WEBVTT 00:00:11.720 --> 00:00:15.060 Breaking free from the chains of the past Where 00:00:15.060 --> 00:00:18.820 truth moves faster than a Holstein calf No law 00:00:18.820 --> 00:00:21.660 waiting on some printed page We're charting new 00:00:21.660 --> 00:00:25.300 ground in the digital age From genomic codes 00:00:25.300 --> 00:00:29.120 to robot facts We cut through the noise, no hold 00:00:29.280 --> 00:00:32.460 them back not your daddy's dairy news tonight 00:00:32.460 --> 00:01:02.890 we're sparking Welcome back to the Bullvine Podcast. 00:01:03.509 --> 00:01:06.430 This is the show where we cut through the dairy 00:01:06.430 --> 00:01:09.450 industry noise to get you the insights that actually 00:01:09.450 --> 00:01:11.689 matter for your operation. That's right, because 00:01:11.689 --> 00:01:13.810 if you're tuning in today, you aren't looking 00:01:13.810 --> 00:01:16.150 for fluff. You aren't looking for someone to 00:01:16.150 --> 00:01:19.409 tell you everything is sunny when you can, well, 00:01:19.590 --> 00:01:22.250 when you can literally see the storm clouds gathering 00:01:22.250 --> 00:01:24.790 over the cornfield yourself. Exactly. We're here 00:01:24.790 --> 00:01:26.989 to look at the hard numbers. The policy shifts. 00:01:27.170 --> 00:01:29.810 The actual reality of the market. The boots on 00:01:29.810 --> 00:01:31.950 the ground perspective. Always. We're here to 00:01:31.950 --> 00:01:34.030 talk about what keeps the lights on in the barn, 00:01:34.150 --> 00:01:37.569 what keeps the parlor running, and most importantly, 00:01:37.730 --> 00:01:40.409 what keeps the banker off your back. And today, 00:01:40.569 --> 00:01:43.969 we are diving deep into a feature piece that 00:01:43.969 --> 00:01:46.469 is, honestly, is probably the most important 00:01:46.469 --> 00:01:48.129 thing you're going to read, or in this case, 00:01:48.150 --> 00:01:50.689 listen to, all year. It's a heavy one. It really 00:01:50.689 --> 00:01:51.969 is a heavy one, and we're going to give it the 00:01:51.969 --> 00:01:54.530 time it deserves. The topic of this deep dive 00:01:54.530 --> 00:01:58.120 is... The real face -off. U .S. versus Canada 00:01:58.120 --> 00:02:01.900 dairy survival guide. Now, I know what everyone 00:02:01.900 --> 00:02:04.459 is thinking about right now. It's Saturday, February 00:02:04.459 --> 00:02:08.240 21st, 2026. Oh, absolutely. Everyone is completely 00:02:08.240 --> 00:02:11.379 glued to the TV. The Olympics are on. It's Canada 00:02:11.379 --> 00:02:14.960 versus the USA. The men's hockey gold medal game. 00:02:15.099 --> 00:02:17.280 The ultimate rivalry. It is the classic rivalry. 00:02:17.500 --> 00:02:20.460 It's national pride. It's bragging rights. It's... 00:02:21.300 --> 00:02:25.620 Fast, physical, emotional. Right. But here's 00:02:25.620 --> 00:02:28.180 the thing. While everyone is watching that puck 00:02:28.180 --> 00:02:30.900 drop over in Milan, wondering if we're going 00:02:30.900 --> 00:02:33.500 to see a repeat of those legendary face -offs. 00:02:33.580 --> 00:02:36.250 A real face -off. Yes. The real face -off is 00:02:36.250 --> 00:02:38.469 happening on your balance sheet. And unlike the 00:02:38.469 --> 00:02:41.150 game in Milan, this one doesn't just end after 00:02:41.150 --> 00:02:44.150 60 minutes. No, it doesn't. The tagline from 00:02:44.150 --> 00:02:45.930 our source material actually really struck me. 00:02:45.949 --> 00:02:48.389 It said, when the gold medals are boxed away, 00:02:48.689 --> 00:02:51.110 your balance sheet is still on the ice. Oof. 00:02:51.710 --> 00:02:53.909 Yeah, that is a chilling thought. It gives me 00:02:53.909 --> 00:02:55.949 goosebumps, honestly, because it's true. I mean, 00:02:55.949 --> 00:02:58.610 we get so distracted by the spectacle. The blags, 00:02:58.610 --> 00:03:01.490 the jerseys. The anthems, right. But the economic 00:03:01.490 --> 00:03:04.110 reality doesn't care who wins the gold. Not all. 00:03:04.189 --> 00:03:06.370 The cows still need to be milked at 4 a .m. tomorrow, 00:03:06.569 --> 00:03:09.110 regardless of who stands on that podium. So let's 00:03:09.110 --> 00:03:11.310 set the context here. Why does this deep dive 00:03:11.310 --> 00:03:13.430 matter right now? Yeah. Aside from the Olympic 00:03:13.430 --> 00:03:16.550 backdrop, we are staring down the barrel of the 00:03:16.550 --> 00:03:19.389 USMCA review. The big one. That is coming up 00:03:19.389 --> 00:03:23.110 in July 2026. That is just a few months away. 00:03:23.250 --> 00:03:25.030 It's literally right around the corner. July 00:03:25.030 --> 00:03:29.889 1st, 2026, the sunset review and the steaks. 00:03:30.409 --> 00:03:32.330 I mean, the stakes could not be higher. No, they 00:03:32.330 --> 00:03:34.789 couldn't. We aren't just talking about a minor 00:03:34.789 --> 00:03:37.090 adjustment to trade policy here. We are talking 00:03:37.090 --> 00:03:39.530 about the fundamental rules of the game for dairy 00:03:39.530 --> 00:03:42.770 on this entire continent. Right. The U .S., Canada 00:03:42.770 --> 00:03:45.669 and Mexico have to sit down and decide if this 00:03:45.669 --> 00:03:47.849 agreement works or if they're just going to rip 00:03:47.849 --> 00:03:50.289 it up. And the backdrop for this political showdown. 00:03:50.620 --> 00:03:53.199 isn't a healthy, thriving industry on either 00:03:53.199 --> 00:03:55.439 side of the border. Not even close. That is the 00:03:55.439 --> 00:03:57.259 uncomfortable truth we really need to unpack 00:03:57.259 --> 00:03:59.699 today. Let's look at the data from the last year, 00:03:59.819 --> 00:04:03.659 2024 going into 2025. Let's hear it. The U .S. 00:04:03.659 --> 00:04:09.020 lost 1 ,434 herds in 2024 alone. Let that sink 00:04:09.020 --> 00:04:13.759 in for a second. 1 ,434 families who decided 00:04:13.759 --> 00:04:17.560 or were forced to call it quits. That's a 5 % 00:04:17.560 --> 00:04:21.040 decline in a single year. It's massive. That 00:04:21.040 --> 00:04:23.079 isn't just consolidation. That is an evacuation. 00:04:23.660 --> 00:04:26.720 It really is. And on the flip side, looking at 00:04:26.720 --> 00:04:29.240 Canada, we have a massive signal of distress 00:04:29.240 --> 00:04:32.740 from the dairy farmers of Ontario, the DFO. Right. 