Chicago, July 17 - A U.S. dairy group said on Thursday that it had agreed in principle to reduce diary herds by 25,474 cows in a bid to lift milk prices paid to producers, who are hurting from soaring feed and fuel costs.

The move comes at a time when milk prices are historically high at about $20 per hundred pounds, but with crude oil and corn futures hitting record highs in recent weeks.

Cooperatives Working Together, which organized the herd reduction program, said in a statement posted on its website that it had accepted 209 bids by producers to retire 25,474 cows that will cut milk production by 440 million pounds.

This is the fifth dairy herd retirement program by the CWT, which began operating in the summer of 2003 and will pay participating producers to take dairy cows out of production.

Chicago Mercantile Exchange milk futures ended higher on Thursday, with the August contract rising 35 cents to $19.01 per cwt and September up 27 cents to $20.07.