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Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Allowhite.
And I'm Jill.
Why isnt thal Joe? You're a Jim person? Aren't you notice I did not say Jim Burrow.
Yeah that's right. Let's say thank you. Aspirationally, I do go to the gym regularly. I don't go to the gym regular enough to see a difference. I think because I'm at the stage of life for like every day I'm getting a little bit closer to death, and so I'm like holding serve. I'm like sort of holding at the same So like I no progress, but maybe I'm not regressing.
But yes, I still think if you go to the gym regularly, you're a Jim person. Okay, Yeah, that's impressive.
I'm gonna have less shame about it.
Okay, here's my question. Have you noticed the drinking habits of some of your fellow Jim people. Have you noticed anyone walking around with bottles of milk?
I have? I mean I still see more people with like the energy drinks milk, but yeah, I've definitely seen it.
You know.
I think, like back in the day. You know, you had these guys. I think some of them still do with actual like people who try to drink a gallon of milk in a day. There's that famous guy. He has a book called Starting Strength. He's like a cult guru within the Barbelle world. Whose name I'm blanking on. I think he's a big like drink a bunch of milk guy.
If you're serious about it, you got to mix raw eggs in with the milk. That's what I say.
You do.
Have you done that? No?
I haven't, although I did when I triple fractured my foot when I was in Hong Kong, and I did have a doctor who advised me to drink a lot of milk to build up the calcium and heal the foot. Anyway, we're getting slightly off topic.
Yeah, Okay.
One of the milk brands that you see a lot in gyms is something called fair Life.
Yeah, I've seen it, and I actually literally like had never thought about what it is or but yes, I had seen this brand.
Okay, so I don't know that much about it, but I first got kind of interested in the company reading Austin Ferrick's book Barrens. There's a whole chapter in there about dairy barns and it's about fair Oaks, which turned into fair Life. All I know about fair Life is that Coke bought them. They had a big distribution deal with Coke, and we know how important distribution is in the beverage industry from our previous conversations on Celsius and
things like that. And it's turned into this phenomenon where fair Life is this milk that's I guess supposed to be healthier. It has more protein, it has less lactose or no lactose I can't remember, which means you can keep it in your fridge for like one hundred days, which is actually I find that useful. So we should talk about it because it's also kind of kicked off this whole protein crazy.
Protein only got protein everywhere I know, I don't get it. Like, yes, Starbucks they have these you can get this protein drinks. I haven't tried them yet. I you know, when did it become a crime to just eat normally? I get I ate some eat and I ate some veggies and occasionally eat some carbs and stuff like that and whatever.
But yeah, over time, it's like different macro nutrients trend, right, So there was a while it's like good fats, right, people are really into fats for a while, and then it's like, oh, you need fermented stuff, so you know, they's more for your gut health. But we're in like a we're certainly in a protein bowl market right now. People really want more protein because reasons.
Yeah, And what's interesting again about fair Life is it's making a lot of money that's feeding into Coke bottom line. Share price has gone up quite a bit, and it's also at odds with basically everything else that's happening in the dairy industry, where you know, prices tend to be pretty low and have been kind of stuck in a downward spiral for a long time. Profit margins are very very thin, so this is an outlier.
People are assuming less traditional dairy. I think a lot, you know, at least I don't know how big is it it is, but some of the quote alternative milks, the almond milks of the world, the cashew milk, so he milk's probably taking some yeah, plain old regular dairy. No I ever talked on, by the way, number two milk. I feel like everyone's either skim or fat. These days because more of the sort of like polarization of society
that no one likes nice middle ground milk anymore. So now apparently they want super high protein milk too.
All right, So we have the perfect guest, yes to discuss fair Life and the dairy industry in general. We're going to be speaking with Corey Geiger. He is the lead dairy economist with Cobank, which is a very big lender to the industry, so really the perfect person to speak to.
Corey.
Thank you so much for coming on.
All thoughts, Well, I'm glad to be here Tracy and Joel.