00:04:32.800 --> 00:04:35.879 They just canceled their February 2026 quota 00:04:35.879 --> 00:04:38.899 exchange entirely. Which is unprecedented. You 00:04:38.899 --> 00:04:41.100 have a system designed to manage supply and demand, 00:04:41.300 --> 00:04:44.560 and the main mechanism for moving quota just... 00:04:44.750 --> 00:04:46.730 It just froze. Completely froze. The numbers 00:04:46.730 --> 00:04:50.370 there are staggering. You had 1 ,915 buyers trying 00:04:50.370 --> 00:04:53.050 to get quota. And how many sellers? 12. 12. 12 00:04:53.050 --> 00:04:55.850 sellers. Absurd. Almost 2 ,000 people wanting 00:04:55.850 --> 00:04:58.470 to buy in or expand and only 12 people willing 00:04:58.470 --> 00:05:01.069 to get out or sell off a piece. And the price 00:05:01.069 --> 00:05:04.189 is capped at $24 ,000 Canadian dollars per kilogram. 00:05:04.589 --> 00:05:07.189 Wow. That isn't a functioning market. That's 00:05:07.189 --> 00:05:10.370 a log jam. It's a dam about to burst. So we have 00:05:10.370 --> 00:05:12.329 these two very different systems, both showing 00:05:12.329 --> 00:05:15.550 massive undeniable signs of stress. And that's 00:05:15.550 --> 00:05:17.790 what we're here to analyze. It's not just about 00:05:17.790 --> 00:05:20.930 trade policy. It's about survival. For the Canadians 00:05:20.930 --> 00:05:23.149 listening, this is about equity. It's about your 00:05:23.149 --> 00:05:25.990 debt ratios. It's about the value of that paper 00:05:25.990 --> 00:05:27.870 you're holding that says you are actually allowed 00:05:27.870 --> 00:05:30.589 to milk cows. Right. For the Americans, it's 00:05:30.589 --> 00:05:33.149 about cash flow. It's about burn rates. It's 00:05:33.149 --> 00:05:35.410 about how long you can tread water when the price 00:05:35.410 --> 00:05:37.889 drops below your break -even. The source calls 00:05:37.889 --> 00:05:41.220 it the uncomfortable truth. Neither system is 00:05:41.220 --> 00:05:43.420 as healthy as the politicians like to claim on 00:05:43.420 --> 00:05:47.000 TV. One is described as a capital trap, and the 00:05:47.000 --> 00:05:49.540 other is described as a casino. That is a brilliant 00:05:49.540 --> 00:05:51.819 way to put it. And if you're a farmer, you are 00:05:51.819 --> 00:05:53.759 living in one of those two realities right now. 00:05:54.000 --> 00:05:56.139 You're either trapped by the cost of your assets, 00:05:56.199 --> 00:05:58.160 unable to pivot because your money is tied up 00:05:58.160 --> 00:06:00.620 in permission slips, or you're gambling every 00:06:00.620 --> 00:06:03.040 single day on the spot market, just hoping the 00:06:03.040 --> 00:06:05.279 house doesn't win this time. Let's get into the 00:06:05.279 --> 00:06:07.560 deep dive discussion. We're going to break this 00:06:07.560 --> 00:06:11.000 down by looking at two specific profiles, avatars 00:06:11.000 --> 00:06:14.079 really, that represent the crisis in each country. 00:06:14.360 --> 00:06:16.939 I think this helps ground the numbers in reality. 00:06:17.439 --> 00:06:20.379 Absolutely. It's so easy to gloss over 1 ,400 00:06:20.379 --> 00:06:23.639 herds or $24 ,000 a kilo. But when you look at 00:06:23.639 --> 00:06:25.800 the individual farmer, the person actually putting 00:06:25.800 --> 00:06:28.829 the cups on it hits home. So first, let's meet 00:06:28.829 --> 00:06:31.370 Jean -Pierre in Quebec. Okay, Jean -Pierre. He 00:06:31.370 --> 00:06:35.509 is the classic modern Canadian dairyman. He represents 00:06:35.509 --> 00:06:38.129 that demographic we see all over Quebec and eastern 00:06:38.129 --> 00:06:42.170 Ontario. He has 75 cows. He's put in a robot, 00:06:42.290 --> 00:06:45.089 so he's got the technology. He's efficient in 00:06:45.089 --> 00:06:47.790 terms of labor. Okay, this is good so far. But 00:06:47.790 --> 00:06:51.050 here's the kicker. He has $4 million Canadian 00:06:51.050 --> 00:06:55.199 dollars in debt. Four million on 75 cows. Four 00:06:55.199 --> 00:06:57.540 million. And most of that debt isn't for the 00:06:57.540 --> 00:07:00.579 land or the barn or even that shiny new robot. 00:07:00.740 --> 00:07:03.279 It's for the quota. He literally bought the right 00:07:03.279 --> 00:07:06.019 to produce. Exactly. He bought quota to bring 00:07:06.019 --> 00:07:08.519 his son into the business. He leveraged the farm 00:07:08.519 --> 00:07:11.180 to secure the next generation. So he has a milk 00:07:11.180 --> 00:07:13.360 check that is predictable. Right. Because of 00:07:13.360 --> 00:07:15.259 the system. He knows roughly what he's going 00:07:15.259 --> 00:07:17.060 to get paid next month because the formula tells 00:07:17.060 --> 00:07:19.779 him. But the bank takes almost all of it just 00:07:19.779 --> 00:07:22.759 to service that massive debt. So he is asset 00:07:22.759 --> 00:07:26.500 rich, but cash poor. Incredibly asset rich on 00:07:26.500 --> 00:07:30.319 paper. But his problem is that he's bought an 00:07:30.319 --> 00:07:33.660 asset, the quota that is based entirely on a 00:07:33.660 --> 00:07:36.060 political promise. That is the fear factor for 00:07:36.060 --> 00:07:37.839 Jean -Pierre. It's what keeps him up at night. 00:07:37.920 --> 00:07:40.920 His $4 million debt is real. The bank expects 00:07:40.920 --> 00:07:43.079 real money. They don't take political goodwill 00:07:43.079 --> 00:07:45.300 as a mortgage payment. No, they don't. But the 00:07:45.300 --> 00:07:48.500 asset backing it, that $3 million worth of quota, 00:07:48.579 --> 00:07:52.050 isn't concrete. It isn't genetics. It isn't land 00:07:52.050 --> 00:07:54.769 you can plant corn on. Right. It is a policy. 00:07:54.870 --> 00:07:57.470 And policies can change with the stroke of a 00:07:57.470 --> 00:07:59.810 pen. Now let's look at his counterpart in Wisconsin. 00:08:00.329 --> 00:08:02.990 Let's call him Mark. Mark is a different beast 00:08:02.990 --> 00:08:07.399 entirely. He is milking 1 ,200 cows. He is an 00:08:07.399 --> 00:08:10.300 absolute efficiency machine. Scaled way up. Scaled 00:08:10.300 --> 00:08:12.300 up. He's done everything the university extension 00:08:12.300 --> 00:08:14.339 economists told him to do for the last 20 years. 00:08:14.560 --> 00:08:17.319 Drive down costs, increase volume, scale, scale, 00:08:17.360 --> 00:08:19.839 scale. But Mark has a problem too. A huge problem. 00:08:20.000 --> 00:08:22.420 He just lost a processor contract because the 00:08:22.420 --> 00:08:24.480 plant switched to dedicated suppliers from even 00:08:24.480 --> 00:08:27.579 larger farms. We're talking the 5 ,000, 10 ,000 00:08:27.579 --> 00:08:31.300 cow dairies. So now Mark is selling on the spot 00:08:31.300 --> 00:08:33.720 market. And the spot market is brutal. It's the 00:08:33.720 --> 00:08:36.440 wild west. He's burning equity. He's working 00:08:36.440 --> 00:08:39.940 14 -hour days, managing a massive crew, running 00:08:39.940 --> 00:08:43.159 a complex biological operation, dealing with 00:08:43.159 --> 00:08:45.480 environmental regs. And he's losing money on 00:08:45.480 --> 00:08:47.279 every hundredweight that leaves the driveway. 