April 9, 2009

Cooperatives Working Together (CWT), a US voluntary producer-funded dairy group, announced last week that it will conduct another round of dairy herd retirement.

The retirement is an incentive program designed to reduce milk production in order to stabilise dairy prices, and this is the seventh herd retirement round since CWT began operations in 2003.

US dairy industry has experienced a dramatic downturn in dairy prices over the past six months, due to falling demand overseas for US dairy products and increased on-farm dairy cow production.

According to the latest quarterly American Farm Bureau Federation Marketbasket Survey, retail food prices have dropped for the second consecutive quarter.

Recording the largest retail price declines of all the food items surveyed were shredded cheddar cheese and milk, dropping US$0.70 and US$0.67 respectively, to US$4.24 per pound and US$3.15 per gallon.

The latest CWT herd retirement round aims to cushion the price fall farmers are currently facing, and speed up the time of financial recovery.

Analysts are predicting this latest herd retirement could boost US cow slaughter by as much as 15,000 dairy cows per week during the summer months from June to August.

Historically, US dairy cow slaughter tends to weaken during this period, while lean manufacturing beef prices peak.

The forecasted boost in cow slaughter over coming months could put a cap on large prices inclines in manufacturing beef prices.