:33.819 you build it doesn't mean they'll come. Not at 00:20:33.819 --> 00:20:36.390 all. If you make bad cheese, you just have a 00:20:36.390 --> 00:20:38.690 very, very expensive pile of waste that you're 00:20:38.690 --> 00:20:40.829 paying interest on. It's a huge gamble. All right. 00:20:40.829 --> 00:20:43.690 That one's scary. What about path three? The 00:20:43.690 --> 00:20:46.730 collective consortium. This feels like the middle 00:20:46.730 --> 00:20:48.990 ground. This is the one that really intrigues 00:20:48.990 --> 00:20:51.410 me the most. The idea here is that instead of 00:20:51.410 --> 00:20:54.470 one farm trying to do it all, you get, say, 20 00:20:54.470 --> 00:20:56.529 farms to go in together and share the infrastructure. 00:20:56.849 --> 00:20:59.549 So instead of one farm spending $1 .2 million, 00:20:59.829 --> 00:21:02.950 you have 20 farms splitting that cost. Suddenly 00:21:02.950 --> 00:21:05.750 the investment per farm drops to maybe $60 ,000 00:21:05.750 --> 00:21:08.430 or $70 ,000. Now that is much more manageable. 00:21:08.529 --> 00:21:10.269 That's in the ballpark of a new pickup truck 00:21:10.269 --> 00:21:12.990 or a used tractor. Right. And there's actually 00:21:12.990 --> 00:21:16.369 money available for this. The USDA has $11 million 00:21:16.369 --> 00:21:20.349 in new grants as of January 2026, specifically 00:21:20.349 --> 00:21:23.930 for this kind of collective value added development. 00:21:24.109 --> 00:21:25.849 So the government is actually trying to nudge 00:21:25.849 --> 00:21:28.150 people in this direction. A little bit, yeah. 00:21:28.269 --> 00:21:30.789 But it requires farmers to work together in a 00:21:30.789 --> 00:21:33.289 way they're historically not very good at. You 00:21:33.289 --> 00:21:35.470 have to give up your individual ego for the good 00:21:35.470 --> 00:21:37.549 of the collective brand. Which is really hard 00:21:37.549 --> 00:21:40.029 for independent minded farmers. We all like to 00:21:40.029 --> 00:21:41.970 be the king of our own little castle. It's very 00:21:41.970 --> 00:21:44.710 hard. But the question is, would you rather be 00:21:44.710 --> 00:21:46.670 the king of a castle that's sinking into the 00:21:46.670 --> 00:21:49.950 swamp or a valued partner in a castle that's 00:21:49.950 --> 00:21:53.190 profitable and secure? Touche. Okay, final one. 00:21:53.250 --> 00:21:56.630 Path four. Demographic specialty. The article 00:21:56.630 --> 00:21:59.029 calls this the sleeper hit. This is the one I'm 00:21:59.029 --> 00:22:01.329 watching the closest. Specifically, Hispanic 00:22:01.329 --> 00:22:03.609 cheeses. Talk to me about the numbers here. Why 00:22:03.609 --> 00:22:05.430 is this a sleeper? Why isn't this mainstream 00:22:05.430 --> 00:22:08.450 yet? It's getting there, but the growth is explosive. 00:22:08.630 --> 00:22:11.670 It's growing anywhere from 2 to 27 times faster 00:22:11.670 --> 00:22:14.750 than mainstream cheese categories. And you just 00:22:14.750 --> 00:22:16.589 have to look at the changing demographics of 00:22:16.589 --> 00:22:19.630 North America. The Hispanic population is booming, 00:22:19.890 --> 00:22:22.710 especially in rural areas. And the beauty of 00:22:22.710 --> 00:22:25.210 a lot of these cheeses, like queso fresco, Oaxaca, 00:22:25.309 --> 00:22:27.920 panela... is that they're fresh cheeses. So you 00:22:27.920 --> 00:22:30.259 don't need a million dollar aging cave. No aging 00:22:30.259 --> 00:22:33.099 cave. No sitting on inventory for two years waiting 00:22:33.099 --> 00:22:35.140 for it to mature while you pay interest on it. 00:22:35.259 --> 00:22:37.380 You can make it on a Monday and sell it at a 00:22:37.380 --> 00:22:39.980 farmer's market on a Friday. The cash flow cycle 00:22:39.980 --> 00:22:42.779 is so much faster than waiting 24 months for 00:22:42.779 --> 00:22:45.359 a cheddar to sharp up. That is a huge, huge advantage 00:22:45.359 --> 00:22:48.140 for a small operations cash flow. Massive. And 00:22:48.140 --> 00:22:50.319 it's not just demographics. Gen Z is driving 00:22:50.319 --> 00:22:53.960 this too, right? Yeah, the data says 71 % of 00:22:53.960 --> 00:22:57.059 Gen Z consumers purchase specialty cheese. They 00:22:57.059 --> 00:22:58.960 want authenticity. They want unique flavors. 