So I'm going to start with the basic question what differentiates fair life from traditional milk.
I think there's two big parts to this, protein and portability. The portability is it's ultra pasteurized and uses aseptic packaging, so that means it you can actually ship it without refrigeration. And when you think about the dairy industry, the dairy
industry is the largest refrigerated food chain in the world. Really, you think, as soon as we milk a cow and we cool the milk, it's cooled in the truck to the processing plant, and then traditional dairy products are refrigerated all the way to the grocery store at a convenience store. But the fair Life story and products like it now are when you go to that aseptic packaging and altar filtration until you open that bottle, it's got a lot
longer shelf life. Of course, once it's opened, you're at the fourteen day clock starts ticking.
This technology that allows you to store milk for a long time without refrigeration. Is this something that's been understood for a long time and now there's suddenly a demand for this milk or is the technology relatively recent? And then the industry is like, oh, we can because of this technology, we can market and get people excited about a new product that can take advantage of these capabilities.
Well, fair Life first came on the scene in twenty fourteen, so it's been with us about a decade. But one of the things that the team at fair Life had to really perfect was this high temperature, short time pasturization, so you're heating the milk up quick and then cooling it quick. One of the things I like sharing is that milk is nature's most perfect beverage. You talked about
it being a health beverage. If it's nature's most perfect beverage, that also means it's a great place to grow bacteria. So pasteurization. You know, over one hundred years ago, the Pasteurized Milk Ordinance came about, and that set a national standard so that a Wisconsin farmer could sell milk in the Chicago market, or an upstate New York farmer could sell milk into the New York City under the same
rules and standards. But going to this ultra the HTST the high temperature short time pasteurization, Originally you kind of got a burnt milk taste. So if you're a consumer and you're tasting it, you're like, eh, it didn't hit the mark. But now they perfected that process and you really get the flavor that you've come to expect from a dairy milk.
You mentioned having to sell into markets, and I'm not quite sure why, but I was reading a book about small scale farming from the nineteen fifties last night and it was talking about if you're a small scale farmer and you want to get into dairy, you have some options.
One option is you sell into a local market that's very close to you, because you know you can't refrigerate the milk for that long, or you sell to like a cheese factory or something like that, and you can go a little bit further, sell maybe more in bulk that sort of thing. How big a deal was fair Life's distribution deal with Coke in its success, This idea that now you have a bed that can be shipped over very very long distances, long timelines, and you have Coke distributing it.
I think it was huge when you really look at it. If you look at the founders of the concept of what became fair Life. Originally they were experimenting Mike and Sue McCloskey with a product that they eventually called athletes Milk Honey, and so they were looking at finding a health beverage for consumers in that market. So there's one
thing to be innovative. Then it's distribution. And one of the for me, I grew up on a sixth generation Wisconsin dairy farmer, one of the obstacles always for milk has been portability. You know, it's you have to have this elaborate transportation system to move it. And I'm talking beverage milk here, and that really overcame the situation with what Fair Life has done with aseptic packaging and the HSUT process to hype pastorization. It was game changing.
I think this is old news, but it used to be the case that milk prices what's the deal they were like set based on your distance from Oak Claire, Wisconsin or something like that, because there was this premise like, oh, we want milk very far away, and you sell to your local market. And explained it that went away or something. But why was Oa Claire, Wisconsin this sort of central hub for a while of the index for pricing milk.
Explain that, yes, there's a number of reasons for it. Actually, we'll start with a little dairy history. Up until about ten, New York was the largest milk producing state in the United States. Then that became Wisconsin, and obviously now America's
dairy Land is on the license plates Wisconsin. Actually, in the eighteen late eighteen hundreds, a gentleman who became governor of the state, William Dempster Hoartz, secured the first refrigerated real car to ship Wisconsin to New York City in the eighteen seventies, and today Wisconsin exports about ninety percent of their milk production via cheese, and that export could be the other forty nine states and certainly now around
the world. But because of all the cheese made in Wisconsin and Minnesota, Well Claire was that kind of center point between Wisconsin and Minnesota to establish a base price for milk. That went away here in about two thousand and we have a different system, but milk is still highly regulated under Federal Milk Marketing Orders, which is really what establishes milk prices.
