Although hay prices have lost more ground the past month, dairy prices are starting to show some improvement – which may give hay growers hope for the same.

USDA’s October all-hay price was $1/ton lower than the September price and $50/ton lower than year-ago prices. October all-milk prices, however, jumped to $13.80/cwt – up 90 cents from September prices but $4 lower than October 2008 production.

In the meantime, an additional 26,412 cows will likely be taken out of production by Cooperatives Working Together (CWT). CWT has tentatively accepted 154 bids in what would be the fourth herd retirement taken in the past 12 months – for a total production capacity reduction of five billion pounds of milk.

“Coming into 2009, CWT’s economists estimated that we would need to remove between five and six billion pounds of milk, the production of approximately 250,000 cows, through herd retirements,” says Jerry Kozak, president and CEO of the National Milk Producers Federation, which administers CWT. “We are pleased that the participation in this third herd retirement of 2009 has brought us to our goal of aligning supply with demand, and hastening the recovery of farm-level milk prices that plunged because of the global recession.”

CWT member-farmers in 33 states submitted a total of 168 herd retirement bids during the two-week bidding period that ended October 15th. This is the ninth herd retirement in the past six years of CWT’s existence, and featured a maximum acceptable bid threshold of $5.25/cwt, the same price ceiling as in the retirement conducted in August.

“We felt it was important to help milk prices continue to strengthen by conducting another herd retirement as soon as we completed farms audits for the previous round one in the summer,” notes Kozak. He says that 465 bred heifers were also accepted this week.

As with the two most recent herd retirements in 2009, producers whose bids are accepted in this herd retirement will be paid in two installments. One totals 90% of the amount bid times the producer’s 12 months of milk production when it is verified that all cows have gone to slaughter. The remaining 10% plus interest will be paid at the end of 12 months following the farm audit. That’s provided that the producer and his dairy facility – whether owned or leased – don’t become involved in the commercial production and marketing of milk during that period.