Cooperatives Working Together announced today that it will conduct a third herd retirement program this fall, with the intention of removing future milk production capacity to avoid the serious imbalance between supply and demand that last occurred before CWT was created in 2003.
Bids will be accepted by CWT starting on August 15th; all bids must be postmarked by Friday, Sept. 16th, to be considered. All dairy producers interested in submitting bids to sell their herds must be members of CWT, either through their membership in a participating cooperative, or as an independent member of CWT.
This is the third year in a row that CWT has conducted a program that allows dairy farmers to sell out their herds. The first two programs reduced cow numbers by more than 83,000, representing reduced milk production equivalent to 1.6 billion pounds. Since CWT began operations in the summer of 2003, dairy prices have been at or above historical averages, preserving millions of dollars in income for dairy farmers.
"In recent months, cow numbers have climbed up, along with milk output per cow, and that combination doesn’t bode well for future milk prices," said Jerry Kozak, President and CEO of NMPF, which manages CWT. "The CWT management committee, in looking at all of the economic indicators that we track, has decided that we need to proceed now to keep production from swamping demand and bringing prices down to unacceptably low levels."
CWT estimates that there will be approximately 70,000 cows in this third retirement program to reach its goal of reducing future milk output by 1.9 billion pounds. Because this third retirement program is being funded for an 18-month period, the amount of milk those 70,000 cows would have produced is being calculated on an 18-month basis.
In its first herd retirement program, CWT accepted 299 of the2,038 bids submitted. Last year, it accepted 363 of the 736 bids submitted. CWT officials said that there have already been a number of inquiries from interested producers about a third round of bidding.
"Based on our feedback from those whose bids we have accepted previously, we know that most producers view the decision to sell their herds through CWT as a long-term commitment which results in them exiting the business permanently," said Walt Wosje, Chief Operating Officer of CWT. "Despite the strengthened milk prices of the past few years, there are still many farmers who want to exit the business of dairy farming, and we know CWT offers a way for them to do so that benefits their fellow dairy producers and contributes to the health of the entire industry."
Through the herd retirement program, if a farmer’s bid is accepted, CWT pays that farmer for the milk-production value of his or her cows. The farmer is responsible for selling the cows for slaughter, and he keeps the proceeds from that transaction.
In this round, any producer who had his bid accepted in either of the past two rounds, and re-entered the business, is not eligible to participate again. Also, those producers who have a financial interest in more than one farm must submit their milk production records for each of their dairy operations.
As in the past, the herd retirement program will again operate under regional safeguard limits to guarantee that milk capacity reductions in any one region of the country do not negatively impact local supplies. The safeguard limits are strictest in the Northeast, Southeast and Upper Midwest.
For more information on how to participate in CWT’s herd retirement, visit www.cwt.coop, or call 888-Info-CWT (888-463-6298).