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 --> 00:01:02.799 we're sparking Welcome back to the Bullvine Podcast, 00:01:03.079 --> 00:01:05.500 where we cut through dairy industry noise to 00:01:05.500 --> 00:01:07.659 get you the insights that actually matter for 00:01:07.659 --> 00:01:10.620 your operation. And today we are doing a deep 00:01:10.620 --> 00:01:14.000 dive into a feature piece about the Ciudad Juarez 00:01:14.000 --> 00:01:18.040 border blockades, the $1 .45 billion in frozen 00:01:18.040 --> 00:01:22.840 exports. The hidden pipeline risks that are completely 00:01:22.840 --> 00:01:25.159 blindsiding your milk check. Right. And I want 00:01:25.159 --> 00:01:27.280 to set the scene right away because the calendar 00:01:27.280 --> 00:01:29.959 is incredibly important for this deep dive. Today 00:01:29.959 --> 00:01:33.459 is March 6, 2026. If you're listening to this 00:01:33.459 --> 00:01:35.379 on the tractor right now, you have exactly two 00:01:35.379 --> 00:01:38.469 weeks. two weeks before a massive coordinated 00:01:38.469 --> 00:01:41.489 national mobilization is planned to hit Mexico 00:01:41.489 --> 00:01:43.989 on March 20. Yeah, and we need to be clear here. 00:01:44.049 --> 00:01:45.689 This isn't a rumor floating around the local 00:01:45.689 --> 00:01:47.909 coffee shop. It is a scheduled event that threatens 00:01:47.909 --> 00:01:50.269 to repeat the absolute devastation of the November 00:01:50.269 --> 00:01:53.390 2025 mega blockades that we all just lived through. 00:01:53.510 --> 00:01:55.530 Exactly. And we need to talk about what that 00:01:55.530 --> 00:01:57.549 actually means for your farm, because I am looking 00:01:57.549 --> 00:01:59.769 at the stakes right now, and they are entirely 00:01:59.769 --> 00:02:02.069 disconnected from what producers see on a future 00:02:02.069 --> 00:02:05.379 screen. That is the core disconnect we really 00:02:05.379 --> 00:02:07.739 have to unpack today. You know, you might be 00:02:07.739 --> 00:02:09.879 sitting there at the farm desk staring at your 00:02:09.879 --> 00:02:12.719 screen and hedging your prices perfectly. You 00:02:12.719 --> 00:02:15.680 are doing everything by the book to protect your 00:02:15.680 --> 00:02:17.780 margin against market crashes. You're paying 00:02:17.780 --> 00:02:19.639 the premiums. Right, you're paying the premiums. 00:02:19.680 --> 00:02:23.180 But your actual mailbox check, the physical money 00:02:23.180 --> 00:02:26.020 deposited into your account that you use to pay 00:02:26.020 --> 00:02:28.740 the feed mill, pay your labor, service your debt, 00:02:28.879 --> 00:02:33.189 that check is quietly shrinking. This deep dive 00:02:33.189 --> 00:02:36.270 is entirely about the massive gap between that 00:02:36.270 --> 00:02:39.150 digital screen and your physical mailbox. Because 00:02:39.150 --> 00:02:41.949 it's about how the dairy industry's so -called 00:02:41.949 --> 00:02:45.229 most reliable customer actually relies on the 00:02:45.229 --> 00:02:47.949 most unreliable high beta transit corridor in 00:02:47.949 --> 00:02:49.729 North America. Hold on, let's stop right there. 00:02:49.789 --> 00:02:51.409 High beta transit corridor. You are throwing 00:02:51.409 --> 00:02:53.370 stock market trader talk at me before we have 00:02:53.370 --> 00:02:55.030 even gotten out to the barn. Let's translate 00:02:55.030 --> 00:02:57.110 that for the guy milking cows right now. What 00:02:57.110 --> 00:02:59.590 do you actually mean by a high beta transit corridor? 00:02:59.949 --> 00:03:06.289 Fair point. In the finance world, beta is a metric 00:03:06.289 --> 00:03:09.110 used to measure volatility. If a stock has a 00:03:09.110 --> 00:03:11.770 high beta, it means it swings wildly compared 00:03:11.770 --> 00:03:14.349 to the rest of the market. High risk, high reward. 00:03:14.610 --> 00:03:16.710 Okay, so a wild ride, basically. Yeah, exactly. 00:03:16.889 --> 00:03:19.409 A wild ride. So when I say we're relying on a 00:03:19.409 --> 00:03:21.469 high beta transit corridor, I mean the physical 00:03:21.469 --> 00:03:23.289 road and bridge infrastructure between the U 00:03:23.289 --> 00:03:26.669 .S. and Mexico is incredibly volatile. It is 00:03:26.669 --> 00:03:29.370 prone to sudden violent disruptions. You're shipping 00:03:29.370 --> 00:03:32.240 a highly perishable product. fluid milk, fresh 00:03:32.240 --> 00:03:34.699 cheese down a pipeline that can literally be 00:03:34.699 --> 00:03:36.379 changed shut overnight. Oh, okay. That makes 00:03:36.379 --> 00:03:38.860 total sense. It's like trying to ride a mechanical 00:03:38.860 --> 00:03:40.719 bull instead of a carousel, but you don't actually 00:03:40.719 --> 00:03:42.020 know when the bull is going to get turned on. 00:03:42.199 --> 00:03:44.080 That's a perfect way to put it. Yeah. Let's look 00:03:44.080 --> 00:03:45.919 at the baseline problem here, which I think we 00:03:45.919 --> 00:03:48.319 can call the illusion of price hedging. I was 00:03:48.319 --> 00:03:49.699 looking at the numbers from the source material 00:03:49.699 --> 00:03:52.620 we pulled for this. Let's review the tape. December 00:03:52.620 --> 00:03:57.060 2025, class three settled at $15 .86 per hundred 00:03:57.060 --> 00:04:00.180 weight. Right. Then January dropped to $14 .59. 00:04:01.189 --> 00:04:03.090 According to the Dairy Star, that was the lowest 00:04:03.090 --> 00:04:08.650 since July 2023. Now, if I am a producer, those 00:04:08.650 --> 00:04:11.090 are normal, albeit frustrating, price moves. 00:04:11.270 --> 00:04:13.330 Yeah, it's cyclical. It's cyclical, and it is 00:04:13.330 --> 00:04:15.389 exactly the kind of volatility my hedge is built 00:04:15.389 --> 00:04:18.370 to handle. I buy a dairy revenue protection endorsement, 00:04:18.410 --> 00:04:21.269 I use the tools, and I cover that drop. My broker 00:04:21.269 --> 00:04:23.410 tells me I am safe, so why shouldn't I sleep 00:04:23.410 --> 00:04:25.389 well at night? Because your broker is only managing 00:04:25.389 --> 00:04:27.550 your price risk. They are not managing your pipe 00:04:27.550 --> 00:04:29.860 risk. Let's look at the physical reality of what 00:04:29.860 --> 00:04:32.420 happened to the U .S. average mailbox price back 00:04:32.420 --> 00:04:36.379 in October 2025. It dropped 85 cents in a single 00:04:36.379 --> 00:04:40.470 month, down to $18 .70 per hundredweight, Ouch. 00:04:40.550 --> 00:04:43.709 Yeah, Ouch is right. That was a massive $5 .58 00:04:43.709 --> 00:04:46.769 below the prior year. And as we moved into late 00:04:46.769 --> 00:04:50.550 2025, we saw a staggering $1 .30 per hundredweight 00:04:50.550 --> 00:04:53.769 national gap between the statistical all milk 00:04:53.769 --> 00:04:56.449 price and what farmers actually received. So 00:04:56.449 --> 00:04:58.430 the all milk price says one thing, but the check 00:04:58.430 --> 00:04:59.910 in the mail says something completely different. 