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  September 23, 2010

Sen. Brubaker introduces legislation to amend Pa. Milk Marketing Law

Dairy producers are urged to contact their State Senators as soon as possible for their support

To locate your Pennsylvania state legislator, click here

by Sherry Bunting, Farmshine, Sept. 24, 2010

HARRISBURG, Pa.—After two hearings and many discussions with groups of dairy producers and members of the dairy industry, Pennsylvania Senator Mike Brubaker (R-36th) introduced Senate Bill 1480 Tues., Sept. 21.

“I introduced the legislation amending the Milk Marketing Law of 1937 to start a legislative discussion about how the state-mandated Pennsylvania Milk Marketing Board (PMMB) over-order premium is distributed to dairy farmers in the Commonwealth,” said Sen. Brubaker, chairman of the Senate Committee for Agriculture and Rural Affairs in an interview with Farmshine on Wednesday, Sept. 22.

“The Senate Agriculture and Rural Affairs Committee held two hearings, and I have been involved in countless meetings, discussions and personal conversations regarding this issue with interested parties on all sides, as have many of my colleagues,” the Senator said. “What became clear to me through the course of these events is that our dairy farmers are struggling, and while we have a valuable tool in the Milk Marketing Law, the use of this tool may not be as effective as it could be to assist Pennsylvania’s producers.”

Sen. Brubaker also noted under the current law, “the processor and the retailer are guaranteed a profit—but the dairy farmer is not.”

The same law that guarantees cost recovery and a profit to the processor and the retailer also includes a statement about the profitability of the dairy farmer, and gives PMMB the authority to set a state over-order premium  that is built into the state minimum retail price paid by consumers to retailers and the state minimum wholesale price paid by retailers to dealers on qualifying milk, which is then to be passed back to the farm level in the producer pay price. The over-order premium is meant to support the state’s dairy farming industry and is based on the conditions that all dairy farmers experience.

The definition of qualifying milk is: Milk produced, processed and sold to consumers in Pennsylvania. Therein lay some loopholes in the current law, including changes that were made in the 1980s that reduced some prior authorities PMMB once had to track “qualifying” milk and identify potential breaks in the chain.

“We are looking forward to working with the Legislature and continuing our efforts to bring more benefit to Pennsylvania dairy farmers from the PMMB’s over-order premium and minimum retail pricing,” said Ag Secretary Russell Redding, when asked for his thoughts on the proposed legislation during a break at the All-American Dairy Show in Harrisburg Wednesday.

“We are particularly interested in closing the gap in the system between the two most important individuals in this transaction: The Pennsylvania consumer, who is presently paying approximately 25 cents per gallon within the retail price of milk for the benefit of the producer, and the Pennsylvania dairy farmer for whom that money is intended,” said Redding, adding that the Department will work with Sen. Brubaker and others to “address the impediments to creating that direct relationship” between what the consumer pays and what the producer receives.

Farm and dairy organizations also responded to the news Wednesday.

At Pennsylvania Farm Bureau’s Camp Hill office, Mark O’Neill reported that PFB is reviewing the bill.

Previously, during the June Senate Ag Committee hearing on the subject, PFB vice-president Richard Ebert, a Westmoreland County dairy farmer, testified that, “Our members are concerned about what we believe is a widening price margin between minimum producer and retail prices on milk sold in Pennsylvania. At the annual meeting in November, our members went as far to pass policy on this issue.”

“What is clear is that we need viable and lasting change within the dairy industry... Ensuring that Pennsylvania’s dairy producers receive their fair share of the (over-order) premium is a good place to start,” Ebert testified.

“The bottom line is Pennsylvania consumers believe they are supporting Pennsylvania farmers when they pay the over-order premium in the higher price for their milk,” said Daniel Brandt, a Lebanon County dairy farmer, who testified for the Dairy Policy Action Coalition (DPAC) at the Senate hearing in June.

“The dairy industry has changed and consolidated over the past 20 years,” Brandt said. “It really does not matter if the dealer buys milk from Pennsylvania farms or out-of-state farms, the over-order premium should not be figured into their business model. The premium should be set aside for dairy farmers. Every penny of the premium should be directly paid back to farmers because the law says that is what the premium is designed for.”

