My previous post earlier in June talked about how the economic crunch facing dairy farmers, generated by record-high feed and fuel costs, prompted NMPF’s Cooperatives Working Together to sponsor its fifth herd retirement program. CWT helps to reduce dairy production, aligning supply with demand, and in so doing, strengthen and stabilize farm-level milk prices.
Well, judging by some of the reaction just here on AgWeb, you would have thought we were plotting highway robbery. There was a mix of misinformed and uninformed reaction, along with other strident opinions, that it wasn’t prudent to voluntarily reduce the nation’s dairy cattle herd in response to oppressive input costs.
And then a funny thing happened: other players in the livestock sector talked about doing the exact same thing as the dairy industry’s CWT program. This recent AP story, while focused primarily on the effects of all the rain in the Corn Belt, highlighted how the poultry (it quotes both chicken and turkey producers about their fowl economic conditions), beef cattle and swine sectors are all gasping for breath after chasing $7+ corn…and the logical, inevitable response is a liquidation of flocks and herds.
This recent story about the woes of Smithfield, one of the largest pork and beef processors, strikes a similar tone, as CEO Larry Pope directly talks about reducing its sow population due to the input cost crunch.
So I hate to say I told you so, but since this is a blog, and that’s what I do…I will. And I’ll repeat it again: this is a huge trend, and CWT is just one more piece of evidence of it. But it’s not a coincidence; times are tough for livestock owners. The economics of the livestock sector are brutal and will be worse if the economy worsens.
The nice thing about CWT is that it’s voluntary – no one has to bid if they don’t want to, and producers are not told what to do by anyone (in contrast to one ill-informed poster from June 10th at who, despite my best efforts at education, still thinks it’s a government program. Sigh). As a reminder, eligible dairy farmers have until June 30th to submit bids.
FOOTNOTE: Two days after this post first appeared, lo and behold, another story materializes about another poultry processor, Sanderson Farms, cutting back expansion plans because of high feed prices.