Could you just real quickly explain one of these words. What does that mean? Like it's regular because the prices do fluctuate, So what does that mean that it's still highly regulated?
Yeah, highly regulated means that Federal Milk Marketing Orders. There's four classes of milk. Class one would be beverage milk. That would be the traditional milk that you drink. And when you come back to the Fair Life story and you discussed that milk fluid milk sales have been flat, but products like Fair Life and Core Power in those are actually a mixture of fluid milk. In Class two, products which traditionally have been scupable products like yogurt, ice
cream would be in there. Sour cream would be in there, and then Class three I liked sharing little miss Tuffett sat on her muffet eating her curds in waste of Class three is cheese, curds and whey, and then Class four products are butter and powder, and butt powder would be non fat dry milk. But each of these classes has different pricing mechanisms, and today beverage milk is priced on the higher of Class three or class four. It gets complicated, and that's why I call their very regulated.
But these orders came about in nineteen thirty seven. It was an act of Congress and it was to ensure the orderly marketing milk and ensure fluid milk in markets that don't have a lot of dairy coves.
So one thing I learned from reading my old farming book is that there are a lot of levers that you can pull if you're again this is for small scale farming, but there are levers you can pull to boost profits. So maybe you're not going to make that much from milk itself, but you know, you can sell the calves for veal, or once the dairy production starts going down with your cows, you can sell those, or you can sell manure for fertilizer and things like that,
all these different levers. Can you talk a little bit more about the actual business model of a dairy farm and where money comes from nowadays, because I imagine it's changed quite a bit.
This is a dynamic space and from over. We'll talk about the dairy farm in a second. But dairy right now has eleven billion dollars of new plant investment in the United States, and it's a number of categories, so there's a lot of energy taking place in a lot of investment. This is historic investment. When you get to the dairy farm. Obviously, if you're a milking cows, your
number one revenue source is milk. I would say up until five years ago, ninety percent of your income came from milk, unless you were selling a lot of crops. But one of the dynamic things that have changed, and it's in the news a lot right now, is beef prices, and every cow has a second career as a beef animal. About five years ago, well I considered the dairy cow the most researched animal on planet Earth. We know more
about her. We have over one hundred and twenty three million records on her over the last one hundred years. In two thousand and eight, the science of genomics came into the industry. I was actually the first one to
write a public article about it. But what you do is you take a DNA sample from the cow, you run her profile, and you can compare it to all this phenotypic data that one hundred and twenty three million records about seventy percent accuracy, we can predict what that baby calf will do as a cow, and that has changed a lot of things in dairy. We are improving butterfat and protein levels at paces we've never seen before.
And these days one out of four heifer calves, baby calves that will eventually become cows, have a genomic test run on them, and that has really changed things. Then as that took place, gender sorted seamen came into the industry, so we can they use lasers. They can sort out the y chromosomes which make a bull calf, and with about ninety to ninety five percent accuracy, produce a product that makes dairy heffercalves. So dairy farmers are planning their replacements.
They're using science to predict the ones and that opened a whole new door to use what we call beef breeds, think angus, limousine, charlat that we breed those, we'd use artificial insemination. The original AI and agriculture had artificial intelligence to inseminate the cows, and dairy farmers are making more
money on that these days. So about five years ago, back to Tracy's original question, a dairy farmer was making about one dollar per hundred weight per hundred pounds of milk equivalent from beef sales, and say a dairy farmer's making eighteen to twenty, So it wasn't eighteen to twenty dollars per hundred weight for milk. It wasn't a big deal. But today that number has gone to four four fifty.
So we're generating a baby black heighted calf. An angus calf that's destined for a feed lot eventually is selling between twelve and eighteen hundred dollars right now, and so it's a big revenue stream doesn't no matter what size your farmers, everybody can play.
