Milk payment process officially described, relevant to Dean trustee ‘avoidance claims’ seeking partial payback from farmers.

By Sherry Bunting, Farmshine, December 4, 2020

BROWNSTOWN, Pa. – In addition to dairy producers, those receiving assigned amounts directly from producer milk checks, such as haulers, have begun receiving these letters of ‘preference action recovery.’ The wide net being cast by ASK LLP as trustee for the Dean Foods Company estate — in search of money to pay bankruptcy administration costs — may become a web of entanglement.

USDA AMS Dairy Programs has not confirmed nor denied whether Market Administrators for the 11 Federal Milk Marketing Order (FMMO) Producer Settlement Funds (PSF) have received letters from ASK LLP or whether Dean’s pre-bankruptcy payments to them have been made subject to these trustee avoidance claims. If so, this would produce another wrinkle.

While USDA AMS is now referring to the Department of Justice all inquiries about the bankrupt Dean Foods estate trustee letters intimidating farmers to repay a portion of their Aug – Nov 2019 milk checks, the USDA did respond late Wednesday evening to Farmshine’s request for a general official description of FMMO milk payment procedures and dates.

This could be helpful to affected dairy producers because the twice monthly transaction dates listed in the letters correspond directly with these official descriptions — showing pre-bankruptcy payments to farmers, and their milk check assignees, are not only ‘ordinary course of business’ and ‘customary for the industry’, but also regulated by Federal Orders.

In Pennsylvania, there is the added layer of the Pennsylvania Milk Marketing Law enforced by the Pa. Milk Marketing Board (PMMB).

PMMB executive secretary Carol Hardbarger provided a synopsis from state statute regarding how PA-regulated plants pay farmers for milk. There are seven Dean plants that are licensed dealers regulated under PMMB, four of these plants are located in Pennsylvania. All seven are now owned by Dairy Farmers of America (DFA) as part of the Southern Foods Group LLC (Dean Foods and holdings) bankruptcy sale.

The PMMB is recommending that farmers do not pay the settlement offers in these letters, and sit tight for further guidance. In Pennsylvania, the State Attorney General is involved. The PMMB chief counsel and Attorney General’s office plan to communicate with ASK LLP this week.

USDA’s FMMO milk payment description follows:

In general, handlers report monthly to the FMMO (Federal Milk Marketing Orders) their receipts and utilization of producer milk from the previous month. The receipts include the skim and fat pounds of the milk, as well as its average monthly component tests (protein, other solids, nonfat solids) in the component orders. Utilization reports include how such butterfat and skim milk (including components) were used during that month.

The FMMO office computes the uniform butterfat price and the uniform skim milk price in the four fat and skim pricing orders (FO 5, FO 6, FO 7, and FO 131) and the producer price differential (PPD) in the seven component pricing orders. These prices are computed based upon the total value of milk in the producer milk received and utilized by all handlers pooling on the Order for the month.

Reporting and price announcement dates are set in regulation and vary by order (see attached chart). For example, for Orders 5, 6, and 7 (Southeast, Florida and Appalachian Orders), producer prices are released on or before the 11th of the month for the previous month, while the announced producer prices for the Northeast order could occur as late as the 17th of the month for the previous month.

Each handler with pooled milk for the marketing period receives an accounting from the Market Administrator, indicating their plant(s) use value for the month along with the associated payments due to producers for that milk. If a plant use value is greater than the producer payments, the difference is due to the Producer Settlement Fund (PSF) of that respective Order.

“A handler whose plant use value is lower than the producer payments owed will receive a payment from the PSF to allow them to make the producer payments in a timely fashion. Th above reporting and payment date chart lists when payments are due to and from the PSF.

Final payments to producers and cooperatives are made a day or two after the payments from the producer settlement fund are made.

Each of the 11 orders requires (advance) payments by handlers for the milk received during the first 15 days of the month a week or two after the 15th of the month.

For Pennsylvania regulated plants, payment due dates are outlined in Milk Marketing Law Regulation 143.12 as follows:

§ 143.12. Terms of payment.

“(a)  Producers shall be paid not later than the 26th day of each month and the 17th day of the following month, as follows:

“(1)  Payment that covers the approximate value of milk or cream purchased from the first to the 15th of each month shall be made not later than the 26th day of each month. This payment need not be accompanied by an itemized statement. This payment shall be at least the lowest announced class price for the previous month for the number of pounds purchased or received during the first 15 days of the month.

“(2)  Final settlement for all milk and cream purchased during any month shall be made not later than the 17th day of the following month. The final settlement shall include any balances due for the first 15-day period and shall be accompanied by a statement to each producer setting forth the information required under §  143.14 (relating to monthly statement to producers).

2 thoughts on “Milk payment process officially described, relevant to Dean trustee ‘avoidance claims’ seeking partial payback from farmers.

  1. Pingback: Dean Foods Chapter 11: Status of Requests for Repayment by ASK, LLP; Liquidation plan filed, Jan. hearing scheduled | MilkshedsBlog

  2. Pingback: UPDATE on Dean trustee letters demanding payment from farmers. Don’t pay. Gather records. Fight back. | Ag Moos

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