What is CWT

What is CWT?
Cooperatives Working Together (CWT) is a program designed exclusively by dairy farmers for the benefit of dairy farmers. It is a multi-dimensional, voluntary, producer-funded national program developed by the National Milk Producers Federation (NMPF), to strengthen and stabilize milk prices by balancing supply with demand.

CWT is designed to reduce milk production and increase demand for dairy products in order to provide meaningful financial returns to dairy producers in all parts of the country. Because CWT has been designed as a voluntary farmer-led and farmer-funded non-government program, it is able to adapt rapidly to changes in marketplace conditions. All dairy farmers, whether they contribute or not, reap the financial rewards of CWT.

Who is investing in CWT?
Dairy farmers in every state, producing nearly 70% of the nation's milk are investing 10¢ per hundred pounds of milk (called a hundredweight, the symbol for which is cwt) in CWT. These producers are either members of the 35 cooperative-members of CWT, or individual producers who recognize the tremendous benefit of this unique program.

How does CWT strengthen prices?
The CWT uses two programs to strengthen and stabilize prices:

The Herd Retirement Program reduces milk production by reducing the number of cows in the national dairy herd. This is done on a voluntary basis in which farmers wishing to get out of the dairy business bid to do so. If their bid is selected, their cows are permanently removed from milk production. CWT has completed eight herd retirements since it began in 2003, removing a total of 451,000 cows that produced over 8.6 billion pounds of milk.
Because CWT is a voluntary, producer-funded program, its Export Assistance Program has been able to financially help CWT member cooperatives compete in the world marketplace. Since 2003, CWT has helped to export over 186 million pounds of cheese, butter, anhydrous milk fat, and whole milk powder to 52 countries on four continents.
What has CWT done for all dairy farmers?
The table below shows how CWT has helped producers by adding a total of nearly $8 billion to their milk checks:

2004 2005 2006 2007 2008 2009
Herd Retirement $0.20 $0.50 $0.60 $0.86 $0.78 $1.50
Export Assistance $0.02 $0.01 $0.09 $0.20 $0.09 $0.04
Total CWT Impact $0.22 $0.51 $0.69 $1.06 $0.87 $1.54

CWT has helped stabilize milk prices
Not only has CWT strengthened dairy farmer milk prices, it has helped stabilized milk prices as well.

Since the government support price for milk was reduced to $9.90 per cwt., milk prices had been very volatile, as the top chart at right shows. Milk prices were below $14 per cwt. for many months from 1991 to 2003, broken by very short periods of milk prices above that level.

However, after CWT went into operation, executing herd retirements in a timely manner, milk prices stabilized considerably.

The second chart at right shows that well-timed CWT-run herd retirements were a major factor in dairy farmers enjoying the longest period ever of milk prices over $14 per cwt. For 23 consecutive months the All Milk price was above that benchmark level.

However, the milk production landscape has changed. A collapse of demand both here and abroad sent milk prices plummeting in 2009 to the lowest levels since CWT started. Combine that continuing high feed and energy costs and dairy farmers’ margins disappeared.

Fortunately, CWT had raised the producer investment to 10¢ per hundredweight in 2006 and received a two-year commitment from members to invest in CWT through 2010. This enabled CWT to secure a line of credit giving CWT the capability to carry out the largest reduction in milk production capacity and cow numbers since the government-run Dairy Termination program in the mid-1980s. Since the beginning of 2009, CWT has removed 226,000 cows that would have produced 4.5 billion pounds of milk. Combined with the other actions taken by NMPF, prices are headed in the right direction.

CWT is run by dairy farmers
Every dairy farmer cooperative, regardless of size, that is a full member of CWT (investing 10¢ per cwt on all its members' milk) has representation on the CWT Committee. In addition, individual producers are represented by dairy farmers from their ranks appointed by the CWT Committee.

The CWT Committee reviews CWT's program effectiveness, approves changes to programs and policies, and oversees the management of CWT. CWT has two full time employees and utilizes NMPF staff when necessary to carry out it programs as directed. As a result, CWT has been able to use over 98% of the funds invested for supply reduction and demand increasing programs.

CWT is in its sixth year of operation and 2009 has been a year like no other dairy farmers have experienced. CWT continues to take action to improve producer margins. To do even more, CWT needs more dairy farmers investing in CWT.