The great rebalancing of 2026 has taught dairy producers a vital lesson: You cannot control the wind, but you can certainly adjust your sails. While much of the industry’s focus remains on milk checks and component values, a silent predator often lurks in the shadows of the balance sheet — the fuel pump.
For an operation like McCarty Family Farms in Rexford, Kan., the 2025 Milk Business Leader in Technology Award winner, which milks thousands of cows across multiple states, the scale of production is matched only by the scale of its energy requirements. With feed trucks, tractors and skid steers running 24/7, fuel is not just a line item; it is the lifeblood of the operation. And in an era of global energy volatility, leaving that lifeblood to the whims of the spot market is a risk Ken McCarty, co-owner and manager, is unwilling to take.
The Math of the Spike
To understand the McCarty strategy, one must first understand the stakes. On a modern, large dairy, the equipment never stops. The sheer volume of TMR moved and the constant management of manure requires a fleet that consumes thousands of gallons of diesel every week.
For large herds, like McCarty’s, a 50¢ spike in diesel can derail a quarterly budget. In reality, that half-dollar move isn’t just an inconvenience; it represents a massive shift in capital that could have been reinvested in herd health, technology or labor. By locking in fuel prices, McCarty isn’t just buying diesel; he is buying the psychological and financial stability required to manage a complex organization.
The 18-Month Horizon: A Layered Approach
The McCarty strategy is defined by its proactivity. While many producers wait for a good day at the local co-op, McCarty and his team are looking 12 to 18 months into the future. They don’t view fuel procurement as a single transaction but rather as a continuous process of layering.
The process begins with a deep dive into data. Working closely with their fuel seller, they evaluate historical usage patterns. They don’t just look at what they used last year; they account for upcoming changes, whether that’s an expansion in acreage, a shift in equipment efficiency or a change in the beef-on-dairy program that might increase hauling requirements.
Once the known demand is established, the layering begins. As forward months become available on the market, the McCarty team begins to book physical gallons. The goal is to reach approximately 90% coverage by the start of the budget year on Jan. 1.
Mitigation, Not Speculation
Perhaps the most important takeaway for other producers is the McCarty philosophy on winning. In a world of high-frequency trading and market gurus, it is easy to fall into the trap of trying to time the bottom of the market. Ken McCarty is quick to dispel that notion.
“We have never viewed this as a money-making strategy,” he says. “Instead, it is purely a risk mitigation strategy.”
For McCarty, the goal isn’t to hit the absolute lowest price of the year — a feat that is more about luck than skill. Instead, the benchmark is historical consistency. If the farm can land in the bottom third or bottom half of the 5- to 10-year historical average or even just maintain consistency year-over-year, the strategy is a success. This consistent-cost model allows the farm to set its milk margins with confidence, knowing that this large input on the farm is already settled.
The Hidden Exposures
Even with 90% of their consumed fuel locked in, McCarty acknowledges the limits of the hedge. The farm remains exposed to indirect fuel costs — the market effects on purchased goods and, perhaps most significantly, milk freight increases.
This distinction is crucial for producers to understand. Locking in the diesel for your own tractors doesn’t protect you from the fuel surcharges applied by the third-party haulers moving your milk or the trucks delivering your distillers grains. This reality reinforces why being aggressive on the fuel you can control is so important; it narrows the window of vulnerability on the variables you cannot control.
Beyond the Contract: Efficiency as a Hedge
While forward contracting provides financial protection, McCarty is also focused on the physical side of the equation: consuming less. Every gallon of diesel not burned is a gallon that doesn’t need to be hedged.
The farm is constantly searching for ways to reduce its energy footprint. This includes everything from optimizing feed routes to reduce idling time to investing in newer, more fuel-efficient equipment. In this view, energy efficiency is the ultimate long-term hedge. It is a permanent reduction in exposure that pays dividends regardless of what happens in the energy markets.
“We have lived through times like this in the past and have no desire to repeat it, so ultimately, if we can be in the bottom third or bottom half of the 5- to 10-year historical average, or at least consistent year-over-year, then we are satisfied,” McCarty shares. “Of course, we are constantly searching for ways to consume less fuel and energy in general as an additional method of reducing our exposure to energy markets.”
Lessons for the 500-Cow Producer
While the McCarty scale is vast, the principles are entirely scalable for a modern 500-cow operation. Whether you are milking 40,000 or 500, the great rebalancing of the market means that margins are found in the details.
Compeer Financial ag economist Megan Roberts concurs with McCarty and says hedging isn’t about hitting the top or the bottom of the market; it’s about avoiding the economic risk of doing nothing.
“Risk management strategies, including hedging, are less about predicting the market and more about carefully managing exposure, using consistent, incremental decisions to smooth volatility in a way that fits the needs of your dairy operation,” she says. “Every farm is different, but in today’s environment, having a clear plan in place and following it with discipline is a wise strategy.”
In the end, the McCarty’s approach to fuel is a reflection of its approach to dairy farming as a whole: disciplined, data-driven and focused on the long game. By taking the volatility of the energy market off the table, it allows McCarty’s to focus on what truly drives the farm’s success: the health of the cows and the quality of the milk.
In a year where milk prices are shifting and trade policies are in flux, the lesson from McCarty Family Farms is clear: Protect what you can, manage what you must and never leave your margin to chance.