So when you're talking about improving sort of butterfat and so forth, what is going is it selective breeding? That just means that you're more likely to get a baby cow that has high levels of whatever you're looking for, like, what.
Is better production rate?
Yeah, what is the source of I guess higher yields.
So I'm past president of Holstein Association USA, which is the largest dairy breed organization in the world, and that source is a bundle of metrics. We study a lot of traits. Certainly the big two would be butterfat, well big three would be butter fat, protein, and milk, but we are also looking at mass titus, resistance or that
you know, the ability to combat and infection. In the other we're looking for longevity, which as a trait we call productive life, or even daughter pregnancy rate, which is a fertility metric. So that's this bundle of better yields from the cow and reduce costs from the standpoint of healthcare and those kind of things. And right now, if you use the best group of Holstein bulls or even Jersey bulls on the next generation, each year, we're improving
genetics one hundred dollars per year. Prior to genomics that number was like thirteen dollars. So this is like significant improvement and using natural science and really doing a better job.
Sorry, I started laughing at the mastitis reference because it's hilarious. It's hilarious.
No.
One of the old timey solutions for this in that old book was using a bicycle pump to inflate the cows utters. Huh, So I'm guessing people don't do that so much anymore.
That is true, we do not do that any Okay.
What about you know you're talking about income that dairy farms can generate. What's going on with the actual input prices because it takes a lot, again from reading this book, takes a lot of feed, a lot of hay, a lot of grains to actually get these cows producing milk and also up to size if you're going to sell them for beef.
So the biggest costs on a dairy farm are feed and labor. My wife's family was actually the first to put robots in twenty five years ago in the United States start milking their cow. So some farmers are using robot technology, but that's not exactly mainstream at this point. But look at the near term prices for feed soybean and corn grain, certainly in LFELFA are some of the core constituents. Those prices are down now that's a good thing if you're a livestock producer, not a great thing
if you're a row crop farmer. The other thing, these days, thirty seven percent of the US corn crop actually goes to biofuels ethanol, so there's byproduct feeds there as well as in the soybean space. We're making biodiesel and one of the by products of that is soybean meals. So the cow is a great recycler. In fact, that four stomachs of the cow allow her to eat a lot of by product feeds. And I've traveled I think I've been to forty eight states covering the dairy industry.
You know.
I've seen tomatoes and carrots that didn't make human grade food in California get fed to cows. I've been in Ohio where reject jelly from smuckers has been fed to cows. I've been to Canada where a farmer plows out driveway next door of the plant that makes biscuits for McDonald's and the reject biscuits go into what is a total mixed ration a TMR, So it's a big food blender mixes up all the food and the cows get a blended diet. So it's kind of a remarkable story.
Honestly, a cow fed on McDonald's biscuit sounds pretty good.
So great. It sounds like a cow is just an amazing machine. All of these discarded food products go in that people that there are no other use because most of us don't have four stomachs. And then every year the cows get better at production, or you get better at producing higher producing cows. Sounds like a great business.
It is remarkable. And that's why. Even though milk is a product that is very consistent, every farm is different and however they approach it. You know, there's very there's similarities to it, but there's a lot of regional differences as well.
Wait, okay, so cows might be amazing machines. Amazing machines.
Yeah, good machines.
Thank you. I had to get at least one pun in there. But the dairy industry, we hear, has been challenged, right, So consumption has been going down. I think I read somewhere it's down forty percent in the US since nineteen seventy five something like that. Profit margins are still pretty compressed. Prices seem to be on basically it's a race to the bottom, and so you've kind of seen a lot of consolidation of the smaller farms into these big dairy conglomerates. Is that this story there?
Well, I want to back up first though. Dairy consumption is actually at the highest level it's been in forty years, and we measure that. We have some really good USDA data on that. But if you look at your term, you know, we started out talking about fair Life, that's Coca Cola's newest one billion dollar brand. If you look at yogurt year over a year, it's up almost ten percent.