00:05:00.300 --> 00:05:03.120 Exactly. Your hedge protected you from the Class 00:05:03.120 --> 00:05:05.980 3 drop on the board, sure, but it did absolutely 00:05:05.980 --> 00:05:09.500 nothing to protect you from that $1 .30 gap that 00:05:09.500 --> 00:05:12.000 eroded your actual physical cash flow. I'm going 00:05:12.000 --> 00:05:14.540 to play devil's advocate here, representing the 00:05:14.540 --> 00:05:17.220 skeptical listener. If I am paying good money 00:05:17.220 --> 00:05:20.220 for a DRP endorsement, I am paying to protect 00:05:20.220 --> 00:05:22.379 my margin. Are you telling me that insurance 00:05:22.379 --> 00:05:25.540 policy is completely useless if a bridge gets 00:05:25.540 --> 00:05:27.730 shut down? It is not useless for the broader 00:05:27.730 --> 00:05:30.550 market, but it does absolutely nothing for local 00:05:30.550 --> 00:05:32.670 basis blowouts caused by physical logistics. 00:05:33.129 --> 00:05:35.610 There is a fundamental difference between price 00:05:35.610 --> 00:05:38.470 risk and pipe risk. A hedge tool protects you 00:05:38.470 --> 00:05:40.689 against the Chicago Mercantile Exchange taking 00:05:40.689 --> 00:05:43.089 a dive, but there is no ticker symbol on the 00:05:43.089 --> 00:05:45.589 CME for physical supply chain paralysis. Right. 00:05:45.649 --> 00:05:47.470 You can't buy a put option on a traffic jam. 00:05:47.689 --> 00:05:49.829 Exactly. You can't. There is no insurance policy 00:05:49.829 --> 00:05:52.110 that pays out when a bridge 1 ,500 miles away 00:05:52.110 --> 00:05:54.550 in Ciudad Juarez is chained shut by protesters. 00:05:55.009 --> 00:05:56.769 So McCann Mechanically, how does a block bridge 00:05:56.769 --> 00:05:58.949 in Mexico steal money out of a mailbox check 00:05:58.949 --> 00:06:01.949 in Wisconsin or Texas? Walk me through the actual 00:06:01.949 --> 00:06:04.569 plumbing of how that loss travels backward up 00:06:04.569 --> 00:06:06.949 the supply chain. This is the harsh reality of 00:06:06.949 --> 00:06:10.149 how basis risk gets passed down the chain directly 00:06:10.149 --> 00:06:12.990 to the producer. Let's think about how your co 00:06:12.990 --> 00:06:16.310 -op operates when the physical pipes jam. Let's 00:06:16.310 --> 00:06:18.350 say your co -op has millions of pounds of milk 00:06:18.350 --> 00:06:21.329 or finished powder destined for Mexico. Suddenly, 00:06:21.490 --> 00:06:23.949 the border closes. The door is shut. The door 00:06:23.949 --> 00:06:26.639 is shut. The Class 3 price on the board stays 00:06:26.639 --> 00:06:29.120 exactly the same. The market hasn't technically 00:06:29.120 --> 00:06:33.240 crashed, but your co -op... suddenly has a massive, 00:06:33.279 --> 00:06:35.600 expensive logistical nightmare on its hands. 00:06:35.800 --> 00:06:38.480 They have product they cannot deliver. They have 00:06:38.480 --> 00:06:40.779 trucks parked in the desert, racking up demurrage 00:06:40.779 --> 00:06:43.060 fees. Which is essentially a penalty charge for 00:06:43.060 --> 00:06:44.779 keeping a freight truck waiting, right? Yeah, 00:06:44.800 --> 00:06:47.060 exactly. Because the trucker is sitting there 00:06:47.060 --> 00:06:49.519 burning diesel to run the reefer unit to keep 00:06:49.519 --> 00:06:51.379 the product cold, and they aren't getting paid 00:06:51.379 --> 00:06:53.759 for making a delivery. They are just a parking 00:06:53.759 --> 00:06:56.560 lot on wheels. So the demurrage fees skyrocket. 00:06:56.879 --> 00:07:00.000 The co -op is forced to either fire sale highly 00:07:00.000 --> 00:07:02.759 perishable milk into lower value domestic channels, 00:07:02.860 --> 00:07:05.279 or they have to pay plants overtime to turn it 00:07:05.279 --> 00:07:07.379 into powder and store it in warehouses that are 00:07:07.379 --> 00:07:09.959 already completely full. And the co -op's margin 00:07:09.959 --> 00:07:12.759 gets violently squeezed. And what we know about 00:07:12.759 --> 00:07:14.920 co -ops, and I say this as someone who has sat 00:07:14.920 --> 00:07:17.319 through a lot of co -op board meetings, is that 00:07:17.319 --> 00:07:20.879 when they panic and bleed cash, they don't just 00:07:20.879 --> 00:07:24.810 eat that loss. No, they socialize it. They socialize 00:07:24.810 --> 00:07:27.050 it. They pull the levers they actually have control 00:07:27.050 --> 00:07:28.930 over on your milk check. They look at your milk 00:07:28.930 --> 00:07:30.889 check and they start making adjustments. They 00:07:30.889 --> 00:07:34.089 slash your export premiums. They cut quality 00:07:34.089 --> 00:07:36.329 incentives that you normally quit with ease. 00:07:36.990 --> 00:07:39.189 Or they implement over -based pricing penalties. 00:07:39.370 --> 00:07:42.149 Yes, exactly. Essentially punishing you for producing 00:07:42.149 --> 00:07:44.250 your normal amount of milk because they suddenly 00:07:44.250 --> 00:07:46.250 have too much milk locally. Even though nothing 00:07:46.250 --> 00:07:48.750 changed on your farm, the pipe just broke. Suddenly 00:07:48.750 --> 00:07:50.930 your basis, that difference between the board 00:07:50.930 --> 00:07:53.350 price and your mailbox price, just blows out. 00:07:53.490 --> 00:07:55.850 So the hedge did its job on the digital screen, 00:07:56.029 --> 00:07:58.370 but I still lost a small fortune because the 00:07:58.370 --> 00:08:01.920 pipe broke. I can see why producers are incredibly 00:08:01.920 --> 00:08:04.500 frustrated. You do the work, you hire the risk 00:08:04.500 --> 00:08:06.839 advisors, you pay the premiums, you lock in your 00:08:06.839 --> 00:08:09.360 margin, and you still end up short on cash to 00:08:09.360 --> 00:08:12.100 pay for silage because of a traffic dam in Ciudad 00:08:12.100 --> 00:08:14.600 Juarez. We really have to stop looking at the 00:08:14.600 --> 00:08:16.740 dairy industry purely through the lens of price 00:08:16.740 --> 00:08:19.220 and start looking at it through the lens of infrastructure. 00:08:20.000 --> 00:08:22.480 And to do that, we need to do a reality check 00:08:22.480 --> 00:08:25.500 on a very popular industry narrative. Let's talk 00:08:25.500 --> 00:08:28.439 about the anatomy of a mega blockade and contrast 00:08:28.439 --> 00:08:30.639 the boardroom narrative with the reality on the 00:08:30.639 --> 00:08:32.919 ground. I am really glad you brought this up. 00:08:33.120 --> 00:08:35.080 In the source material, there is a reference 00:08:35.080 --> 00:08:38.879 to a CoBank report from December 2024. Yeah. 00:08:38.960 --> 00:08:41.500 The title of the report was literally Mexico 00:08:41.500 --> 00:08:44.279 has become America's most reliable dairy customer. 00:08:44.440 --> 00:08:46.440 I remember that one. Yeah. And the numbers they 00:08:46.440 --> 00:08:49.480 cited to back that up are frankly massive. Mexico 00:08:49.480 --> 00:08:52.460 takes 4 .5 percent of total U .S. milk production. 