My thoughts on the ABC’s of PA’s state-mandated OOP

By Sherry Bunting, published in Farmshine, May 5, 2023

The purpose of Pennsylvania’s 1930s Milk Marketing Law was to regulate and support the Commonwealth’s dairy industry. Today, it continues to set a retail minimum price for milk through the Pennsylvania Milk Marketing Board (PMMB) while most other states have zero protection against supermarkets using milk as a loss-leader to attract shoppers. 

To me, that’s the real problem. Nationwide, consumers don’t know or appreciate the true value of milk after years of rampant and extreme loss-leading. I’m not talking about random sales to clear inventory, I’m talking about day-in-day-out well-below-cost prices as a retail business model.

Supermarkets chains have gotten into doing their own milk bottling or refuse to pay for services or quality as a way to avoid eating all of the cost of their own decisions to knock the price of milk back several dollars per gallon. They know milk is in 95% of shopping baskets. It’s a staple. If their store brand is the cheapest around, they’ll get your business and sell other high margin items at the same time.

Dairy farmers and milk bottlers, quite frankly, should not be on the hook for that. Period. But indirectly they are.

At the federal level, no one wants to address this because USDA also benefits when it comes to buying cheap (skimmed) milk for food programs like school lunch, where they also reimburse Impossible not-burger, nacho chips and pop-tarts — but not whole milk, only skimmed.

Is it any wonder consumers balk at spending $5 for a gallon of milk in Pennsylvania but will pay $1.50 for a cup of water, even more for a cup of water with artificial additives? 

Is it any wonder consumers don’t think of milk’s nutritional value next to other protein and vitamin drinks? Intrinsically, the higher margin drinks are perceived as more valuable because the price is higher. Milk is perceived as worth less than water!

This makes Pennsylvania a sitting duck in a national, no, a global market. Why? Because Pennsylvania sets a minimum retail and wholesale milk price each month.

Pennsylvania’s Milk Marketing Law prevents supermarkets from selling milk under the monthly announced state-minimum price. The over-order premium (OOP) portion of this price was intended to help Pennsylvania farmers. The Milk Marketing Law already gives the retailers and bottlers a 2.5 to 3.5% profit margin over average industry costs within that set minimum-price buildup.

The OOP is currently set by the PMMB at $1.00 per hundred pounds of milk plus a 44-cent per hundredweight fuel adjuster. This come out to 13 cents per gallon paid within the state minimum retail price that is meant to be the farmer’s over-order premium (OOP).

A variety of loopholes have diminished how much of the state-mandated OOP gets back to Pennsylvania dairy farmers as intended by the law. It has encouraged interesting business models that involve more out-of-state milk coming in to displace Pennsylvania milk in some Pennsylvania stores (and some creative accounting for sure).

Whether in tankers or packages, more out-of-state milk is competing with an unfair advantage when the built-in OOP is either collected and not paid to farmers or remains completely undocumented — floating around and up for grabs by the supply chain.

Senate Ag Minority Chair Judy Schwank had an interesting exchange with Chuck Turner of Turner Dairy near Pittsburgh during the recent Senate Ag hearing on the matter. She asked whether or not the aseptically processed, shelf-stable milk, which she buys, has the OOP built into its price.

Good question.

Turner explained that for the members of the Pennsylvania Association of Milk Dealers, the OOP is factored in as a cost that they incur when they procure milk within the state and then return this OOP to their Pennsylvania farmers based on their sales of Class I fluid milk products within the state.

On the other hand, when a Nestle or some other company, like fairlife, makes a shelf-stable flavored milk that ends up in a retail dairy case in Pennsylvania, the OOP doesn’t enter into their thought process on these products coming most likely from Indiana (and New York), he said. To his mind, that means it does not “collect” OOP.

In reality, such out-of-state packaged fluid milk products that fall into the Class I fluid milk category are ‘collecting’ the OOP — even ultrafiltered and aseptically packaged milk. These products compete for Pennsylvania consumer dollars. Whether out-of-state fluid milk products are unflavored or flavored, fresh or shelf-stable, they are part of the unknown number Schwank said the Senate Ag Committee needs to know.

It doesn’t matter if the milk is sold above state-minimum price, the OOP is in there.

Take for example the fresh fluid milk brands that are bottled in Pennsylvania — that are not shelf-stable – but are priced on supermarket shelves above the state minimum retail price.

This happens when stores like Walmart and Costco want to differentiate their private label store brands as the lowest-price. What do they do? They put other brands higher.

Since supermarkets in Pennsylvania cannot go below the state’s minimum price to “loss-lead” with their in-house private label, they bump-up the price on competing name brands instead.

In some cases, this pressures sales volume even lower for name brands that are produced, processed and sold in Pennsylvania, reducing the OOP that goes back to the Pennsylvania farms. At the same time, some of the private-label store brands sold at state-minimum fall into the category of breaking the chain of produced, processed and sold in Pennsylvania, which affords them the ability to keep the farmer’s OOP.

Here’s my bottom line from the recent Pennsylvania Senate Ag hearing on the OOP:

For 15 years grassroots dairy producer groups have been grappling with the concerns shared at the hearing, and how the OOP may be affecting the use of Pennsylvania-produced milk in Pennsylvania consumer markets. The embarrassment of not knowing definitively how much fluid milk is sold in the state and how much premium is stranded off-record or on-record has been the subject of meetings, hearings, estimates, emotion, stonewalling and bickering for over 15 years!

