Dairy buyouts continue, increase

SALEM, Ohio – The dairy program that began in 2003 with promises to boost farmers’ milk checks is working on its biggest year yet.
Cooperatives Working Together, better known as CWT, tentatively accepted 448 herds that will be taken out of production before the end of the year. This means 66,000 cows will be slaughtered, which will eliminate 1.2 billion pounds of milk.
The theory is that if the milk supply is cut, prices will go up. And, so far, that plan appears to be working.
Over the past two years, CWT has paid farmers to trim their production and cull their herds, in combination with a cheese and butter export program. Since then, whether coincidence or a direct result of CWT, dairy producers have enjoyed stronger milk prices.
Is there a future? Even though he says it’s been a success, spokesman Chris Galen still isn’t sure of the program’s future.
Although CWT is retiring more cows than ever now that it’s in its third year, the number of farmers who submitted bids was down. This year it was 651 bids, compared to 2,038 in 2003.
And there aren’t funds for the herd retirements to continue for a fourth year, he said.
Farmers in member co-ops will pay 5 cents per hundredweight toward CWT through the end of next year. But the money raised is paying for the current round of retirements, Galen said.
For there to be a herd retirement next year, either the assessment would need to be increased or more farmers and cooperatives would need to join CWT.
Control. Dairyman Davis Denman is one farmer who wouldn’t mind paying a little more to keep the program going and boost prices even more.
Denman estimates he pays about $5 a day toward CWT on his 170-head dairy in Trumbull County, Ohio. He belongs to and is a councilman in one of the participating dairy cooperatives, Dairy Farmers of America.
“Another nickel wouldn’t bother me because it’s a good investment,” he said, adding that even more cows could be taken out of production then.
“I like to see dairy farmers control their own destinies,” he said.
This is a way to control the milk price without the government’s help, Denman said.
Helping each other. Even farmers who don’t necessarily support the program, support that theory behind it.
Farmers helping farmers is always a good idea, said Dave Winchell, a dairyman in Garrettsville, Ohio. It means they’re no longer relying on the government as their safety net because that’s not always guaranteed help.
This was seen most recently when Congress failed to renew the federal government’s Milk Income Loss Contract payments. This program paid farmers when their milk checks fell below a certain baseline.
But Winchell, who does not belong to a member co-op, thinks there are better ways than CWT for farmers to help each other.
One way is to lower the maximum somatic cell count, he said. Farmers would have to ship cows, which would get cows out of production, just like with CWT. But in this case, the low-producing cows would be gone and the quality of milk would improve. Plus farmers wouldn’t have to pay an assessment like they do now, he said.
Besides, no one has proved the increase in the milk check is directly related to CWT, Winchell said.
Influences. There are other factors that may have also influenced the milk price.
There’s the world market, Mother Nature, feed quality.
And then there’s the Canadian border being closed.
Under Canada’s milk quota system, once farmers meet their quota, they unload their cows into the U.S. at a cheap price, said Neil Zehentbauer, a dairy farmer in Hanoverton, Ohio.
This puts more cows, and more milk, into the U.S. So, while CWT works to take dairy cattle out of the country, Canada will just be bringing more in, he said.
Zehentbauer, who is a Dairy Farmers of America member and pays the assessment, thinks CWT is a decent program but says more emphasis needs to be put on keeping the Canadian border closed or his milk check may begin dropping again.
Reason to retire. The program has its place, though, Zehentbauer said.
For a farmer who wants to retire, CWT is a way to get a decent sale.
The Weigel brothers in Lorain County, Ohio, were at the point three years ago where they either needed to renovate their 50-head dairy or sell.
The three brothers, Albert, James and Jerry, were all close to 50 years old and if they made improvements to the farm, they’d be tied to milking another 25 years, Albert Weigel said.
It wasn’t a high-producing herd, Weigel said, and they knew CWT would bring the same amount of money as a dispersal sale, but without the hassles.
So they sent a bid to CWT in 2003 and about a month later got their acceptance call.
Within a week, an auditor came to the farm, tagged the cows, and the Weigels were out of the dairy business.
True impact. These situations make it hard to gauge the program’s true impact, said Cameron Thraen, Ohio State dairy economist.
In the late 1980s when the federal government had a dairy buyout program, studies found that 50 percent to 60 percent of the animals sold, would’ve been sold anyway, he said.
You have to ask, Thraen said, how many of these 448 farms participating in CWT this year would be selling even without the program?
There’s not much doubt that the program is successful, but just how successful is hard to tell, he said.
(Reporter Kristy Hebert welcomes feedback by phone at 800-837-3419, ext. 23 or by e-mail at khebert@farmanddairy.com.)

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CWT numbers close to home

The Cooperatives Working Together program splits the country into five sections and caps how much milk production can be cut from each. This is so no area is disproportionately affected. Ohio is in the Upper Midwest region and Pennsylvania is in the Northeast region.

HERD RETIREMENTS

2003

Ohio 11 bids accepted, representing 12 million pounds of milk
Pa. 13 bids accepted, representing 10 million pounds of milk

2004

Ohio 12 bids accepted, representing 10 1/2 million pounds of milk
Pa. 22 bids accepted, representing 23 million pounds of milk

(Source: Chris Galen, National Milk Producers Federation)