An independent economic analysis of the impact of Cooperatives Working Together has found that the historic dairy self-help program has raised farmers' prices by at least 40 cents per hundredweight since it began operations in 2003.

The analysis was performed by Scott Brown, University of Missouri, farm policy expert. Brown examined the impact of CWT's three herd retirements, plus its ongoing export assistance program, while also taking into consideration other factors affecting the dairy supply in 2003-2006, such as the relative shortage of Canadian dairy replacements. His analysis showed that CWT alone was responsible for a minimum 40 cent average increase in prices from 2004-06, apart from the other factors affecting the market.

"At the start of CWT, I was skeptical about the long-term effects that CWT would have on dairy farmers' prices, but the evidence is clear that this program has raised the price that all farmers have received since it first began removing cows at the end of 2003," Brown said.  "For a very modest investment, CWT has netted farmers a very positive return."

The cumulative impact of CWT from the start of 2004 through the first half of 2006 is $1.97 billion in additional producer revenue, according to Brown's evaluation.  It showed that the milk price impact has grown with each herd retirement program. The normal attrition of cows in a herd was taken into consideration in determining the effect on milk production in the years following a herd removal. 

CWT's export assistance program, meanwhile, has been most active in 2006. So far, it has exported the milk equivalent of approximately 500 million pounds, which Brown's analysis showed as boosting farm prices by 9 cents just through the first half of this year. Exports prior to 2006 were minimal and thus had little impact on prices prior to this year.

The head of the National Milk Producers Federation, which manages CWT, said that the independent analysis quantifies what many farmers intuitively understand:  trimming cow numbers, coupled with reducing market supplies, provides a tailwind behind farm-level prices.

"We always believed that CWT was an economically-sound concept, if it could be properly executed," said Jerry Kozak, President and CEO of NMPF. "Dr. Brown's assessment should lay to rest any remaining doubts about whether CWT itself has had a positive rate of return since its inception. Even though we've seen both rising and falling prices since 2003, there is no questions that prices overall are better because of CWT."

Starting with July's milk production, CWT member cooperatives and individual farmers have begun contributing ten cents per hundredweight, an increase of five cents per hundredweight from the initial level of commitment. The higher assessment will run through 2007, and ensures that CWT will be able to fund additional herd retirement efforts, as well as its ongoing export assistance program.

The chart below gives a brief synopsis of the study results. For more detailed information on the economic analysis, click here. (Requires Adobe Acrobat Reader)

CWT, NMPF