Attempts have been made by lawmakers like former State Senator Mike Brubaker and current State Representative John Lawrence repeatedly putting forward bills that would have penetrated the armor surrounding this issue.

Now, in the past 12 to 18 months, we have the Pennsylvania Farm Bureau on high-alert, the Department of Agriculture now is involved and has come up with a plan. 

The CDE and PDMP are studying the issues around the premium and the obstacles to processing investment with the help of a Cornell economist. 

And the Senate Ag Chairman and Minority Chair offered their data-driven bills last session and will offer them again, because, of course, they are paralyzed by still needing that data they’ve been needing for 15 years!

Now, as the fluid milk market is in steep decline over the past 15 years (ironically the same 15 years in which whole milk and 2% milk have been federally prohibited as choices in schools and daycares)…

Now as most of the milk bottling assets, nationally, are owned by cooperatives and most of the rest by retailers…

Now as fluid milk plants are closing to the south and the west, while Pennsylvania has managed to hold on to a core of independent bottlers…

Now as the state courts the favor of Coca-Cola / fairlife or other new processors to invest in Pennsylvania … (Coca-Cola announced May 9 that New York will get the new plant).

Now as everyone is sitting up noticing that the tens of millions of Pennsylvania-paid ‘stranded’ OOP annually over the past 15-plus years may have been fueling growth beyond Pennsylvania’s borders while Pennsylvania’s own farms have been stagnated by more stringent supply management programs due to lack of processing capacity…

Here we are, back to the question of needing the data. Senators were interested in doing something, but Chairman Elder Vogel, said threading the needle will be difficult, and Minority Chair Schwank said “we have to have the data.”

Pennsylvania is enduring erosion on one hand in part because of the OOP and/or the minimum pricing, while on the other hand, these structures are believed by some to provide a stabilizing effect for the Class I bottlers that remain.

And so, the cats keep chasing their tails around the milk bowl!

Meanwhile, more producers have strived to get some of their milk outside of this game by selling it raw – an entirely separate market. The PMMB reached out to a number of them last year telling them they had to be licensed and do monthly reports, then backed off a bit for the time being. They are not the problem. Their milk is not pasteurized, and it is not part of the system in Federal Milk Marketing Orders either.

My biggest questions after the recent hearing, after 15 years of following this and for a time helping farmers who were involved in seeking changes more than a decade ago: Where would we be today if in any of the prior legislative bills, meetings, hearings, plans, would have moved forward in some fashion? 

And yes, this too is related: Where would we be today if whole milk had not been removed from schools?

One thing is clear on the first question, we would by now have solved the math equation of A + B = C instead of estimating, stonewalling, bickering…

On the second question? We might be selling more milk.

Read Part One and Part Two of the PA Senate Ag Hearing about the ABC’s of the OOP here and here

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Part Two: Digging into the PA Senate Ag hearing on the PMMB over-order premium

By Sherry Bunting, Farmshine, May 5, 2023

HARRISBURG, Pa. — As reported in Part One, published in Farmshine’s April 28th edition, the Pennsylvania Senate Agriculture Committee held a three-hour hearing on April 25 about the state’s mandated Class I milk over-order premium (OOP), which is part of the state’s minimum milk price per gallon set by the Pennsylvania Milk Marketing Board (PMMB).

Agriculture Secretary Russell Redding offered this equation to describe what is known and unknown about the estimated $30 million or more in annual OOP paid by Pennsylvania consumers: A+B=C.

‘A’ was confirmed by PMMB auditor supervisor Gary Golsovich to be $23.6 million collected by processors in 2022. But, he said, only $14.5 million of this collected OOP was documented as paid to Pennsylvania farms for milk that could demonstrate all three criteria: produced, processed and sold in Pennsylvania.

Golsovich gave an example: A processor sourcing 50% of its milk from Pennsylvania farms with 50% of its sales being consummated in Pennsylvania only has the obligation to pay 25% of the OOP to the Pennsylvania farms. This was something the PMMB tried to change 10 years ago, seeking to require processors to pay up to the percentage of in-state sales that matched in-state sources, but a constitutional interstate commerce challenge in the courts caused the state to back down.

‘B’, said Redding, is the additional $5 to $10 million in OOP that is paid by Pennsylvania consumers but is presently unaccounted for. Examples are packaged milk from out-of-state and other cross-border transactions. Legislation such as Senate Bills 840 and 841 from last session would capture this information, and Senate Ag Chairman Elder Vogel Jr. and Minority Chair Judy Schwank said they intend to re-introduce these bills in the current legislative session.

He estimates the total ‘C’ would be around $30 million, or more, but last year less than half that amount was paid to the intended beneficiaries: Pennsylvania farms.

The only way to fix the leakage, said the Secretary, is to “break the chain,” to remove the OOP from the minimum price and make it a fee collected at retail and remitted to the Department of Revenue into a designated fund. This would also require legislation.

“Pennsylvania has a system that is like no other,” said PMMB Chairman Rob Barley, a farmer in Lancaster and York counties. “The system worked well when people were drinking a lot of milk produced by Pennsylvania dairy producers. That’s changing. The system needs an adjustment.”

When the Senate Ag Chairman pressed the PMMB Chairman for specific ideas, Barley said the Secretary’s proposal, “while not ideal, is probably the only way to do it.”

He mentioned the potential for a tiered or scaled system where smaller farms could receive more and larger farms less, much like the federal Dairy Margin Coverage has a tiered program based on annual milk production history. 

“We want to work with the legislature on this — to benefit everyone,” said Barley.