00:08:47.500 --> 00:08:51.080 Every single one. So Jean -Pierre fears the politician 00:08:51.080 --> 00:08:54.179 who might change the rules. Mark fears the market 00:08:54.179 --> 00:08:56.820 that might drop the price. But here is the thing 00:08:56.820 --> 00:08:59.279 that connects them. They both fear the banker. 00:08:59.519 --> 00:09:01.840 That is the common thread right there. It doesn't 00:09:01.840 --> 00:09:04.480 matter if you're in Quebec or Wisconsin. When 00:09:04.480 --> 00:09:06.980 the numbers don't add up, the banker is the one 00:09:06.980 --> 00:09:09.460 making the phone call. And believe me, the banker 00:09:09.460 --> 00:09:11.720 is looking at the same spreadsheets we are. Let's 00:09:11.720 --> 00:09:13.460 talk about the operational impact of these different 00:09:13.460 --> 00:09:16.019 stresses. Jean -Pierre has what looks like stability, 00:09:16.240 --> 00:09:18.899 right? On the surface, yes. He sleeps at night 00:09:18.899 --> 00:09:20.700 knowing the milk truck is coming and the price 00:09:20.700 --> 00:09:23.419 is fixed. But he wakes up in a cold sweat thinking 00:09:23.419 --> 00:09:26.059 about interest rates and trade deals because 00:09:26.059 --> 00:09:29.419 he has absolutely no wiggle room. His debt service 00:09:29.419 --> 00:09:32.500 is so high that a small change in his asset value, 00:09:32.700 --> 00:09:35.960 say a concession in the USMCA, puts him underwater 00:09:35.960 --> 00:09:38.720 immediately. He's walking a tightrope over a 00:09:38.720 --> 00:09:41.700 canyon. And Mark. Mark has freedom. The American 00:09:41.700 --> 00:09:44.740 dream, right? No caps on production. If he wants 00:09:44.740 --> 00:09:46.820 to milk another hundred cows, he just buys them. 00:09:46.960 --> 00:09:50.139 Right. But that freedom includes the freedom 00:09:50.139 --> 00:09:53.200 to go broke. He has the freedom to burn through 00:09:53.200 --> 00:09:56.039 his life savings in six months of bad prices. 00:09:56.620 --> 00:09:59.019 It really is a tale of two different kinds of 00:09:59.019 --> 00:10:02.879 stress. One is a slow, crushing weight of capital 00:10:02.879 --> 00:10:05.899 cost. The other is a high -speed, volatile roller 00:10:05.899 --> 00:10:08.600 coaster. And neither one feels particularly golden 00:10:08.600 --> 00:10:10.419 when you're in the middle of it. It's stress 00:10:10.419 --> 00:10:13.039 either way. That leads us perfectly into our 00:10:13.039 --> 00:10:15.639 second segment, the industry reality check. Yeah. 00:10:15.720 --> 00:10:17.879 We need to bust some myths here. Oh, I love busting 00:10:17.879 --> 00:10:19.620 myths. Let's do it. Let's start with the U .S. 00:10:19.620 --> 00:10:20.899 myth. You hear it all the time from the top. 00:10:21.159 --> 00:10:23.759 The golden age of dairy. Right. Agriculture Secretary 00:10:23.759 --> 00:10:25.799 Brooke Rawlins was talking about this just recently. 00:10:26.200 --> 00:10:29.080 Quotes like, exports are up, demand is up, it's 00:10:29.080 --> 00:10:32.620 a golden age. Look, I respect the optimism, but 00:10:32.620 --> 00:10:34.480 you have to look at who it is actually golden 00:10:34.480 --> 00:10:37.799 for. The data tells a very different story for 00:10:37.799 --> 00:10:41.100 the producer. We mentioned the 1 ,434 herds lost 00:10:41.100 --> 00:10:45.460 in 2024. That's a 5 % decline nationally. But 00:10:45.460 --> 00:10:47.559 look at where those losses are happening. Wisconsin 00:10:47.559 --> 00:10:50.980 alone lost 400 herds. That is the heartland. 00:10:51.220 --> 00:10:54.860 That is America's dairy land. Losing 400 herds 00:10:54.860 --> 00:10:57.379 in a year is a catastrophe for those communities. 00:10:57.519 --> 00:10:59.799 It's not just the farms. It's the vet clinics, 00:11:00.039 --> 00:11:03.460 the feed mills, the local schools, the tire shops. 00:11:03.740 --> 00:11:05.879 When you lose that many businesses, the rural 00:11:05.879 --> 00:11:09.240 fabric just tears. And Rabobank is predicting 00:11:09.240 --> 00:11:11.259 it's going to get worse. They are projecting 00:11:11.259 --> 00:11:15.759 2 ,800 closures for 2025. Wow. That would be 00:11:15.759 --> 00:11:18.460 a 7 % to 9 % exit rate. Think about that. If 00:11:18.460 --> 00:11:20.899 any other industry, auto manufacturing, tech, 00:11:20.980 --> 00:11:23.740 retail, was losing nearly 10 % of its businesses 00:11:23.740 --> 00:11:26.159 in a single year, there would be national emergency 00:11:26.159 --> 00:11:28.080 hearings. There would be bailouts. Absolutely. 00:11:28.220 --> 00:11:30.059 But in dairy, we just call it consolidation. 00:11:30.539 --> 00:11:33.080 We use the sterile word to describe families 00:11:33.080 --> 00:11:35.320 losing their legacy. But the cows aren't leaving, 00:11:35.440 --> 00:11:38.139 are they? No, and that's the paradox. The cows 00:11:38.139 --> 00:11:40.779 are just moving. The production is actually up. 00:11:40.980 --> 00:11:45.259 The average herd size is climbing. It's at 377 00:11:45.259 --> 00:11:47.879 cows nationally now. So the milk is still flowing. 00:11:48.100 --> 00:11:50.519 The engine doesn't have a brake pedal. We keep 00:11:50.519 --> 00:11:53.539 producing more milk with fewer farms. The efficiency 00:11:53.539 --> 00:11:56.039 is incredible, but the human cost is incredibly 00:11:56.039 --> 00:11:58.820 high. So the golden age is really just a golden 00:11:58.820 --> 00:12:01.379 age for the survivors who can scale fast enough. 00:12:01.600 --> 00:12:03.899 Exactly. It's a survivor's game. It's basically 00:12:03.899 --> 00:12:06.379 the Hunger Games with Holsteins. Now let's look 00:12:06.379 --> 00:12:08.440 at the Canadian myth. The myth is that supply 00:12:08.440 --> 00:12:11.700 management is this perfect, impenetrable safety 00:12:11.700 --> 00:12:14.240 net. It is a safety net, sure, and it has served 00:12:14.240 --> 00:12:16.860 Canada well for 50 years. But it's a safety net 00:12:16.860 --> 00:12:18.919 that is becoming incredibly expensive to stand 00:12:18.919 --> 00:12:21.779 on. Let's go back to that DFO exchange crisis. 