Oct. 26, 2015
By State Representative John Lawrence
Here’s a question: How much of your last milk check came from the Pennsylvania Milk Marketing Board Over-Order Premium? The premium established by the state for your benefit as a dairy farmer. Can you tell if it benefits you? The truth is, many Pennsylvania dairy farmers don’t know. That’s a problem that needs to be addressed.
In 1988, the Milk Marketing Board established the Over-Order Premium (OOP) by assessing a fee on every gallon of Class 1 fluid drinking milk sold in Pennsylvania. The fee has varied over the years and is currently $1.85 per hundredweight or 16 cents per gallon. The idea behind the OOP is simple: Pennsylvania consumers pay a little more per gallon to help out the Pennsylvania dairy farmer, ensuring a steady, reliable source of local milk. Milk pricing is fickle, and trying to make a living as a dairy farmer is harder than ever. The OOP can help cushion the blow that national or even global economic forces might have on the small family dairy farmer.
Tens of millions of dollars in premiums have been collected from consumers. Yet many Pennsylvania farmers do not know how much, if any, of that state-mandated money is actually getting back to them. Many have said to me that the money is “lost in the system.” How can this be?
Current law and regulation require payment and full disclosure of this state-mandated milk premium when a “milk dealer” makes a payment to a “producer.” These terms seem straightforward, but as anyone who has ever dealt with the government can tell you, terms are not always defined as one might think. You might imagine that the family dairy farmer is the “producer.” But how is the term “producer” defined in state law?
As defined in the Milk Marketing Law, a "PRODUCER" means a person producing milk. This seems straightforward enough. But let us also look at the definition of a dairy cooperative according to state law: "COOPERATIVE" means a cooperative agricultural association or corporation of producers organized under the laws of this Commonwealth or of any other state and engaged in making collective sales or in the marketing of milk for producers under contract with it. A cooperative shall not be deemed a milk dealer or handler, but shall be deemed a producer, except as otherwise provided herein (emphasis added).
Under current Pennsylvania law, both a family farmer and a dairy cooperative are defined as a “producer.” As a result, according to current law and regulation, we can know the following:
Milk dealers paying family farmers (producers) must include a line-item on the milk check showing the specific amount of state-mandated premiums contained in the check.
Milk dealers paying cooperatives (producers) must include a line-item on the milk check showing the specific amount of state-mandated premiums contained in the check.
Cooperatives paying family farmers are under no obligation to disclose anything on the milk check showing the specific amount of state-mandated premiums contained in the check. So if you sell to a cooperative, it gets the premium money, but it doesn’t have to tell you what it does with it.
House Bill 1265 seeks to correct this issue. A Pennsylvania family farmer has the right to know how much of the payment he receives for milk comes from a state-mandated premium, regardless of whether that farmer sells his milk to a cooperative or a milk dealer. The state-mandated over-order premium should be transparent at all levels but particularly to the family dairy farmer. Certainly, all family farmers in Pennsylvania should know what is in their milk checks.
Earlier this year, the House Agriculture and Rural Affairs Committee held a hearing on House Bill 1265. In that hearing, a large dairy cooperative admitted that Pennsylvania Over-Order Premium money is sent to farmers outside Pennsylvania. In my view, this is reprehensible. The Pennsylvania Milk Marketing Board established that premium for the benefit of Pennsylvania dairy farmers, not farmers outside the state. Without complete transparency on this state-mandated premium, we cannot have true assurance that these monies are going to benefit the Pennsylvania dairy farmer.
Cooperatives play a vital role in the dairy industry. As private, member-based organizations, they should be free from government getting involved in contract issues between management and membership. However, when a state-mandated premium enters the equation, certainly every dairy farmer in Pennsylvania should know if that state-mandated premium is achieving the desired outcome.
This legislation has seen stiff opposition from one large dairy cooperative that wants to preserve the status-quo. Right now, they are advocating against House Bill 1265 in the halls of the state Capitol in Harrisburg, with the goal of burying this legislation.
So what’s next? House Bill 1265 has been scheduled for a floor vote in the House of Representatives in the near future. If you support the transparency contained in House Bill 1265 – if you want to know how much of the state-mandated over-order premium is in your milk check – now is the time to speak up. Your voice can truly make the difference.
Representative John Lawrence serves the 13th Legislative District, which covers parts of Chester and Lancaster Counties.