CWT Home Top Banner


Herd Retirement Herd Retirement Frequently Asked Questions
Long term stability

Who can participate in CWT's Herd Retirement Program?

Any dairy farmer who is a member of a cooperative fully participating in CWT, OR is an individual CWT member, effective January 2009, may bid in the Herd Retirement Program. A dairy farmer who had his/herd selected and removed in a previous herd retirement, may not bid in this or subsequent herd retirements.

The Herd Retirement Bid Form PDF is also available through the Herd Retirement menu or by calling 888-463-6298.

What is the 90%/10% rule in effect for this herd retirement?

CWT will pay successful bidders in two installments; 90% when CWT receives verification that all dry and milking cows have gone to slaughter and, at the end of the 12-month waiting period the remaining 10% plus interest if neither the producer nor the dairy premises (whether owned by the producer or leased) have been involved in the production and marketing of milk during that twelve month period.

How does CWT determine when to have a herd retirement program?

CWT monitors a number of economic indicators, or benchmarks, in determining when to conduct a Herd Retirement program. CWT's goal is to achieve maximum positive impact on producers' milk price. These benchmarks include but are not limited to:

• The All-Milk price
• The cost of milk production
• The milk-feed price ratio
• Dairy cow numbers
• Milk production
• Dairy cow culling

The significant variation in cash costs of milk production, cull and replacement prices reaffirm the wisdom of monitoring multiple economic indicators. CWT's focus cannot be just on the price of milk — it must also consider the operating margin of milk production. The timing of CWT's Herd Retirements allows market forces to begin to work more quickly to prevent the severe imbalance of supply and demand that damages the operating margins of dairy farmers.

What happens when CWT decides to initiate a Herd Retirement?

When analysis of the benchmarks indicates that CWT should act, CWT management announces broadly in the media that a Herd Retirement will take place. The announcement, along with bid forms and program rules, are made available on the CWT website and are also e-mailed or directly mailed to participating cooperatives and to individual producer members. CWT announces the deadline by which producers must submit their bids. Bids are only accepted from producers who are members of a cooperative fully participating in CWT, or who enrolled individually as CWT members effective January 2009.

If a producer chooses to bid into the Herd Retirement Program, what is he/she required to do?

 A Producer who is a member of CWT, individually or through a cooperative member, may bid in the Herd Retirement program, provided:

• Producer has not sold, leased, licensed, lent, exchanged or otherwise transferred any cows (except for slaughter) after the date specified on the Herd Retirement Bid Form;
• Producer's cows constitute a commercial dairy herd and are not cows that have been segregated from other cows due to lower production or illness, including from cows in which Producer has an interest and which have been located to another farm;
• Producer's bid includes all cows in which producer has an ownership interest, regardless of where the cows are located.

What if a producer has multiple dairies and wants to bid in a herd retirement?

A producer with multiple dairies must bid all dairies in which he/she has an ownership interest into the herd retirement program. The producer cannot bid just one of his/her dairies. Also, the producer must be a paying into CWT on the milk production of all dairies in which he/she has an ownership interest.

How does a producer determine the amount to bid to retire his or her cows?

CWT will pay a Producer who makes a successful bid up to an amount equal to $3.75/cwt, multiplied by the herd's milk production over the 12-month period April 1, 2009 through March 31, 2010. The Producer must submit, along with the bid form, a monthly production report for this period from his/her milk plant. In general, CWT will award payments to those Producers who submit the lowest bid prices, subject to certain other program requirements.

CWT makes an interactiive bid calculator and a bid calculation form available on its website, www.cwt.coop, or will mail the form to producers who so request. Basically the calculation allows a producer to compute a bid price based on the producer's judgment of the average market value of his or her average cow, less the slaughter value, divided by the average production per cow.

For example (and this is for example purposes only), assume that the Producer believes that the average market value of a cow in his herd is $1350. Assume that the average cow in the herd weighs 1200 pounds, that the average annual milk production is 21,000 pounds per cow, and that the going slaughter value 55 cents a pound. Using the CWT bid calculation form, the Producer would make the following calculation:[ $1350 minus $660 (1200 pounds times 55¢) = $690] divided by 210 hundredweights (21,000 pounds divided by 100 pounds per hundredweight), or $3.29/cwt.

When is my bid due?

The Herd Retirement Bid Form will specifies June 25, 2010, as the date by which the completed and signed bid form with all the required information must be postmarked. DO NOT assume that putting it in the mail on June 25th means it will be post marked on that day. Producers submitting bids are urged to give themselves a cushion. Bids postmarked after the deadline will not be considered.

What happens after the producer submits his or her bid?

All bids mailed go directly to an independent accounting firm which tabulates and arranges the bids from lowest to highest. After the bidding period closes, the auditor meets with CWT staff and each bid is evaluated to ensure that it will result in an appropriate amount of milk production being removed from the system. The herd being offered for retirement is evaluated for month-to-month consistency in milk production as well as consistency from the beginning of the twelve month period to the end of the twelve months.

After CWT staff selects successful bids, all applicable information is provided to the CWT farm auditors who will visit the dairy farms. Producers are notified that their bids have been selected just prior to the auditor's visit.