The consumer member of the PMMB board, Kristi Kassimer Harper from Fayette County, noted examples in her area of western Pennsylvania, where the OOP works among a variety of independent bottlers that buy Pennsylvania milk, process it in Pennsylvania and sell most of it in Pennsylvania.

She cited studies by St. Joseph’s University indicating consumers don’t give much thought to where their milk comes from, but a survey of Pennsylvania consumers showed that two-thirds would pay a 10-cent premium if the premium gets back to the farmers. (They are already paying a 13-cent OOP plus fuel adjuster embedded in the milk price, but less than half of it is getting back Pennsylvania farms.)

In his back-and-forth discussion with Vogel, Barley said a formula could be developed that would prioritize producers that are currently serving the Class I fluid milk market, using a graduated scale. This idea turned Chairman Vogel’s head. He said it’s the first time he’s heard this approach mentioned.

Something like this would address the concerns of milk dealers who are currently upholding the spirit of the law and the testimony from the State Grange, urging caution about diluting the meaningful amount of OOP 15 to 20% of Pennsylvania farms currently receive.

“Consumers are already paying this, it’s not a tax, but if we collected it from Pennsylvania retailers as a fee and put it in a restricted fund, we can avoid the constitutional issues with interstate commerce,” said Senator Gene Yaw. “We do this all the time, collect funds and put it toward programs we want to support. In this case, the people are already paying it, and if the money is in one place, we can audit it.”

The “mechanics” of how to distribute it, he said, can be worked out with the Board and the industry. But at the same time, Yaw and other Senators said they want to help more of the state’s farmers access what was intended for them, without harming those already receiving some.

Meanwhile, the Department of Agriculture’s plan mentions ‘uniform distribution,’ as do the policy points endorsed by Pennsylvania Farm Bureau.

PMMB board member Jim Van Blarcom, a farmer from Bradford County, stated that in his nine years on the Board, he has heard the concerns of producers across the state. He noted the geographic and generational diversity of the PMMB Board, and their ability to understand how different parts of the state have different experiences with the OOP. 

“The OOP was put in place to help dairymen recoup some costs,” said Van Blarcom, explaining to lawmakers that the Milk Marketing Law already has built into it a 2.5 to 3.5% profit margin for bottlers and retailers. “Since then, the industry has changed, making it outdated and less effective. As a board member, it is getting more difficult to weigh the benefits for the farmers who receive a useful OOP vs. farmers who receive very little to none. When consumers pay a mandated 8 to 12 cents on every gallon of milk sold, this becomes a large sum of money, of which some is unaccounted for.

“During my time on the Board, I have heard over and over about the tanker loads of New York milk coming in and displacing Pennsylvania farmers’ milk. The primary reason these companies do this is they can take advantage of the OOP… We are essentially encouraging this to happen,” he explained.

Recounting testimony at a Board hearing from a dairy farmer milking 90 cows, he said the amount of OOP that farm received wass equivalent to one bag of milk replacer a month.

“I don’t believe one bag of calf feed keeps that farmer in business, but rather his tenacity and commitment to the family farm,” said Van Blarcom.

He also recounted testimony at a Board hearing from Pennsylvania Representative John Lawrence, who cited the accurate accounting on mandated fees for alcohol and fuel.

“This is not happening with the mandated milk OOP. It will continue to become more difficult to defend as a program with funds that are not accurately accounted for and not fairly distributed,” Van Blarcom asserted, adding that consumers will also “become more aware of the unfairness to themselves.”

Meanwhile, when laying out the Department of Agriculture’s plan, the Secretary talked about “a collective investment in PA Dairy,” such as using some of these funds to invest in processing.

Andy Bollinger, a Lancaster County dairy farmer testifying for PDMP said the organization has not taken a position on reforming the OOP because they want to see the facts and the results of a study they are working on with a third-party economist.

Zach Myers from the Center for Dairy Excellence also mentioned a study CDE is involved in to understand the obstacles to processing investment within the state. He cited the impact on farms from supply management programs placed on them based on processing capacity.

“We come to you and ask for investments,” Secretary Redding told lawmakers. “Here’s one that’s already done in the marketplace, and we’re failing to bring those dollars back specifically to reinvest in PA Dairy.”

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Little bit new, little bit Dé-jà vu – PA Senate Ag hearing digs into ABC’s of milk OOP

Data and reform needed, but is Secretary eyeing portion of estimated $30 million-plus for ‘dairy reinvestment’?

By Sherry Bunting, Farmshine, April 27, 2023

HARRISBURG, Pa. – Little bit new, little bit Dé·jà vu. (That’s French for ‘the feeling of having experienced this situation before.’) 

Those first thoughts came to mind listening to the Pennsylvania Senate Ag Committee’s hearing Tuesday (April 25) on reforming the state’s mandated over-order premium (OOP) that is part of the state’s minimum wholesale and retail milk prices, set by the Pennsylvania Milk Marketing Board (PMMB).

Ag Secretary Russell Redding laid out for state lawmakers the Department of Agriculture’s plan to seek reforms that: 1) uniformly and fairly distribute the OOP, 2) ensure the amounts charged to Pennsylvania consumers substantially equal amounts distributed back to farmers, and 3) uses a distribution system that does not have incentives to avoid paying Pennsylvania producers by selling milk from across state lines.

He said the Department is a “reluctant participant” but sees the need to make the “collective case” for the “composite of Pennsylvania Dairy.”

“We believe there are inequities, and we see division and growing farmer mistrust,” said Redding. “We knew there were data gaps in our petition last year… Think about the OOP as an equation: A + B = C.