One of the big stories in the yogurt category is certainly Shabani and I would have half of the sales of yogurt these days are Greek yogurt, which are high protein yogurt. Another category that's been exploding. It's we made Grandma's cottage cheese hip again, and cottage cheese is up.
The cottage cheese is great. I always thought it always feels like it should have a moment more like Greek yogurt, and it's like, oh, this is cottage cheese is year? Is it finally happening?
It is? And people can't make it fast enough. I was actually talking to a dairy processor at Wisconsin Cheesemakers just last week when it comes to yogurt, and one of his customers said, can you get me more? And he goes, well, not until next year, and he goes, well, just send me whatever you can. It's those products are very tight right now. And then cheese consumption is at an all time high, actually at forty pounds per person per year per capita. So those are some big growth areas.
What you're probably seeing Tracy, though, is the story on fluid milk. In the nineteen seventies, the average American drank thirty gallons a year, and now we're probably closer to nineteen gallons. One of the things for fluid milk is it's hitch to dry breakfast cereal compliments to one another, and in fact, one third of all fluid milk it's consumed on dry breakfast cereal, and that category has not
been going well. But then you flip over to these the core power, which is really a high protein milkshake, and that is not actually tracked in the fluid beverage cat it's considered a different product. We have seen consolidation in the dairy industry. There's fewer dairy farms each year. But the interesting thing is I graduated college in nineteen
ninety five. While dairy farm numbers are down, the number of dairy cows are the same, essentially about nine nine point three million, but milk production from those cows is up forty five percent during that time. It just speaks to the efficiency of the dairy cow and what things are taking place on a dairy farm.
My intuition is correct that within the liquid milks category, we've sort of everything in society has become so polarized, and everyone loves extremes, and we see it in politics, we see it everywhere. This is well known people. No one likes the middle ground anymore. Within the liquid milk category, has everyone sort of has gone to the extreme ends. They want the high fat milk or the skim leaving that good old two percent milk the missing middle.
That's a very interesting question, Joe. What's taking place in fluid milk? I three big trends protein so products like fair Life. Another one is lactose free. A new milk plant going up today will have membrane technology and to do reverse osmosis. And about everybody on the new milks are pulling out lactose. And you've got to remember about one third of Americans are probably lactose and tolerant, about one hundred and twenty million. So let's make a product
that they can enjoy. And then in the traditional milk categories, you're absolutely right, whole milk is about the only one that's growing right now, skim, which is basically fat free, and the other percentages are down. You know, the dietary guidelines for Americans that USDA and FDA do every five
years haven't really changed their guidance on fat. But there's a lot of research out there that said the fats saturated fats found in dairy and animal protein like beef and pork and poultry, fish too, seafood, are actually good for you. And so so there are people already voting with their pocketbooks this category.
One thing we learned from previous episodes on I Guess Trendy Drinks of the Moment is the importance of shelf placement in grocery stores. And I have to admit, when I'm buying milk at a grocery store, I basically just buy what's at eye level. I do buy whole milk though, Yeah, that's the preference. But how important is placement for a product like milk, which generally would be considered a staple and perhaps doesn't have as much brand loyalty as some other things.
Yeah, well, there's a reason in the grocery aisle. If you look at if you walk through your grocery island next time after listening to this podcast, dairy is often in the back of the store because dairy is in like over ninety five percent of households, so it's a routinely purchased product, and that's part of the placement situation. Now. About five years years ago, a lot of the plant based beverages were making inroads, and those sales are actually
down now. People consumers, in my intuition, are looking for clean labels and they want to see ingredients that they can understand, and I think that's been part of the changing tide in a dairy space as well. And it's interesting when you look at it and you think about we're just past a ten year anniversary now of Coca
Cola and Select Milk and Fair Life Partnership. Now there's others that are looking into that space, you know, PepsiCo has announced that they're going to have their Propel water brand is going to have a clear protein in it that has twenty grams of protein. And they're also reformulating their muscle milk and they're going to have dairy based protein in that category as well. I think when you go to places like Costco or Walmart, dairy is just
not found in the dairy aisle anymore. It's shelf stable. It could be in the health food section, it could be in you know, all nutrition sections and those kind of things. And so it's expanding beyond its traditional role because of these high protein beverages. And also if you're looking for calcium, some of these products are you know, and one serving can get you fifty percent of that as well.
