Cooperatives Working Together to manage milk supply

Export assistance
Cowherd purchasing program
Incentives to reduce production
CWT Proposal Update

In a proactive effort to return milk prices to a sustainable supply/demand balance, DFA’s board of directors agreed - in early March - to support the development and implementation of an industry-wide, voluntary, self-help program to manage the milk supply. Working with other dairy cooperatives through the National Milk Producers Federation (NMPF), a proposed plan to strengthen and stabilize milk prices by balancing domestic supply with demand was develop and dubbed, Cooperatives Working Together, or CWT.

The program, as proposed, consists of three major elements: an export assistance program that will help stimulate exports and clear inventory from the U.S. marketplace; a cowherd purchasing program that will reduce the overall number of dairy cows in the national herd; and a program to provide incentives for producers to reduce their milk marketings.

The CWT program is intended to bring both short-term relief and long-term stability to producer prices. Because CWT would be a voluntary farmer-led and farmer-funded effort, government approval of any and all of these programs is not necessary. The average net gain in a producer’s milk price as a result of CWT is $0.82 per hundredweight. This is net of an assessment of $0.179 per hundredweight and the present MILC payments.

A special meeting of the NMPF Board of Directors and representatives from all member cooperatives has been set for Friday, May 9, 2003 to discuss and vote on acceptance of the final program.

Click on the following links for an overview of each of the three elements in the proposed CWT program.

Export assistance
Cowherd purchasing program
Incentives to reduce production
CWT Proposal Update

Reviewing the CWT Program
A number of significant factors have been identified by the EPC that should be contemplated as your cooperative conducts its review of the CWT program:

1. It has been determined that the highest priority of the program is to ensure that no one region within the country suffers a disproportionate loss of production capacity due to program participation. The EPC has now decided to establish “safeguard levels” on a regional basis using 5 Regions (see chart #3). Each region would be able to participate up to a maximum level equivalent to one year’s growth in milk production in the region or one-half of one percent (0.5%) of annual milk production in the region, whichever is greater.
2. The calculations used to develop the CWT program are based on an assumption of full participation by all of the member cooperatives of NMPF. The collective milk production of the entire membership now represents approximately 70 percent of the nation’s milk supply. It has also been determined that an aggressive solicitation campaign to encourage participation by non-member cooperatives and independent producers will be put forth to achieve at least an 80% participation rate in CWT. It should be noted that we have already received pledges to participate from nonmember cooperatives and independent producers.
3. CWT would be managed and administered under the present structure of NMPF, but a new “CWT Management Committee” consisting of a representative from each participating cooperative would be formed. It is envisioned that such a structure would help reduce administrative costs and keep any operations bureaucracy to an absolute minimum. A preliminary legal analysis indicates that there would be no organizational problems with the proposed structure of CWT. As an entity operating within the current structure of NMPF, CWT would be a “Federation of Cooperatives” which can include independent producers and/or producer-handlers.
4. It is now envisioned that the CWT program would be initiated on July 1, 2003. Although the program’s milk price and producer return targets have been determined using this start-up date, it is anticipated that certain program elements such as a solicitation for bids for export assistance and requests for bids for participation in the herd retirement and reduced production marketings programs could be initiated shortly after the Board/Membership meeting on May 9.