“What we know today is that of the $23.6 million in OOP collected by processors in 2022, $14 million was required to go back to farmers. That’s A. 

“B is generated in the marketplace but not collected,” he explained. “Our belief is that this is another $5 to $10 million (annually). 

“C is the total that we believe is in the neighborhood of $28.6 to $33 million. The question is, what do we do about it?” he asked.

He answered to say the only way to fix this is to change the system and begin removing the OOP from the minimum price buildup and instead have the PMMB establish a retail-based premium, collected at that point of sale and remitted to the Department of Revenue into a designated fund.

This would require the legislation.

“The General Assembly could then appropriate direct payments to producers and to reinvestment in dairy processing,” said Redding.

The Secretary called it an “embarrassment that we don’t have this number (B)” to complete the A + B = C equation, but as he talked about the PDA’s plan, we heard articulated for the first time this idea that once numbers can be put to the equation and legislative authority for the Board to devise a formula, the OOP could become a “milk tax.” 

The difference being that many consumers don’t know they are already paying the OOP, but when pulled out of the minimum price buildup, it becomes a known quantity.

“We trust the state to do this with liquor, cigarettes and liquid fuel. The legislature could decide how these funds would be used, and a portion could be used to help processors invest or reinvest,” said Redding.

In fact, Zach Myers for the Center for Dairy Excellence said a study is underway to assess the obstacles that are preventing processing investment and reinvestment in Pennsylvania.

PMMB Chairman Rob Barley noted that, “It’s certainly time to evaluate how the OOP dollars get back to farmers and not pick winners and losers. The over $800 million that has gone back to dairy farmers since 1988, especially when the majority of it did, no doubt made a positive difference, but that is changing,” he said. “Fluid milk sales have dropped in half (since then), and it is difficult to account for the dollars with the current tools that we as a Board have.”

Barley noted that if the process moves forward to reform the structure, perhaps other products could be eventually added.

“Right now we don’t have the authority to do any of this. Going back to the 1988 testimony, the primary reason the over-order premium was added (to Class I) is that was the practical point, that was the mechanism already in place for fluid milk. There is no such system for other classes, and Class I is also more of a localized product, which I think is still true today,” Barley explained.

Going forward, he said, the choices for the Board are “to get rid of what we have, which is a choice many are not in favor of, or to have legislation to change the OOP without violating interstate commerce, or to develop a new system that strengthens the Pennsylvania dairy industry to benefit all sectors.”

Redding stressed the point that, “This is all about the dairy farmer, how do we incentivize what we need? Keeping our eye on the farmer and understanding we can do something extraordinary here, we have this opportunity to extract this premium from the marketplace and get (the OOP) back to farmers and for the purposes of reinvestment…”

That’s the New. Now for the Dé·jà vu…

The next thought to emerge in this reporter’s mind after hearing the new twist on OOP as ‘milk tax’ and a portion for ‘reinvestment’ was this: Everyone is at the table now, sitting up, alert, paying attention, and offering solutions after 15-plus years of meetings, hearings and discussions. But the same bottomline emerges: everyone still wants a dip of the farmer’s elusive cream.

Not 15 minutes later, after PMMB board member Jim Van Blarcom testified, his Senator Gene Yaw of the northern tier counties shared a similar thought about how this may be already happening within the minimum price buildup in a rapidly changing industry.

“We made this so complicated and there are too many fingers in this pie, frankly,” said Yaw, asking whether processors get any of this money, now.

PMMB auditor supervisor Gary Gojsovich answered that the OOP is currently collected by processors through their sales, and they pay it back to Pennsylvania producers only when the milk is produced, processed and sold in Pennsylvania, all three must apply.

“In the simplest terms, it sounds like we need to change how the premium is collected and the point of where it is collected,” Senator Yaw responded.

Senator Judy Schwank representing parts of Berks County said: “We need the data. We have to have the data.”

So, we are back to the data. 

The Secretary called it an “embarrassment that we don’t have this number.”

Chairman Elder Vogel and ranking member Schwank said they plan to reintroduce their bills that did not move forward in the last legislative session that would give PMMB authority to license distributors, a move that would account for all packaged milk sales coming into Pennsylvania from out-of-state and other cross-border transactions, which ‘strand premiums.’

A quick history

For decades, there have been meetings and hearings and discussions about the future of the Pennsylvania Milk Marketing Law and the PMMB that sets minimum wholesale and retail milk prices. The law dates back to the 1930s, but the mandated OOP was introduced to the existing structure during a year of drought and high feed prices in 1988.

At that time, the state’s OOP was set by the Board at $1.05 per hundredweight (9 cents per gallon). Today it is $1.00 plus a 50-cents per hundredweight fuel adjuster (combined is 13 cents per gallon). 

At intervals before 2018, the OOP was as high as $3.00 plus a fuel adjuster (over 26 cents per gallon). In 2017, it was nearly $2.00 (17 cents per gallon), but was abruptly cut in half in December of 2017 due to the pressure of out-of-state milk — a harbinger of things to come just four months before Dean Foods announced it was ending contracts with 130 dairy farms in 8 states, 42 of them in Pennsylvania and five months before the startup of the Walmart bottling plant in Indiana.

Also included in the minimum resale and retail milk price buildups are the Federal Order price benchmarks, which vary geographically because Pennsylvania is split between two different Federal Orders. To this minimum federal benchmark price, the OOP is added, translating now to about 13 cents per gallon. 

