CWT herd retirement No. 8 could be huge

The clock is ticking fast for dairy producers to submit bids in the second installment of the Cooperatives Working Together Herd Retirement program for 2009. Postmark deadline is July 24, eight days from today.

Even though it comes just 10 weeks after the close of the huge Herd Retirement Round No. 7 in May, and there are many new rules about bidding and participation, and there is a $5.25-per-hundredweight limit on how much producers can bid, we have a feeling participation from the West and Southwest in retirement Round No. 8 could be huge. Continued steep losses in the dairy economy since Round No. 7, plus a weak milk price outlook that extends well into next year, are big reasons why.

A tiny two-week window for bidding, which is by far the shortest in program history, and a $5.25 bid limit are odd features of Round No. 8. As seen below, average bid price accepted in both rounds in 2008 were above $6. (CWT officials have not announced the average price in Round No. 7 and pointed out there is no guarantee that $5.25 offers will be accepted this time.)

CWT Herd Retirement average bid prices accepted:
Round No. 1 (2003) – $4.02
Round No. 2 (2004) – $5.24
Round No. 3 (2005) – $6.75
Round No. 4 (2007) – $5.50
Round No. 5 (2008) – $6.10
Round No. 6 (2008) – $6.49

For cows producing the 2008 U.S. average of 20,396 pounds per year, a $5.25 bid translates into $1,070 per head which is right in line with current market prices. Producers also receive whatever beef price is realized. With most herds estimated to still be losing between $3 and $5 per cow per day, that three-part combination may be all the incentive they need to get out while it is still possible to do so.