00:12:22.100 --> 00:12:26.299 February 2026, the exchange was canceled. Why 00:12:26.299 --> 00:12:29.000 is that such a massive red flag? Because it shows 00:12:29.000 --> 00:12:31.480 the system is broken at the entry and exit points. 00:12:31.620 --> 00:12:33.840 You have nearly 2 ,000 people wanting to buy. 00:12:34.299 --> 00:12:36.899 That shows there is optimism or at least a desperate 00:12:36.899 --> 00:12:39.899 need to scale just to cover fixed costs. Right. 00:12:40.019 --> 00:12:42.340 But only 12 people want to sell. Why aren't people 00:12:42.340 --> 00:12:47.700 selling? If the price is $24 ,000 a kilo, which 00:12:47.700 --> 00:12:50.659 is a massive amount of money, why not cash out? 00:12:50.879 --> 00:12:53.600 A few reasons. One, where else do you put your 00:12:53.600 --> 00:12:55.980 money that gives you that kind of return? Two, 00:12:56.179 --> 00:12:59.419 there is a massive tax implication. But three, 00:12:59.580 --> 00:13:01.399 and this is the scary part, I think a lot of 00:13:01.399 --> 00:13:03.539 farmers are holding on waiting to see what happens 00:13:03.539 --> 00:13:05.460 with the trade deal. Ah, waiting for a buyout. 00:13:05.600 --> 00:13:08.679 Right. They don't want to sell if there is a 00:13:08.679 --> 00:13:11.370 government buyout coming. Or... They're just 00:13:11.370 --> 00:13:13.850 frozen by indecision. They're completely paralyzed. 00:13:14.210 --> 00:13:15.909 Our source calls it a capital trap with a waiting 00:13:15.909 --> 00:13:18.049 list. That is the perfect description. You can't 00:13:18.049 --> 00:13:20.169 get in because there is no quota available and 00:13:20.169 --> 00:13:22.049 you can't really get out easily without triggering 00:13:22.049 --> 00:13:24.750 massive tax events or total lifestyle changes. 00:13:25.129 --> 00:13:27.769 And meanwhile, the exit rates in Canada are creeping 00:13:27.769 --> 00:13:32.049 up too. About 2 .6 % of farms are dropping out 00:13:32.049 --> 00:13:34.669 annually. Dalhousie University has been warning 00:13:34.669 --> 00:13:37.389 about this. They said half of Canada's farms 00:13:37.389 --> 00:13:40.049 could be gone by 2030 without reform. And that 00:13:40.049 --> 00:13:43.470 warning was just reiterated in May 2025. The 00:13:43.470 --> 00:13:46.509 trend line is so clear. Supply management slows 00:13:46.509 --> 00:13:49.029 the bleeding, but it does not stop the wound. 00:13:49.250 --> 00:13:52.250 The smaller farms are still disappearing, just 00:13:52.250 --> 00:13:54.750 at a slower rate than in the U .S. It seems like 00:13:54.750 --> 00:13:57.029 both systems are bleeding the middle. That is 00:13:57.029 --> 00:13:59.909 exactly it. If you are small and niche doing 00:13:59.909 --> 00:14:02.870 on -farm processing, maybe you survive. If you 00:14:02.870 --> 00:14:04.610 are massive and efficient, maybe you survive. 00:14:04.870 --> 00:14:08.139 But the traditional family farm. The backbone 00:14:08.139 --> 00:14:10.580 of the industry. Yeah. It is endangered on both 00:14:10.580 --> 00:14:12.759 sides of the border. Let's move to segment three. 00:14:13.080 --> 00:14:15.879 We told you to grab a pencil earlier. Now we're 00:14:15.879 --> 00:14:17.600 going to do the barn math. We're going to stress 00:14:17.600 --> 00:14:19.759 test these operations. This is where the rubber 00:14:19.759 --> 00:14:22.460 meets the road or where the manure hits the spreader, 00:14:22.480 --> 00:14:24.299 depending on how your day is going. Let's start 00:14:24.299 --> 00:14:26.360 with the Canadian math. Let's look at Jean -Pierre's 00:14:26.360 --> 00:14:29.179 balance sheet. Okay. Visualize this. Jean -Pierre 00:14:29.179 --> 00:14:32.899 has a 100 cow equivalent operation under the 00:14:32.899 --> 00:14:36.559 current rules with the cap at $24 ,000 per kilo. 00:14:37.100 --> 00:14:40.100 His quota, just the paper right to produce milk, 00:14:40.200 --> 00:14:43.080 is worth about three million Canadian dollars. 00:14:43.379 --> 00:14:46.100 It is a huge asset. It is his biggest asset. 00:14:46.220 --> 00:14:48.879 It dwarfs the value of his cows and maybe even 00:14:48.879 --> 00:14:52.139 his land. It is collateral for absolutely everything. 00:14:52.320 --> 00:14:54.539 Right. His operating line of credit, his land 00:14:54.539 --> 00:14:57.220 loan, the robot loan, maybe even his parents' 00:14:57.360 --> 00:15:00.059 retirement payout. It is all secured against 00:15:00.059 --> 00:15:03.759 that quota. Now let's model a scenario. The USMCA 00:15:03.759 --> 00:15:06.679 review happens in July. Canada makes a concession. 00:15:07.000 --> 00:15:10.720 Quota value drops by 15%. Which is a conservative 00:15:10.720 --> 00:15:13.100 estimate if things go sideways during negotiations. 00:15:13.559 --> 00:15:17.419 So 15 % drop. His quota value goes from $3 million 00:15:17.419 --> 00:15:22.600 to $2 .5 million. That is a $450 ,000 loss. On 00:15:22.600 --> 00:15:25.460 paper, yes. But here is the massive problem. 00:15:25.700 --> 00:15:28.440 His debt doesn't change. It never does. He still 00:15:28.440 --> 00:15:30.460 owes the bank exactly what he owed yesterday. 00:15:30.700 --> 00:15:32.799 But his equity, the value of his business that 00:15:32.799 --> 00:15:35.080 he actually owns, just dropped by nearly half 00:15:35.080 --> 00:15:37.159 a million dollars. So his debt to equity ratio 00:15:37.159 --> 00:15:39.399 takes a massive hit. It jumps from a manageable 00:15:39.399 --> 00:15:44.159 55 % to over 60%. And 60 .4 % is the specific 00:15:44.159 --> 00:15:46.820 number our source crunched. That crosses the 00:15:46.820 --> 00:15:48.980 comfort threshold for Farm Credit Canada and 00:15:48.980 --> 00:15:51.460 most major lenders. So it's not just a paper 00:15:51.460 --> 00:15:54.399 loss. it triggers a very real banking problem. 00:15:54.580 --> 00:15:57.379 Correct. When you cross that threshold, the banker 00:15:57.379 --> 00:16:00.120 calls. They say, Jean -Pierre, you are now considered 00:16:00.120 --> 00:16:03.139 high risk. We need to restructure. We need more 00:16:03.139 --> 00:16:06.000 collateral. Or we need to increase your interest 00:16:06.000 --> 00:16:09.480 rate. It starts a death spiral. If your interest 00:16:09.480 --> 00:16:12.919 rate goes up 2%, Your cash flow evaporates, and 00:16:12.919 --> 00:16:15.080 suddenly you can't pay the basic bills. And debt 00:16:15.080 --> 00:16:17.259 service is already his biggest cost. Exactly. 