Also added are the average cost recovery amounts for bottlers and retailers as determined by annual hearings for each area of the state, along with adding the 2.5 to 3.5% profit margin the Milk Marketing Law guarantees milk bottlers and retailers on top of the average cost recovery.

What has come under fire, especially since 2009, is the producer OOP, how it is collected and passed back to farmers, how some of it is stranded and how the changing dairy industry has impacted the real and perceived equity of the distribution of these funds.

Lawmakers made it clear that they look at this as two distinctly separate things, the collection is one issue, and the distribution quite another.

Among those testifying, the amount of the current OOP at $1.50 including fuel adjuster that is received on their farms ranged from 6 cents to 50 cents.

The bottomline is for all of the PMMB’s efforts to expand communication and transparency with the tools available, even board member Van Blarcom conceded that it is becoming more difficult to justify the OOP to his peers.

For his part, Matt Espenshade, a Lancaster County dairy farmer representing the State Grange, told lawmakers that producers and cooperatives that are ‘in’ the Class I market take risks and have requirements other class markets do not experience. 

He cautioned against reforms that would dilute the premium for the 15 to 20% of state farmers currently receiving a meaningful amount because they have costs and risks associated with that reward.

Johnny Painter, a Tioga County dairy farmer testifying for the Pennsylvania Farm Bureau advocated for a uniform distribution of the OOP in reforms that would have the state collect it all. He said farmers in all classes of milk have the same quality standards to meet. 

When pressed by Senator Schwank on why PFB made policy to end the OOP, Painter said it was a tactic to get the dialog started.

Troye Cooper for the Pennsylvania Association of Dairy Cooperatives and a member services director for Maryland and Virginia Cooperative said those receiving very little OOP are part of the 3500 Pennsylvania dairy farms shipping milk through cooperatives that perform essential “balancing” services for the fluid milk market. As coop members, they share in the cost of that.

However, what remained unspoken in his testimony is that the current minimum wholesale and retail milk price buildups now include a roughly 25-cent ‘co-op procurement cost’ for these balancing services along with the requirement that cooperatives list on member milk checks how much of the producer OOP was included. 

Representing the Pennsylvania Association of Milk Dealers, Chuck Turner of Turner Dairy near Pittsburgh, pointed out that fluid milk sales are declining, and other class products are increasing. He asked how bottlers can continue cutting checks to the Federal Orders to bring up the payments for other class milk while reducing the payments to their own shippers when their own fluid milk market volumes are shrinking.

“The fluid milk business is in tough shape. Sales volume has trended downward for 13 years by more than 20%. That’s 1 gallon in 5 lost, 1 plant in 5 closed. It can’t bear the burden for the other classes. It seems particularly unfair with sales growing in the other categories,” said Turner, noting that plants outside of Pennsylvania have been closing “at an astonishing rate.” 

He said the number of independent milk processors in the U.S. fell from 69% to 44% in 2020, whereas in Pennsylvania, independent bottlers still represent 62% of the fluid milk, and he credited the PMMB system for that difference.

Myers noted that Pennsylvania is the state with the second most dairy farms and the fourth smallest average herd size, with production costs that are higher than in some neighboring states. 

He cited loss of market premiums, including quality premiums, the impacts of other price erosion such as Federal Order make allowances that a potential hearing could further degrade. 

Compared to the U.S. All-Milk price published monthly by USDA, Myers noted the Pennsylvania All-Milk price used to be higher than the U.S. average, but this gap has narrowed significantly in the past 15 years.

“It was $1.73 per hundredweight from 2008 to 2012, averaged $1.29 from 2013 to 2017, and in the last five years, it has narrowed to just 49 cents, on average,” said Myers.

In fact, during the pandemic in 2020-21, the Pennsylvania All-Milk price averaged 18 cents less than the U.S. All-Milk price, according to Myers.

“There are several factors for this narrowing, but it’s safe to say it can’t be fixed by increasing the premiums,” said Myers, noting that 80% of the milk produced in Pennsylvania is marketed through cooperatives, and there are cooperative base programs limiting expansion on Pennsylvania farms.

These coop base programs and penalties affect the dairy farms and are in part tied to the limits in processing capacity.

Meanwhile, there were several references by testifiers citing milk coming from New York into Central Pennsylvania for processing and sale and displacing milk produced in that area. The OOP, of course, stays with that retailer, processor and/or cooperative as part of their business model to expand their state’s markets into Pennsylvania so their producers can grow.

“When that premium goes back to New York, that’s exactly what is playing out, and it feels like an injustice to be asking our consumers to pay it without regard to that investment,” said Redding. “We want to capture that premium and put it back into our Pennsylvania dairy farmers.”

The problem, said Barley, is the PMMB can’t just “grab that money and give it to Pennsylvania farmers if the milk is not produced, processed and sold in-state without being challenged in court as in the past on the grounds of violating the interstate commerce clause.”

Senator Yaw interjected that, “If the milk is sold here, we should give the premium back to our farmers. If the milk came from New York, those farmers should not benefit from what we are doing to support Pennsylvania farmers.”

Redding said lawmakers “do not have to wait for the data. The bill on licensing distributors could go forward along with a bill to set up a structured system, assuming the amount to be around $30 million, and we believe it to be higher, to decide how to distribute that revenue.”

Redding said his fear is that as the frustration undertow grows, Pennsylvania will lose this premium without action.

He pointed out that his committee “kept its promise” to get everyone around the table to hear ideas, but that it will be “difficult to thread this needle and it will require collaboration.”