00:22:59.019 --> 00:23:01.460 They don't just want that boring orange block. 00:23:01.720 --> 00:23:04.440 So if you're located anywhere near an urban center 00:23:04.440 --> 00:23:07.400 or a community with a growing Hispanic population, 00:23:07.940 --> 00:23:10.299 this is a green light. It's a flashing green 00:23:10.299 --> 00:23:12.559 light on the dashboard. You don't need a PDO 00:23:12.559 --> 00:23:15.500 from the 1400s to make fantastic queso fresco. 00:23:15.539 --> 00:23:17.980 You just need high quality milk and to know your 00:23:17.980 --> 00:23:21.119 customer. I love that. It's so practical. Now 00:23:21.119 --> 00:23:23.220 let's get into our contrarian take section. We 00:23:23.220 --> 00:23:25.480 need to challenge some of the big industry narratives 00:23:25.480 --> 00:23:28.720 here. Let's do it. The world narrative. The big 00:23:28.720 --> 00:23:34.180 U .S. dairy lobby groups, NMPF, USDEC, they often 00:23:34.180 --> 00:23:36.980 frame these European geographic indications, 00:23:37.079 --> 00:23:39.839 these GIs, as nothing more than trade barriers. 00:23:40.079 --> 00:23:42.539 Right. They claim Europe is cheating the system. 00:23:42.680 --> 00:23:45.420 They do. The official line is that Europe is 00:23:45.420 --> 00:23:47.880 just being protectionist and unfair. How dare 00:23:47.880 --> 00:23:49.880 they tell us we can't call our mass -produced 00:23:49.880 --> 00:23:52.279 cheese Parmesan? But is it really unfair if it's 00:23:52.279 --> 00:23:54.279 working so well for their farmer? That's my whole 00:23:54.279 --> 00:23:56.279 argument. You can call it a barrier if you want. 00:23:56.319 --> 00:23:58.579 You can call it protectionism. But it's a barrier 00:23:58.579 --> 00:24:01.119 that pays farmers enough to make a profit. It 00:24:01.119 --> 00:24:03.680 results in cheese that sells for 11 euros a kilogram. 00:24:04.000 --> 00:24:07.299 So maybe, just maybe, instead of spending millions 00:24:07.299 --> 00:24:09.359 of dollars lobbying to tear down their walls, 00:24:09.480 --> 00:24:11.490 we should stop and ask, why are - we building 00:24:11.490 --> 00:24:14.150 our own walls? Why aren't we building our own 00:24:14.150 --> 00:24:16.789 value fortresses around things we do uniquely 00:24:16.789 --> 00:24:19.890 well? Why are we so obsessed with being the low 00:24:19.890 --> 00:24:22.109 -cost provider of a generic commodity for the 00:24:22.109 --> 00:24:24.970 world when the world is clearly telling us it 00:24:24.970 --> 00:24:27.049 wants to pay a premium for something special? 00:24:27.250 --> 00:24:29.690 We're trying to sell commodity volume into a 00:24:29.690 --> 00:24:32.430 world that is screaming for premium value. It's 00:24:32.430 --> 00:24:34.630 like we're bringing a knife to a gunfight. Exactly. 00:24:34.910 --> 00:24:37.750 And you don't even need a full -blown GI to see 00:24:37.750 --> 00:24:40.410 the effect. Look at the California seal program. 00:24:40.710 --> 00:24:43.329 Real California milk. It's not a strict PDO, 00:24:43.369 --> 00:24:46.210 but just having that seal of origin on the package 00:24:46.210 --> 00:24:50.430 drove a 6 .3 % sales spread over products without 00:24:50.430 --> 00:24:52.349 it. Just by putting a sticker on the package. 00:24:52.589 --> 00:24:54.809 People care where their food comes from. The 00:24:54.809 --> 00:24:57.950 data shows 56 % of consumers actively seek out 00:24:57.950 --> 00:25:01.089 authenticity seals. We are leaving so much money 00:25:01.089 --> 00:25:03.230 on the table by ignoring that fundamental desire. 00:25:03.509 --> 00:25:05.890 We are hiding the farm from the consumer and 00:25:05.890 --> 00:25:07.990 the consumer is punishing us for it at the checkout. 00:25:08.210 --> 00:25:10.660 So we've covered a ton of ground here. We've 00:25:10.660 --> 00:25:12.880 looked at the tragedy of the U .S. volume model, 00:25:13.039 --> 00:25:15.779 the triumph of the Italian volume model, and 00:25:15.779 --> 00:25:17.819 the confusing middle ground up in Canada. Yeah. 00:25:17.900 --> 00:25:19.779 But we always like to leave our listeners with 00:25:19.779 --> 00:25:21.619 something they can actually do with this information. 