WEBVTT - The Viral Milk That Helped Set Off America's Protein Boom 0:00:02.720 --> 0:00:13.960 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.079 --> 0:00:20.960 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.040 --> 0:00:22.439 I'm Tracy Allowhite. 0:00:22.079 --> 0:00:22.560 And I'm Jill. 0:00:22.600 --> 0:00:25.760 Why isnt thal Joe? You're a Jim person? Aren't you 0:00:26.120 --> 0:00:27.680 notice I did not say Jim Burrow. 0:00:27.800 --> 0:00:30.440 Yeah that's right. Let's say thank you. Aspirationally, I do 0:00:30.520 --> 0:00:32.640 go to the gym regularly. I don't go to the 0:00:32.680 --> 0:00:35.280 gym regular enough to see a difference. I think because 0:00:35.400 --> 0:00:37.680 I'm at the stage of life for like every day 0:00:37.680 --> 0:00:39.199 I'm getting a little bit closer to death, and so 0:00:39.240 --> 0:00:42.520 I'm like holding serve. I'm like sort of holding at 0:00:42.560 --> 0:00:44.879 the same So like I no progress, but maybe I'm 0:00:44.880 --> 0:00:45.560 not regressing. 0:00:45.680 --> 0:00:47.960 But yes, I still think if you go to the 0:00:48.000 --> 0:00:52.239 gym regularly, you're a Jim person. Okay, Yeah, that's impressive. 0:00:52.280 --> 0:00:53.479 I'm gonna have less shame about it. 0:00:53.520 --> 0:00:57.680 Okay, here's my question. Have you noticed the drinking habits 0:00:57.760 --> 0:01:00.400 of some of your fellow Jim people. Have you noticed 0:01:00.440 --> 0:01:03.280 anyone walking around with bottles of milk? 0:01:03.920 --> 0:01:06.440 I have? I mean I still see more people with 0:01:06.480 --> 0:01:09.560 like the energy drinks milk, but yeah, I've definitely seen it. 0:01:09.600 --> 0:01:09.760 You know. 0:01:09.840 --> 0:01:12.440 I think, like back in the day. You know, you 0:01:12.560 --> 0:01:14.679 had these guys. I think some of them still do 0:01:15.360 --> 0:01:17.880 with actual like people who try to drink a gallon 0:01:17.920 --> 0:01:22.840 of milk in a day. There's that famous guy. He 0:01:22.880 --> 0:01:25.360 has a book called Starting Strength. He's like a cult 0:01:25.400 --> 0:01:28.760 guru within the Barbelle world. Whose name I'm blanking on. 0:01:29.040 --> 0:01:31.160 I think he's a big like drink a bunch of 0:01:31.160 --> 0:01:32.360 milk guy. 0:01:32.480 --> 0:01:34.480 If you're serious about it, you got to mix raw 0:01:34.560 --> 0:01:36.440 eggs in with the milk. That's what I say. 0:01:37.280 --> 0:01:37.520 You do. 0:01:37.840 --> 0:01:38.760 Have you done that? No? 0:01:38.840 --> 0:01:42.039 I haven't, although I did when I triple fractured my 0:01:42.080 --> 0:01:44.360 foot when I was in Hong Kong, and I did 0:01:44.400 --> 0:01:46.680 have a doctor who advised me to drink a lot 0:01:46.720 --> 0:01:50.440 of milk to build up the calcium and heal the foot. Anyway, 0:01:50.560 --> 0:01:51.800 we're getting slightly off topic. 0:01:51.960 --> 0:01:52.600 Yeah, Okay. 0:01:52.600 --> 0:01:55.000 One of the milk brands that you see a lot 0:01:55.040 --> 0:01:56.760 in gyms is something called fair Life. 0:01:56.880 --> 0:01:59.400 Yeah, I've seen it, and I actually literally like had 0:01:59.440 --> 0:02:02.000 never thought about what it is or but yes, I 0:02:02.000 --> 0:02:02.760 had seen this brand. 0:02:02.880 --> 0:02:05.600 Okay, so I don't know that much about it, but 0:02:05.840 --> 0:02:08.840 I first got kind of interested in the company reading 0:02:08.919 --> 0:02:12.200 Austin Ferrick's book Barrens. There's a whole chapter in there 0:02:12.240 --> 0:02:16.320 about dairy barns and it's about fair Oaks, which turned 0:02:16.360 --> 0:02:19.840 into fair Life. All I know about fair Life is 0:02:19.880 --> 0:02:23.239 that Coke bought them. They had a big distribution deal 0:02:23.320 --> 0:02:25.920 with Coke, and we know how important distribution is in 0:02:25.960 --> 0:02:29.560 the beverage industry from our previous conversations on Celsius and 0:02:29.600 --> 0:02:33.480 things like that. And it's turned into this phenomenon where 0:02:33.560 --> 0:02:36.440 fair Life is this milk that's I guess supposed to 0:02:36.440 --> 0:02:40.640 be healthier. It has more protein, it has less lactose 0:02:40.760 --> 0:02:43.520 or no lactose I can't remember, which means you can 0:02:43.600 --> 0:02:45.800 keep it in your fridge for like one hundred days, 0:02:46.320 --> 0:02:49.240 which is actually I find that useful. So we should 0:02:49.240 --> 0:02:52.440 talk about it because it's also kind of kicked off 0:02:52.480 --> 0:02:54.560 this whole protein crazy. 