Ranking member Schwank said everything hinges on getting the data that is needed to know how to proceed.

Click to read Part Two.

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Why did PMMB go after raw milk farms for Milk Dealer licenses? Small farm bottlers push back, PMMB puts further licensing ‘on hold’

When Lone Oak shared their public post to customers on facebook that their raw milk and chocolate milk would no longer be available at Back to Nature, they encouraged their customers in Indiana, Pennsylvania to come the extra 20 miles to the farm in Marion Center. The response was overwhelming. They chose to only sell their milk at the farm after being notified by PMMB about needing an intrusive Milk Dealer’s license on top of the PDA permit, inspections and testing they already do. Small processors are pushing back, and PMMB has put licensing of small processors on hold as it evaluates what to do. Facebook photo

By Sherry Bunting, Farmshine, August 19, 2022

HARRISBURG, Pa. — Calls and mailings from the Pennsylvania Milk Marketing Board to small dairy farms processing and selling their very own milk — including those that are permitted by the Pennsylvania Department of Agriculture to sell raw milk — are stirring up a hornet’s nest .

The context of the communications was to get these very small processors to fill out the intrusive applications for Milk Dealer’s licenses, to pay the flat fee, and to do the ongoing monthly milk accountant reporting and calculate and further pay their 6 cents per hundredweight on sales.

To most, this made no sense, given these farms do not purchase milk from other farmers. They do their own pricing based on their expenses — always well above the state-mandated retail minimum — and many are selling raw milk, which is not a general or interstate commerce item.

In the case of raw milk, these producers operate outside of the Federal Milk Marketing Orders, so why is the Pennsylvania Milk Marketing Board (PMMB) coming after them for a Milk Dealer’s license? And why now? Could it have something to do with the bill seeking to collect over-order premium and pool it and pay it to producers directly so that the big players can’t continue to strand some of that premium?

Think about it. The PMMB doesn’t license entities doing cross-border sales of packaged milk whether it was produced in-state or out-of-state to follow the money, but they want small raw milk farms to be licensed Milk Dealers? Something isn’t right.

To their credit, however, the pushback from raw milk producers and citizens has resulted in PMMB putting this licensing effort “on hold”… for now.

Lone Oak Farm, Marion Center, Pennsylvania was one of the small producers to get a voice mail from an attorney identifying himself as a “special investigator for the Milk Marketing Board” wanting to know the name and address to send a packet to fill out.

The packet came. It was the same packet they had received two years earlier — a month before the Covid pandemic — but at that time they were only selling their raw milk and chocolate milk at the farm. They had stated in 2020 that the Milk Dealer’s license did not apply to them and never heard back from the PMMB.

That was the end of it, until August 2022.

This time, the packet included the same letter, along with an intrusive form requiring them to list all of their assets, liabilities — a complete financial statement of personal information — as part of a Milk Dealer’s License application along with monthly forms for calculating their 6 cents/cwt monthly licensing fee and the lesser fee for milk sold through products on which PMMB does not fix a price.

“There was no flow chart to determine if we needed to do this (like is shown below at PMMB website: https://www.mmb.pa.gov/Licensing/Dealer/Documents/License%20Flowchart%202020.pdf). My wife emailed back wanting to know why this pertained to us,” said Aaron Simpson of Lone Oak Farm in an Aug. 17 phone interview with Farmshine. “We were told it pertains to us because we were selling a small amount of milk off site at Back to Nature,” a health store in Indiana, Pennsylvania.

“Someone tipped them off,” he guesses. “We didn’t fill anything out (in the packet), and my wife responded that we would pull our small wholesale account out of Back to Nature rather than jump through these hoops.”

For Lone Oak and other small producers voicing concern, it isn’t even the 6 cents/cwt licensing fee that is the biggest problem, though they believe it is unnecessary. The real problem is the onerous and intrusive forms and the logistics and time it takes to fill out monthly milk accounting to the PMMB. Farms like Lone Oak already applied for and were granted raw milk permits by the Pennsylvania Department of Agriculture (PDA), which inspects them.

Furthermore, as a small producer, with several entities from produce to bakery to milk and more under one umbrella on the farm, the financial statement that the PMMB was requiring was information Lone Oak was not comfortable providing. Why should they? Why is it the PMMB’s business to know their personal business?

“They asked for our entire financial rundown of the farm — as a whole — right down to every asset we own, some of it not even related to the dairy. We are not willing to give that up for a (Milk Dealer’s license),” said Simpson. “This is not how it should be. The only reason we exist is because selling all of our milk conventionally has not been feasible. We are one of three dairy farms left in our township. We are down to the bits and pieces of who makes it and who doesn’t, and that’s been a failure of the dairy industry.”

Most farmers wouldn’t really choose to do customer service as they would rather focus just on farming and taking care of the cows, not running a store. Many have turned to this to preserve their livelihoods, their dairy farms.

“The whole reason we are doing this is because the Milk Marketing Board has failed the farmers, the dairy industry has failed the farmers. How many farms has Pennsylvania lost since 2015?” Simpson pondered aloud. “Within five miles of us, we have lost five or six farms since 2015, so we started selling our own milk with a permit from PDA in 2016.”

Simpson is part of the fourth generation at Lone Oak Farms, milking 40 cows in the same 1960s barn, and diversifying over the years instead of expanding the dairy herd. Now he gets calls from other farmers with all herd sizes wondering how they got started, including large farms wanting to scale back their herd size and get closer to consumers.

