WEBVTT
00:00:11.039 --> 00:00:20.160
Hello and welcome to Cat BDC with the Capital Collector Daily today, which is Friday, October 30th, and we're going to talk about investment in dairy processing facilities.
00:00:20.480 --> 00:00:27.199
How to be smart about preserving your ranch legacy and what lenders are going to look for as you go to renew your farm loans this year.
00:00:27.359 --> 00:00:28.960
So let's get to it.
00:00:29.359 --> 00:00:37.679
America's dairy processors are investing more than$15 billion in new and expanded manufacturing capacity across 23 states.
00:00:38.079 --> 00:00:46.880
More than 85 projects planned are underway through 2030, according to a new analysis from the International Dairy Foods Association.
00:00:47.439 --> 00:00:57.039
The investments span nearly every major dairy category and include new plants, facility expansions, additional processing lines, and modernization projects.
00:00:57.280 --> 00:01:00.159
They reflect strong confidence in the future of U.S.
00:01:00.320 --> 00:01:11.120
dairy as companies add capacity to produce more high-protein, nutrient-dense dairy foods to meet growing domestic demand and expand export opportunities.
00:01:11.359 --> 00:01:21.439
The investment comes as dairy manufacturing is projected to outpace the broader manufacturing sector in both employment and output growth over the next decade.
00:01:22.079 --> 00:01:22.400
U.S.
00:01:22.480 --> 00:01:33.599
Bureau of Labor Statistic projects dairy product manufacturing employment will increase 5.6% over the next 10 years, compared with 3.5% growth for total U.S.
00:01:33.760 --> 00:01:37.519
employment and just 0.6% for manufacturing overall.
00:01:38.079 --> 00:01:51.040
Inflation-adjusted dairy manufacturing output is projected to rise nearly 30% over the same period from$138.5 billion to$179 billion over the same period.
00:01:51.760 --> 00:02:04.400
Top five states by investment total are New York at$2.8 billion, Texas at$1.7, Michigan at$1.43 billion, Wisconsin at$1.4 billion, and Pennsylvania at$1.4 billion.
00:02:05.680 --> 00:02:22.479
Investments by product category include milk or cream at$5.63 billion, cheese at$3.76, yogurt and cultured dairy at$3.07, butters and powders at$1.086, and ice cream at$745 million.
00:02:22.960 --> 00:02:29.919
There's more information, including a detailed map of where investments are happening that can be accessed through BlackDirtDaily.com.
00:02:31.199 --> 00:02:43.439
Moving over to beef news, it's easy to pour everything back into the ranch, but that strategy can unintentionally break the legacy if life deals an unexpected card and the transition plans aren't strategic.
00:02:43.759 --> 00:02:58.639
Donovan Wagner with Wagner Financial Services says that almost everyone thinks that their equity is in the farm, but the issue is that with that is someday health issues happen or they get old and can't make it work on their own anymore.
00:02:59.120 --> 00:03:02.639
Transition planning is a key topic Wagner is passionate about.
00:03:02.879 --> 00:03:10.159
There's a variety of tools to take care of yourself, spouses, on-farm children, and off-farm children in a fair manner.
00:03:10.639 --> 00:03:19.680
He says the senior generation has to pass this on to them through the next generation so they can afford to take it over, and there's a lot of ways of doing that.
00:03:19.919 --> 00:03:23.599
One of the first tools Wagner highlights is life insurance.
00:03:23.840 --> 00:03:33.919
Those policies can be used to take care of a surviving spouse or provide a fair share to off-farm children, which simplifies transition planning for the on-farm children.
00:03:34.159 --> 00:03:40.479
Another almost hidden opportunity with life insurance is to use it in place of a long-term care policy.
00:03:40.719 --> 00:03:47.919
When written properly, families can receive up to 4% of the death benefit per month to cover long-term care costs.
00:03:48.319 --> 00:03:58.159
Additional financial tools that aid in transition planning include simplified employee pension plans and Roth IRAs to serve as dedicated retirement funds.
00:03:59.039 --> 00:04:05.280
As always, there's a lot more to this Drover's article available through the link on BlackDirtDaily.com.
00:04:06.719 --> 00:04:16.160
Wrapping up with some general ag finance news, farmers will be sitting down with their creditors to review financials and negotiate funding needs for 2027 pretty soon.
00:04:16.639 --> 00:04:28.319
Margins may be tight, but lenders emphasize the loan renewal process and the parameters for constructive conversations haven't changed, and it's key to walk in ready and with a plan.