0:02:54.120 --> 0:02:58.480 Protein only got protein everywhere I know, I don't get it. Like, yes, 0:02:58.520 --> 0:03:01.359 Starbucks they have these you can get this protein drinks. 0:03:01.400 --> 0:03:05.359 I haven't tried them yet. I you know, when did 0:03:05.360 --> 0:03:07.919 it become a crime to just eat normally? I get 0:03:08.120 --> 0:03:10.080 I ate some eat and I ate some veggies and 0:03:10.320 --> 0:03:13.200 occasionally eat some carbs and stuff like that and whatever. 0:03:13.320 --> 0:03:17.440 But yeah, over time, it's like different macro nutrients trend, right, 0:03:17.720 --> 0:03:19.639 So there was a while it's like good fats, right, 0:03:19.760 --> 0:03:22.440 people are really into fats for a while, and then 0:03:22.720 --> 0:03:26.200 it's like, oh, you need fermented stuff, so you know, 0:03:26.320 --> 0:03:29.320 they's more for your gut health. But we're in like 0:03:29.360 --> 0:03:31.880 a we're certainly in a protein bowl market right now. 0:03:31.880 --> 0:03:34.240 People really want more protein because reasons. 0:03:34.400 --> 0:03:37.760 Yeah, And what's interesting again about fair Life is it's 0:03:37.800 --> 0:03:41.160 making a lot of money that's feeding into Coke bottom line. 0:03:41.240 --> 0:03:44.560 Share price has gone up quite a bit, and it's 0:03:44.600 --> 0:03:47.480 also at odds with basically everything else that's happening in 0:03:47.520 --> 0:03:50.880 the dairy industry, where you know, prices tend to be 0:03:51.040 --> 0:03:53.680 pretty low and have been kind of stuck in a 0:03:53.760 --> 0:03:56.800 downward spiral for a long time. Profit margins are very 0:03:56.880 --> 0:03:59.040 very thin, so this is an outlier. 0:03:59.360 --> 0:04:02.640 People are assuming less traditional dairy. I think a lot, 0:04:02.720 --> 0:04:04.440 you know, at least I don't know how big is 0:04:04.480 --> 0:04:07.320 it it is, but some of the quote alternative milks, 0:04:07.360 --> 0:04:10.400 the almond milks of the world, the cashew milk, so 0:04:10.440 --> 0:04:14.400 he milk's probably taking some yeah, plain old regular dairy. 0:04:15.080 --> 0:04:17.279 No I ever talked on, by the way, number two milk. 0:04:17.320 --> 0:04:20.000 I feel like everyone's either skim or fat. These days 0:04:20.000 --> 0:04:22.920 because more of the sort of like polarization of society 0:04:23.200 --> 0:04:25.920 that no one likes nice middle ground milk anymore. So 0:04:25.960 --> 0:04:28.120 now apparently they want super high protein milk too. 0:04:28.480 --> 0:04:30.800 All right, So we have the perfect guest, yes to 0:04:30.839 --> 0:04:34.320 discuss fair Life and the dairy industry in general. We're 0:04:34.320 --> 0:04:36.160 going to be speaking with Corey Geiger. He is the 0:04:36.279 --> 0:04:39.400 lead dairy economist with Cobank, which is a very big 0:04:39.520 --> 0:04:42.680 lender to the industry, so really the perfect person to 0:04:42.760 --> 0:04:43.120 speak to. 0:04:43.240 --> 0:04:43.520 Corey. 0:04:43.560 --> 0:04:44.680 Thank you so much for coming on. 0:04:44.720 --> 0:04:47.840 All thoughts, Well, I'm glad to be here Tracy and Joel. 0:04:48.240 --> 0:04:51.040 So I'm going to start with the basic question what 0:04:51.240 --> 0:04:54.760 differentiates fair life from traditional milk. 0:04:56.080 --> 0:05:00.800 I think there's two big parts to this, protein and portability. 