When Lone Oak shared their public post to customers on facebook that their raw milk and chocolate milk would no longer be available at Back to Nature, and encouraged their customers in Indiana, Pennsylvania to come the extra 20 miles to the farm in Marion Center, the response was overwhelming.

As the post was shared multiple times, PMMB executive secretary Carol Hardbarger commented that the PMMB staff was looking into what could be done, but that they had to “follow the law.”

The law, according to the flow chart found at the PMMB website (above), stipulates that any dairy farmer selling more than 1500 pounds of milk per month (less than 6 gallons per day) direct to consumers, would have to be a licensed Milk Dealer if they sold any of that milk at a site off the farm or if they sold more than two gallons per day to one customer.

This week, an official response from PMMB executive secretary Hardbarger notes that, “we have officially put licensing of small processors on hold until we decide what to do, sending a letter from me to each not licensed yet, to the ag committees with an explanation, and to PDA.”

But how did this come about and what will happen going forward?

If this requirement is truly part of the law, and if it requires small producers selling their very own milk privately in small amounts must be licensed as Milk Dealers, why have we not heard about it before?

In fact, a Penn State extension educator preparing for a value-added dairy seminar reached out to Farmshine for clarification after reading about the issue in Market Moos last week. She wanted to know why this was never brought to her attention when she asked state agencies for all of the things a small value-added dairy producer needed to know and do to sell milk and dairy products made on the farm. She wanted clarification.

According to Hardbarger, small producers, and those with raw milk permits have received packets and calls in the past, but that a list of raw milk permits was made available to PMMB recently through the online data-sharing that was set up this year between PDA and PMMB now that the weigh-sampler certification work PMMB used to help with has transferred exclusively to PDA. This put the list of raw milk permits directly into the PMMB’s hands.

This PDA list of raw milk permits has always been publicly available and updated online. So why was the action to get small producers to become licensed Milk Dealers started in earnest at this particular time? No clear answer has been given, except that the PMMB is now looking at the situation and putting it ‘on hold.’

Perhaps the biggest players in the industry — that have a stake in preserving the price-regulating and milk-accounting functions of the PMMB — are concerned about the increasing number of Pennsylvania producers going this route outside the system with some or all of their milk. Some dairy farmers are making and selling pasteurized milk and dairy products, others are selling raw milk.

In fact, at Ag Progress Days recently, a panel talked about farm transitions and how important value-added direct-to-consumer sales are for Pennsylvania’s agricultural industry. The Commonwealth has the second largest volume of direct-to-consumer sales of farm products in the U.S., and this is growing as farms are also becoming more diversified, the experts shared.

“As farmers, we don’t need another irritant to yield a pearl for PMMB. This (Milk Dealer’s license) is more administrative paperwork and a check we would need to send every month. It’s one more thing,” Simpson explained, listing all of the things they already do to sell milk through their permit with PDA and in general as dairy farmers.

“Fluid milk is breakeven across the spectrum,” he said. “We have enough irritants in a year’s time, and just that statement about irritants and pearls shows the disconnect between farmers and the PMMB.”

Farmers and dairy professionals around the state are questioning the very low 1500-pounds per month threshold on private sales of milk from farms that pushes these small producers into the category of a Milk Dealer — if any of that milk is sold at a store off the farm.

For example, Lone Oak milks just 40 cows and markets about one-third of that as direct-to-consumer sales of milk, chocolate milk, ice cream and yogurt. The rest goes to United Dairy. They are inspected four times a year for the raw milk permit and twice a year for the conventional bulk sales and federal inspection every 18 months as well. The milk tests are done twice every time they pull milk from the tank – once for the private sales and once for the conventional sales. There will also be new types of inspections coming as well, farmers are told.

Yes, small on-farm processors do not need ‘one more thing.’

“The limit for the number of gallons sold privately off the farm needs to be set drastically higher for this (Milk Dealer license),” said Simpson. “We are not even a blip on the radar, so there needs to be very large exemptions if we are to keep small farms in Pennsylvania.”

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New PMMB consumer rep sees dairy crisis from outside-in

Dr. Carol Hardbarger is digging in and looking at all angles of PA dairy crisis.

Hardbarger9825 (1).jpgBy Sherry Bunting, from Farmshine, Sept. 7, 2018

HARRISBURG, Pa. — Solving problems, bridging gaps, making connections, bringing different interests together – these are skills Carol Hardbarger, Ph.D. has been using throughout her career in education. Today, she brings a unique combination of skills and background to the Pennsylvania Milk Marketing Board (PMMB). She was appointed by Gov. Tom Wolf in May and confirmed by the Senate in June.

“It is a tremendous honor for this to come at the end of my career, to be asked by Governor Wolf, to meet with Senators during confirmation, and to have this opportunity to do something for the state and the dairy industry I love,” Hardbarger said in a recent interview with Farmshine at the PMMB offices in Harrisburg.

She reflects on that call from the Governor’s office, telling her she had been nominated and asking if she would serve. She promptly began looking at the information on what the PMMB does.

“There is a crisis in the dairy industry,” says Dr. Hardbarger. “Oftentimes, when there is a problem, there is a solution that can be obvious to someone looking at the problem from the outside, to go back to what the objectives are of an organization or project at hand, looking at what has been done and why it hasn’t worked.”

She talks about the smaller steps that may be missed in trying to get to an end goal.

“That’s how my brain is wired,” the intense, but easy-to-talk-to Hardbarger says with a smile. She is a big-picture thinker with an obvious knack for process details.

