Industry Based Dairy Buyout to Remove 103,000 Cows From Production
May 15, 2009
Emmit L. Rawls
Professor Agricultural and Resource Economics
UT Extension Livestock Marketing Specialist
Cooperatives Working Together (CWT), a cooperative effort of a number of dairy cooperatives, has accepted bids to remove 103,000 head of dairy animals from production in its most recent buyout program. There have been six previous buyouts beginning in 2003, with two taking place in 2008. CWT field auditors began the third week of May visiting the 388 farms whose bids were accepted, checking milk production records, inspecting their herds and tagging each cow for slaughter. All farms should be audited by early July. Milk producers have 15 days following the audit to move their cows to market for slaughter. That slaughter should begin in late May to early June and will likely extend into late July and early August.
Concentrating 103,000 cows in about 10 weeks will average 10,000 per week. It is expected that beef cow slaughter in the U. S. for that period will be below that of 2008. U.S. imports of Canadian cows will likely be down along with a significant year-to-year decline in slaughter of beef cows of U. S. origin, assuming pasture and range conditions remain good. Thus, it is expected that the net addition to cow slaughter compared to 2008 will be less than 10,000 per week and within the capability of federally inspected plants. Dairy cow slaughter was up over 25 percent from 2008 earlier this year, but declined sharply as producers waited to see if their bids were accepted in the buyout. Those submitting bids to sell their cows will be notified no later than June 12, 2009.
This level of cow slaughter increase is not expected to have major impact on fed cattle prices, but could impact cull cow prices $1 to $3 per cwt. It actually comes at a time when consumers are buying more ground beef products due to some downshifting to cheaper beef items purchased due to the economy. CWT implied in its press release that it could have additional buyouts this year. The whole purpose of the buyout is to reduce milk production and improve prices paid to milk producers. It is anticipated that the buyout will remove 2 billion pounds of milk from the market. Members of CWT pay 10 cents per hundred into a fund which is then used to pay producers whose bids are accepted. Beef organizations have not strongly opposed the CWT programs, since they involve no government funds. Those same organizations opposed inclusion in the economic stimulus package any government sponsored dairy buyout such as occurred in the mid 1980s, when over 800,000 dairy animals were removed from production and caused a significant decline in prices for beef cattle. Those whose bids were accepted will be paid the buyout bid price times their 12 month milk production when it is verified that all their cows have gone to slaughter. Those producers must remain uninvolved in commercial production and marketing of milk for a period of 12 months after the cows have been sold.