The return this year on dairy producers’ investment in Cooperatives Working Together will be at least 75-cents per hundredweight, according to an independent economic analysis of the program.

Scott Brown, University of Missouri Food and Agricultural Policy Research Institute ag economist, evaluated the impact of CWT’s 2007 herd retirement and its export assistance activities during the first half of 2007. He also evaluated the effects of CWT’s past activities.

Brown’s analysis shows that the combination of CWT programs — herd retirement and export assistance — helped raise farm-level milk prices by 75 cents per cwt. this year. That’s up from 67 cents in 2006, 42 cents in 2005, 18 cents in 2004 and 5 cents in the brief time the program operated in 2003.

CWT has had a growing influence on the financial returns of dairy farmers,” says Brown. “My economic models account for the variety of supply and demand factors affecting prices, include that fact that in response to CWT, some producers have added cows and produced more milk.” When you separate out all the other factors affecting milk production, the fact remains that CWT has boosted the milk check of each farmer by 75 cents per cwt. this year, he adds.

The analysis also shows that, as a result of the program, U.S. dairy cow numbers are a net 66,000 head fewer than they would have been without CWT. This figure includes the reduction produced by the program’s four herd retirements and also factors in the reduction in the heifers those cows would have produced.

Furthermore, CWT’s export activities have picked up the pace, especially during the past two years. The program has exported the milk equivalent of 1 billion pounds of milk in 2006 and nearly an additional billion pounds in the first six months of 2007.

“The exports of cheese, butter and anhydrous milkfat have added 12 cents per cwt. to farmer’s checks in 2006 and 13 cents per cwt. so far this year,” says Brown. The impact of the CWT export program will grow if CWT assists more exports this fall and winter.

“Brown’s assessment demonstrates that CWT’s modest investment provides farmers a significant amount of economic leverage in the marketplace,” says Jerry Kozak, president and chief executive officers of the National Milk Producers Federation. “Whenever dairy producers wonder about what they can achieve collectively, they need only to look at the eight-fold return on investment that they get with CWT to find an answer.”

CWT member cooperatives and individual producers contribute 10 cents per cwt. through 2007 to fund the program. And the cooperative and individual producers on the CWT Committee voted in June to recommend the program’s continuation in 2008.

CWT has also raised its target price benchmarks from $14 to $16 per cwt., in light of the ongoing challenges that farmers face with higher cost of production due to higher feed and fuels expenses. That farm-level price benchmark is a key determinant of when CWT decided to conduct activities that tighten supply.

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Source: CWT