00:04:28.639 --> 00:04:33.759
That means knowing your numbers because lenders will scrutinize your books closer than ever.
00:04:34.560 --> 00:04:50.480
Several established bank benchmarks offer a quick read on a farm operations financial health, typically focus focusing on liquidity, solvency, profitability, repayment cap repayment capacity, and financial efficiency.
00:04:50.879 --> 00:04:57.439
Ratios vary with the industry's overall margins, and lenders recognize that every client's operation is different.
00:04:57.680 --> 00:05:02.639
Under today's financial stress, they are paying particular attention to three metrics.
00:05:03.040 --> 00:05:14.079
First is working capital, which measures the cash cushion available after current liabilities are subtracted from current assets, which is the first line of defense in a down year.
00:05:14.319 --> 00:05:19.199
The lender benchmark is a minimum ratio of 1.25 to 1.5.
00:05:20.959 --> 00:05:28.319
Total debt coverage reflects whether your operation generates enough cash flow to cover all debt payments, including principal and interest.
00:05:28.480 --> 00:05:31.680
Falling below the threshold signals cash flow stress.
00:05:31.839 --> 00:05:35.839
The lender benchmark here is 1.25 or better.
00:05:36.560 --> 00:05:44.160
The third is debt to worth, which compares total liabilities to total net worth and indicates how leveraged your operation is.
00:05:44.560 --> 00:05:48.000
Higher ratio means more risk for both the farmer and the lender.
00:05:48.240 --> 00:05:51.279
The lender benchmark here is below 2.5.
00:05:52.879 --> 00:05:53.920
Well, that's all for now.
00:05:54.000 --> 00:05:55.199
As always, thanks for tuning in.
00:05:55.279 --> 00:05:57.040
If you found it useful, drop me a comment.
00:05:57.199 --> 00:06:03.839
Be sure to check out blackdeartdaily.com for the full stories behind these topics, and don't forget to sign up for the newsletter.
00:06:04.079 --> 00:06:07.600
I'll be back Monday with more business news across Ag and Financial Markets.
00:06:07.759 --> 00:06:10.959
Until then, I'm Mike Opperman, and goodbye for now.
00:00:11.039 --> 00:00:20.160
Hello and welcome to Cat BDC with the Capital Collector Daily today, which is Friday, October 30th, and we're going to talk about investment in dairy processing facilities.
00:00:20.480 --> 00:00:27.199
How to be smart about preserving your ranch legacy and what lenders are going to look for as you go to renew your farm loans this year.
00:00:27.359 --> 00:00:28.960
So let's get to it.
00:00:29.359 --> 00:00:37.679
America's dairy processors are investing more than$15 billion in new and expanded manufacturing capacity across 23 states.
00:00:38.079 --> 00:00:46.880
More than 85 projects planned are underway through 2030, according to a new analysis from the International Dairy Foods Association.
00:00:47.439 --> 00:00:57.039
The investments span nearly every major dairy category and include new plants, facility expansions, additional processing lines, and modernization projects.
00:00:57.280 --> 00:01:00.159
They reflect strong confidence in the future of U.S.
00:01:00.320 --> 00:01:11.120
dairy as companies add capacity to produce more high-protein, nutrient-dense dairy foods to meet growing domestic demand and expand export opportunities.
00:01:11.359 --> 00:01:21.439
The investment comes as dairy manufacturing is projected to outpace the broader manufacturing sector in both employment and output growth over the next decade.
00:01:22.079 --> 00:01:22.400
U.S.
00:01:22.480 --> 00:01:33.599
Bureau of Labor Statistic projects dairy product manufacturing employment will increase 5.6% over the next 10 years, compared with 3.5% growth for total U.S.
00:01:33.760 --> 00:01:37.519
employment and just 0.6% for manufacturing overall.
00:01:38.079 --> 00:01:51.040
Inflation-adjusted dairy manufacturing output is projected to rise nearly 30% over the same period from$138.5 billion to$179 billion over the same period.
00:01:51.760 --> 00:02:04.400
Top five states by investment total are New York at$2.8 billion, Texas at$1.7, Michigan at$1.43 billion, Wisconsin at$1.4 billion, and Pennsylvania at$1.4 billion.
00:02:05.680 --> 00:02:22.479
Investments by product category include milk or cream at$5.63 billion, cheese at$3.76, yogurt and cultured dairy at$3.07, butters and powders at$1.086, and ice cream at$745 million.
