Cooperatives Working Together (CWT) exported nearly 1.5 billion lb. of milk equivalent in 2015. In the grand scheme of things, that’s still less than 1% of U.S. milk production. But it does represent something like 3 or 4% of total U.S. exports.
And, more importantly, it represents a significant amount at a time when export volumes are down 9% and export values are down a staggering 27% through October. See export sales through October.
The critical thing is that these CWT exports also represent higher value products: 57 million lb. of cheese, 26 million lb. of butter and 50 million lb. of whole milk powder. Sales were made to 36 countries on all continents but Antarctica.
Had these products not been exported, they likely would have gone into inventory here and further depressed milk prices. “That’s a pretty big deal,” says Andy Novakovic, a dairy economist with Cornell University.
By exporting this amount of product, it not only buoyed commodity prices but raised fluid milk prices well, he says. Calculating just how much of a price impact CWT sales had gets complicated very quickly. That’s because you’d have to look at cheese, butter and whole milk powder individually, then calculate the impact on federal order prices and finally look at consumer sales.
The National Milk Producers Federation Board of Directors voted to double the CWT assessment from 2¢/cwt to 4¢/cwt in 2013. Roughly 70% of the nation’s milk supply is signed up for the program, which suggests CWT is collecting something in excess of $55 million annually. If even 90% of CWT assessments have been used to subsidize sales, butter sales alone might cover the cost. “They are getting their money’s worth,” says Novakovic.
Some have argued, and at times it is true, that CWT-assisted sales are competing with and taking sales from private sellers who can’t offer the same sales incentive. But that has been hardly the case in 2015.
U.S. cheese and butter prices have been well above world prices this year. In the case of butter, U.S. prices have sometimes been nearly double world prices. Even now, U.S. prices for cheese are still nearly 10% higher than world prices; butter is 40% higher. Couple that with a strong dollar, and you have a doubly strong head wind pushing against U.S. exports.
CWT might have its detractors. But as milk prices turn to ugly in the coming weeks and months, be thankful CWT is there to keep exports flowing off shore.