ROSEMONT, Ill. – The membership of the National Milk Producers Federation took further steps May 9 toward the creation of a new economic program that it says will balance supply with demand in the dairy marketplace and improve the prices that farmers receive for their milk.
The federation’s board of directors voted overwhelmingly to establish a three-pronged effort to trim domestic milk production over the next year.
Decisions. The federation-led initiative, Cooperatives Working Together, has also received the backing of several other dairy cooperatives not part of the federation membership, and will now formalize the broader participation of additional co-ops and individual dairy producers not affiliated with a dairy cooperative.
The board decided to move ahead with the establishment of the administrative structure of Cooperatives Working Together, and directed the federation’s staff to finish work on the details of the multidimensional new program.
Funding. The board determined that collection of the producer assessment will begin when an adequate level of the nation’s milk production is enrolled in the program. The board set an enrollment target of 80 percent of national production.
Cooperatives Working Together will be funded through an 18 cent per hundredweight assessment on participants in the program.
Three aspects. The money raised by the assessment will be used to fund three efforts that will prune dairy supplies and help stabilize prices: an export assistance program to enhance commercial sales of cheese and butter in foreign markets; a reduced production marketings program to provide incentives for farmers to decrease their milk output; and a herd retirement program that will pay farmers to sell their entire herds of dairy cows.
All three programs will operate on a bid basis, meaning that interested parties will be asked to submit bids to be compensated for their involvement in the activities.
Numbers. Taken together, the three programs are designed to pare milk supplies by 4.6 billion pounds during the 12 months that Cooperatives Working Together is scheduled to operate.
The targeted economic impact of the supply reduction program is an average increase of $1 per hundredweight in the price that farmers receive for their milk.
The federations says Cooperatives Working Together’s rapid development – coming just seven weeks after the board first decide to explore such as program – is a reflection of the fact that farmers across the country are facing the lowest milk prices since 1978.
The USDA recently reported that April’s all-milk price is $10.90 per hundredweight, the lowest in 25 years.
Regions. Five regional targets have been established for the amount of milk output that Cooperatives Working Together reduces. Federation President Jerry Kozak said that the regional parameters “are designed to ensure that we don’t pull milk supplies out of areas that are already struggling with declining milk production.”
Culling cows. In addition, the herd retirement program, which is intended to remove 125,000 milk cows from a national dairy herd of approximately 9.2 million, will be operated to minimize any adverse impact on beef prices.
Typically, 35 million cattle, including 3 million dairy cows, are sent to market each year, so the overall impact of the herd reduction – adding an additional three-tenths of one percent to the nation’s beef supply – “is extremely small when you look at the big picture,” Kozak said.
He indicated that the dairy cattle removed through Cooperatives Working Together will be culled over a four-month period beginning this summer – a time when beef marketing tends to be slower.
Stability? Kozak said that in addition to strengthening producer prices for milk, Cooperatives Working Together will also help provide some stability to farm-level prices that have become increasingly volatile in the past decade.
Although it is intended to operate for 12 months, “we don’t anticipate just walking away from this effective tool we are creating. We can certainly foresee a longer-term role for CWT’s supply-balancing activities,” Kozak said.
The federation board will meet again by June 30 to authorize the final launch of the program.
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