At the farm, the auditor checks current milk production against the milk production records from the producer's plant that was provided with the Herd Retirement bid. The farm auditor also counts the number of milking and dry cows and requires verification that any missing cows were either slaughtered or rendered. If the auditor is satisfied, he supervises the application of the special CWT ear tags to the cows, makes a list of the CWT tag numbers provided, and observes the tagging.

The Producer is required to ship the cows for slaughter within 15 days after completion of the audit. CWT will pay the Producer his or her bid amount times the milk production for the twelve-month period upon receipt of sales documents verifying that the cows did go to slaughter. CWT also recovers the special CWT ear tags from the slaughterhouse so that it can check the numbers of the ear tags returned against those on the farm auditor's list.

Payment is normally made within 30 days of receiving verification that all cows have gone to slaughter.

Can a producer who bid in a past herd retirement, but was not selected, bid in this herd retirement?

Yes. Those who have bid before, but were not selected, may bid in this herd retirement.

A producer who bid in a previous herd retirement and was selected will not be allowed to bid in this and any subsequent herd retirements.

What if a producer changes his/her mind after submitting a bid and wants to withdraw their bid?

A Producer may withdraw his/her bid prior to CWT beginning the bid selection process, July 7, 2010, without consequence. However, after the selection process has begun, a producer may not withdraw a bid CWT has selected without paying liquidated damages of three cents (3¢) per hundredweight (cwt.), based on the herd's annual production, or $1,000 whichever is greater.

Where should a producer mail their bid package?

The bid should be mailed regular U.S. mail, not certified or registered since this could actually slow the receipt of the bid by the accounting firm. The completed and signed bid form along this the plant summary report of milk marketings from April 1, 2009 through March 31, 2010, should be mailed to:

CWT Herd Retirement Program
P.O. Box 41049
Bethesda, MD 20824-1049

What about regional safeguards?

When CWT was formed several years ago, there was concern that the CWT Herd Retirement could disrupt the availability of milk supplies in some parts of the country. To guard against this potential problem, the CWT program incorporated "regional safeguards." The 48 contiguous states were grouped into five regions and limits were placed on the volume of milk production that could be removed in any one region.

However, based on experience in the first four herd retirements, the CWT Committee determined that the initial concern was unfounded, and decided to do away with regional safeguards. This now gives all producers investing in CWT an equal opportunity to have their bids selected. 

When and how will I be informed if my bid is accepted?

CWT's field auditors contact the producers in their regions whose bids have been selected and arrange a visit to each farm. This occurs shortly after bids are selected, and the auditor attempts to make his visit on the day immediately after his contact whenever possible. All producers who submit bids will be notified whether their bids have been selected no later than July 30, 2010.

Are there any restrictions on a producer's operation while waiting to learn if CWT has selected their herd retirement bid?

A Producer may continue normal operations until notified by CWT that his/her bid has been selected. However, the Producer should not move any cows off the dairy, and should not sell any milking or dry cows (except to slaughter). If a cow is sold for slaughter during that period, the Producer must retain the slaughter sales slips so that it will be available to the CWT farm auditor during the farm visit. Heifers may be sold at any time prior to calving.

Does CWT buy the producer's cows?

No, CWT does not take ownership of cows under the Herd Retirement Program; CWT makes a payment to the Producer who has sold his/her herd for slaughter of the bid amount on Herd Retirement Bid Form times the twelve months of milk production specified on the form. If a Producer's bid is selected, the Producer must arrange to move all cows to slaughter within 15 days after the farm audit. A reasonable extension will be granted for dry cows that have been treated with drugs necessitating a market-withholding period. CWT will make payment after the Producer provides documentation verifying the sale of all cows for slaughter.

Who gets the proceeds from the sale to slaughter?

Producers keep the proceeds from slaughter sales. To be competitive, bidders must consider this income when preparing their bid application. However, CWT does not compensate the producer for the difference between his bid price and the slaughter price the producer receives for the cows. All CWT will pay the producer is the bid per hundredweight of milk the producer put on the bid form times the plant-verified milk production submitted with the bid form.

How is CWT's payment for a herd retirement calculated?

CWT will pay successful bidders an amount equal to the price bid by the Producer multiplied by producer's verified twelve-month milk volume submitted with their bid in two installments: 90% when CWT receives the required verification that all milking an dry cows have gone to slaughter; the remaining 10% plus interest when CWT verifies that neither the producer nor the dairy facility, whether owned or leased, has not been engaged in the commercial production and marketing of milk during the 12 months following the CWT farm audit. The annual volume is based on verified production during the period specified on Herd Retirement Bid Form.

When does the producer get paid?

 The CWT payment as specified above will be made only after CWT receives verification that all cows including animals that had been treated have gone to slaughter. The 10% plus interest will be paid on the anniversary of the farm audit when CWT verifies that neither the producer nor the dairy facility, whether owned or leased, has not been engaged in the commercial production and marketing of milk during the 12 months following the CWT farm audit.

Where can producers get more information or help?

For more information, go to the CWT website, www.cwt.coop. There are bid forms and a bid calculator as well as a summary of past programs. If producers have further questions, call CWT toll-free at: 888-INFO-CWT (888-463-6298).

Contact CWT