The way these trends change when it comes to macro nutrients, you know, someone I saw a tweet or something and there's like a fiber is going to be the new protein. That's going to be the big thing everyone wants.
We should encourage fiber. We should probably we're useful than I mean, Americans consume a lot of protein already. I don't know why we need more.
Apparently we need more, But does the industry, Like how long does it take the industry to say, you know what, this is a durable trend We're actually going to invest in the processing space for this, because there's got to be some risk. Consumers are very fickle Internet health influencers.
They may be onto something else by next year, like no, you got to get whatever, you go back to low fat, that's the new hot thing, etc. How do producers think about their capital allocation budget when it comes to playing on new trends within consumption.
Well that's a large and big question. Yeah, and you really look at the long term trends and where things are going. Tracy's absolutely right. If you read some of the research. Fiber probably will be the next follow up the protein. I hear people talking about how do I put a protein drink out there with fiber in it
and bundle the two together. You know, when I was going to grade school, there was a cheese out there called Mazzarella in the late mid nineteen seventies that was only at a couple pounds per capita consumption, and now it's the most consumed cheese, largely because of its relationship with pizza. So these mega trends can reshape categories. You know in the nineteen well, let's back up even a little further. There was in the nineteen sixties there was
an organization called the Wisconsin Feeder Pig Cooperative. And how in the heck would that be formed in Wisconsin when I was the largest hog state. But what was happening? We didn't have the technology going back to kurds and Way making cheese and why we could make cheese, but the byproduct was way, and in Way was protein, the most complete amino acid known humanity. But cheesemakers were just set in a farmer's home with it do something. Some would spread it on fields, some would feed it the
baby pigs. Well, we learned the baby pigs would grow so fast, so that Wisconsin Feeder Pig co Op started shipping two to three million feeder pigs that I want to be finished with porn and soybeans. Well, now we can use these big dryers just using drying and harvest that way in a lot cheese plants, not a lot. All the new cheese plants are really going in with a business model not only to make cheese, but to capture the way weigh. Protein isolates are selling roughly at
ten dollars a pound, which is record high. And so these business models that are taking place and the research to build these eleven billion dollars A new plant investment is really how do we make more out of milk? I think you know collagens and colostrum, and now a new one is lacto fare in, which is one of
the milk components that really helps reduce inflammation. There's some research out there, you know, depending on the number you see, there may be five thousand there, maybe six three hundred somewhere in their unique molecules and milk. And we are just beginning to research that, learning what parts we can pull apart and help humans. And there's going to be more and more in that space here in the coming years.
And that's all part of that investment strategy. What's going to take place in the plant years away from some of that.
But so, one thing I know about farmers is they're always complaining about something and no judgment there. I'm always complaining about something too. Joe can attest to this, But what are the current complaints that you're hearing the most from dairy farms.
Well, right now, near term, ninety percent of milk in the United States is priced on multiple component pricing. Dairy farmers would see an mcpiece, so the ninety percent of that pricing is butterfat and protein. Well, if you look at protein and butterfat is two nascars on the racetrack. From two thousand to two thousand and fourteen, the protein nascar always won, and then as consumers started demanding more fat, and remember the flavor is in the fat, butterfat won
eight of the last ten years. But right now we've made so much butterfat that butter prices are down, not only in the US but worldwide. So that's changed the milk checks. So that would be if you went to a dairy meeting right now to be like, that's what's milk prices down here in the last sixty days. That's one issue that is near on top of mind. The
other thing would be labor. Of course, it takes a lot of people to run a dairy farm, and the US dairy industry and a lot of farmers Americans don't like doing dirty jobs when it comes down to it. On weekends, I work on our family farm. But these are still just like building homes. This is very hands on process here and that would be another issue that would be top of mind dairy farmers, and you'll always get a good conversation on the weather. Farmers in general.