00:16:17.460 --> 00:16:19.600 And you can't hedge against this. There is no 00:16:19.600 --> 00:16:22.600 futures market for political promises. You can't 00:16:22.600 --> 00:16:24.779 buy insurance that pays out if the prime minister 00:16:24.779 --> 00:16:28.299 caves on a trade deal. You are completely exposed 00:16:28.299 --> 00:16:31.100 to the whims of negotiators in a closed room. 00:16:31.440 --> 00:16:34.200 Now let's switch to the U .S. math. Let's look 00:16:34.200 --> 00:16:37.759 at Mark. Okay, Mark has 300 cows. Let's say the 00:16:37.759 --> 00:16:41.379 milk price drops to $16 .50. And his break -even 00:16:41.379 --> 00:16:44.879 is $20. Right. And $20 is a pretty efficient 00:16:44.879 --> 00:16:46.940 break -even these days with feed costs where 00:16:46.940 --> 00:16:51.139 they are. So he is losing $3 .50 on every single 00:16:51.139 --> 00:16:53.500 hundredweight of milk he produces. Let's do the 00:16:53.500 --> 00:16:56.559 multiplication on that. 300 cows doing about 00:16:56.559 --> 00:17:01.960 2 ,100 weight a month. That is... 6 ,375 hundredweight 00:17:01.960 --> 00:17:04.259 of milk hitting the tank every single month. 00:17:04.440 --> 00:17:09.180 You multiply that by a $3 .50 loss. That is over 00:17:09.180 --> 00:17:16.240 $22 ,000. $22 ,313 leaving his bank account every 00:17:16.240 --> 00:17:20.180 single month. Wow. That is cash drain. That is 00:17:20.180 --> 00:17:22.039 money that should be going to pay down principal 00:17:22.039 --> 00:17:25.279 or buy new tires. And instead, it's just covering 00:17:25.279 --> 00:17:27.339 the hole. But what about the safety net? What 00:17:27.339 --> 00:17:30.339 about dairy margin coverage, DMC? DMC is a great 00:17:30.339 --> 00:17:32.299 program, don't get me wrong. But it has caps. 00:17:32.519 --> 00:17:35.839 Tier 1 coverage caps at 5 million pounds of production 00:17:35.839 --> 00:17:38.759 history. For a herd of Mark's size, that only 00:17:38.759 --> 00:17:41.599 covers about 65 % of his milk. So he gets a check 00:17:41.599 --> 00:17:44.480 for some of it. He gets help on the first 4 ,000 00:17:44.480 --> 00:17:46.539 hundredweight or so. That stops the bleeding 00:17:46.539 --> 00:17:48.779 a bit. But the remaining 2 ,200 hundredweight, 00:17:48.839 --> 00:17:51.099 that is fully exposed to the market. He is totally 00:17:51.099 --> 00:17:53.359 naked on that volume. So even with the safety 00:17:53.359 --> 00:17:55.380 net working perfectly, he is still losing money. 00:17:55.640 --> 00:18:01.220 He is still losing over $7 ,700 a month. In six 00:18:01.220 --> 00:18:05.400 months, he has burned through over $133 ,000 00:18:05.400 --> 00:18:07.920 in equity. That's a staggering amount of money. 00:18:08.019 --> 00:18:11.579 That is real cash gone. That's a tractor. That's 00:18:11.579 --> 00:18:14.940 a kid's college tuition. Just gone. And if he 00:18:14.940 --> 00:18:18.160 doesn't have $133 ,000 in liquid cash sitting 00:18:18.160 --> 00:18:20.480 around in a checking account. Then he is borrowing 00:18:20.480 --> 00:18:24.059 it. He is eating into his land equity. And eventually 00:18:24.059 --> 00:18:26.640 the lender looks at his debt service coverage 00:18:26.640 --> 00:18:30.279 ratio, his DSCR. Right. If that falls below 1 00:18:30.279 --> 00:18:33.339 .0, meaning he isn't generating enough cash to 00:18:33.339 --> 00:18:36.000 pay his daily debts, the conversation shifts 00:18:36.000 --> 00:18:39.339 from renewal to... Exit planning. Exit planning. 00:18:39.500 --> 00:18:41.900 That is a very polite way of saying foreclosure 00:18:41.900 --> 00:18:44.660 or forced sale. It is. It's the bank telling 00:18:44.660 --> 00:18:46.660 you to sell the cows before they have to send 00:18:46.660 --> 00:18:49.019 trailers to come take them. And the source makes 00:18:49.019 --> 00:18:50.819 a really chilling point here. If you haven't 00:18:50.819 --> 00:18:52.480 run these numbers, your lender already have. 00:18:52.720 --> 00:18:55.259 That is the takeaway right there. The bank knows 00:18:55.259 --> 00:18:57.440 your vulnerability better than you do sometimes. 00:18:57.859 --> 00:19:01.579 And that is exactly why we are doing this deep 00:19:01.579 --> 00:19:04.160 dive. You need to know these numbers before they 00:19:04.160 --> 00:19:06.319 make the call. You need to walk into that office 00:19:06.319 --> 00:19:09.779 with a plan, not a prayer. This financial pressure 00:19:09.779 --> 00:19:11.859 doesn't just stay in the barn office, though. 00:19:12.240 --> 00:19:15.220 It seeps into the house. It affects the family. 00:19:16.799 --> 00:19:19.519 Let's talk about segment four, the case studies 00:19:19.519 --> 00:19:22.769 and the human cost. Yeah, we talk about cows 00:19:22.769 --> 00:19:24.910 and quotas, but we are really talking about people 00:19:24.910 --> 00:19:26.869 here. We are talking about families who have 00:19:26.869 --> 00:19:29.369 been on this land for generations. There's a 00:19:29.369 --> 00:19:32.130 study by Dr. Andrea Jones -Bitton regarding mental 00:19:32.130 --> 00:19:34.990 health and agriculture. The stats are heavy. 00:19:35.190 --> 00:19:38.210 They are heartbreaking. 45 % of Canadian farmers 00:19:38.210 --> 00:19:41.890 reported high stress. 57 % met the criteria for 00:19:41.890 --> 00:19:45.130 anxiety. 35 % for depression. And this was before 00:19:45.130 --> 00:19:47.849 the latest round of USMCA anxiety. This was the 00:19:47.849 --> 00:19:50.130 baseline. And these numbers are likely very similar 00:19:50.130 --> 00:19:52.250 in the US. Absolutely. The stress just comes 00:19:52.250 --> 00:19:54.069 from different places. It manifests differently. 00:19:54.170 --> 00:19:56.630 But the human toll is exactly the same. Right. 00:19:56.970 --> 00:19:59.930 Jean -Pierre's stress is capital weighted. He 00:19:59.930 --> 00:20:02.589 is stressed about an asset he can't control because 00:20:02.589 --> 00:20:06.029 it is tied completely to politics. He feels helpless 00:20:06.029 --> 00:20:09.420 because... A bureaucrat in Ottawa or Washington 00:20:09.420 --> 00:20:12.640 holds his fate. He feels like a pawn in a bigger 00:20:12.640 --> 00:20:15.420 game. He can be the best farmer in the world, 00:20:15.599 --> 00:20:17.759 have the best somatic cell count, the highest 00:20:17.759 --> 00:20:20.539 components, and he can still be wiped out by 00:20:20.539 --> 00:20:23.059 a signature on a treaty he never even saw. And 00:20:23.059 --> 00:20:25.859 Mark's stress is market -weighted. Mark is watching 00:20:25.859 --> 00:20:27.980 the ticker. He is watching the Chicago Mercantile 00:20:27.980 --> 00:20:30.859 Exchange. He is stressed because the global market 00:20:30.859 --> 00:20:33.619 doesn't care about his mortgage. No, it doesn't. 00:20:33.660 --> 00:20:36.279 He is fighting forces, whether in New Zealand 00:20:41.820 --> 00:20:43.740 Let's look at the winner table from the source. 