00:08:52.960 --> 00:08:54.879 They account for more than one fourth of the 00:08:54.879 --> 00:08:58.629 total U .S. dairy export value. We export 1 .38 00:08:58.629 --> 00:09:01.389 billion pounds of milk solids down there. They 00:09:01.389 --> 00:09:03.330 are covering 80 % of their entire dairy deficit 00:09:03.330 --> 00:09:05.809 with our milk. On paper, if you are looking at 00:09:05.809 --> 00:09:07.710 a spreadsheet in a corporate office in Chicago 00:09:07.710 --> 00:09:10.210 or Washington, D .C., that looks like the textbook 00:09:10.210 --> 00:09:12.210 definition of reliable. It looks like an incredible 00:09:12.210 --> 00:09:14.509 success story of exports going up to the right 00:09:14.509 --> 00:09:16.970 year after year. But let's look at the physical 00:09:16.970 --> 00:09:19.169 reality just a few weeks after that report came 00:09:19.169 --> 00:09:24.129 out. November 23 and 24, 2025. The mega blockade. 00:09:24.600 --> 00:09:26.519 Okay, so the map looks great on a spreadsheet, 00:09:26.779 --> 00:09:28.759 but you were looking at the actual ground reports 00:09:28.759 --> 00:09:31.559 from last November. What actually happens when 00:09:31.559 --> 00:09:33.960 that spreadsheet collides with thousands of angry 00:09:33.960 --> 00:09:37.360 protesters? It is total paralysis. You had massive 00:09:37.360 --> 00:09:39.700 farmer and trucker groups, specifically the National 00:09:39.700 --> 00:09:41.840 Front for the Rescue of Mexican Farmland, which 00:09:41.840 --> 00:09:45.179 goes by the acronym FNRCM. You had the National 00:09:45.179 --> 00:09:48.059 Association of Carriers, known as ANTAC, and 00:09:48.059 --> 00:09:51.240 the Movimiento Agricola Campesino, or MA. They 00:09:51.240 --> 00:09:54.370 launched coordinated blockades before dawn. Let 00:09:54.370 --> 00:09:56.250 me stop you there because that is a lot of alphabet 00:09:56.250 --> 00:09:58.750 soup. Who actually are these people on the ground? 00:09:58.789 --> 00:10:00.389 Are we talking about a dozen guys with picket 00:10:00.389 --> 00:10:02.909 signs or is this a massive operation? This is 00:10:02.909 --> 00:10:05.870 a massive, highly organized operation. We are 00:10:05.870 --> 00:10:08.970 talking about... Thousands of domestic Mexican 00:10:08.970 --> 00:10:11.590 farmers, commercial truck drivers, and agricultural 00:10:11.590 --> 00:10:14.250 workers. And the scale of what they achieved 00:10:14.250 --> 00:10:16.370 was unprecedented. They didn't just stand on 00:10:16.370 --> 00:10:19.330 a sidewalk. They shut down major federal highways 00:10:19.330 --> 00:10:22.210 and physically occupied international customs 00:10:22.210 --> 00:10:25.110 facilities in at least 17 different states across 00:10:25.110 --> 00:10:28.649 Mexico. Oh, 17 states. Yes. They systematically 00:10:28.649 --> 00:10:31.289 targeted the main commercial corridors in Chihuahua, 00:10:31.350 --> 00:10:34.450 Sinaloa, Zacatecas, and the arterial routes radiating 00:10:34.450 --> 00:10:37.049 out of Mexico City. I remember reading the FreightWaves 00:10:37.049 --> 00:10:39.509 report about the Ciudad Juarez to El Paso crossing, 00:10:39.710 --> 00:10:42.090 which is Mexico's busiest commercial border zone. 00:10:42.470 --> 00:10:45.850 They reported there were 38 ,000 trucks stranded. 00:10:46.049 --> 00:10:48.090 I want everyone listening to just try and picture 00:10:48.090 --> 00:10:51.009 that. 38 ,000 commercial trucks. That isn't a 00:10:51.009 --> 00:10:53.490 traffic jam. That is a newly formed city of stranded 00:10:53.490 --> 00:10:56.210 metal. Just idling in the heat. Yes. You have 00:10:56.210 --> 00:10:58.870 drivers sitting in the cab of their truck in 00:10:58.870 --> 00:11:02.750 the desert sun. Behind them is a tanker full 00:11:02.750 --> 00:11:05.980 of highly perishable fluid milk. Or a reefer 00:11:05.980 --> 00:11:09.279 full of fresh cheese. They can't go forward because 00:11:09.279 --> 00:11:11.419 there are literal tractors chained together on 00:11:11.419 --> 00:11:13.559 the bridge. And they can't go backward because 00:11:13.559 --> 00:11:16.019 there are 10 ,000 trucks behind them. That milk 00:11:16.019 --> 00:11:19.539 is literally ticking like a clock. And that ticking 00:11:19.539 --> 00:11:21.860 clock translates to instant financial bleeding. 00:11:22.639 --> 00:11:24.899 The source material calculates that the industry 00:11:24.899 --> 00:11:29.679 losses hit $25 .8 million per hour. Maquiladora 00:11:29.679 --> 00:11:32.000 plants across the border. These are the massive 00:11:32.000 --> 00:11:34.000 manufacturing hubs that build everything from 00:11:34.000 --> 00:11:36.779 car parts to electronics. They went into technical 00:11:36.779 --> 00:11:38.899 stoppages because they simply didn't have parts 00:11:38.899 --> 00:11:40.940 arriving. They just sent people home. Yeah. 30 00:11:40.940 --> 00:11:43.220 ,000 manufacturing workers were sent home to 00:11:43.220 --> 00:11:45.960 sit idle. But here is the critical data point 00:11:45.960 --> 00:11:47.779 for the dairy farmer listening to this right 00:11:47.779 --> 00:11:50.909 now. Dairy was the very first product to run 00:11:50.909 --> 00:11:53.129 short in Mexico. I was reading through the notes 00:11:53.129 --> 00:11:55.169 here and it mentioned something about local businesses 00:11:55.169 --> 00:11:58.049 in Juarez hitting a wall instantly. How fast 00:11:58.049 --> 00:12:00.309 did things actually shut down there for the grocery 00:12:00.309 --> 00:12:02.690 stores and distributors? Almost immediately. 00:12:03.230 --> 00:12:06.389 Ivan Perez Ruiz, the president of the Juarez 00:12:06.389 --> 00:12:08.970 Chamber of Commerce, actually went on the record 00:12:08.970 --> 00:12:11.070 and stated that the blockades nearly resulted 00:12:11.070 --> 00:12:14.179 in a complete shortage of dairy products. Milk 00:12:14.179 --> 00:12:16.320 and cheese were the most impacted goods in the 00:12:16.320 --> 00:12:18.120 entire supply chain. More than anything else. 00:12:18.360 --> 00:12:20.720 More than anything else. Maria Teresa Delgado 00:12:20.720 --> 00:12:23.639 Zarate from Index Juarez estimated the daily 00:12:23.639 --> 00:12:27.539 export losses at $250 million across all sectors. 00:12:28.240 --> 00:12:30.940 Manuel Sotelo Suarez, who represents the trucking 00:12:30.940 --> 00:12:33.580 sector, warned the city was very close to running 00:12:33.580 --> 00:12:36.360 out of basic supplies entirely. You really have 00:12:36.360 --> 00:12:38.220 to understand the physical nature of what we 00:12:38.220 --> 00:12:41.259 produce. You can park a truck full of steel auto 00:12:41.259 --> 00:12:43.399 parts in the desert for a week. The steel doesn't 00:12:43.399 --> 00:12:45.759 care. It is fine. You cannot park a tank or a 00:12:45.759 --> 00:12:47.799 fluid milk in the desert for a week. The entire 00:12:47.799 --> 00:12:50.559 dairy export model relies on high -velocity transit. 