0:05:00.920 --> 0:05:06.200 The portability is it's ultra pasteurized and uses aseptic packaging, 0:05:06.320 --> 0:05:10.000 so that means it you can actually ship it without refrigeration. 0:05:10.560 --> 0:05:12.839 And when you think about the dairy industry, the dairy 0:05:12.839 --> 0:05:18.040 industry is the largest refrigerated food chain in the world. Really, 0:05:18.040 --> 0:05:20.279 you think, as soon as we milk a cow and 0:05:20.800 --> 0:05:23.200 we cool the milk, it's cooled in the truck to 0:05:23.279 --> 0:05:28.000 the processing plant, and then traditional dairy products are refrigerated 0:05:28.040 --> 0:05:30.360 all the way to the grocery store at a convenience store. 0:05:30.839 --> 0:05:33.880 But the fair Life story and products like it now 0:05:34.279 --> 0:05:37.160 are when you go to that aseptic packaging and altar 0:05:37.240 --> 0:05:40.720 filtration until you open that bottle, it's got a lot 0:05:40.800 --> 0:05:43.680 longer shelf life. Of course, once it's opened, you're at 0:05:43.960 --> 0:05:46.000 the fourteen day clock starts ticking. 0:05:46.839 --> 0:05:51.520 This technology that allows you to store milk for a 0:05:51.560 --> 0:05:56.240 long time without refrigeration. Is this something that's been understood 0:05:56.400 --> 0:05:59.200 for a long time and now there's suddenly a demand 0:05:59.360 --> 0:06:04.320 for this milk or is the technology relatively recent? And 0:06:04.320 --> 0:06:06.400 then the industry is like, oh, we can because of 0:06:06.400 --> 0:06:09.200 this technology, we can market and get people excited about 0:06:09.200 --> 0:06:11.800 a new product that can take advantage of these capabilities. 0:06:12.320 --> 0:06:14.920 Well, fair Life first came on the scene in twenty fourteen, 0:06:15.000 --> 0:06:17.360 so it's been with us about a decade. But one 0:06:17.440 --> 0:06:19.640 of the things that the team at fair Life had 0:06:19.680 --> 0:06:23.720 to really perfect was this high temperature, short time pasturization, 0:06:23.920 --> 0:06:26.560 so you're heating the milk up quick and then cooling 0:06:26.560 --> 0:06:29.560 it quick. One of the things I like sharing is 0:06:29.600 --> 0:06:32.600 that milk is nature's most perfect beverage. You talked about 0:06:32.600 --> 0:06:36.360 it being a health beverage. If it's nature's most perfect beverage, 0:06:36.520 --> 0:06:38.880 that also means it's a great place to grow bacteria. 0:06:39.000 --> 0:06:42.280 So pasteurization. You know, over one hundred years ago, the 0:06:42.400 --> 0:06:46.360 Pasteurized Milk Ordinance came about, and that set a national 0:06:46.440 --> 0:06:50.040 standard so that a Wisconsin farmer could sell milk in 0:06:50.120 --> 0:06:53.240 the Chicago market, or an upstate New York farmer could 0:06:53.279 --> 0:06:56.719 sell milk into the New York City under the same 0:06:56.800 --> 0:07:01.480 rules and standards. But going to this ultra the HTST 0:07:01.720 --> 0:07:05.719 the high temperature short time pasteurization, Originally you kind of 0:07:05.720 --> 0:07:09.560 got a burnt milk taste. So if you're a consumer 0:07:09.640 --> 0:07:12.320 and you're tasting it, you're like, eh, it didn't hit 0:07:12.400 --> 0:07:16.600 the mark. But now they perfected that process and you 0:07:16.640 --> 0:07:18.880 really get the flavor that you've come to expect from 0:07:18.920 --> 0:07:19.600 a dairy milk. 0:07:20.640 --> 0:07:24.160 You mentioned having to sell into markets, and I'm not 0:07:24.240 --> 0:07:26.120 quite sure why, but I was reading a book about 0:07:26.160 --> 0:07:29.640 small scale farming from the nineteen fifties last night and 0:07:29.840 --> 0:07:31.760 it was talking about if you're a small scale farmer 0:07:32.120 --> 0:07:35.200 and you want to get into dairy, you have some options. 