Cooperatives Working Together (CWT) says it has tentatively accepted 388 bids representing 102,898 cows and 2 billion lbs. of milk production capacity in the first of a series of herd retirements planned over the next 12 months. The number of cows and milk volume represent the largest single herd retirement carried out in the six-year history of CWT.

CWT field auditors will begin next week to visit the 388 farms whose bids were accepted to check production records, inspect herds and tag cows for processing. The cows are expected to begin moving off dairies by late May.

Producers whose bids are accepted in this herd retirement will be paid in two installments: 90% of the amount bid times the producer’s 12 months of milk production when it is verified that all cows have gone to slaughter, and the remaining 10% plus interest at the end of 12 months following the farm audit, if both the producer and his dairy facility – whether owned or leased – do not become involved in the commercial production and marketing of milk during that period.

CWT is funded by dairy cooperatives and individual dairy farmers, who are contributing 10¢/cwt. assessment on their milk production through December 2010. For more info, visit www.cwt.coop.

Meanwhile, the CME Group’s May 14 Daily Livestock Report estimates the program will send about 10,000 more dairy culls weekly to slaughter over a 10-week period ending in late July or early August. “More cows coming to slaughter will increase the supply of grinding beef, potentially driving the grinding complex, which has been a major source of strength for beef prices in 2009, lower,” the report says.

“Cattlemen realize this and have raised questions about previous buyout plans – especially in light of the government-funded buyout in the mid-’80s that severely damaged beef markets for several years. Beef interests have not strongly opposed the CWT programs since they involve no government funds.”

The CME Groups points out that U.S. beef cow slaughter in recent weeks has lagged year-ago levels by 4,800 to 8,450 head. And, with U.S. range and pasture conditions generally good and calf prices back above $1.25/lb., these levels should remain near 60,000/week.

“It is also obvious that dairy producers have been holding cows in anticipation of the CWT program as dairy cow slaughter has been lower than last year in 3 of the past 4 weeks in spite of continued heavy losses on milk production. Adding 10,000 head/week to slaughter totals will obviously not be good for beef prices but lower beef cow slaughter numbers, ample slaughter capacity and the expected measured pace of shipments should prevent any big reduction in grinding beef values,” the report says.