July 2, 2004

 

 

US' National Milk Producers Federation Initiate CWT Program Round II as US Milk Prices Drop

 

Record-high milk prices were reported for two months in the US. But USDA recently announced the July Class I base milk price at $17.95 per hundredweight, down $3.18 from June.

 

Just as milk prices are starting to drop, the Cooperatives Working Together (CWT) program is beginning its second round. The program was initiated in July 2003 by National Milk Producers Federation, in an effort to "address the supply and demand imbalances" that depressed milk prices. A five-cent per hundredweight assessment paid by participating farmers was collected and used to finance programs to reduce the supply of milk in the domestic market by about 1.2 billion pounds.

 

On July 1, as the CWT Round II begins, the five-cent assessment will basically continue for participating dairy producers since the first round of assessment was collected through June 30. The second round of assessment collection will continue through June 30, 2005.

 

CWT's first round's efforts - which included Herd Retirement, Herd Milk Reduction, and an Export Assistance Program - contributed about 60 cents to the All-Milk Price paid to producers. Chris Galen, NMPF's spokesperson, said the 60-cent increase is calculated through September. NMPF is still working on price increase estimates for the second round.

 

The second round will incorporate two of the program's initial three milk-supply control efforts - the Herd Retirement and the Export Assistance Program. The first round's Herd Retirement removed 33,000 cows and 700 million pounds of milk. All the retired cows were sent to slaughter.

 

The decreased milk supply contributed to the record high milk prices paid to the farmer, and experienced by the dairy-product-buying consumer.

 

"CWT was not the primary cause for the price increase, but it certainly was 'a' reason," Galen said on June 24.

 

"Basically this (CWT) and a handful of other factors" contributed to the rise in milk prices. Other factors include the ban on Canadian dairy heifers coming into the United States, a discontinuation of the bST hormone that increases milk production, and "the depressed milk prices for the past two years" which had already forced many dairy farmers to quit the business, Galen added.

 

Statistics published by NMPF show the number of milk cows declining from 2002 to 2004, and Galen feels the recent high milk prices has not generated an increase in milk supply - a situation that has occurred in the past when dairy farmers add to their herds to capture as much of the high milk money as possible.

 

U.S. Department of Agriculture statistics show May dairy cow numbers at 7.72 million head, down 71,000 from a year ago. The same report shows Texas cow numbers to be down by 3,000 compared to the same month a year ago.

 

The NMPF board of directors voted, back in March, to reauthorize Round II of the CWT program, and thus continue collecting the 5-cent assessment. The funds could be used to implement CWT's programs when needed to affect milk supply.

 

In the June Dairy Farmers of America newspaper, DFA Board Chairman Tom Camerlo noted, "Round II of CWT is not needed at the moment. We, however, must be ready for that 'rainy day' when the current rise in prices swings the other way."

 

The swing began shortly after Camerlo's statement. In mid-June, the Class I milk price for July was announced at more than $3 less than June's price, and then cheese prices took a downward turn the third week of June. "Cheese prices have held for three weeks, but all of a sudden, they started going down," Galen said on June 24. "And this makes what we are doing even more urgent."