0:07:35.240 --> 0:07:38.360 One option is you sell into a local market that's 0:07:38.440 --> 0:07:41.080 very close to you, because you know you can't refrigerate 0:07:41.120 --> 0:07:44.520 the milk for that long, or you sell to like 0:07:44.560 --> 0:07:46.800 a cheese factory or something like that, and you can 0:07:46.840 --> 0:07:50.080 go a little bit further, sell maybe more in bulk 0:07:50.240 --> 0:07:53.920 that sort of thing. How big a deal was fair 0:07:54.080 --> 0:07:59.120 Life's distribution deal with Coke in its success, This idea 0:07:59.160 --> 0:08:01.240 that now you have a bed that can be shipped 0:08:01.320 --> 0:08:06.200 over very very long distances, long timelines, and you have 0:08:06.280 --> 0:08:07.400 Coke distributing it. 0:08:08.080 --> 0:08:10.440 I think it was huge when you really look at it. 0:08:10.520 --> 0:08:13.320 If you look at the founders of the concept of 0:08:13.320 --> 0:08:16.880 what became fair Life. Originally they were experimenting Mike and 0:08:16.960 --> 0:08:21.200 Sue McCloskey with a product that they eventually called athletes 0:08:21.280 --> 0:08:24.720 Milk Honey, and so they were looking at finding a 0:08:24.840 --> 0:08:30.040 health beverage for consumers in that market. So there's one 0:08:30.080 --> 0:08:34.280 thing to be innovative. Then it's distribution. And one of 0:08:34.320 --> 0:08:36.840 the for me, I grew up on a sixth generation 0:08:37.040 --> 0:08:41.440 Wisconsin dairy farmer, one of the obstacles always for milk 0:08:41.520 --> 0:08:44.480 has been portability. You know, it's you have to have 0:08:44.559 --> 0:08:48.640 this elaborate transportation system to move it. And I'm talking 0:08:48.679 --> 0:08:55.120 beverage milk here, and that really overcame the situation with 0:08:55.160 --> 0:08:57.840 what Fair Life has done with aseptic packaging and the 0:08:58.040 --> 0:09:03.000 HSUT process to hype pastorization. It was game changing. 0:09:04.240 --> 0:09:06.520 I think this is old news, but it used to 0:09:06.520 --> 0:09:09.520 be the case that milk prices what's the deal they 0:09:09.520 --> 0:09:13.000 were like set based on your distance from Oak Claire, 0:09:13.000 --> 0:09:16.120 Wisconsin or something like that, because there was this premise like, oh, 0:09:16.160 --> 0:09:19.040 we want milk very far away, and you sell to 0:09:19.080 --> 0:09:22.240 your local market. And explained it that went away or something. 0:09:22.280 --> 0:09:25.760 But why was Oa Claire, Wisconsin this sort of central 0:09:25.840 --> 0:09:28.559 hub for a while of the index for pricing milk. 0:09:28.720 --> 0:09:33.120 Explain that, yes, there's a number of reasons for it. Actually, 0:09:33.200 --> 0:09:37.520 we'll start with a little dairy history. Up until about ten, 0:09:38.320 --> 0:09:41.559 New York was the largest milk producing state in the 0:09:41.640 --> 0:09:46.319 United States. Then that became Wisconsin, and obviously now America's 0:09:46.400 --> 0:09:51.000 dairy Land is on the license plates Wisconsin. Actually, in 0:09:51.080 --> 0:09:54.600 the eighteen late eighteen hundreds, a gentleman who became governor 0:09:54.640 --> 0:09:57.760 of the state, William Dempster Hoartz, secured the first refrigerated 0:09:57.800 --> 0:10:01.000 real car to ship Wisconsin to New York City in 0:10:01.000 --> 0:10:06.520 the eighteen seventies, and today Wisconsin exports about ninety percent 0:10:06.559 --> 0:10:09.560 of their milk production via cheese, and that export could 0:10:09.559 --> 0:10:12.600 be the other forty nine states and certainly now around 0:10:12.640 --> 0:10:15.520 the world. But because of all the cheese made in 0:10:15.559 --> 0:10:20.360 Wisconsin and Minnesota, Well Claire was that kind of center 0:10:20.400 --> 0:10:25.160 point between Wisconsin and Minnesota to establish a base price 0:10:25.480 --> 0:10:28.520 for milk. That went away here in about two thousand 0:10:28.520 --> 0:10:31.520 and we have a different system, but milk is still 0:10:31.600 --> 0:10:35.800 highly regulated under Federal Milk Marketing Orders, which is really 0:10:35.880 --> 0:10:37.480 what establishes milk prices. 0:10:38.800 --> 0:10:40.720 Could you just real quickly explain one of these words. 