A U. S. dairy group on April 1 launched a plan to buy out an unspecified number of cows in a bid to arrest the slump in milk prices, which have dropped nearly 40 per cent from a record high last June.
A sharp decline in exports and reduced domestic demand in the wake of the 14-month recession in the United States have contributed to the fall in milk prices.
The buyout plan by Cooperatives Working Together came the same day that the U. S. Agriculture Department said it will pay $150 million to dairy farmers hurt by low prices.
On March 31, the government said it would spend about $117 million to buy turkey, pork, lamb and walnuts for food assistance programs to help farmers.
News of the CWT plan had the desired effect on the milk market April 1, with futures at the Chicago Mercantile Exchange rising, although gains were capped by a weak cheese market.
“It’s difficult to be short a market in which some of the major players are removing supply,” said independent milk trader Nick Kelne.
In a message posted on its website, CWT said: “In light of the perilous financial plight affecting America’s dairy farmers, CWT… will conduct its latest herd retirement round.”
“We recognize that 2009 is shaping up to be among the toughest years on record for dairy farmers, but CWT will help shorten the price plunge farmers are facing and speed the recovery,” said Jerry Kozak, president and chief executive of the organization that manages the CWT.
This is the seventh herd retirement round since CWT began operations in the summer of 2003, during which the cooperative had removed 275,000 cattle.
Kozak said CWT has set no target for volume of milk or number of cows to be removed in this round, which will end on May 1.
CWT spokesman Chris Galen said that milk exports dropped about 10 per cent in the last quarter of 2008. “There was a significantly drop in exports, and demand here has declined because of the slowdown in the economy,” he said.
He said dairy farmers have also been affected by the historically high prices for feed grain in the United States, which has about 9.2 million head of dairy cattle.