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Milk prices have tanked as dairymen put more milk in the tank. In reaction, the National Milk Producers Federation (NMPF) is proposing a plan to help strengthen milk prices. The plan includes a dairy herd buyout program.

USDA reports that last year, dairymen in the top 20 producing states boosted production by 3 percent over 2001. Production in the first quarter of this year is up another 1.3 percent due to more cows and higher output per cow. The increased production has translated into lower prices: a drop of 17 percent last year and a projected decline of another 8 percent this year. As a result, USDA is forecasting this year's all milk price at $11.10.

The NMPF, a trade association for dairy cooperatives, has voted to implement a project called Cooperatives Working Together (CWT). NMPF describes CWT as a farmer-led national program to strengthen and stabilize producer prices for a minimum of one year. CWT would attempt to reduce milk supplies by 4.6 billion pounds or approximately 2.7 percent. To implement this program, CWT would ask dairy farmers to contribute 18 cents for each hundredweight of milk they produce. Farmers who market milk either through co-ops or independently would be eligible to participate.

A prominent part of the plan is a herd retirement program. CWT will solicit bids for the buyout of whole dairy herds including milking and dry cows. CWT would verify production records and chose successful bids, then take possession of accepted herds and send the animals to slaughter. The total number of cows projected to be retired is 125,000.

Another component of the plan is designed to reduce future production. CWT would seek and choose bids from farmers to reduce marketings by a minimum of 10 percent. Accepted bidders would be paid a fee for reducing sales.

A final part of CWT would subsidize export sales of dairy products. Manufacturers and exporters would bid to receive funds to buy down the cost of the products they sell into foreign markets.

NMPF expects the program to begin this summer. American Farm Bureau has taken no official stance on CWT because this is a nongovernmental plan. OFBF's dairy advisory committee will be discussing the plan during its July meeting.