0:10:40.880 --> 0:10:43.080 What does that mean? Like it's regular because the prices 0:10:43.120 --> 0:10:45.560 do fluctuate, So what does that mean that it's still 0:10:45.600 --> 0:10:46.479 highly regulated? 0:10:47.040 --> 0:10:51.160 Yeah, highly regulated means that Federal Milk Marketing Orders. There's 0:10:51.200 --> 0:10:54.439 four classes of milk. Class one would be beverage milk. 0:10:54.679 --> 0:10:56.679 That would be the traditional milk that you drink. And 0:10:56.720 --> 0:10:59.120 when you come back to the Fair Life story and 0:10:59.520 --> 0:11:03.240 you discussed that milk fluid milk sales have been flat, 0:11:03.679 --> 0:11:06.959 but products like Fair Life and Core Power in those 0:11:07.200 --> 0:11:11.360 are actually a mixture of fluid milk. In Class two, 0:11:11.480 --> 0:11:16.280 products which traditionally have been scupable products like yogurt, ice 0:11:16.320 --> 0:11:18.920 cream would be in there. Sour cream would be in there, 0:11:19.360 --> 0:11:22.720 and then Class three I liked sharing little miss Tuffett 0:11:22.880 --> 0:11:24.920 sat on her muffet eating her curds in waste of 0:11:25.000 --> 0:11:29.360 Class three is cheese, curds and whey, and then Class 0:11:29.400 --> 0:11:32.520 four products are butter and powder, and butt powder would 0:11:32.520 --> 0:11:35.760 be non fat dry milk. But each of these classes 0:11:35.880 --> 0:11:42.400 has different pricing mechanisms, and today beverage milk is priced 0:11:42.440 --> 0:11:47.000 on the higher of Class three or class four. It 0:11:47.040 --> 0:11:51.479 gets complicated, and that's why I call their very regulated. 0:11:51.960 --> 0:11:54.800 But these orders came about in nineteen thirty seven. It 0:11:54.840 --> 0:11:58.240 was an act of Congress and it was to ensure 0:11:58.640 --> 0:12:03.400 the orderly marketing milk and ensure fluid milk in markets 0:12:03.400 --> 0:12:04.960 that don't have a lot of dairy coves. 0:12:05.600 --> 0:12:09.680 So one thing I learned from reading my old farming 0:12:09.720 --> 0:12:12.120 book is that there are a lot of levers that 0:12:12.200 --> 0:12:14.760 you can pull if you're again this is for small 0:12:14.760 --> 0:12:17.040 scale farming, but there are levers you can pull to 0:12:17.080 --> 0:12:19.520 boost profits. So maybe you're not going to make that 0:12:19.600 --> 0:12:22.920 much from milk itself, but you know, you can sell 0:12:22.960 --> 0:12:27.040 the calves for veal, or once the dairy production starts 0:12:27.080 --> 0:12:29.840 going down with your cows, you can sell those, or 0:12:29.960 --> 0:12:32.960 you can sell manure for fertilizer and things like that, 0:12:33.080 --> 0:12:35.360 all these different levers. Can you talk a little bit 0:12:35.400 --> 0:12:38.640 more about the actual business model of a dairy farm 0:12:38.800 --> 0:12:42.520 and where money comes from nowadays, because I imagine it's 0:12:42.640 --> 0:12:43.480 changed quite a bit. 0:12:45.040 --> 0:12:48.719 This is a dynamic space and from over. We'll talk 0:12:48.760 --> 0:12:51.800 about the dairy farm in a second. But dairy right 0:12:51.840 --> 0:12:55.480 now has eleven billion dollars of new plant investment in 0:12:55.520 --> 0:12:59.360 the United States, and it's a number of categories, so 0:12:59.400 --> 0:13:01.520 there's a lot of energy taking place in a lot 0:13:01.520 --> 0:13:04.440 of investment. This is historic investment. When you get to 0:13:04.480 --> 0:13:07.760 the dairy farm. Obviously, if you're a milking cows, your 0:13:07.840 --> 0:13:11.360 number one revenue source is milk. I would say up 0:13:11.400 --> 0:13:14.760 until five years ago, ninety percent of your income came 0:13:14.800 --> 0:13:17.080 from milk, unless you were selling a lot of crops. 0:13:17.080 --> 0:13:19.679 But one of the dynamic things that have changed, and 0:13:19.720 --> 0:13:23.000 it's in the news a lot right now, is beef prices, 0:13:23.720 --> 0:13:27.400 and every cow has a second career as a beef animal. 