00:12:50.840 --> 00:12:52.899 If the wheels stop turning, the product dies. 00:12:53.879 --> 00:12:55.779 As an impartial deep dive, we need to look at 00:12:55.779 --> 00:12:57.940 the root causes of this without taking sides. 00:12:58.200 --> 00:13:01.159 Because understanding the why is crucial to understanding 00:13:01.159 --> 00:13:04.519 the actual ongoing risk to your farm. This isn't 00:13:04.519 --> 00:13:07.240 just random vandalism. The Mexican groups organizing 00:13:07.240 --> 00:13:10.519 these blockades are protesting over real, potent, 00:13:10.700 --> 00:13:13.570 deeply felt issues in their country. they have 00:13:13.570 --> 00:13:15.409 legitimate grievances from their perspective. 00:13:15.450 --> 00:13:18.110 Right, exactly. They are demanding higher basic 00:13:18.110 --> 00:13:20.850 grain prices for their domestic growers. They 00:13:20.850 --> 00:13:23.909 are actively opposing changes to Mexico's general 00:13:23.909 --> 00:13:26.110 water law, which affects their irrigation rights. 00:13:26.389 --> 00:13:29.409 They are marching for what they term food sovereignty, 00:13:29.610 --> 00:13:31.909 essentially arguing that Mexico shouldn't be 00:13:31.909 --> 00:13:35.110 so heavily reliant on U .S. imports for its basic 00:13:35.110 --> 00:13:38.230 caloric needs. Right. And in October 2025, the 00:13:38.230 --> 00:13:41.309 leader of FNRCM publicly alleged that the Chicago 00:13:41.309 --> 00:13:43.870 Mercantile Exchange and transnational grain companies 00:13:43.870 --> 00:13:46.570 were actively manipulating markets to hurt the 00:13:46.570 --> 00:13:48.870 Mexican farmer. Exactly. Now, as the source notes, 00:13:48.970 --> 00:13:51.129 there wasn't specific evidence provided to support 00:13:51.129 --> 00:13:53.549 that claim of direct market manipulation by the 00:13:53.549 --> 00:13:56.450 CME. But frankly, the empirical validity of their 00:13:56.450 --> 00:13:58.870 political claim almost doesn't matter to your 00:13:58.870 --> 00:14:00.669 milk check. What do you mean it doesn't matter? 00:14:00.769 --> 00:14:03.049 If they're protesting over something that isn't 00:14:03.049 --> 00:14:05.370 technically true, shouldn't the government just 00:14:05.370 --> 00:14:08.139 clear them out? Whether you or I agree with their 00:14:08.139 --> 00:14:10.500 politics or whether their economic theory holds 00:14:10.500 --> 00:14:13.179 water is completely irrelevant to the flow of 00:14:13.179 --> 00:14:15.919 milk. What matters is that these grievances are 00:14:15.919 --> 00:14:18.879 potent enough to mobilize tens of thousands of 00:14:18.879 --> 00:14:21.720 people to park heavy machinery on international 00:14:21.720 --> 00:14:25.320 bridges. These are real visceral political forces 00:14:25.320 --> 00:14:28.840 capable of completely paralyzing North American 00:14:28.840 --> 00:14:31.659 infrastructure. They have learned that the border 00:14:31.659 --> 00:14:33.639 choke points are their most effective leverage. 00:14:34.269 --> 00:14:36.669 They are using your milk trucks as a deliberate 00:14:36.669 --> 00:14:39.690 negotiating tool against their own government. 00:14:40.269 --> 00:14:43.009 Which brings us to the absolute most painful 00:14:43.009 --> 00:14:45.710 part of this deep dive, the actual barn math. 00:14:46.250 --> 00:14:48.169 We need to follow the money from that paralyzed 00:14:48.169 --> 00:14:50.509 bridge in Juarez straight back to the farm's 00:14:50.509 --> 00:14:52.350 cash flow, because this is where the theoretical 00:14:52.350 --> 00:14:55.149 talk of basis risk turns into the physical reality 00:14:55.149 --> 00:14:57.669 of missing a payment to the feed mill. Let's 00:14:57.669 --> 00:14:59.629 do some simple barn math. I want to look at the 00:14:59.629 --> 00:15:01.549 baseline economics we are dealing with right 00:15:01.549 --> 00:15:04.139 now. Let's lay out the baseline. According to 00:15:04.139 --> 00:15:07.039 dairy economist Bill Brooks of Stoneheart, consulting 00:15:07.039 --> 00:15:10.720 the estimated 2026 income over feed cost, what 00:15:10.720 --> 00:15:14.480 we call the IOFC, is sitting at just $10 .14 00:15:14.480 --> 00:15:17.440 per hundredweight. According to the Dairy Star, 00:15:17.559 --> 00:15:20.940 that is down $2 .30 from 2025. So right out of 00:15:20.940 --> 00:15:23.440 the gate, before a single protester even thinks 00:15:23.440 --> 00:15:26.179 about walking onto a bridge, the margin cushion 00:15:26.179 --> 00:15:29.659 on the farm is already incredibly thin. $10 .14 00:15:29.659 --> 00:15:32.220 over feed costs does not leave a lot of room 00:15:32.220 --> 00:15:34.940 for error when you factor in labor, fuel, equipment 00:15:34.940 --> 00:15:37.419 repairs, and debt service. It is razor thin. 00:15:37.600 --> 00:15:40.580 And then you add in that $1 .30 per hundredweight 00:15:40.580 --> 00:15:42.860 national gap between the all -milk price and 00:15:42.860 --> 00:15:44.940 actual farmer receipts that we discussed earlier, 00:15:45.159 --> 00:15:48.080 which FarmShine's Sherry Bunting documented extensively. 00:15:48.460 --> 00:15:50.679 Let's pause on that gap. You mentioned de -pooling 00:15:50.679 --> 00:15:52.519 in component math earlier when we were talking 00:15:52.519 --> 00:15:55.059 about co -op deductions. That jargon gets thrown 00:15:55.059 --> 00:15:57.139 around at co -op meetings all the time, and half 00:15:57.139 --> 00:15:59.820 the room falls asleep. Explain mechanically how 00:15:59.820 --> 00:16:02.340 things like de -pooling widen that gap even before 00:16:02.340 --> 00:16:05.080 a crisis hits. De -pooling happens when a milk 00:16:05.080 --> 00:16:08.220 handler or a co -op decides to pull their milk 00:16:08.220 --> 00:16:10.340 out of the federal milk marketing order pool 00:16:10.340 --> 00:16:13.200 because the advanced prices of classy fluid milk 00:16:13.200 --> 00:16:15.840 or class 2 are actually lower than the manufacturing 00:16:15.840 --> 00:16:18.740 classes like class 3 cheese. They keep that extra 00:16:18.740 --> 00:16:21.000 value for themselves rather than sharing it with 00:16:21.000 --> 00:16:22.700 the whole pool. Right, they protect their own 00:16:22.700 --> 00:16:25.799 bottom line. Yes, they protect the house. Component 00:16:25.799 --> 00:16:28.480 math gets tricky because if they are forced to 00:16:28.480 --> 00:16:30.799 dump milk or downgrade it from a high -value 00:16:30.799 --> 00:16:34.019 cheese class to a low -value powder class, the 00:16:34.019 --> 00:16:37.220 value of your butterfat and protein gets diluted 00:16:37.220 --> 00:16:40.419 in their internal accounting. So that $1 .30 00:16:40.419 --> 00:16:43.840 gap is already eating into your $10 .14 margin. 00:16:44.600 --> 00:16:46.820 But when a blockade hits, that gap blows out 00:16:46.820 --> 00:16:48.960 even further because the co -op suddenly has 00:16:48.960 --> 00:16:51.240 millions of dollars in unexpected logistical 00:16:51.240 --> 00:16:53.240 losses they have to cover. Let's slow this down 00:16:53.240 --> 00:16:55.779 and walk through the exact math of a 30 -day 00:16:55.779 --> 00:16:58.600 blockade backlog. I want everyone listening to 00:16:58.600 --> 00:17:01.000 picture their own bulk tank right now and apply 00:17:01.000 --> 00:17:03.100 these numbers to their operation. All right. 