00:25:21.640 --> 00:25:24.079 Right. Practical steps. Because complaining about 00:25:24.079 --> 00:25:27.079 the milk price doesn't change the milk price. 00:25:27.440 --> 00:25:29.180 Action does. All right. Let's role play this. 00:25:29.299 --> 00:25:32.039 A farmer just finished the morning milking. They 00:25:32.039 --> 00:25:34.160 wiped off their boots, hopefully scraped them 00:25:34.160 --> 00:25:36.619 off first. They're driving to the feed store 00:25:36.619 --> 00:25:40.009 right now, listening to us. What are the three 00:25:40.009 --> 00:25:41.950 things they need to write on the back of a receipt 00:25:41.950 --> 00:25:46.109 right now? Okay. Grab a pen. Or open the notes 00:25:46.109 --> 00:25:49.329 app on your phone. Here we go. Number one. Something 00:25:49.329 --> 00:25:52.990 to do this week. The audit. The action is calculate 00:25:52.990 --> 00:25:56.690 your real break -even. Define real. Because I 00:25:56.690 --> 00:25:58.690 know guys who, you know, they leave certain things 00:25:58.690 --> 00:26:00.789 out to make the numbers look better. I mean, 00:26:00.789 --> 00:26:03.630 stop lying to yourself. stop cooking the books 00:26:03.630 --> 00:26:05.130 to make yourself feel better at the end of the 00:26:05.130 --> 00:26:07.930 month you have to include family labor if you 00:26:07.930 --> 00:26:10.509 got hit by a bus tomorrow and had to hire someone 00:26:10.509 --> 00:26:12.970 to do your job what would that cost put that 00:26:12.970 --> 00:26:15.720 number in the spreadsheet You have to include 00:26:15.720 --> 00:26:18.240 principal payments on your loans, not just the 00:26:18.240 --> 00:26:21.359 interest. And you have to include your family 00:26:21.359 --> 00:26:23.720 living expenses. And what do you do when you 00:26:23.720 --> 00:26:27.099 get that number and it's $20 .50? If you're sitting 00:26:27.099 --> 00:26:30.079 at $20 .50 and the market is at $18 .95, you 00:26:30.079 --> 00:26:31.619 have to look yourself in the mirror and admit 00:26:31.619 --> 00:26:33.720 that you have a structural problem. You do not 00:26:33.720 --> 00:26:36.359 have an efficiency problem. You cannot milk your 00:26:36.359 --> 00:26:39.529 way out of that hole. with more volume. You need 00:26:39.529 --> 00:26:41.589 to change the game you're playing. You need to 00:26:41.589 --> 00:26:43.809 stop thinking about expanding and start thinking 00:26:43.809 --> 00:26:46.690 about how to pivot. That is a hard truth, but 00:26:46.690 --> 00:26:49.309 a necessary one. Yeah. Okay, number two, medium 00:26:49.309 --> 00:26:52.869 term, the pivot. Let's say three to six months 00:26:52.869 --> 00:26:55.950 out. Investigate path four or path three. Start 00:26:55.950 --> 00:26:58.269 looking seriously at that demographic specialty 00:26:58.269 --> 00:27:00.730 cheese market or the consortium model. What's 00:27:00.730 --> 00:27:02.670 the specific action? Who do I call? What do I 00:27:02.670 --> 00:27:05.170 Google? Start by looking for a specialty cheese 00:27:05.170 --> 00:27:08.130 processor within 100 miles of your farm. See 00:27:08.130 --> 00:27:10.450 who's already making these products. Or better 00:27:10.450 --> 00:27:12.869 yet, go to your next co -op meeting, raise your 00:27:12.869 --> 00:27:16.400 hand, and ask the hard question. We're spending 00:27:16.400 --> 00:27:19.119 millions on new stainless steel. Are we doing 00:27:19.119 --> 00:27:21.299 anything with that investment to make high -value 00:27:21.299 --> 00:27:24.400 cheese? Or are we just building bigger tanks 00:27:24.400 --> 00:27:26.039 to hold more commodity milk that we're going 00:27:26.039 --> 00:27:28.180 to sell at a loss? Put them on the spot. I like 00:27:28.180 --> 00:27:31.619 that. And check the demographics. Google the 00:27:31.619 --> 00:27:33.819 census data for your county. Is there a growing 00:27:33.819 --> 00:27:36.599 Hispanic population nearby? That demand signal 00:27:36.599 --> 