00:20:43.839 --> 00:20:46.160 It compares the two systems across different 00:20:46.160 --> 00:20:49.440 categories. Who wins on income stability? Canada 00:20:49.440 --> 00:20:51.880 wins that one, hands down. The check is stable, 00:20:52.059 --> 00:20:55.039 but... And there is a big asterisk here that 00:20:55.039 --> 00:20:58.019 income is just servicing the debt you took on 00:20:58.019 --> 00:20:59.980 to buy the quota. Right. Doesn't necessarily 00:20:59.980 --> 00:21:02.759 build wealth. It services the entry fee. It's 00:21:02.759 --> 00:21:04.759 like having a high salary, but a massive, massive 00:21:04.759 --> 00:21:06.599 mortgage. You look rich, but you're actually 00:21:06.599 --> 00:21:08.900 cash strapped. What about growth potential? The 00:21:08.900 --> 00:21:11.839 U .S. wins. The sky is the limit. If you want 00:21:11.839 --> 00:21:14.660 to milk 10 ,000 cows, you can. Nobody stops you. 00:21:14.759 --> 00:21:17.619 You can build an absolute kingdom. But the fall 00:21:17.619 --> 00:21:20.779 is also limitless. There is no floor. Succession. 00:21:21.099 --> 00:21:23.819 This is a big one for family farms. Huge. Canada 00:21:23.819 --> 00:21:27.039 prides itself on having 98 % family farms. It's 00:21:27.039 --> 00:21:29.460 part of the national identity up there. But here 00:21:29.460 --> 00:21:33.700 is the dirty secret. 88 % of them lack a formal 00:21:33.700 --> 00:21:37.160 succession plan. 88 % why? Because the capital 00:21:37.160 --> 00:21:40.339 cost is too high. How does a young person buy 00:21:40.339 --> 00:21:42.640 out their parents when the quota alone is worth 00:21:42.640 --> 00:21:45.559 $3 or $4 million? The math just doesn't work 00:21:45.559 --> 00:21:47.599 for the next generation. So the Barons have to 00:21:47.599 --> 00:21:49.640 act as the bank or they simply can't retire. 00:21:50.039 --> 00:21:52.200 Or they sell the quota and the cows leave the 00:21:52.200 --> 00:21:54.539 farm. They cash out. The mega dairy neighbor 00:21:54.539 --> 00:21:56.619 buys the quota and the family barn goes empty. 00:21:57.019 --> 00:21:59.700 That's how we lose the family farm. Not to bankruptcy, 00:21:59.880 --> 00:22:03.019 but to the pure inability to transfer the asset. 00:22:03.200 --> 00:22:05.579 And in the U .S. There is no quota to buy, so 00:22:05.579 --> 00:22:08.119 entry is much cheaper. You can buy cows and start 00:22:08.119 --> 00:22:11.160 milking tomorrow. But you are entering a burning 00:22:11.160 --> 00:22:13.140 building sometimes. You are entering a market 00:22:13.140 --> 00:22:16.000 that eats 5 % to 9 % of its participants every 00:22:16.000 --> 00:22:19.220 single year. It's easier to start. but much, 00:22:19.259 --> 00:22:21.859 much harder to stay. So who wins on mid -size 00:22:21.859 --> 00:22:24.859 survival? Neither. That's the hard truth. Canada 00:22:24.859 --> 00:22:27.319 caps you so you can't grow your way out of inefficiency 00:22:27.319 --> 00:22:31.200 easily. The U .S. crushes you with scale. Both 00:22:31.200 --> 00:22:33.539 systems are just bleeding the middle -class farmer. 00:22:33.740 --> 00:22:36.259 It is a crisis of the middle. It's a sobering 00:22:36.259 --> 00:22:38.599 assessment. The Canadian system is great for 00:22:38.599 --> 00:22:40.339 preserving a farm that already exists and is 00:22:40.339 --> 00:22:43.279 fully paid off. The U .S. system is great for 00:22:43.279 --> 00:22:45.279 the gambler who wants to build an empire. But 00:22:45.279 --> 00:22:46.900 neither is great for the average family trying 00:22:46.900 --> 00:22:48.910 to pass the torch. And that should really worry 00:22:48.910 --> 00:22:51.670 all of us. Let's pivot to the future. Segment 00:22:51.670 --> 00:22:55.210 five, the USMCA 2026 review. This is the freight 00:22:55.210 --> 00:22:57.509 train coming down the tracks. The big date, July 00:22:57.509 --> 00:23:00.769 1st, 2026. Mark it on your calendar in bright 00:23:00.769 --> 00:23:03.849 red ink. The sunset review. What exactly is happening 00:23:03.849 --> 00:23:06.309 then? Basically, the three countries, the US, 00:23:06.490 --> 00:23:09.170 Canada, and Mexico, sit down and decide if they 00:23:09.170 --> 00:23:11.630 want to extend the agreement for another 16 years. 00:23:12.130 --> 00:23:15.369 But it is not a rubber stamp. It is a hardcore 00:23:15.369 --> 00:23:18.589 negotiation. and everything is on the table. 00:23:18.710 --> 00:23:20.650 And the political pressure in the U .S. is really 00:23:20.650 --> 00:23:23.089 ramping up right now. Huge pressure. You have 00:23:23.089 --> 00:23:26.029 bipartisan support, Republicans and Democrats 00:23:26.029 --> 00:23:28.990 pushing aggressively for access to the Canadian 00:23:28.990 --> 00:23:32.269 dairy market. Representative Jim Costa has been 00:23:32.269 --> 00:23:33.970 leading the charge. They formed a coalition, 00:23:34.170 --> 00:23:36.710 right? Yeah, the Agricultural Coalition for USMCA. 00:23:36.869 --> 00:23:39.509 They are organized, they are well -funded, and 00:23:39.509 --> 00:23:42.049 they have a very clear target, Canada's supply 00:23:42.049 --> 00:23:44.029 management. And their main complaint is about 00:23:44.029 --> 00:23:48.059 TRQs. Tariff rate quotas. Right. The U .S. says 00:23:48.059 --> 00:23:50.480 we negotiated access to sell dairy in Canada 00:23:50.480 --> 00:23:53.160 in the last deal. Canada says, sure, here are 00:23:53.160 --> 00:23:55.440 the permits. But Canada gave those permits, the 00:23:55.440 --> 00:23:59.000 TRQs, mostly to Canadian processors. Very companies 00:23:59.000 --> 00:24:01.259 that have absolute no incentive to import American 00:24:01.259 --> 00:24:04.380 milk. Exactly. Why would a Canadian cheesemaker 00:24:04.380 --> 00:24:07.180 import American cheese that directly competes 00:24:07.180 --> 00:24:08.579 with their own product? They just sit on the 00:24:08.579 --> 00:24:12.640 permits. So the fill rates. The amount of product 00:24:12.640 --> 00:24:15.019 actually crossing the border are incredibly low, 00:24:15.119 --> 00:24:18.160 only about 42 % filled. So the U .S. feels cheated? 