0:13:28.120 --> 0:13:32.520 About five years ago, well I considered the dairy cow 0:13:32.559 --> 0:13:35.360 the most researched animal on planet Earth. We know more 0:13:35.400 --> 0:13:37.920 about her. We have over one hundred and twenty three 0:13:38.000 --> 0:13:40.320 million records on her over the last one hundred years. 0:13:40.760 --> 0:13:44.600 In two thousand and eight, the science of genomics came 0:13:44.640 --> 0:13:47.760 into the industry. I was actually the first one to 0:13:47.760 --> 0:13:49.880 write a public article about it. But what you do 0:13:50.040 --> 0:13:53.400 is you take a DNA sample from the cow, you 0:13:53.480 --> 0:13:55.880 run her profile, and you can compare it to all 0:13:55.920 --> 0:13:59.000 this phenotypic data that one hundred and twenty three million 0:13:59.000 --> 0:14:04.400 records about seventy percent accuracy, we can predict what that 0:14:04.520 --> 0:14:07.800 baby calf will do as a cow, and that has 0:14:07.960 --> 0:14:12.160 changed a lot of things in dairy. We are improving 0:14:12.200 --> 0:14:16.920 butterfat and protein levels at paces we've never seen before. 0:14:16.960 --> 0:14:21.120 And these days one out of four heifer calves, baby 0:14:21.240 --> 0:14:24.880 calves that will eventually become cows, have a genomic test 0:14:24.960 --> 0:14:29.560 run on them, and that has really changed things. Then 0:14:29.680 --> 0:14:33.520 as that took place, gender sorted seamen came into the industry, 0:14:33.640 --> 0:14:37.280 so we can they use lasers. They can sort out 0:14:37.280 --> 0:14:40.320 the y chromosomes which make a bull calf, and with 0:14:40.400 --> 0:14:43.600 about ninety to ninety five percent accuracy, produce a product 0:14:43.600 --> 0:14:48.360 that makes dairy heffercalves. So dairy farmers are planning their replacements. 0:14:49.000 --> 0:14:52.520 They're using science to predict the ones and that opened 0:14:52.520 --> 0:14:57.040 a whole new door to use what we call beef breeds, 0:14:57.080 --> 0:15:02.960 think angus, limousine, charlat that we breed those, we'd use 0:15:03.080 --> 0:15:07.760 artificial insemination. The original AI and agriculture had artificial intelligence 0:15:08.120 --> 0:15:12.760 to inseminate the cows, and dairy farmers are making more 0:15:12.800 --> 0:15:16.160 money on that these days. So about five years ago, 0:15:16.840 --> 0:15:20.600 back to Tracy's original question, a dairy farmer was making 0:15:20.640 --> 0:15:23.600 about one dollar per hundred weight per hundred pounds of 0:15:23.600 --> 0:15:27.480 milk equivalent from beef sales, and say a dairy farmer's 0:15:27.520 --> 0:15:30.000 making eighteen to twenty, So it wasn't eighteen to twenty 0:15:30.000 --> 0:15:32.200 dollars per hundred weight for milk. It wasn't a big deal. 0:15:32.640 --> 0:15:35.160 But today that number has gone to four four fifty. 0:15:35.320 --> 0:15:39.360 So we're generating a baby black heighted calf. An angus 0:15:39.400 --> 0:15:42.720 calf that's destined for a feed lot eventually is selling 0:15:42.760 --> 0:15:46.000 between twelve and eighteen hundred dollars right now, and so 0:15:46.040 --> 0:15:49.560 it's a big revenue stream doesn't no matter what size 0:15:49.600 --> 0:16:04.800 your farmers, everybody can play. 0:16:07.000 --> 0:16:10.680 So when you're talking about improving sort of butterfat and 0:16:10.840 --> 0:16:14.080 so forth, what is going is it selective breeding? That 0:16:14.240 --> 0:16:16.680 just means that you're more likely to get a baby 0:16:16.760 --> 0:16:20.800 cow that has high levels of whatever you're looking for, like, what. 0:16:20.800 --> 0:16:22.000 Is better production rate? 0:16:22.120 --> 0:16:25.280 Yeah, what is the source of I guess higher yields. 