Dairy farmers facing decision time for CWT

By LYNN MONTGOMERY | East Texas Edition

These dairy heifers probably won't be affected by the new milk supply reduction plan called Cooperatives Working Together (CWT). The plan is to take 1.2 billion pounds of milk out of supply this year in order to increase milk prices. -- Staff photo

August 21, 2003 -- For dairy producers considering making a bid for the Cooperative Working Together (CWT) program, the deadline is fast approaching.

Dairy producers are facing making a decision by Aug. 22 on whether they want to participate in CWT. There are two programs within the program for dairymen to consider: 1) herd retirement and 2)milk production reduction.

Producers can submit a "bid" for both programs. Decisions on the bids, to be made by CWT leaders, were expected to be made around Sept. 12. Of course, if the bid for the herd retirement is accepted, the bid for production reduction is void.

Another portion of the program is a dairy product export assistance program.

Dr. Blake Bennett, Extension economist, told producers gathered at an East Texas Dairy Seminar in Winnsboro on Aug. 12, the program was "not designed to take the producers out, just to liquidate the herd."

With the CWT program, dairymen are not asked to stop milking for a great length of time. Bennett said producers can begin milking as soon as the next day.

The programs are set to remove 1.2 billion pounds of milk out of production, by removing approximately 36,100 cows. By doing so, CWT believes the effort will strengthen and stablize farm milk prices.

Of the 36,000-plus cows to be removed, 4.3 percent will come from the region that includes Texas.

These cows must be sold for slaughter, in which Bennett told the audience, "hauling cost will be paid by you, the producer."

With the bid deadline Friday (Aug. 22), Bennett asked, "How is it going to be adventitious to you?"

Bennett expressed concern about the program because it does not take into consideration "the dairy farmers" personal goals.

Discussing the herd retirement program, Bennett asked, "If you are looking to liquidate this herd and buying another, how much out of pocket expenses do you want to have?

"When you make your bid you want to get the highest amount for your cattle, but you want to make a reasonable bid. Remember the goal for CWT is to take out the most milk for the least amount of money.

"This is happening fast," Bennett added. "You need to have all the 'what if' questions answered before submitting a bid."

In order to be eligible for the programs, producers must either belong to a cooperative fully supporting CWT, or have submitted an independent producer membership application.

Producers will also have a 5-cent per hundredweight assessment on milk output, starting with their July production. This assessment will be apportioned among the CWT's three supply reduction programs.

According to the CWT website, cwt.coop, the program will offer a 400 percent return on investment with the nickel contribution leading to an increase in all-milk prices by an average of 23 cents per cwt., even when factoring in the cost of the assessment and lower government MILC payments.

"We're going to stay with our initial plan to make 45 percent of the milk supply reductions through herd retirements, 10 percent through other marketing reductions and 35 percent through product exports," said Jerry Kozak, National Milk Producers Federation president and CEO, in a recent news release.

The remaining 10 percent will be allocated among the previous three programs as conditions warrant.

Once the bids are accepted, field audits will be performed, and herd removals completed. Dates for these happenings are Sept. 13 through Oct. 26.

At the Aug. 12 seminar, this led to a question: "What are we going to do when all these cows hit the market?"

"I remember 1986 when the dairy buyout happened. It drove the price of cattle down," said Brian Cummins, cattleman and Van Zandt County Extension agent.

Another question was posed from a dairyman who runs his cattle with his son's herd.

"If I submit a bid for my cattle, can I sell my cows and not his?"

The answer was "No."

The explanation was if a "cow" has been milked at the dairy and the producer turns in a bid for 150 cows, then all the cows must go to slaughter, if the bid is accepted.

"What if you have a springing heifer? She has a calf after the bid is turned in. What happens to her?"

One dairyman's response, at the seminar, was she would have to go. Another dairyman's response was she would not have to go.

"There's a lot of questions that have not been answered," Bennett said.

Bennett did offer some advice on making bids.

"I would suggest rounding your numbers. For example, if you say you can take $3.80 per hundredweight, can you really take $3.795. Get off ending your bid in five's or zero's," Bennett said.

The best advice Bennett said he could give was "Know your goals, and have them clearly defined."

For more information about the programs, contact CWT by calling 888-INFO-CWT (888-463-6298) or email info@cwt.coop.