Episode Details

A 50-cent diesel move costs a 19,000-cow dairy $427,500 a year. McCarty Family Farms books roughly 90% of next year's diesel before January 1 — and the playbook scales to 500 cows.

With U.S. retail diesel at $5.64/gallon as of May 12, 2026 — up 61% year-over-year — fuel risk is now a lender conversation, not just a line item. This episode breaks down McCarty's three-pillar hedging system: proactive layering, historical benchmarking, and mitigation over speculation. We walk through the barn math on a 50-cent move ($11,250 on 500 cows, $112,500 on 5,000 cows), the hidden exposures a hedge doesn't cover, and the 30-day on-ramp you can start today with no working capital required.

What You'll Learn:

• How a 50-cent diesel move translates to $0.09/cwt on a 200-cow herd — and why that tips marginal lenders from green to yellow
• The three exposures that leak through even a 90% hedge: hauling adjusters, the processing paradox, and embedded energy in feed and parts
• Why McCarty treats beating the spot price as luck, not skill — and books 20–25% layers across 18 months instead
• The Jan 1, 90% rule: how to layer forward gallons in quarterly increments without betting on one price point
• What lenders are starting to ask for before renewing a line of credit — and the one-page energy-risk plan that improves your profile
• Why pairing fuel hedging with DRP and LGM-Dairy is the only way to lock margin across all three legs: milk, feed, and energy

The FMMO Make-Allowance 2025 update trimmed an estimated $0.85–$0.93/cwt off Class III–IV values. Stack that with a $1.00 diesel move and you're looking at budget derailment, not inconvenience. McCarty's system — built with Compeer Financial economist Dr. Megan Roberts — shows how forward-booking diesel at any scale shrinks the surface area of things you can't control. Whether you're milking 500 or 5,000, the question is the same: where does your fuel coverage sit on January 1, and what are you changing this month to get it closer to 90%?

Full article and sources: https://www.thebullvine.com/farm-economics-management/the-427500-diesel-hole-mccarty-locks-shut-before-january-1/

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