0:16:25.560 --> 0:16:28.880 So I'm past president of Holstein Association USA, which is 0:16:28.920 --> 0:16:32.080 the largest dairy breed organization in the world, and that 0:16:32.160 --> 0:16:35.440 source is a bundle of metrics. We study a lot 0:16:35.480 --> 0:16:39.040 of traits. Certainly the big two would be butterfat, well 0:16:39.080 --> 0:16:41.800 big three would be butter fat, protein, and milk, but 0:16:42.080 --> 0:16:45.280 we are also looking at mass titus, resistance or that 0:16:45.360 --> 0:16:48.040 you know, the ability to combat and infection. In the 0:16:48.080 --> 0:16:51.560 other we're looking for longevity, which as a trait we 0:16:51.600 --> 0:16:54.840 call productive life, or even daughter pregnancy rate, which is 0:16:54.840 --> 0:16:58.800 a fertility metric. So that's this bundle of better yields 0:16:58.840 --> 0:17:03.320 from the cow and reduce costs from the standpoint of 0:17:03.560 --> 0:17:07.360 healthcare and those kind of things. And right now, if 0:17:07.400 --> 0:17:10.240 you use the best group of Holstein bulls or even 0:17:10.320 --> 0:17:14.320 Jersey bulls on the next generation, each year, we're improving 0:17:14.520 --> 0:17:18.600 genetics one hundred dollars per year. Prior to genomics that 0:17:18.680 --> 0:17:22.399 number was like thirteen dollars. So this is like significant 0:17:23.080 --> 0:17:28.639 improvement and using natural science and really doing a better job. 0:17:29.320 --> 0:17:34.440 Sorry, I started laughing at the mastitis reference because it's hilarious. 0:17:34.840 --> 0:17:35.560 It's hilarious. 0:17:35.680 --> 0:17:35.760 No. 0:17:35.960 --> 0:17:39.520 One of the old timey solutions for this in that 0:17:39.600 --> 0:17:43.439 old book was using a bicycle pump to inflate the 0:17:43.480 --> 0:17:47.040 cows utters. Huh, So I'm guessing people don't do that 0:17:47.160 --> 0:17:48.040 so much anymore. 0:17:48.600 --> 0:17:52.040 That is true, we do not do that any Okay. 0:17:52.280 --> 0:17:55.840 What about you know you're talking about income that dairy 0:17:55.880 --> 0:17:59.360 farms can generate. What's going on with the actual input 0:17:59.440 --> 0:18:03.639 prices because it takes a lot, again from reading this book, 0:18:03.920 --> 0:18:06.240 takes a lot of feed, a lot of hay, a 0:18:06.240 --> 0:18:10.160 lot of grains to actually get these cows producing milk 0:18:10.280 --> 0:18:12.320 and also up to size if you're going to sell 0:18:12.359 --> 0:18:12.920 them for beef. 0:18:13.480 --> 0:18:16.600 So the biggest costs on a dairy farm are feed 0:18:16.640 --> 0:18:20.000 and labor. My wife's family was actually the first to 0:18:20.080 --> 0:18:22.760 put robots in twenty five years ago in the United 0:18:22.760 --> 0:18:25.680 States start milking their cow. So some farmers are using 0:18:25.760 --> 0:18:30.119 robot technology, but that's not exactly mainstream at this point. 0:18:30.280 --> 0:18:34.040 But look at the near term prices for feed soybean 0:18:34.240 --> 0:18:37.720 and corn grain, certainly in LFELFA are some of the 0:18:37.720 --> 0:18:41.880 core constituents. Those prices are down now that's a good 0:18:41.880 --> 0:18:44.200 thing if you're a livestock producer, not a great thing 0:18:44.320 --> 0:18:47.760 if you're a row crop farmer. The other thing, these days, 0:18:48.040 --> 0:18:51.720 thirty seven percent of the US corn crop actually goes 0:18:51.760 --> 0:18:56.960 to biofuels ethanol, so there's byproduct feeds there as well 0:18:57.000 --> 0:19:01.720 as in the soybean space. We're making biodiesel and one 0:19:01.760 --> 0:19:04.359 of the by products of that is soybean meals. So 0:19:04.400 --> 0:19:08.160 the cow is a great recycler. In fact, that four 0:19:08.240 --> 0:19:11.160 stomachs of the cow allow her to eat a lot 0:19:11.200 --> 0:19:14.000 of by product feeds. And I've traveled I think I've 0:19:14.000 --> 0:19:16.320 been to forty eight states covering the dairy industry. 