“We appreciate Senator Brubaker’s leadership on this issue,” said Nelson Troutman, a Lebanon County dairy farmer who also serves on the state issues action group as a DPAC board director. “Senator Brubaker has stepped to the plate to start this legislative process showing his concern for all Pennsylvania dairy farmers and the future of our farms and supporting agribusinesses here.”

Glenn Gorrell, a Bradford County dairy producer and president of the Professional Dairy Managers of Pennsylvania stated PDMP’s belief that stranded premium dollars for milk produced and sold in Pennsylvania, that are intended for producers, should actually get to producers.

“We applaud Senator Brubaker and the Senate Agriculture Committee for holding hearings on this issue so important to dairy farmers,” said Gorrell. “We are grateful that he has introduced a bill that intends to address the stranded producer premium, and we trust that the legislature will sincerely consider this bill, correct unintended consequences that result in stranded producer premiums, and amend the state’s Milk Marketing Law accordingly.”

In June, PDMP board member Keith Spicher, a Mifflin County dairy producer, testified that, “These premiums were created to help the Pennsylvania dairy farmers operate within the many adverse conditions we constantly work, from drought to the volatility of milk pricing and production costs. The goal here is to eliminate the loopholes in processing, collection or sale of milk that strand the premium, and instead get it to Pennsylvania dairy farmers, for whom it is intended.”

“Putting this legislation forward encourages everyone to look back to the original purpose in the law for PMMB and the over-order premium,” adds Zachary Meck, a Berks County dairy producer who serves on the state action group for DPAC.

“As an organization, DPAC is focused on market transparency. We have great respect for Sen. Brubaker for stepping out and not just listening but moving forward with a bill that seeks to close the gaps and get the stranded premium paid directly to the dairy farmers to shorten the number of links in the chain,” Meck added. “This is an important discussion, and if producers will work together, we can accomplish something positive for the future of our industry that lives up to the spirit of the law.”

When asked for his thoughts on recent hearings and the proposed legislation, John Frey, executive director at the Center for Dairy Excellence observed that, “The past 18 months have been very difficult for many dairy producers and dairy service and support organizations here in Pennsylvania.”

“As a result, discussions around state and federal policies for pricing have brought many to new levels of engagement and understanding,” said Frey. “We are fortunate to have all key dairy interests committed to reviewing opportunities to make the system better.”

“The bottom line is that in Pennsylvania, consumers pay the 25 cents per gallon premium that is placed on milk to help the dairy farmers and to help ensure the dairy industry continues to be viable in the Commonwealth,” said Dennis Wolff, a lifelong dairy farmer, former ag secretary and partner in the Harrisburg-based consulting firm Versant Strategies.

“The premium is set to correlate with the profitability of dairy operations. Unfortunately, in reviewing the information available, an estimated $16 to $26 million paid by consumers did not find its way to dairy farmers’ milk checks,” said Wolff. “The milk marketing law needs to be revised to address this problem and to ensure that a higher percentage of the premiums that are paid by consumers for this purpose are actually received by the dairy farmers.”

S.B. 1480 includes constructive language stating that the over-order premium relates to the first sale of the milk at the farm level. This defines the first link in the qualifying chain. The bill also seeks to expand PMMB’s authority to include retail stores. The primary purpose here is to connect the end of the chain that collects the premium from consumers with the beginning of the chain: the farmer producing the milk. The bill also would establish a producer settlement fund to receive the premium dollars and distribute them back to dairy farmers.

The bill would expand the PMMB to five members instead of three, and specifies that three of the five would be current or former dairy farmers, with one member appointed to represent consumers. The bill also defines “producer” as the farm-level milk producer for the purpose of receiving the premium.

Sen. Brubaker said S.B. 1480 is a start to the legislative discussion, and he invited input from all interested parties. 

To hear the audio replay of the June 29 Senate hearing, click here

To find you Pennsylvania State Senator, click here

 

 

 

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