00:24:18.380 --> 00:24:21.240 They feel like Canada is playing games with the 00:24:21.240 --> 00:24:23.720 implementation. They feel like they won the negotiation 00:24:23.720 --> 00:24:26.480 but lost the execution. And honestly, looking 00:24:26.480 --> 00:24:29.420 at the trade data, U .S. exports to Canada actually 00:24:29.420 --> 00:24:33.460 rose 11 % in 2025. So product is moving. They 00:24:33.460 --> 00:24:37.299 hit $1 .2 billion. So stuff is moving. But the 00:24:37.299 --> 00:24:39.799 U .S. wants more. And on the Canadian side, the 00:24:39.799 --> 00:24:42.119 government... definitely knows this is a vulnerability. 00:24:42.500 --> 00:24:45.000 They do. And how do we know they know? Because 00:24:45.000 --> 00:24:47.460 they keep writing massive checks. The compensation 00:24:47.460 --> 00:24:50.680 payments. Canada has paid out nearly $3 billion. 00:24:51.119 --> 00:24:53.980 That's billion with a B in compensation to dairy 00:24:53.980 --> 00:24:56.859 farmers for previous trade deals like CETA with 00:24:56.859 --> 00:25:00.319 Europe and CPTPP, the Pacific deal. That is an 00:25:00.319 --> 00:25:02.440 admission, isn't it? It is a flat out confession. 00:25:02.759 --> 00:25:04.900 It is the government saying, we know we hurt 00:25:04.900 --> 00:25:07.220 you. We know we sold a piece of your market to 00:25:07.220 --> 00:25:10.450 get a deal on cars or tech. Here is some hush 00:25:10.450 --> 00:25:13.930 money. Right. The question for 2026 isn't if 00:25:13.930 --> 00:25:16.509 there will be damage. It is how much damage. 00:25:16.769 --> 00:25:19.289 And will the compensation check clear before 00:25:19.289 --> 00:25:21.829 the bank calls? It is the compensation trap. 00:25:22.049 --> 00:25:24.789 You lose market share, you get a check. But you 00:25:24.789 --> 00:25:27.250 lose the market share forever. The check is a 00:25:27.250 --> 00:25:30.589 one -time thing or spread over a few years. And 00:25:30.589 --> 00:25:32.450 that check doesn't fix your balance sheet permanently. 00:25:32.549 --> 00:25:34.809 It just... patches the hole for a little while. 00:25:34.910 --> 00:25:36.690 It's like putting duct tape on a leaking pipe. 00:25:37.089 --> 00:25:39.130 Eventually, the pressure bursts right through. 00:25:39.430 --> 00:25:41.589 Let's get into some contrarian takes. We like 00:25:41.589 --> 00:25:43.269 to challenge the narrative here. We don't just 00:25:43.269 --> 00:25:45.369 parrot what the lobby groups say. Let's stir 00:25:45.369 --> 00:25:47.930 the pot a little. I'll take the U .S. side. U 00:25:47.930 --> 00:25:50.049 .S. farmers seem convinced that opening the Canadian 00:25:50.049 --> 00:25:52.549 market is the answer to their oversupply problems. 00:25:53.309 --> 00:25:55.890 The thought is, if we could just sell to Canada, 00:25:56.089 --> 00:25:59.069 prices would instantly go up. I hear that at 00:25:59.069 --> 00:26:01.490 every diner in Wisconsin. Those Canadians are 00:26:01.490 --> 00:26:03.589 blocking our milk. But let's look at the math. 00:26:04.069 --> 00:26:06.529 Canada is the size of California, roughly, in 00:26:06.529 --> 00:26:09.269 terms of population. Even if the U .S. got everything 00:26:09.269 --> 00:26:12.390 they wanted, total open borders, zero tariffs, 00:26:12.589 --> 00:26:15.509 the Canadian market is tiny compared to U .S. 00:26:15.529 --> 00:26:17.549 production. It's a drop in the bucket. U .S. 00:26:17.569 --> 00:26:21.869 production is over 225 billion pounds. Accessing 00:26:21.869 --> 00:26:26.809 3 .6 % of the Canadian market is nothing. It's 00:26:26.809 --> 00:26:28.970 a rounding error. It wouldn't move the Class 00:26:28.970 --> 00:26:32.150 3 milk price by more than a few pennies. So your 00:26:32.150 --> 00:26:35.769 take is access to Canada is a bonus, not a business 00:26:35.769 --> 00:26:38.730 plan. Exactly. Stop waiting for Canada to save 00:26:38.730 --> 00:26:41.230 you. It will not fix the fundamental oversupply 00:26:41.230 --> 00:26:43.190 issue in the U .S. I like it. It's harsh, but 00:26:43.190 --> 00:26:46.130 it's totally true. My contrarian take for the 00:26:46.130 --> 00:26:48.450 Canadians, stop believing that quota value is 00:26:48.450 --> 00:26:50.630 permanent. But it's been $24 ,000 for a long 00:26:50.630 --> 00:26:52.829 time. It feels like bedrock to them. It has, 00:26:53.009 --> 00:26:55.369 but it's not real estate. It's not gold. It is 00:26:55.369 --> 00:26:58.289 a policy construct. It exists only because a 00:26:58.289 --> 00:27:00.829 piece of legislation says it exists. If that 00:27:00.829 --> 00:27:03.450 legislation changes, the value evaporates. It's 00:27:03.450 --> 00:27:05.549 collateralizing a loan with a political promise. 00:27:05.890 --> 00:27:09.369 And you cannot hedge against a political promise 00:27:09.369 --> 00:27:11.849 expiring. We saw it in Australia. We saw it in 00:27:11.849 --> 00:27:14.440 Europe with quotas ending. It can happen. And 00:27:14.440 --> 00:27:16.839 if you are betting the farm literally that I 00:27:16.839 --> 00:27:19.920 won't, that is a very risky bet. You are trusting 00:27:19.920 --> 00:27:22.740 politicians to protect your wealth. When has 00:27:22.740 --> 00:27:25.339 that ever been a sure thing? OK, we have scared 00:27:25.339 --> 00:27:27.299 everyone sufficiently. Let's try to be helpful. 00:27:27.480 --> 00:27:29.200 Fair enough. We can't just leave them in the 00:27:29.200 --> 00:27:31.940 dark. We pride ourselves on actionable insights. 00:27:32.160 --> 00:27:35.839 So picture this. A farmer is driving to the feed 00:27:35.839 --> 00:27:38.380 store right now. They just listen to this. Their 00:27:38.380 --> 00:27:41.079 knuckles are white on the steering wheel. What 00:27:41.079 --> 00:27:43.220 are the three things they need to do? Let's break 00:27:43.220 --> 00:27:45.759 it down by country. Start with the Canadian farmer, 00:27:45.940 --> 00:27:47.819 the Jean -Pierre playbook. Okay, Jean -Pierre, 00:27:47.900 --> 00:27:50.599 listen up. First, the immediate time frame, the 00:27:50.599 --> 00:27:53.519 next 30 days. Go to the Farm Credit Canada website. 00:27:53.640 --> 00:27:55.740 They have a solvency calculator. Run three scenarios. 00:27:55.940 --> 00:27:58.500 Scenario A, current quota value. Scenario B, 00:27:58.680 --> 00:28:02.220 minus 10%. Scenario C, minus 20%. And if they 00:28:02.220 --> 00:28:04.940 don't like what they see. If that minus 20 % 00:28:04.940 --> 00:28:07.559 scenario pushes your debt to equity ratio over 00:28:07.559 --> 00:28:11.220 0 .60, you need a contingency plan today, not 00:28:11.220 --> 00:28:14.599 in July. Today, call your accountant. Call your 00:28:14.599 --> 00:28:17.019 lender proactively. That is the stress test. 00:28:17.279 --> 00:28:19.500 What about the medium term? Medium term. The 00:28:19.500 --> 00:28:23.039 next 90 days. Look at your asset mix. If quota 00:28:23.039 --> 00:28:25.500 makes up more than 50 % of your total assets, 00:28:25.819 --> 00:28:29.579 you are dangerously concentrated. You are overexposed 00:28:29.579 --> 00:28:32.660 to one risk factor. Start shifting equity. How 00:28:32.660 --> 00:28:34.740 do they do that? Can you pay down quoted debt 00:28:34.740 --> 00:28:37.400 aggressively? Can you invest in land or equipment? 