0:19:16.560 --> 0:19:16.720 You know. 0:19:16.760 --> 0:19:20.600 I've seen tomatoes and carrots that didn't make human grade 0:19:20.920 --> 0:19:23.119 food in California get fed to cows. I've been in 0:19:23.119 --> 0:19:27.119 Ohio where reject jelly from smuckers has been fed to cows. 0:19:27.160 --> 0:19:30.639 I've been to Canada where a farmer plows out driveway 0:19:30.800 --> 0:19:34.200 next door of the plant that makes biscuits for McDonald's 0:19:34.200 --> 0:19:37.000 and the reject biscuits go into what is a total 0:19:37.040 --> 0:19:40.000 mixed ration a TMR, So it's a big food blender 0:19:40.480 --> 0:19:42.760 mixes up all the food and the cows get a 0:19:43.080 --> 0:19:45.959 blended diet. So it's kind of a remarkable story. 0:19:46.520 --> 0:19:49.840 Honestly, a cow fed on McDonald's biscuit sounds pretty good. 0:19:49.880 --> 0:19:52.440 So great. It sounds like a cow is just an 0:19:52.440 --> 0:19:57.560 amazing machine. All of these discarded food products go in 0:19:58.200 --> 0:20:00.640 that people that there are no other use because most 0:20:00.640 --> 0:20:02.880 of us don't have four stomachs. And then every year 0:20:02.960 --> 0:20:05.520 the cows get better at production, or you get better 0:20:05.760 --> 0:20:09.959 at producing higher producing cows. Sounds like a great business. 0:20:10.400 --> 0:20:15.239 It is remarkable. And that's why. Even though milk is 0:20:15.320 --> 0:20:18.959 a product that is very consistent, every farm is different 0:20:19.000 --> 0:20:21.400 and however they approach it. You know, there's very there's 0:20:21.400 --> 0:20:24.240 similarities to it, but there's a lot of regional differences 0:20:24.240 --> 0:20:24.720 as well. 0:20:25.119 --> 0:20:29.879 Wait, okay, so cows might be amazing machines. Amazing machines. 0:20:29.960 --> 0:20:30.920 Yeah, good machines. 0:20:31.000 --> 0:20:32.720 Thank you. I had to get at least one pun 0:20:32.800 --> 0:20:38.480 in there. But the dairy industry, we hear, has been challenged, right, 0:20:38.560 --> 0:20:41.000 So consumption has been going down. I think I read 0:20:41.040 --> 0:20:44.080 somewhere it's down forty percent in the US since nineteen 0:20:44.160 --> 0:20:49.960 seventy five something like that. Profit margins are still pretty compressed. 0:20:50.440 --> 0:20:53.439 Prices seem to be on basically it's a race to 0:20:53.520 --> 0:20:55.320 the bottom, and so you've kind of seen a lot 0:20:55.359 --> 0:20:59.480 of consolidation of the smaller farms into these big dairy conglomerates. 0:20:59.560 --> 0:21:00.879 Is that this story there? 0:21:01.520 --> 0:21:04.560 Well, I want to back up first though. Dairy consumption 0:21:04.720 --> 0:21:07.359 is actually at the highest level it's been in forty years, 0:21:07.400 --> 0:21:10.040 and we measure that. We have some really good USDA 0:21:10.160 --> 0:21:13.560 data on that. But if you look at your term, 0:21:13.720 --> 0:21:16.080 you know, we started out talking about fair Life, that's 0:21:16.800 --> 0:21:20.440 Coca Cola's newest one billion dollar brand. If you look 0:21:20.480 --> 0:21:24.760 at yogurt year over a year, it's up almost ten percent. 0:21:24.880 --> 0:21:27.600 One of the big stories in the yogurt category is 0:21:28.520 --> 0:21:32.360 certainly Shabani and I would have half of the sales 0:21:32.359 --> 0:21:35.320 of yogurt these days are Greek yogurt, which are high 0:21:35.320 --> 0:21:39.440 protein yogurt. Another category that's been exploding. It's we made 0:21:39.600 --> 0:21:43.600 Grandma's cottage cheese hip again, and cottage cheese is up. 0:21:43.600 --> 0:21:46.200 The cottage cheese is great. I always thought it always 0:21:46.240 --> 0:21:48.520 feels like it should have a moment more like Greek yogurt, 0:21:48.560 --> 0:21:50.280 and it's like, oh, this is cottage cheese is year? 0:21:50.400 --> 0:21:51.480 Is it finally happening? 0:21:52.040 --> 0:21:54.960 It is? And people can't make it fast enough. I 0:21:55.040 --> 0:22:00.000 was actually talking to a dairy processor at Wisconsin Cheesemakers 0:22:00.520 --> 0:22:03.520 just last week when it comes to yogurt, and one 0:22:03.560 --> 0:22:07.600 of his customers said, can you get me more? And 0:22:07.640 --> 0:22:09.640