Capital Press

Cooperatives Working Together's three dairy herd buyouts in 2009 cost participating members nearly $217 million in payments to producers.

But industry insiders say it's hard to put a dollar amount on how much the seven-year old program with nine retirements thus far has helped.

An economic analysis commissioned by National Milk Producers Federation by Scott Brown, director of the livestock and dairy program at the Food and Agricultural Policy Research Institute at the University of Missouri, seems to be the only such analysis in existence.

Brown's numbers show sending cows to slaughter through the program increased producers' milk prices by $1.61 per hundredweight in 2009 and $0.76 cwt. on average over the 2004 to 2009 period.

"Basically, it did what it was designed to do -- remove milk from the market. In the short term, it worked ... it helped adjust price," said Jamie Bledsoe, president of Western United Dairymen and a Riverdale, Calif., dairyman.

"I think overall they have (helped), not necessarily this last one," said Bill Stouder, a Jerome, Idaho, dairyman. "This last one was not much money. I felt like they just spent money and didn't do much good."

But, he said, CWT didn't cause the dairy price collapse of 2008 and 2009. There wasn't too much milk, just a dramatic loss of markets.

"If I had it to do again, I'd participate again. We still are," he said.

"I think the first one helped; I don't know if subsequent ones have. At the time, it was the most significant price-enhancement program I'd ever seen," said dairy analyst Alan Levitt, publisher of CME Daily Dairy Report.

But herd retirements are a self-reinforcing mechanism, he said.

"You give farmers more money, they'll make more milk. So you have to do another cull," he said.

Clearly, the herd retirements have removed a lot of cows, said dairy analyst Jerry Dryer, publisher of Dairy & Food Market Analyst.

"Personally, I'd rather see them grow the market rather than contain it," he said.

Ken Mathews and Don Blayney, ag economist with USDA's Economic Research Service, said it's difficult to ferret out the price impacts of CWT's herd retirements.

"You can argue it's helped in places they actually bought out the herd," Mathews said. "The one thing it has done is reduced the mature cow inventory."

But it's hard to sort out how much heifer retention and how much of the uptrend in per-cow production have been a result, he said.

"I don't think there's any doubt it had a price impact. But they are short-run times of activity that don't necessarily slow milk supply," Blayney said.

Over time, the output of U.S. cows has been increasing 2 percent per year, he said. Cows being retired are being replaced with better producers.

"Buying out 26,000 or 50,000 cows at one point in time doesn't appear to be enough to slow this aggregate milk supply," he said.

CWT is a way to address short-term, supply-and-demand issues, but it's not a long-term management tool, Blayney said.

"The fact they believed they had to do (9) rounds seems they don't think so either," he added.

Neither the producer nor the facility can go back in the dairy business for one year. If they do, they lose the 10 percent of the payment CWT holds back.

"The cost to CWT of requiring producers and facilities to stay out longer would have been too great and the impact negligible," said Jim Tillison, CWT chief operating officer. And "only a small percentage of producers -- less than 10 percent -- go back in business."

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