00:17:03.159 --> 00:17:05.359 Let's say your co -op's effective pay price ends 00:17:05.359 --> 00:17:07.400 up running 40 cents per hundred weight below 00:17:07.400 --> 00:17:10.380 what your hedge implied for 30 days. They justify 00:17:10.380 --> 00:17:12.970 this because they had to reroute milk. dump product 00:17:12.970 --> 00:17:15.410 into lower classes, and eat massive freight penalties. 00:17:15.849 --> 00:17:18.289 40 cents doesn't sound like a catastrophic number 00:17:18.289 --> 00:17:20.369 on paper to someone outside the industry. It 00:17:20.369 --> 00:17:22.450 doesn't, until you scale it up to the size of 00:17:22.450 --> 00:17:24.990 a modern dairy. If you are running a 700 -cow 00:17:24.990 --> 00:17:28.170 herd and you are shipping roughly 560 hundredweight 00:17:28.170 --> 00:17:31.470 a day, that 40 -cent hit over 30 days translates 00:17:31.470 --> 00:17:36.089 to a $6 ,720 loss. Just vanish from your check. 00:17:36.380 --> 00:17:38.539 And if you are running a 1 ,200 -cow herd... 00:17:38.539 --> 00:17:40.400 If you are running a 1 ,200 -cow herd shipping 00:17:40.400 --> 00:17:43.339 960 hundredweight a day, that exact same 40 -cent 00:17:43.339 --> 00:17:47.420 scenario costs you $11 ,520. And if you have 00:17:47.420 --> 00:17:50.059 a 2 ,400 -cow dairy, you are looking at a $23 00:17:50.059 --> 00:17:52.960 ,000 surprise deduction over a single month. 00:17:53.160 --> 00:17:56.039 With an income over feed cost already incredibly 00:17:56.039 --> 00:18:01.720 tight at $10 .14, an $11 ,000 or $23 ,000 surprise 00:18:01.720 --> 00:18:05.740 hit isn't just a minor annoyance. That is a tractor 00:18:05.740 --> 00:18:08.460 payment gone because of a traffic jam a thousand 00:18:08.460 --> 00:18:11.299 miles away. It is the difference between making 00:18:11.299 --> 00:18:14.529 payroll comfortably and scrambling. It's the 00:18:14.529 --> 00:18:16.630 difference between paying the feed mill on time 00:18:16.630 --> 00:18:19.450 to keep your discounts and having a very uncomfortable, 00:18:19.670 --> 00:18:22.329 sweaty conversation with your agricultural lender. 00:18:22.509 --> 00:18:24.769 Absolutely. And to me, the most insidious part 00:18:24.769 --> 00:18:27.049 is how the co -op actually pulls that money out 00:18:27.049 --> 00:18:29.049 of your account. They don't send you a transparent 00:18:29.049 --> 00:18:31.230 line item on your statement that says Juarez 00:18:31.230 --> 00:18:32.990 blockade penalty deductible. No, the extraction 00:18:32.990 --> 00:18:35.069 is completely opaque. You just look at your check 00:18:35.069 --> 00:18:37.410 and notice the export premiums you usually rely 00:18:37.410 --> 00:18:39.730 on are suddenly gone. The quality incentives 00:18:39.730 --> 00:18:41.670 you usually hit because you have great somatic 00:18:41.670 --> 00:18:43.680 sell counts are suddenly Structure differently 00:18:43.680 --> 00:18:46.140 or reduce. They move the goalposts. They absolutely 00:18:46.140 --> 00:18:49.180 move the goalposts. They might invoke a harsh 00:18:49.180 --> 00:18:51.980 overbase pricing penalty telling you that anything 00:18:51.980 --> 00:18:54.359 you produced over your historical average is 00:18:54.359 --> 00:18:56.599 going to be paid at an abysmal salvage rate. 00:18:56.720 --> 00:18:59.440 They use the complex pricing levers already built 00:18:59.440 --> 00:19:01.819 into your existing contract to socialize the 00:19:01.819 --> 00:19:05.039 pain of the closed pipe. Okay, so let's dig into 00:19:05.039 --> 00:19:07.299 the physical logistics of that pain. I want to 00:19:07.299 --> 00:19:09.200 talk about what actually happens to the physical 00:19:09.200 --> 00:19:11.480 milk when the bridge closes. Because this... 00:19:11.769 --> 00:19:15.349 case study in logistics really exposes why the 00:19:15.349 --> 00:19:18.710 co -ops bleed so much cash so quickly. When Juarez 00:19:18.710 --> 00:19:20.849 shuts down the processing plants in the U .S., 00:19:20.849 --> 00:19:23.829 don't just stop receiving milk from the farm. 00:19:23.950 --> 00:19:26.529 The cows keep milking. You can't turn a Holstein 00:19:26.529 --> 00:19:28.950 off like a faucet. So what does the plant actually 00:19:28.950 --> 00:19:31.440 do with the milk? The plants go into immediate 00:19:31.440 --> 00:19:33.640 scramble mode. They have incoming milk from the 00:19:33.640 --> 00:19:35.799 farms and they have outgoing product that suddenly 00:19:35.799 --> 00:19:38.420 has nowhere to go. Their first instinct is to 00:19:38.420 --> 00:19:40.940 try to reroute the loads hundreds of miles out 00:19:40.940 --> 00:19:42.880 of the way to cross at different ports of entry 00:19:42.880 --> 00:19:46.180 like Nogales in Arizona or Nuevo Laredo in Texas. 00:19:46.400 --> 00:19:48.200 But I'm guessing they aren't the only ones with 00:19:48.200 --> 00:19:50.980 that brilliant idea, right? Exactly. Every single 00:19:50.980 --> 00:19:54.000 industry, auto parts, electronics, produce, they 00:19:54.000 --> 00:19:56.559 are all trying to reroute through those exact 00:19:56.559 --> 00:19:59.220 same secondary ports. So those ports instantly 00:19:59.220 --> 00:20:01.859 get jammed up too. The infrastructure simply 00:20:01.859 --> 00:20:04.700 cannot handle the diverted volume. If the milk 00:20:04.700 --> 00:20:07.019 can't cross anywhere, that highly perishable 00:20:07.019 --> 00:20:09.839 product... has to be shoved into lower -valued 00:20:09.839 --> 00:20:12.000 domestic channels. So they fire up the dryers. 00:20:12.119 --> 00:20:14.440 Yeah, they might have to run the dryers at maximum 00:20:14.440 --> 00:20:16.779 capacity, paying triple overtime to the staff 00:20:16.779 --> 00:20:20.019 just to turn fluid milk into milk powder so they 00:20:20.019 --> 00:20:22.440 can safely store it. And they do this hoping 00:20:22.440 --> 00:20:24.539 that the buyers in Mexico will wait out the strike 00:20:24.539 --> 00:20:27.359 and buy it later. All of this adds massive freight 00:20:27.359 --> 00:20:30.119 costs, emergency processing costs, and immense 00:20:30.119 --> 00:20:33.039 inventory holding costs. And the friction doesn't 00:20:33.039 --> 00:20:35.299 magically end the minute the protesters go home, 00:20:35.359 --> 00:20:37.140 does it? The source material points out that 00:20:37.140 --> 00:20:39.119 even after a blockade was called, the bleeding 00:20:39.119 --> 00:20:42.079 continues. Far from it. The source notes that 00:20:42.079 --> 00:20:45.519 even after a truce was called, like the one Mexico's 00:20:45.519 --> 00:20:48.220 Interior Minister Rosa Isila Rodriguez managed 00:20:48.220 --> 00:20:51.259 to negotiate on November 27, shippers were told 00:20:51.259 --> 00:20:53.880 to expect 10 or more days of severe delays just 00:20:53.880 --> 00:20:56.839 to clear the physical backlog. It takes weeks 00:20:56.839 --> 00:20:59.839 to unspool a logistical knot of 38 ,000 trucks. 