Reading the latest CWT tea leaves

Hoard's Dairyman: 

Reading the latest CWT tea leaves

Mon, 07/19/2010

Now that the dust is settling a week after results of the 10th and most recent Cooperatives Working Together (CWT) Herd Retirement were announced, let’s look at what they might say about dairy producers and the state of dairying.

Of 209 bids submitted, 194 were accepted. They accounted for 34,442 cows and 653.9 million pounds of milk production per year, which is equal to about one-third of the total output in Illinois.

One thing that sticks out is the relatively low participation rate. One hundred and ninety-four herds is the fewest in all but three previous retirement rounds. This may be due as much to the $3.75 per hundredweight maximum bid limit imposed, as to the return to modest profitability that most dairies are enjoying in 2010.

Along with the low participation rate were commensurately low removal totals for both cows and milk production. Only the CWT removals held in early 2008 and in 2003 were smaller.

Sifting through the tea leaves reveals that cows taken in the latest herd retirement were mediocre for milk production. In 2009, average production for all cows in the U.S. was 20,576 pounds. By comparison, average production for all cows accepted into CWT round 10 averaged just 18,986 pounds.

One possibility is that herds submitted were not highly efficient, or were unable to maintain production during the financial meltdown in 2009. They were, however, of roughly average size at 178 head. Average U.S. herd size in 2009 was 170.