Dairy Industry Claims Buyout
Harmless; Cattlemen Disagree
By John Bradshaw
ARLINGTON, Va. — Nearly 103,000 head of black and white cows will soon be filing into packing houses around the country, thanks to the latest dairy herd buyout.
Beef producers, whether they're expecting a decrease in beef prices this time around or just remembering what the government buyout of 1986 did to them, are none too thrilled.
Cows from the 388 farms selected by Cooperatives Working Together, a national, dairy producer-funded organization, will begin moving around the end of May, says Jim Tillison, chief operating officer of CWT. He expects they should all be shipped by the end of July.
Low milk prices around the country are the reason for this herd retirement, says Tillison, many dairies receiving about $10 or less per hundred pounds of milk, while the cost is approximately $16 to $17 per hundred.
Though many beef producers are worried about their market, Tillison says this should not affect prices. The cows are spread across the country, he says, and the sales should happen over a period of six to eight weeks.
"Normally there are 200,000 to 250,000 dairy cows a month that go anyway, so it's not a huge increase over what goes. And don't forget, dairy farmers have a good portion of their income that comes from beef prices as well, so we try to keep that in mind as we carry these things out," he claims.
This buyout, which is the largest in CWT's history, is the first of a series of buyouts planned for the next year.
"Basically, we have established a goal in mind for total number of cows we'd like to take out over the next 12 months. We're not making that number public, but certainly, this herd retirement takes us a good part of the way to where we want to be," he says.
Tillison declined to even give a ballpark number for these future herd retirements. Rumor has that number at 300,000-400,000 head, but he says it is actually "not near that level."
Cooperatives Working Together is not releasing the dollar figure for the bids they accepted from the dairy farms looking to retire their herds. Prices are determined through a somewhat complicated formula that uses replacement prices, slaughter prices, annual milk production, and a bid.
Producers receive an amount from CWT, plus whatever slaughter price they may get for each cow. An example on their website shows a producer receiving $1000 per cow from CWT and $500 from the actual sale of the cow. Tillison says that $1500 per cow is a reasonable figure considering today's milk and cattle prices.
Assuming that CWT pays $1000 for their share on 103,000 head, the organization will pay out $103 million. Some beef producers have a hard time believing there is no government money involved, but Tillison says funds come solely from the cooperative.
"No government. This is not a government program in any way, shape or form. If they look at the government program, the government took out a million cows in one fell swoop, you know, over a period of time, obviously," Tillison says.
Dairy producers participating in a herd retirement are required to remain out of business for at least one year, and their dairy must remain shut down for the same period of time. Tillison says the vast majority of dairy farmers stay out of business after their one year is up.
Participating dairies must retire their entire herd, not just their cull cows. During the government buyout 23 years ago, there was plenty of cow trading going on before shipping day. It was supposedly thought cruel to brand selected cows, so there was no way to ensure the same cows got on the truck as were earlier inspected. Tillison claims that won't happen this time around.
Auditors for CWT look at milk production records, and each cow is tagged with a tamper-proof eartag, which the slaughter house must return to CWT for tag-number comparisons.
"Frankly, the other thing is that since this is a farmer-funded program, if one of their neighbors suspects there is some shenanigan going on, we get a phone call," he says.
Tillison claims beef prices didn't suffer too much after the initial shock caused by the 1986 buyout, but some beef men out there will argue that point.
One of those who doesn't share Tillison's point of view is Bob Edington of Coleman Livestock Auction Commission Company. He's quick to point out that he doesn't like anything that might threaten beef prices, and the sting of the government dairy buyout of '86 hasn't been forgotten.
"I'm not a dairy friend. I'm in the salebarn business. I'm in the livestock business. I'm in the cattle feeding business," Edington says.
The fact that the government hasn't shown the same concern for the beef industry as it has for dairies isn't lost on Edington, as are dairy programs that benefit the milk man at the expense of the meat man.
"They get more handouts and they do more squealing than anyone else," Edington says. "I don't like them. You can put that and underline my name."
Most new dairies seem to be trying to outdo their neighbors on facilities, and even the owner's home sitting next door. Edington believes they have only themselves to blame when their income cannot keep up with expenses.
"I don't like it. They're squealing that they're losing money, but how come they keep doing it? Why in the hell do they give so much money for these heifers, or give so much for this land to put all these things on?"
The market crash caused by the 1986 government buyout was uncalled for, Edington says. When asked what exactly that buyout did to him, he responds in no uncertain terms that it broke him.
"The cattle I owned went to nothing. My feeders went to 38 cents. You don't forget things like that," he explains.