00:02:22.960 --> 00:02:29.919
There's more information, including a detailed map of where investments are happening that can be accessed through BlackDirtDaily.com.
00:02:31.199 --> 00:02:43.439
Moving over to beef news, it's easy to pour everything back into the ranch, but that strategy can unintentionally break the legacy if life deals an unexpected card and the transition plans aren't strategic.
00:02:43.759 --> 00:02:58.639
Donovan Wagner with Wagner Financial Services says that almost everyone thinks that their equity is in the farm, but the issue is that with that is someday health issues happen or they get old and can't make it work on their own anymore.
00:02:59.120 --> 00:03:02.639
Transition planning is a key topic Wagner is passionate about.
00:03:02.879 --> 00:03:10.159
There's a variety of tools to take care of yourself, spouses, on-farm children, and off-farm children in a fair manner.
00:03:10.639 --> 00:03:19.680
He says the senior generation has to pass this on to them through the next generation so they can afford to take it over, and there's a lot of ways of doing that.
00:03:19.919 --> 00:03:23.599
One of the first tools Wagner highlights is life insurance.
00:03:23.840 --> 00:03:33.919
Those policies can be used to take care of a surviving spouse or provide a fair share to off-farm children, which simplifies transition planning for the on-farm children.
00:03:34.159 --> 00:03:40.479
Another almost hidden opportunity with life insurance is to use it in place of a long-term care policy.
00:03:40.719 --> 00:03:47.919
When written properly, families can receive up to 4% of the death benefit per month to cover long-term care costs.
00:03:48.319 --> 00:03:58.159
Additional financial tools that aid in transition planning include simplified employee pension plans and Roth IRAs to serve as dedicated retirement funds.
00:03:59.039 --> 00:04:05.280
As always, there's a lot more to this Drover's article available through the link on BlackDirtDaily.com.
00:04:06.719 --> 00:04:16.160
Wrapping up with some general ag finance news, farmers will be sitting down with their creditors to review financials and negotiate funding needs for 2027 pretty soon.
00:04:16.639 --> 00:04:28.319
Margins may be tight, but lenders emphasize the loan renewal process and the parameters for constructive conversations haven't changed, and it's key to walk in ready and with a plan.
00:04:28.639 --> 00:04:33.759
That means knowing your numbers because lenders will scrutinize your books closer than ever.
00:04:34.560 --> 00:04:50.480
Several established bank benchmarks offer a quick read on a farm operations financial health, typically focus focusing on liquidity, solvency, profitability, repayment cap repayment capacity, and financial efficiency.
00:04:50.879 --> 00:04:57.439
Ratios vary with the industry's overall margins, and lenders recognize that every client's operation is different.
00:04:57.680 --> 00:05:02.639
Under today's financial stress, they are paying particular attention to three metrics.
00:05:03.040 --> 00:05:14.079
First is working capital, which measures the cash cushion available after current liabilities are subtracted from current assets, which is the first line of defense in a down year.
00:05:14.319 --> 00:05:19.199
The lender benchmark is a minimum ratio of 1.25 to 1.5.
00:05:20.959 --> 00:05:28.319
Total debt coverage reflects whether your operation generates enough cash flow to cover all debt payments, including principal and interest.
00:05:28.480 --> 00:05:31.680
Falling below the threshold signals cash flow stress.
00:05:31.839 --> 00:05:35.839
The lender benchmark here is 1.25 or better.
00:05:36.560 --> 00:05:44.160
The third is debt to worth, which compares total liabilities to total net worth and indicates how leveraged your operation is.
00:05:44.560 --> 00:05:48.000
Higher ratio means more risk for both the farmer and the lender.
00:05:48.240 --> 00:05:51.279
The lender benchmark here is below 2.5.
00:05:52.879 --> 00:05:53.920
Well, that's all for now.
00:05:54.000 --> 00:05:55.199
As always, thanks for tuning in.
00:05:55.279 --> 00:05:57.040
If you found it useful, drop me a comment.
00:05:57.199 --> 00:06:03.839
Be sure to check out blackdeartdaily.com for the full stories behind these topics, and don't forget to sign up for the newsletter.
00:06:04.079 --> 00:06:07.600
I'll be back Monday with more business news across Ag and Financial Markets.
00:06:07.759 --> 00:06:10.959
Until then, I'm Mike Opperman, and goodbye for now.
