NMPF scales back CWT milk
supply-balancing plan
By Patrick Duffey, Writer
Editor
USDA Rural Development
patrick.duffey@usda.gov
ressed against the barn
wall by some of the lowest
milk prices in a quarter
century, the nation’s dairy
industry has approved a
scaled-back version of the Cooperatives
Working Together (CWT) program, an
attempt to boost milk prices by reducing
production to better meet demand. The
first CWT proposal, drafted by the
National Milk Producers Federation,
failed to garner the needed 80 percent
support level, so NMPF scaled back the
program, lowering the level of support
needed to 70 percent, which it got.
“We’re thrilled to be able to move
forward with CWT,” said NMPF President
and CEO Jerry Kozak. “This
groundbreaking program is tremendously
important for the dairy-producer
community.”
The original CWT proposal called
for producers to pay an 18-cent-per-hundredweight
assessment to fund the program.
The revised CWT program would
reduce the assessment to five-cents per-hundredweight for participating dairy
producers. The goal would be to reduce
milk supplies by 1.2 billion pounds during
the next year. The money raised
would be used to pay some farmers to
“retire” their herds, cut back production
and for an export assistance program.
“The revised CWT program will still
offer a 400-percent return on investment,”
NMPF President and CEO Jerry
Kozak said. The five-cent-per-hundredweight
CWT assessment would
raise all milk prices an average of
23 cents per hundredweight,
even when factoring in the cost
of the CWT assessment and
lower government program payments,
Kozak said. Some dairy
co-ops not affiliated with
NMPF, as well as many producers
who do not belong to a coop,
are still supporting CWT, he noted.
NMPF, which represents more than
30 of the major dairy marketing cooperatives
and 60,000 dairy farmers who produce
70 percent of the nation’s milk, also
proposed the original CWT program as
a three-pronged effort to boost depressed
on-farm prices by better balancing
supply with demand. To succeed,
NMPF needed to get individual producers
to collectively commit 80 percent of
the nation’s milk supply to the original
CWT program by June 30, but it failed
to do so. According to press reports, the
plan faced considerable opposition
among small farmers in the Upper Midwest,
particularly in Wisconsin.
In its May newsletter, Prairie Farms
Dairy Inc., a co-op based in Carlinville,
Ill., said the original CWT was a bold
and well-intentioned proposal, but said
it could not urge a “yes” vote for a number
of reasons. These included the concern
that the 70 percent of producers
who belong to NMPF would have to
carry the burden for the other 30 percent.
It also noted that the program
“does not sell one more quart of milk or
slice of cheese” and the co-op questioned
whether the export incentives
would work more than briefly, as the
rest of the world would most likely
“soon adjust to lower prices in order to
maintain market share.”
The three major components of the
original CWT program included:
- A $60 million export assistance
program (aimed at Central and South
America and Asian countries) to stimulate
exports and clear inventory from
the U.S. market place by paying manufacturers
and exporters a bonus, on
bid basis, for cheese and butterfats destined
for foreign commercial markets.
The target was to remove 1.6 billion
pounds of milk.
- An $18 million reduced milk marketing
program that would have provided
incentives for producers to
decrease the amount of milk they ship
by at least 10 percent. Producers would
submit bids stating how much they
would accept for selling their entire
herd for slaughter. The goal was to
eliminate 460 million pounds of milk a
year from the market, or about 3 percent
of the national supply.
- The $112 million herd-reduction
plan would have removed 125,300 milk
cows (less than 4 percent from the
nation’s herd of 9.2 million cows) or the
annual equivalent of 2.07 billion pounds.
The herd reduction plan was aimed at
retiring farmers, who would be induced
to sell their herds into slaughter rather
than sell to another producer. But farmers
could also sell their entire herd and
turn around and start new ones.