Edington believes dairy cows should be marketed and processed separate from beef cows. He explains that most of the negative impacts on beef prices have originated from spotted cows, including bangs, tuberculosis, the whole downer cow issue and mad cow disease. The only case of mad cow in the United States so far was in a dairy cow.
"Isn't it a coincidence that the one last week in Canada was a dairy cow? Isn't that a coincidence?" he demands. "They ought to have to kill it and market it their own damn self."
The only nice thing Edington has to say about dairy farmers is that they are much more organized than beef producers. He wishes ranchers could join together better, but he believes their independence may keep them from it.
"It's the truth. But we as independent cattle feeders, we don't do our homework like they do," he admits.
Edington isn't expecting another market crash, but he thinks the effects will show. He expects the packers to use it to their advantage, and he's anticipating a change in the futures.
"If they take $10 or $15 off that cow meat just because we know it's coming, well, that's 50 or 75 bucks a head they take off my customer's cows."
He can see the bright, or maybe just dim, side of it all, though. The timing isn't too bad, he says, and the number of dairy cows could be much worse.
"As it is now, it may not amount to a hill of beans. A hundred-thousand cows, we all know that's nothing. Maybe it won't be a big deal."
Even so, he recommends anyone with some cull cows get them to a barn before the buyout hits.
Don McCandless, owner of Floydada Livestock Sales, has been keeping up with the situation. When told the final number is 103,000 head, he replies, "That's a lot of cows."
McCandless admits that he's been dreading this buyout. He doesn't believe it will cause a wreck like the big buyout once did, but he believes some will be hurt nonetheless.
"Well, I think the packing companies will use it to take four or five dollars per hundred off the slaughter cows. It could take a little bit off the fat cattle; there's enough tonnage there to affect the fat cattle," McCandless says.
Within a week of the buyout of 1986, McCandless says, prices dropped $30 per hundred, which he points out is $150 on a 500-pound steer.
"It broke a lot of people if they didn't have a contract," he says.
Owners who were able to hold their cattle for a couple of months weren't hurt as badly, McCandless remembers, and a few were able to make some money buying cattle cheap and holding them.
Even though the market did recover some within a month or two, McCandless says it was a year until things got back to normal.
He believes these buyouts will be much easier for beef producers if they are done in an orderly fashion and scattered throughout the year.
http://www.livestockweekly.com/papers/09/05/28/index.html
Harmless; Cattlemen Disagree
By John Bradshaw
ARLINGTON, Va. — Nearly 103,000 head of black and white cows will soon be filing into packing houses around the country, thanks to the latest dairy herd buyout.
Beef producers, whether they're expecting a decrease in beef prices this time around or just remembering what the government buyout of 1986 did to them, are none too thrilled.
Cows from the 388 farms selected by Cooperatives Working Together, a national, dairy producer-funded organization, will begin moving around the end of May, says Jim Tillison, chief operating officer of CWT. He expects they should all be shipped by the end of July.
Low milk prices around the country are the reason for this herd retirement, says Tillison, many dairies receiving about $10 or less per hundred pounds of milk, while the cost is approximately $16 to $17 per hundred.
Though many beef producers are worried about their market, Tillison says this should not affect prices. The cows are spread across the country, he says, and the sales should happen over a period of six to eight weeks.
"Normally there are 200,000 to 250,000 dairy cows a month that go anyway, so it's not a huge increase over what goes. And don't forget, dairy farmers have a good portion of their income that comes from beef prices as well, so we try to keep that in mind as we carry these things out," he claims.
This buyout, which is the largest in CWT's history, is the first of a series of buyouts planned for the next year.
"Basically, we have established a goal in mind for total number of cows we'd like to take out over the next 12 months. We're not making that number public, but certainly, this herd retirement takes us a good part of the way to where we want to be," he says.
Tillison declined to even give a ballpark number for these future herd retirements. Rumor has that number at 300,000-400,000 head, but he says it is actually "not near that level."
Cooperatives Working Together is not releasing the dollar figure for the bids they accepted from the dairy farms looking to retire their herds. Prices are determined through a somewhat complicated formula that uses replacement prices, slaughter prices, annual milk production, and a bid.
Producers receive an amount from CWT, plus whatever slaughter price they may get for each cow. An example on their website shows a producer receiving $1000 per cow from CWT and $500 from the actual sale of the cow. Tillison says that $1500 per cow is a reasonable figure considering today's milk and cattle prices.
Assuming that CWT pays $1000 for their share on 103,000 head, the organization will pay out $103 million. Some beef producers have a hard time believing there is no government money involved, but Tillison says funds come solely from the cooperative.
"No government. This is not a government program in any way, shape or form. If they look at the government program, the government took out a million cows in one fell swoop, you know, over a period of time, obviously," Tillison says.