Are we always beholding to Mother Nature?
It's interesting you didn't say trade, but partly like I get the impression that there's always a million little lawsuits going on between Wisconsin farmers and their friends on the other side of the border about some rules of origin and they're not buying enough this. It seems like this is one of those things that transcends every administration. They try to hammer it out, but they're always like sort of arguing over details. You're not fulfilling that as you're
supposed to let in this mini galllenge. You didn't what are the core persistent issues that American dairy farmers feel is unfair or unideal about I guess our dairy trading relationship with Canada.
Joe. That's a great point, and I should have put it in my list. Trade is top of mind. In nineteen ninety five, the US was essentially a non player in the global dairy exports, and that's the year that NAFTA came about. Actually, NAFTA came about nineteen ninety four, and then nineteen ninety five the US Dairy Export Council
was formed. And these days about seventeen percent of the US milk supply, or one out of seven tankers of milk, are actually exported as either dairy products or ingredients around the world, so it's very important to dairy. We're actually having a strong export year, but largely because US dairy products and ingredients were lower than the other two major competitors. So the EU the twenty seven countries of the European Union, are the world's largest dairy exporters. They roughly export twenty
percent of their milk production. Then the small and mighty nation of New Zealand is the number two export They have five million cows and five million people, roughly in the size of Minnesota and Wisconsin, so one third of their gross domestic product comes from dairy. If you read Auckland paper, you would hear dairy at least weekly. And then comes to US. The US is number one export customer is our friends south of the border in Mexico. So the US is about a nine billion dollar export
market on dairy. Mexico is at about two billion of that. Now Canada is a discussion to itself. Canada's milk supply is largely governed by quota system, so dairy farmers up there purchased the right to sell milk, and in fact, on a Canadian dairy farm, the quota is worth more than everything else. It's worth more than the cow's it's worth more than the land, it's worth more in the
equipment to make that work. You can have a lot of imports come in, so there are some things that we send north to the border, butter being one of them. But when you hear the headlines right now, of course there are other things that were agreed upon in the trade agreement the last time, the US Mexico Canada trade agreement. In one of those largely centers on protein.
Surprisingly, that's interesting. So if you look into your crystal ball for the future in the next ten years, look at the dairy industry, what's going to be most important in terms of the success of a dairy farm or profitability? Is it technology? Is it scale and consolidation, is it perhaps branding and specialization or efficiencies in a way you're breaking down milk into all these various products, or all of the above.
I think that's a two part question. Because you got the dairy farmers or dairy producers, and then you have the dairy processors. We're going to have to use more and more technology on the dairy farms. I think, coming back to the cow, when dairy farmers invest in genetics, those genetics are additive and they're so important and if this protein booms continues, genetics is one of the only
ways to improve it. We don't have a lot of feeding practices in the toolbox in that regard, certainly AI and technology and I'm going to say artificial intelligence here for the farmers out there, listening will be very crucial into this, and we're going to have to use more technology and find ways to use robotic technology. We're already doing some of that and rotary milking parlors. So a rotary parlor would be like a merry go round that
the cows go on. But when we do milking preparation right now, some robots are putting on teat dip or a sanitizer before we milk that cow, which is important. So those are some areas the space, and a lot of dairy farmers are also crop farmers, especially growing corn silage where alfalfa would be two big staples, and you know, the whole space on farm equipment would be another area. When it comes to the processing plants. You know, some of these new and modern processing plants have a lot
of stainless steel and those costs are going up. But it's that investment in technology, investment in it. You know, all this ultra filtered milk that we've been talking about too. You know, I was just in a plant. There's almost nine thousand filters in there. It's very it's a very clean and good process, but it takes a lot of investment.
It's materials heavy, materials heavy environment.
Yes, it is.
All right, Corey. Thank you so much for coming on all thoughts that we're going to have to leave it there. But that was so much fun. Love talking about milk clicking.