00:27:39.400 is there. If your current processor isn't seeing 00:27:39.400 --> 00:27:41.779 it, maybe you need to find one that is. Or maybe 00:27:41.779 --> 00:27:44.200 you need to find 19 of your neighbors and start 00:27:44.200 --> 00:27:46.740 that consortium yourselves. Okay. Number three, 00:27:46.920 --> 00:27:50.500 long term. Thinking one to two years out. The 00:27:50.500 --> 00:27:53.119 investment. The action is a balance sheet stress 00:27:53.119 --> 00:27:55.420 test. What does that mean in plain English? It 00:27:55.420 --> 00:27:58.220 means if you're seriously considering path to 00:27:58.220 --> 00:28:00.339 going all in on a farmstead cheese operation, 00:28:00.700 --> 00:28:03.079 you need to ask yourself a very blunt question. 00:28:03.440 --> 00:28:06.640 Do you have 42 months of working capital? 42 00:28:06.640 --> 00:28:09.670 months. That's three and a half years. That is 00:28:09.670 --> 00:28:12.349 an eternity in dairy years. That's the reality. 00:28:12.549 --> 00:28:14.710 That's how long it can take to build your inventory, 00:28:14.910 --> 00:28:17.769 build your brand, get into stores and actually 00:28:17.769 --> 00:28:20.210 get paid. If you don't have that kind of capital 00:28:20.210 --> 00:28:22.430 sitting in the bank, then you need to be looking 00:28:22.430 --> 00:28:25.750 for those USDA DBI grants. You need to be looking 00:28:25.750 --> 00:28:28.150 for outside partners. You cannot go into that 00:28:28.150 --> 00:28:31.230 kind of venture alone and undercapitalized. And 00:28:31.230 --> 00:28:33.190 I'm going to add my own take here for the long 00:28:33.190 --> 00:28:36.170 term. If you want the Italian margins. You have 00:28:36.170 --> 00:28:38.670 to be willing to accept the Italian discipline. 00:28:38.869 --> 00:28:41.869 Yes, that is the absolute key. That means accepting 00:28:41.869 --> 00:28:45.150 quality over quantity. That means potentially 00:28:45.150 --> 00:28:48.009 participating in collective marketing where you 00:28:48.009 --> 00:28:50.990 are not the star. The regional brand is the star. 00:28:51.109 --> 00:28:53.549 It means giving up a little bit of your fierce 00:28:53.549 --> 00:28:55.710 independence for a whole lot more financial security. 00:28:55.849 --> 00:28:58.160 That's the reality check right there. Italy is 00:28:58.160 --> 00:29:00.299 playing chess with branding and heritage, and 00:29:00.299 --> 00:29:02.319 we're still playing checkers with volume. And 00:29:02.319 --> 00:29:04.359 right now, the checkers board is getting flipped 00:29:04.359 --> 00:29:07.140 over every time the USDA releases a new report. 00:29:07.380 --> 00:29:10.240 It certainly feels that way sometimes. This has 00:29:10.240 --> 00:29:12.380 been a heavy one, but I actually think it's a 00:29:12.380 --> 00:29:13.759 hopeful one if you look at the opportunities. 00:29:14.099 --> 00:29:16.519 The door isn't closed. We just need to start 00:29:16.519 --> 00:29:18.099 walking through a different one. Absolutely. 00:29:18.140 --> 00:29:20.880 The money is there. The consumer wants this kind 00:29:20.880 --> 00:29:22.539 of product. We just have to build the bridge 00:29:22.539 --> 00:29:25.460 to get it to them. This has been another Bullvine 00:29:25.460 --> 00:29:28.480 podcast from The Bullvine Podcast. For more straight 00:29:28.480 --> 00:29:31.259 -talking industry analysis and to check the full 00:29:31.259 --> 00:29:33.779 math on those four paths we talked about today, 00:29:33.940 --> 00:29:38.000 head over to www .thebullvine .com. It really 00:29:38.000 --> 00:29:41.140 is the home of no BS dairy analysis. And be sure 00:29:41.140 --> 00:29:42.960 to subscribe wherever you get your podcasts. 00:29:43.380 --> 00:29:45.539 We're out with new episodes every single day. 00:29:46.160 --> 00:29:48.940 Coming up next, we're looking at why all that 00:29:48.940 --> 00:29:51.660 new stainless steel processing capacity being 00:29:51.660 --> 00:29:54.539 built might not actually save your milk check. 00:29:54.720 --> 00:29:56.759 You won't want to miss that one. Stay profitable 00:29:56.759 --> 00:29:58.200 out there. See you next time.