Posted: Thursday, November 11, 2010 11:00 AM
Lower assessment planned to help boost participation
Cooperatives Working Together's board of directors has voted to end herd retirements and focus exclusively on export assistance.
"Frankly, herd retirements have pretty much run their course," said Jim Tillison, CWT chief operating officer.
The 68 percent of dairymen supporting CWT are tired of the free-rider situation, he said. With an assessment of 10 cents per hundredweight, participating dairymen are contributing a significant amount of money that benefits all U.S. producers by decreasing cow numbers.
The voluntary herd retirement program "has reached a point of diminishing returns, where there were a declining number of member farms that were expecting to use CWT as a means to liquidate their herds," Jerry Kozak, president and CEO of National Milk Producers Federation, said in a press release announcing the decision, which was made Oct. 26.
The three herd retirements in 2009 retired 791 herds at an average of 300 cows each. The single herd retirement in 2010 bought out 187 herds at an average of 160 cows, Tillison said.
In March, CWT began investing in export markets, offering assistance to processors on export sales of cheese, butter and butterfat. Since then, the program has assisted in export sales of more than 1 billion pounds of product.
CWT officials see foreign markets as the greatest potential for affecting producers' bottom lines, Kozak said.
Exports now represent U.S. dairy's fastest-growing market, according to National Milk Producers Federation.
"The return on the export assistance program is fairly close to the return on herd retirement," Tillison said.
An analysis by Scott Brown, program director of livestock and dairy at the Food and Agricultural Policy Research Institute at the University of Missouri, showed that every dollar of export assistance returned $15.53 to dairy farmers in 2010.
The herd-retirement program, begun in 2003, returned $19.12 for every dollar invested, Tillison said.
CWT's new, two-year program, beginning Jan. 1, will be funded at 2 cents a hundredweight, down from 10 cents a hundredweight, and will require 75 percent participation to continue the program. In the coming weeks, CWT officials will be reaching out to co-ops and independent dairymen to attain the needed participation.
Tillison said he believes that level of participation won't be a problem.
Some co-ops disagreed with herd retirements, because it reduced supply and created the potential for increased imports. They prefer to build markets, he said.
"For 2 cents per head, the return on the amount of money invested is significant. A return of $15.53 on every dollar is nothing to sneeze at," he said.
CWT's budget for the two-year program is $40 million a year, which includes a $15 million carryover from 2010. Its previous two-year budget totaled $300 million.