Later this month, approximately 100,000 dairy cows will begin making their way to terminal markets as part of that industry’s attempt to reduce market-depressing excess milk production. Arguably, live-cattle and feeder-cattle prices haven’t reacted much to the news. Or, the market already anticipated it and that’s part of the reason cattle prices remain lackluster, despite tightening supplies.
Reports surfaced late last year that dairy producers were looking to clear as many as 350,000 head from the national inventory. If that many hit the market over the course of 4-5 months, CattleFax analysts said in February that fed-cattle prices would likely lose $2/cwt.
This dairy culling is less than the early predictions. But, when Cooperatives Working Together (CWT) announced the planned herd retirement program last Wednesday, it noted this is the first of a series of herd retirements planned over the next 12 months.
CWT is funded by dairy cooperatives and individual dairy farmers, who are contributing 10¢/cwt. assessment on their milk production through December 2010. The money is being apportioned among supply-management programs, including the dairy herd retirement program, to stabilize and grow milk prices.
In this first round, CWT accepted 388 bids, representing 102,898 cows and 2 billion lbs. of milk production capacity. It’s the largest single herd retirement coordinated by CWT in its six-year history.
“The high percentage of bids CWT selected this time around is an indication producers understood CWT would only be able to accept reasonable bids per hundred pounds of milk in order to adjust the nation’s dairy herd and better align supply and demand,” says Jerry Kozak, President and CEO of the National Milk Producers Federation (NMPF), which administers CWT.
“We will continue to monitor key economic indicators in order to determine the right time to implement the next herd retirement,” Kozak says.