Well, here we are. It is May 2023, and I am writing another column on the over-order premium. But this time I am feeling positive about the fact that discussions have begun, and the Pennsylvania Senate Agriculture and Rural Affairs Committee has held its first hearing on the issues.
The hearing occurred April 25 with testimonies presented by our board and one staff member, Ag Secretary Russell Redding, the Pennsylvania State Grange president, and other representatives of the dairy industry.
Milk Marketing Board testimony highlighted information about the history of the premium and the current collection and distribution process.
The three board members provided insight on their unique roles as dairy farmers, industry and consumer advocates. All recognize that the system is flawed and a review and revision are necessary.
I was absent from the hearing due to vacation, so I did not have the opportunity to testify. However, upon my return, I sent the ag committee chair, Sen. Elder Vogel, and the minority chair, Sen. Judy Schwank, my thoughts on the matter, which are framed within the context of my three concerns:
1. Something needs to be put in place quickly to demonstrate that we are working on the issues.
2. We need a multi-tiered and multi-step plan for full implementation of a program that will best serve the needs of all Pennsylvania dairy farmers.
3. Separate discussions about collection and distribution need to begin the process, with collection issues resolved first.
The current system begins with a premium established by the board that is part of the producer price.
As a result of the minimum price buildup process, consumers pay the premium when they purchase milk at a retail outlet.
The dealer — in-state only — is required to pay the premium to producers from whom they purchased milk based on the amount of Class I milk sold in Pennsylvania and the percentage of Pennsylvania producer milk purchased by the dealer. In other words, milk produced, processed and sold in Pennsylvania.
While this system is well established, its major flaw is that out-of-state wholesalers are not required to pay the premium to their Pennsylvania producers.
A second flaw is the requirement for premium to be paid only on milk produced, processed and sold in Pennsylvania, which is necessary to avoid violations of the interstate commerce clause.
As part of the minimum price buildup, the premium is paid and collected as milk is bought and sold through the chain of commerce. Pennsylvania does not collect the premium at any point.
One potential change to the current system would have the state collect the premium as part of a transaction that occurs in Pennsylvania. The money would then ultimately end up in the general fund, along with the vast majority of other money collected by the state, to be appropriated by the Legislature as it sees fit.
If money collected as premium were paid into the state treasury in the same way other revenue items are paid, the Legislature could then allocate funds toward a specific program much the same way it funds other commonwealth expenditures and operations.
Assuming the premium is collected by the state and becomes part of the general fund, it would lose its identity as the “OOP.” But the purpose of the OOP is to enhance producer revenue because federal order minimum prices generally are not high enough to pay producers their cost of production plus a reasonable profit, as is required by the Milk Marketing Law.
It would then be up to the Legislature to potentially appropriate money to be paid to producers.
Two ideas that might be considered are equal payments to all dairy farmers or a tiered distribution based on hundredweight sold.
I have come out in favor of a multi-year planning process that would start with equal distribution to all and phase into a tiered distribution based on volume sold.
This is because I believe it will take a substantial amount of time to develop a tiered system and collect data to implement it.
An initial equal distribution to all while we are working on a tiered distribution would ensure we have the best and most accurate system for distribution in place.
This initial distribution along with outlines of a multiyear plan for development of a final structure for the system would help reassure our producers and other stakeholders that a plan is being worked on. I think this is very important.
Also, as part of the initial processes there is a need to pass Senate Bill 840, which would enable the Milk Marketing Board to license the “big-box” distributor stores.
We currently do not license them; most of their milk is brought into Pennsylvania from their out-of-state warehouses, and we have no idea how much milk is being sold.
Source: lancasterfarming.com
Photo Credit: gettyimages-dimasobko
Categories: Pennsylvania, Livestock, Dairy Cattle, Rural Lifestyle