00:21:00.319 --> 00:21:02.220 And we absolutely cannot ignore the physical 00:21:02.220 --> 00:21:05.240 danger of rerouting this product. This isn't 00:21:05.240 --> 00:21:07.480 just about drawing a new line on a map. You are 00:21:07.480 --> 00:21:10.579 sending truckers on massive detours through areas 00:21:10.579 --> 00:21:12.980 with severe life -threatening security risks. 00:21:13.200 --> 00:21:16.200 The security aspect is terrifying. The source 00:21:16.200 --> 00:21:18.339 cites a report from El Pais stating there are 00:21:18.339 --> 00:21:21.559 8 ,000 cargo robberies per year in Mexico. That 00:21:21.559 --> 00:21:24.180 averages out to 21 a day, and over 80 % of those 00:21:24.180 --> 00:21:27.140 involve violence against the driver. ANTAC, the 00:21:27.140 --> 00:21:29.619 Carriers Association we mentioned earlier, claims 00:21:29.619 --> 00:21:31.359 the real number is actually somewhere between 00:21:31.359 --> 00:21:34.559 54 to 70 major thefts daily because so many of 00:21:34.559 --> 00:21:36.380 them go entirely unreported to corrupt local 00:21:36.380 --> 00:21:38.660 authorities. So the official stats are just the 00:21:38.660 --> 00:21:41.339 tip of the iceberg. Exactly. CONCAMIN, the Industrial 00:21:41.339 --> 00:21:43.599 Chambers Confederation, estimates cargo theft 00:21:43.599 --> 00:21:46.079 costs the Mexican economy around 15 million pesos 00:21:46.079 --> 00:21:48.319 per day. So put yourself in the shoes of that 00:21:48.319 --> 00:21:51.519 logistics manager at the co -op. trying to reroute 00:21:51.519 --> 00:21:54.279 a highly perishable, highly valuable product 00:21:54.279 --> 00:21:57.000 through rural territories with some of the highest 00:21:57.000 --> 00:21:59.579 cargo theft rates in the world on roads that 00:21:59.579 --> 00:22:01.579 weren't designed for this kind of volume, driven 00:22:01.579 --> 00:22:04.099 by drivers who know they are targets. It is an 00:22:04.099 --> 00:22:06.799 absolute logistical nightmare. And every single 00:22:06.799 --> 00:22:09.319 ounce of that inefficiency, every security surcharge, 00:22:09.339 --> 00:22:11.779 every lost load ultimately gets deducted from 00:22:11.779 --> 00:22:14.160 your milk check. Which brings us to the collision 00:22:14.160 --> 00:22:16.099 course we are on right now. We mentioned at the 00:22:16.099 --> 00:22:18.420 very top of this deep dive that today is March 00:22:18.420 --> 00:22:22.259 6, 2026. Two weeks from now on March 20, FNRCM 00:22:22.259 --> 00:22:24.980 and ANTAC have called a massive national mobilization. 00:22:25.259 --> 00:22:27.920 This was widely reported by UNO TV and confirmed 00:22:27.920 --> 00:22:31.259 by MexicoBusiness .News. Additionally, the CNTE 00:22:31.259 --> 00:22:33.980 Teachers Union is striking from March 18 to March 00:22:33.980 --> 00:22:36.240 20. It is a coordinated effort. It is a planned 00:22:36.240 --> 00:22:38.480 action. It's a scheduled, heavily publicized 00:22:38.480 --> 00:22:41.420 event, and it is entirely tied to the looming 00:22:41.420 --> 00:22:45.349 July 1st, 2026 USMCA joint review. This is a 00:22:45.349 --> 00:22:47.930 huge pivot point for the industry. This is where 00:22:47.930 --> 00:22:50.569 the border transitions from being just a logistical 00:22:50.569 --> 00:22:53.029 checkpoint where you show your paperwork to a 00:22:53.029 --> 00:22:55.869 strategic geopolitical choke point. Break down 00:22:55.869 --> 00:22:58.190 this USMCA review for us neutrally. What are 00:22:58.190 --> 00:23:00.170 the two sides actually fighting for here? Under 00:23:00.170 --> 00:23:03.789 Article 34 .7 of the United States -Mexico -Canada 00:23:03.789 --> 00:23:06.849 Agreement, the pact has to undergo a formal joint 00:23:06.849 --> 00:23:10.069 review this July. And we have two incredibly 00:23:10.069 --> 00:23:13.329 powerful, totally opposing forces colliding head 00:23:13.329 --> 00:23:15.789 on. On one side, you have the U .S. agricultural 00:23:15.789 --> 00:23:19.509 lobby. More than 120 U .S. agricultural groups, 00:23:19.670 --> 00:23:22.329 including massive players like the National Milk 00:23:22.329 --> 00:23:24.390 Producers Federation and the U .S. Dairy Export 00:23:24.390 --> 00:23:27.200 Council, have drawn a line in the sand. And what 00:23:27.200 --> 00:23:29.440 are they asking for? They want the USMCA extended 00:23:29.440 --> 00:23:31.460 with minimal structural changes, but they are 00:23:31.460 --> 00:23:33.680 demanding strict enforcement of market access 00:23:33.680 --> 00:23:35.539 commitment. Because they have billions of dollars 00:23:35.539 --> 00:23:37.140 riding on those commitments, right? Exactly. 00:23:37.559 --> 00:23:40.000 They are desperately trying to protect the $8 00:23:40.000 --> 00:23:43.579 billion in new dairy processing capacity that 00:23:43.579 --> 00:23:46.539 is currently coming online across the US. That 00:23:46.539 --> 00:23:49.259 massive expansion in processing was built almost 00:23:49.259 --> 00:23:51.640 entirely on the assumption that those exports 00:23:51.640 --> 00:23:54.539 to Mexico would continue to flow unimpeded. And 00:23:54.539 --> 00:23:56.890 on the other side of the table. What do the Mexican 00:23:56.890 --> 00:23:59.690 farm movement actually want out of this July 00:23:59.690 --> 00:24:03.049 1 review? Neutrally speaking, the Mexican farm 00:24:03.049 --> 00:24:05.390 movements led by groups like Mexico Solidarity 00:24:05.390 --> 00:24:08.410 are treating this as an existential fight. They 00:24:08.410 --> 00:24:10.950 are calling this upcoming protest a mobilization 00:24:10.950 --> 00:24:13.890 for food sovereignty and agricultural transformation. 00:24:14.410 --> 00:24:17.150 They are explicitly demanding that basic grains 00:24:17.150 --> 00:24:19.269 and essential agricultural products be removed 00:24:19.269 --> 00:24:21.750 from the USMCA entirely. They want to protect 00:24:21.750 --> 00:24:23.490 their own farmers. Right. They want the right 00:24:23.490 --> 00:24:25.630 to protect their domestic markets with tariffs 00:24:25.630 --> 00:24:28.450 and quotas that the USMCA currently forbids. 