00:28:37.559 --> 00:28:40.200 Things that have tangible value outside of the 00:28:40.200 --> 00:28:42.799 supply management system. I know diversification 00:28:42.799 --> 00:28:45.579 capital computes with paying down debt, but concentration 00:28:45.579 --> 00:28:48.039 risk is the killer here. You need assets that 00:28:48.039 --> 00:28:50.519 have value even if the system changes. And long 00:28:50.519 --> 00:28:53.559 term. Long term. The next 365 days, get involved. 00:28:53.839 --> 00:28:56.180 Do not rely on the Dairy Farmers of Canada or 00:28:56.180 --> 00:28:57.920 your provincial board to just handle it behind 00:28:57.920 --> 00:29:00.900 closed doors. The 2023 panel victory was great, 00:29:01.039 --> 00:29:04.000 but it might have created complacency. The 2026 00:29:04.000 --> 00:29:06.240 review is a totally different animal. So they 00:29:06.240 --> 00:29:08.640 need to speak up. Show up to the meetings. Make 00:29:08.640 --> 00:29:10.740 sure your voice is heard about what kind of compensation 00:29:10.740 --> 00:29:13.339 or transition plan you actually need. If you're 00:29:13.339 --> 00:29:15.539 silent, you get what you get. Okay, now for the 00:29:15.539 --> 00:29:18.900 U .S. Farmer. The Mark Playbook. All right, Mark. 00:29:19.980 --> 00:29:23.240 Immediate time frame, 30 days. Enroll in DMC. 00:29:23.799 --> 00:29:26.299 The deadline is February 26th. I don't care if 00:29:26.299 --> 00:29:28.039 you think it won't pay out. I don't care if you 00:29:28.039 --> 00:29:30.240 hate the paperwork. Just do it. The production 00:29:30.240 --> 00:29:32.660 history reset has changed the math completely. 00:29:33.019 --> 00:29:36.900 For herds under 350 cows, it is an absolute no 00:29:36.900 --> 00:29:39.059 -brainer. It is cheap insurance. Do it. It sets 00:29:39.059 --> 00:29:41.819 the floor under your revenue. Medium term. Medium 00:29:41.819 --> 00:29:44.819 term. 90 days out. Check your DSCR, that debt 00:29:44.819 --> 00:29:47.279 service coverage ratio we talked about. If it 00:29:47.279 --> 00:29:50.619 is below 1 .15, meaning you have just barely 00:29:50.619 --> 00:29:53.480 enough cash to cover debt plus a 15 % buffer 00:29:53.480 --> 00:29:56.740 and your cost of production is over $20. You 00:29:56.740 --> 00:29:59.599 are walking on thin ice. Very thin ice. You are 00:29:59.599 --> 00:30:02.440 one price dip away from the bank taking the keys. 00:30:02.500 --> 00:30:04.900 You need to know that number. If it's low, talk 00:30:04.900 --> 00:30:07.359 to the bank now. Restructure debt while you still 00:30:07.359 --> 00:30:09.740 have cash flow, not when you are bouncing checks. 00:30:10.240 --> 00:30:12.839 Extend the amortization if you have to. Preserve 00:30:12.839 --> 00:30:15.359 cash. And long -term. Long -term. Next year, 00:30:15.460 --> 00:30:18.299 stop dreaming about Canada. Focus on what you 00:30:18.299 --> 00:30:21.970 control. efficiency, components, milk quality. 00:30:22.289 --> 00:30:25.289 The controllables. Yes. Processors are paying 00:30:25.289 --> 00:30:28.069 for protein and butterfat. Invest in genetics 00:30:28.069 --> 00:30:30.250 that give you that. Invest in technology that 00:30:30.250 --> 00:30:33.150 lowers your labor cost. That is your only real 00:30:33.150 --> 00:30:36.210 defense against the spot market. Be the low -cost 00:30:36.210 --> 00:30:38.250 producer of the highest value milk. That's the 00:30:38.250 --> 00:30:40.630 only way to win in a commodity market. That is 00:30:40.630 --> 00:30:43.430 incredibly solid advice. Control the controllables. 00:30:43.589 --> 00:30:45.710 It's the only way to survive. Everything else 00:30:45.710 --> 00:30:48.440 is just noise. We are coming to the end of our 00:30:48.440 --> 00:30:50.700 deep dive. I want to circle back to the opening 00:30:50.700 --> 00:30:53.880 image. The hockey game. The game. It's exciting. 00:30:54.019 --> 00:30:55.579 I'll definitely be watching it. But the source 00:30:55.579 --> 00:30:57.539 ends with a really powerful thought for us to 00:30:57.539 --> 00:31:00.200 mull over. The jerseys come off tomorrow. The 00:31:00.200 --> 00:31:03.319 medals get boxed. The hashtags fade. But on Monday 00:31:03.319 --> 00:31:06.200 morning at 4 .30 a .m., Jean -Pierre is still 00:31:06.200 --> 00:31:08.599 walking into that barn in Quebec. He is still 00:31:08.599 --> 00:31:11.539 servicing $4 million in debt. And Mark is still 00:31:11.539 --> 00:31:14.220 milking 1 ,200 cows in Wisconsin, watching his 00:31:14.220 --> 00:31:18.089 equity burn. The crowd is gone, but the work 00:31:18.089 --> 00:31:21.190 remains. The real win isn't a medal. No, the 00:31:21.190 --> 00:31:23.990 real win is ensuring that a family is still there 00:31:23.990 --> 00:31:26.869 to drop the puck for the next generation. It's 00:31:26.869 --> 00:31:28.910 about staying in the game. It's about resilience. 00:31:29.029 --> 00:31:31.569 That is the ultimate goal, keeping the legacy 00:31:31.569 --> 00:31:34.150 alive. Start with your balance sheet. Don't wait 00:31:34.150 --> 00:31:36.109 for the politicians to fix it. They won't. You 00:31:36.109 --> 00:31:39.910 have to fix it. Powerful words. Well, that wraps 00:31:39.910 --> 00:31:42.450 up this deep dive into the Canada -U .S. dairy 00:31:42.450 --> 00:31:45.349 face -off. We hope this gave you some clarity, 00:31:45.410 --> 00:31:48.069 even if the news is a bit tough to swallow. Better 00:31:48.069 --> 00:31:50.430 to swallow tough news now than choke on it later. 00:31:50.670 --> 00:31:53.369 Exactly. This has been another Bullvine podcast. 00:31:53.490 --> 00:31:55.690 For more straight -talking industry analysis, 00:31:55.990 --> 00:32:00.930 head to www .thebullvine .com. Subscribe wherever 00:32:00.930 --> 00:32:02.990 you get podcasts. We're out with new episodes 00:32:02.990 --> 00:32:05.630 every day. And hey, enjoy the hockey game, but 00:32:05.630 --> 00:32:07.529 keep one eye on that spreadsheet. Thanks for 00:32:07.529 --> 00:32:08.769 listening. Stay safe out there.