Yeah, that was fantastic. I learned a bunch of stuff.
Thank you, Joe and Tracy.
I will say after that conversation, I'm not I'm not craving liquid milk, but I'm craving I'm craving cheese.
Yeah, I'm craving cheese right now. And butter like a nice piece I want a piece of bread, would just like go crazy with the butter, butter and salt. Yeah, butter and salt.
I love that it's lunchtime.
Yeah, I know, we have a yeah, right.
I really did learn a lot conversation.
No, that was really helpful. This is one of those markets, like many egg markets, I think, where there's clearly a heavy market component and clearly a heavy regulatory component as well, and so I think those are some of the hardest for me to wrap my head around. I didn't realize, for example, that in Canada that you buy the right to sell dairy, and so that just that right to sell into the market becomes a very valuable asset in its own right. I thought that was a great conversation.
I'm also fascinated by the fact that maybe it's just day one in terms of learning about all of the useful molecules in that can be separated out and have some He mentioned a few that I had never heard of. But the idea that there's just more science there to be done on learning what is milk or what is in it that could be a value A lot of interesting stuff there.
No the efficiencies and the values you can ring out of a single product. The cow kind of amazing.
Yeah.
So yeah, again, I'm going to go back to that book just because it's fresh in my mind. But one of the things that was saying is if you feed the cow is a bunch of corn, then they spit out corn kernels in their manure. Oh and you can apparently actually feed pigs on the half eaten corn kernels.
That's truly discussion in the manure.
I know. But it's efficient, Joe.
It's interesting. I think, what do you call it? Mixed something, something that you could just like, oh, we're going to have some old biscuits and we're going to put some tomatoes together, and it doesn't matter. The cow's stomach is going to be able to digest it like that is a really incredible machine, and it is a good reminder of how extraordinary nature and biology are from efficiency standpoint.
That if you wanted to build a machine that could separate do the equivalent of four different stomachs, et cetera, it would be such an extraordinarily costly machine. And nature has solved this for us via hundreds of millions of years of evolution. It's just a very fascinating thing to think about some of these how efficient these processes have gotten and then what scientists can do when they learn more about how they work.
The cows are efficient themselves. I'm still amazed at some of the labor inputs that go into this. So, you know, cows producing milk have to produce calves, so you have to inseminate them. You have to take the calves away from the cows so that the cows will produce milk that you can sell. And then you have to teach the cows to like drink from either a bucket or an artificial utter or whatever. There's a lot you have to do.
I'm not sure. I may have mentioned it once or twice. When I was growing up in the Midwest, my grandmother, her husband was a dairy and fruit farmer in the middle of Michigan, and he was very big in the local sort of dairy board or whatever it was, et cetera. And when I was younger, I thought that was so boring, And now I'm like, it's so many I wish you were still around. Yeah, I wish I have so many.
Quite like, if I hear around these days, it'd be one of those things where I would like visit him and I would like ask him two hours of questions about the dairy. You have him on odd Lots like one of those people who will answer any of my questions. She would have. He was a very patient, good guy. And I always feel like, man, I wish a little bit older whatever, because that would have been a very good resource.
Yeah. I feel the same way. My granddad was a cattle rancher in Texas, and he died before I got a chance to ask him all these questions. All I remember from his cow industry is that he used to name some of the cows after me and my cousin, yeah them, and he'd tell us like, Tracy number three is no longer with us, So there we go.
That's fun, all right.
Shall we leave it there?
Let's leave it there.
This has been another episode of the odd Bots podcast. I'm Tracy Alloway. You can follow me at Tracy.
Alloway and I'm Jill Wisenthal. You can follow me at the Stalwart. Follow our producers Carbon Rodriguez at Carmen armand dash O Bennett at Dashbot and kill Brooks at Kilbrooks. From our Oddlows content, go to Bloomberg dot com slash odd Lots, where the daily newsletter and all of our episodes and you can chat about all of these topics twenty four seven in our discord discord dot gg slash odd lots.
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