00:24:28.569 --> 00:24:31.210 They are treating the July 1 review as a critical 00:24:31.210 --> 00:24:33.589 pressure point, and they have realized that parking 00:24:33.589 --> 00:24:35.930 trucks on the international bridges is the absolute 00:24:35.930 --> 00:24:38.369 most effective leverage they have to force their 00:24:38.369 --> 00:24:40.769 government's hand. So these blockades are no 00:24:40.769 --> 00:24:43.269 longer a one -off tantrum over a local water 00:24:43.269 --> 00:24:46.490 dispute. They are a deliberate scheduled negotiating 00:24:46.490 --> 00:24:50.390 tool being used on a continental scale, which 00:24:50.390 --> 00:24:53.089 leads to a really contrarian take that I think 00:24:53.089 --> 00:24:55.589 we need to discuss because it goes against everything 00:24:55.589 --> 00:24:58.190 I have heard at every Gary conference for the 00:24:58.190 --> 00:25:00.430 last decade. I know exactly where you were going 00:25:00.430 --> 00:25:02.859 with this. In the dairy industry, we have been 00:25:02.859 --> 00:25:06.279 fed this relentless narrative for 10 years that 00:25:06.279 --> 00:25:08.779 exports going up and to the right is inherently 00:25:08.779 --> 00:25:11.500 and purely good for the farmer. Co -op executives 00:25:11.500 --> 00:25:14.160 brag about their export volumes at every single 00:25:14.160 --> 00:25:16.480 annual member meeting. They show the bar charts, 00:25:16.680 --> 00:25:18.579 everyone claps, and they say they are feeding 00:25:18.579 --> 00:25:20.660 the world. Right, it's the ultimate feel -good 00:25:20.660 --> 00:25:22.680 slide in the PowerPoint presentation. Exactly. 00:25:22.720 --> 00:25:25.519 But we need to stop blindly blaming the market 00:25:25.519 --> 00:25:27.759 for our margin compression and start seriously 00:25:27.759 --> 00:25:31.069 questioning the pipe? Yes. The contrarian view 00:25:31.069 --> 00:25:34.789 here is that extreme reliance on one single massive 00:25:34.789 --> 00:25:38.250 buyer is a massive, totally unpriced vulnerability. 00:25:39.009 --> 00:25:42.009 We established that Mexico covers 80 % of its 00:25:42.009 --> 00:25:44.910 massive dairy deficit with U .S. milk, and almost 00:25:44.910 --> 00:25:47.170 all of that physical volume is concentrated through 00:25:47.170 --> 00:25:50.170 just a handful of bridges, far Laredo, Juarez, 00:25:50.269 --> 00:25:52.970 and Nogales. If a co -op boasts about Mexican 00:25:52.970 --> 00:25:56.049 export dominance but has absolutely zero contingency 00:25:56.049 --> 00:25:58.789 plan for when those specific bridges close, if 00:25:58.789 --> 00:26:01.069 their only plan is to dump milk and socialize 00:26:01.069 --> 00:26:02.950 the loss, they aren't just being optimistic, 00:26:03.089 --> 00:26:05.549 they are being negligent. They are passing existential 00:26:05.549 --> 00:26:08.430 basis risk directly to you, the producer, without 00:26:08.430 --> 00:26:10.750 compensating you for taking on that risk. It 00:26:10.750 --> 00:26:12.750 feels like the entire industry has been completely 00:26:12.750 --> 00:26:15.250 blinded by demand. We see the consumption numbers 00:26:15.250 --> 00:26:16.990 in Mexico going up, the middle class growing, 00:26:17.170 --> 00:26:19.849 more pizza being eaten, and we completely ignore 00:26:19.849 --> 00:26:22.049 the extreme fragility of the physical supply 00:26:22.049 --> 00:26:24.589 chain required to fulfill that demand. I hedge 00:26:24.589 --> 00:26:26.569 my milk prices on the CME because I know the 00:26:26.569 --> 00:26:29.190 market is volatile. But by signing with a heavily 00:26:29.190 --> 00:26:31.150 export -dependent co -op, I am leaving my farm 00:26:31.150 --> 00:26:32.950 completely exposed to the physical volatility 00:26:32.950 --> 00:26:35.410 of four concrete bridges over the Rio Grande. 00:26:35.630 --> 00:26:38.150 That is the exact paradox. You lock the front 00:26:38.150 --> 00:26:40.390 door of your farm with a price hedge, but you 00:26:40.390 --> 00:26:43.390 leave the back door wide open to supply chain 00:26:43.390 --> 00:26:46.230 chaos. All right, so let's get incredibly practical 00:26:46.230 --> 00:26:49.319 here. A dairy farmer is listening to this. They 00:26:49.319 --> 00:26:50.779 just finished their morning milking, they are 00:26:50.779 --> 00:26:53.200 driving the pickup to the feed store, and their 00:26:53.200 --> 00:26:56.519 head is absolutely spinning with basis gaps, 00:26:56.839 --> 00:26:59.240 geopolitical blockades, and high beta corridors. 00:26:59.839 --> 00:27:02.039 What are the specific actionable things they 00:27:02.039 --> 00:27:04.220 need to remember and act on from today's deep 00:27:04.220 --> 00:27:07.140 dive? The source material lays out four clear 00:27:07.140 --> 00:27:09.420 paths for the farm broken down into immediate, 00:27:09.680 --> 00:27:12.539 medium -term, and long -term positioning. Let's 00:27:12.539 --> 00:27:14.500 start with path one, the 30 -day stress test. 00:27:14.680 --> 00:27:16.160 I need you to explain this so I can go do it 00:27:16.160 --> 00:27:18.440 this afternoon. Path 1 is an immediate action. 00:27:18.619 --> 00:27:20.640 Within the next 30 days, honestly do it this 00:27:20.640 --> 00:27:23.059 week before the March 20 protests hit, you need 00:27:23.059 --> 00:27:24.700 to sit down at the kitchen table and pull your 00:27:24.700 --> 00:27:27.420 last 12 months of actual milk checks. Calculate 00:27:27.420 --> 00:27:30.019 your exact average daily 100 -weight shift. Then 00:27:30.019 --> 00:27:32.339 run a brutal stress test. Model what happens 00:27:32.339 --> 00:27:34.279 to your cash flow if your mailbox price comes 00:27:34.279 --> 00:27:36.420 in 30 cents worse and then 50 cents worse than 00:27:36.420 --> 00:27:39.059 your hedge implied for 30 consecutive days. So 00:27:39.059 --> 00:27:41.500 translate those cents per hundredweight into 00:27:41.500 --> 00:27:43.940 hard dollar numbers for my specific herd size, 00:27:44.180 --> 00:27:46.079 just like we did with the barn math earlier. 00:27:46.359 --> 00:27:48.539 Exactly. You need to know your number. Once you 00:27:48.539 --> 00:27:50.420 have that hard dollar number, look at your upcoming 00:27:50.420 --> 00:27:54.579 cash flow plan. If a $15 ,000 or $20 ,000 sudden 00:27:54.579 --> 00:27:57.539 unexplained drop breaks your debt covenants or 00:27:57.539 --> 00:28:00.109 means you can't pay the feed mill, you need to 00:28:00.109 --> 00:28:02.029 book a meeting with your agricultural lender 00:28:02.029 --> 00:28:04.250 immediately. Don't wait for the surprise. Do 00:28:04.250 --> 00:28:06.490 not wait for the milk check to bounce in April. 00:28:06.650 --> 00:28:08.569 You walk into the bank this week and say, look, 00:28:08.670 --> 00:28:10.630 here is what these Mexican border scenarios look 00:28:10.630 --> 00:28:13.410 like for our cash flow. If this pipeline breaks 00:28:13.410 --> 00:28:16.839 and my co -op passes the cost to me. What do 00:28:16.839 --> 00:28:19.640 you need to see from us to bridge the gap? Proactive 00:28:19.640 --> 00:28:22.440 conversations beat reactive canic every single 00:28:22.440 --> 00:28:24.480 time. I love that. Control what you can control. 