Dairy producers participating in a herd retirement are required to remain out of business for at least one year, and their dairy must remain shut down for the same period of time. Tillison says the vast majority of dairy farmers stay out of business after their one year is up.
Participating dairies must retire their entire herd, not just their cull cows. During the government buyout 23 years ago, there was plenty of cow trading going on before shipping day. It was supposedly thought cruel to brand selected cows, so there was no way to ensure the same cows got on the truck as were earlier inspected. Tillison claims that won't happen this time around.
Auditors for CWT look at milk production records, and each cow is tagged with a tamper-proof eartag, which the slaughter house must return to CWT for tag-number comparisons.
"Frankly, the other thing is that since this is a farmer-funded program, if one of their neighbors suspects there is some shenanigan going on, we get a phone call," he says.
Tillison claims beef prices didn't suffer too much after the initial shock caused by the 1986 buyout, but some beef men out there will argue that point.
One of those who doesn't share Tillison's point of view is Bob Edington of Coleman Livestock Auction Commission Company. He's quick to point out that he doesn't like anything that might threaten beef prices, and the sting of the government dairy buyout of '86 hasn't been forgotten.
"I'm not a dairy friend. I'm in the salebarn business. I'm in the livestock business. I'm in the cattle feeding business," Edington says.
The fact that the government hasn't shown the same concern for the beef industry as it has for dairies isn't lost on Edington, as are dairy programs that benefit the milk man at the expense of the meat man.
"They get more handouts and they do more squealing than anyone else," Edington says. "I don't like them. You can put that and underline my name."
Most new dairies seem to be trying to outdo their neighbors on facilities, and even the owner's home sitting next door. Edington believes they have only themselves to blame when their income cannot keep up with expenses.
"I don't like it. They're squealing that they're losing money, but how come they keep doing it? Why in the hell do they give so much money for these heifers, or give so much for this land to put all these things on?"
The market crash caused by the 1986 government buyout was uncalled for, Edington says. When asked what exactly that buyout did to him, he responds in no uncertain terms that it broke him.
"The cattle I owned went to nothing. My feeders went to 38 cents. You don't forget things like that," he explains.
Edington believes dairy cows should be marketed and processed separate from beef cows. He explains that most of the negative impacts on beef prices have originated from spotted cows, including bangs, tuberculosis, the whole downer cow issue and mad cow disease. The only case of mad cow in the United States so far was in a dairy cow.
"Isn't it a coincidence that the one last week in Canada was a dairy cow? Isn't that a coincidence?" he demands. "They ought to have to kill it and market it their own damn self."
The only nice thing Edington has to say about dairy farmers is that they are much more organized than beef producers. He wishes ranchers could join together better, but he believes their independence may keep them from it.
"It's the truth. But we as independent cattle feeders, we don't do our homework like they do," he admits.
Edington isn't expecting another market crash, but he thinks the effects will show. He expects the packers to use it to their advantage, and he's anticipating a change in the futures.
"If they take $10 or $15 off that cow meat just because we know it's coming, well, that's 50 or 75 bucks a head they take off my customer's cows."
He can see the bright, or maybe just dim, side of it all, though. The timing isn't too bad, he says, and the number of dairy cows could be much worse.
"As it is now, it may not amount to a hill of beans. A hundred-thousand cows, we all know that's nothing. Maybe it won't be a big deal."
Even so, he recommends anyone with some cull cows get them to a barn before the buyout hits.
Don McCandless, owner of Floydada Livestock Sales, has been keeping up with the situation. When told the final number is 103,000 head, he replies, "That's a lot of cows."
McCandless admits that he's been dreading this buyout. He doesn't believe it will cause a wreck like the big buyout once did, but he believes some will be hurt nonetheless.
"Well, I think the packing companies will use it to take four or five dollars per hundred off the slaughter cows. It could take a little bit off the fat cattle; there's enough tonnage there to affect the fat cattle," McCandless says.
Within a week of the buyout of 1986, McCandless says, prices dropped $30 per hundred, which he points out is $150 on a 500-pound steer.
"It broke a lot of people if they didn't have a contract," he says.
Owners who were able to hold their cattle for a couple of months weren't hurt as badly, McCandless remembers, and a few were able to make some money buying cattle cheap and holding them.
Even though the market did recover some within a month or two, McCandless says it was a year until things got back to normal.
He believes these buyouts will be much easier for beef producers if they are done in an orderly fashion and scattered throughout the year.
http://www.livestockweekly.com/papers/09/05/28/index.html
.....of course, we farm so I can get buy saying that :wink: . 