00:28:24.700 --> 00:28:27.079 What is path two? This looks like a medium -term 00:28:27.079 --> 00:28:30.019 strategy regarding the co -op. Path two is push 00:28:30.019 --> 00:28:33.240 for a written co -op playbook. If you are committed 00:28:33.240 --> 00:28:35.140 to your co -op and you want to stay with them, 00:28:35.279 --> 00:28:38.519 you need to demand aggressive transparency. At 00:28:38.519 --> 00:28:40.839 the very next member meeting or even in a direct 00:28:40.839 --> 00:28:43.400 email to your field rep today, you need to ask 00:28:43.400 --> 00:28:46.390 for an exposure map. Ask them point blank what 00:28:46.390 --> 00:28:49.049 exact percentage of our total solids go to Mexico. 00:28:49.430 --> 00:28:51.289 And more importantly, what percentage of our 00:28:51.289 --> 00:28:53.329 milk moves specifically through the vulnerable 00:28:53.329 --> 00:28:56.490 bridges at Pharr, Laredo, Juarez, or Nogales. 00:28:56.730 --> 00:28:58.829 And if the co -op executives or the field reps 00:28:58.829 --> 00:29:01.450 can't even ballpark which bridges carry your 00:29:01.450 --> 00:29:03.549 milk. If they don't know the physical route of 00:29:03.549 --> 00:29:05.789 their own product that is a massive red flag 00:29:05.789 --> 00:29:08.210 regarding their risk management, you also need 00:29:08.210 --> 00:29:10.069 to ask them to state on the record their exact 00:29:10.069 --> 00:29:12.670 order of operations for cutting premiums if a 00:29:12.670 --> 00:29:15.279 border freezes. You want to know which plants 00:29:15.279 --> 00:29:18.160 pull back intake first. In what specific order 00:29:18.160 --> 00:29:20.460 do they adjust quality incentives and over -based 00:29:20.460 --> 00:29:22.900 pricing? You need to know exactly how they plan 00:29:22.900 --> 00:29:25.000 to socialize the loss before the loss occurs 00:29:25.000 --> 00:29:27.119 so you can plan your own finances accordingly. 00:29:27.500 --> 00:29:29.559 That brings us to path three, which is another 00:29:29.559 --> 00:29:31.980 medium -term move. Align your risk advisors. 00:29:32.599 --> 00:29:34.759 I talk to my broker all the time about where 00:29:34.759 --> 00:29:37.299 the market is going. How do I need to change 00:29:37.299 --> 00:29:40.099 that conversation? You need to force your brokers 00:29:40.099 --> 00:29:42.079 and advisors to look past the digital screen. 00:29:42.559 --> 00:29:45.019 Ensure they are discussing basis moves when pipelines 00:29:45.019 --> 00:29:48.400 jam, not just CME price fluctuations. Your hedge 00:29:48.400 --> 00:29:50.799 strategy might actually need a new internal trigger. 00:29:51.019 --> 00:29:53.460 If the gap between your hedge implied price and 00:29:53.460 --> 00:29:56.039 your actual mailbox check widens beyond 30 or 00:29:56.039 --> 00:29:58.839 50 cents for two consecutive pay periods, that 00:29:58.839 --> 00:30:01.059 should be a massive red flag. A signal the pipe 00:30:01.059 --> 00:30:03.480 is broken. Yes. Your advisor should be helping 00:30:03.480 --> 00:30:06.119 you track that basis drift so you know when it's 00:30:06.119 --> 00:30:08.599 time to start asking your co -op those hard questions 00:30:08.599 --> 00:30:10.779 about pipeline issues. That makes perfect sense. 00:30:10.980 --> 00:30:12.980 The broker shouldn't just sell me a policy and 00:30:12.980 --> 00:30:15.079 walk away. They need to monitor the physical 00:30:15.079 --> 00:30:18.079 efficiency of my milk check. Finally, path four 00:30:18.079 --> 00:30:20.900 is long -term positioning. Treat Mexico as a 00:30:20.900 --> 00:30:23.460 high beta outlet. We define high beta earlier 00:30:23.460 --> 00:30:26.259 as highly volatile and prone to sudden swings. 00:30:26.559 --> 00:30:28.619 How do I apply that to my long -term business 00:30:28.619 --> 00:30:31.819 plan? Before you sign any new long -term supply 00:30:31.819 --> 00:30:34.640 deals with a handler, and especially before you 00:30:34.640 --> 00:30:37.019 take on millions in debt to build a new barn 00:30:37.019 --> 00:30:40.200 and expand your herd, you must apply a realistic 00:30:40.200 --> 00:30:43.220 risk haircut to your long -range margin expectations. 00:30:43.779 --> 00:30:46.900 You have to intellectually recognize that what 00:30:46.900 --> 00:30:49.500 we used to politely call occasional rough patches 00:30:49.500 --> 00:30:52.220 at the border are no longer occasional. They 00:30:52.220 --> 00:30:54.130 are the new normal. They might now be highly 00:30:54.130 --> 00:30:56.410 predictable seasonal political events tied to 00:30:56.410 --> 00:30:59.069 trade negotiations. You have to aggressively 00:30:59.069 --> 00:31:01.650 price that physical volatility into your expansion 00:31:01.650 --> 00:31:04.390 plans. If I don't factor in the pipe risk -grusk, 00:31:04.390 --> 00:31:08.190 my 2027 business plan is basically just crossing 00:31:08.190 --> 00:31:10.710 my fingers and hoping that nobody in Chihuahua 00:31:10.710 --> 00:31:13.339 decides to park a John Deere on a bridge. And 00:31:13.339 --> 00:31:15.740 hope, as they say, is not a risk management strategy. 00:31:16.039 --> 00:31:17.980 It certainly isn't. You have to build margin 00:31:17.980 --> 00:31:20.880 buffers that can absorb a closed border or you 00:31:20.880 --> 00:31:22.660 are gambling your farm's equity on international 00:31:22.660 --> 00:31:25.420 trade politics. As we wrap up this deep dive, 00:31:25.579 --> 00:31:27.440 I want to leave everyone listening with a larger 00:31:27.440 --> 00:31:29.480 philosophical question to mull over while you 00:31:29.480 --> 00:31:32.579 finish up chores today. Consider this. If one 00:31:32.579 --> 00:31:35.480 out of every six U .S. tanker loads relies on 00:31:35.480 --> 00:31:38.119 overseas transit and the dairy industry's massive 00:31:38.119 --> 00:31:41.339 $8 billion processing expansion is banking almost 00:31:41.339 --> 00:31:43.869 entirely on a customer whose front door can be 00:31:43.869 --> 00:31:46.750 chained shut by a few parked tractors? Are we 00:31:46.750 --> 00:31:50.029 building the future of American dairy on a geopolitical 00:31:50.029 --> 00:31:52.990 fault line? If the pipe never fully stabilizes, 00:31:52.990 --> 00:31:55.410 cash flow management on the family farm is going 00:31:55.410 --> 00:31:57.190 to forever change from a simple math equation 00:31:57.190 --> 00:32:00.049 into a geopolitical guessing game. That is the 00:32:00.049 --> 00:32:02.549 exact reality we are facing. This has been another 00:32:02.549 --> 00:32:04.849 deep dive from the Bullvine podcast. For more 00:32:04.849 --> 00:32:07.250 straight talking, no BS industry analysis, make 00:32:07.250 --> 00:32:10.430 sure you head over to www .thebullvine .com. 00:32:10.799 --> 00:32:12.539 Subscribe wherever you listen to your audio. 00:32:12.700 --> 00:32:15.460 We are out with new deep dives every day and 00:32:15.460 --> 00:32:17.460 our upcoming topics will be digging into crossing 00:32:17.460 --> 00:32:19.980 by crossing export flows and analyzing how different 00:32:19.980 --> 00:32:22.299 co -op structures actually absorb and distribute 00:32:22.299 --> 00:32:25.119 border stress. Keep your eyes open, watch your 00:32:25.119 --> 00:32:26.980 basis, and we will catch you on the next one.