In every job before retirement, she was brought in to help solve a problem and was able to deal successfully with those situations.

The dairy industry issues go well beyond the regulatory aspects of the PMMB. As the board’s consumer representative, Hardbarger seeks a broader role in marketing and advocacy that is refreshing.

She has rolled up her sleeves to dig in, confessing that she loves an intellectual challenge.

Her intention to spend one day a week at the PMMB offices in Harrisburg, quickly became two days a week and has now evolved into a full-time 40- to 50-hour work week.

Hardbarger serves on the board with dairy producers Jim Van Blarcom of Bradford County and Rob Barley (chair) of Lancaster County. They are also putting more time in their roles.

“That’s okay,” she says. “In order to accomplish what the Governor and Senators have communicated, that level of time and organization is necessary.”

She spends her time combing through records, meeting with government and industry entities, opening lines of communication, and being helpful to staff, which has been reduced in recent years by unfilled retirements.

Hardbarger sees external communication and a visible, accessible board on “advocacy things” as vital for developing the relationships that lead to solving problems.

She started the PMMB facebook page and twitter feed (@PAMilkBoard), as well as an email newsletter to legislators and industry that will eventually broaden to consumers. She also helped organize upcoming listening sessions. There is no need to pre-register or pre-submit comments, and the board urges those who can’t attend to send comments electronically to ra-pmmb@pa.gov.

The first listening session was held Sept. 26 from 6 to 9 p.m. in western Pennsylvania. The second will be Oct. 16 at Troy Fairgrounds in northern Pennsylvania, and another is being planned for southeastern Pennsylvania, potentially in Lebanon in November.

In the office with staff through the week, Hardbarger says Pennsylvania’s dairy industry is lucky to have these individuals, who are “highly capable and dedicated in jobs that are not easy.”

On the road forward, she sees a starting point is identifying where there is agreement.

“We have to start with what we all agree are issues to address. Otherwise, we are just putting on band-aids,” says Hardbarger, explaining that such a “holistic approach” is a way for deep-rooted past, present and future issues to be addressed for the long-term.

“I have some concern as I listen to the various constituency groups in the dairy industry — the farmers, the dealers, the retailers, the consumers — that when they speak, for the most part, I hear a lot of individual agenda,” she relates. “I believe strongly that we must be able to look at the agendas of all the groups and somehow integrate them to come up with solutions and prioritize them.”

When Hardbarger talks about “systemic solutions,” as she did in her Senate confirmation hearing, she means the longstanding parts of the system that are “built into how the industry operates.”

She gives the example that some are talking about “temporarily suspending” the minimum milk price, which would require changes in the law.

“We told the Senate that we want to look at some legislative items and see what makes sense for 2018 and 2019,” says Hardbarger.

Another example is some want the over-order premium to end.

“They believe it is not working the way it needs to,” she says. “We are not hearing many suggestions to raise the over-order premium. It will be interesting to see what comments and ideas we get at the upcoming listening sessions.”

The challenge is, according to Hardbarger, “how do we blend a holistic approach to a problem and how it developed systemically over the years with legislation and regulation that was implemented in a time very much different from today.”

She says the board is taking a neutral approach as they look at impacts.

“There are some misconceptions about what the board can and cannot do… so I hope the newsletter and outreach will develop good lines of communication with the legislature while correcting misconceptions and give us the ability to come back to the Assembly with information they need,” Hardbarger relates. “We obviously have the two laws we are responsible for with the associated regulations. But as our name implies, we are ‘marketing.’”

Through facebook and twitter, Hardbarger posts things she sees every day of interest to dairy. The newsletter will eventually include a calendar, an information piece from the chairman, questions and answers by staff, and the school nutrition aspect will be discussed.

Asked why the PMMB’s facebook and twitter profile picture is the PA Preferred logo, Hardbarger responded simply: “We want to promote Pennsylvania dairy products.”

She gave the example of a recent step — sending information to retailers and processors on how special milk promotions can legally be done, and suggesting such promotions be linked to PA Preferred milk.

Hardbarger says she wants PMMB’s communications to be an information clearinghouse between the industry and the legislature and ultimately the consumer.

In developing her role as consumer representative, she is already pursuing relationships with consumer groups and civic organizations to provide information about the nutritional benefits of consuming dairy products and what the industry means to Pennsylvania and its communities.

For example, Hardbarger has already reached out to school nutrition officials with ideas about how milk and dairy are nutritionally assessed within the USDA meal profile for school breakfast, lunch and after school programs.

“If milk and dairy products were separated from the nutritional analysis… we may see schools offer more milk and dairy in the morning and after school programs without having to fit into a total nutrition analysis,” she suggests, adding that this idea is being provided to Representative G.T. Thompson, who sits on the Congressional workforce and education committee as well as to U.S. Senators Pat Toomey and Bob Casey.

“We are also communicating with USDA on this issue of getting whole milk (unflavored) in the schools along with now flavored 1% milk,” she said.

PMMB also sent official comments to the FDA docket to enforce and uphold milk’s standard of identity, and sent emails encouraging others to do so.

Hardbarger understands the nutritional tightrope schools walk to serve foods and milk that students enjoy and will consume. She is aware of the steady drumbeat of scientific studies showing dairy as a complete protein and complete source of vitamins and minerals children today are lacking, as well as the positive dietary revelations about whole milk and full fat dairy, especially for children.

She remembers her youth and spending much time on her grandparents’ dairy farm in northern Maryland, of making and consuming everything from homemade cottage cheese, butter and farmers cheese to whipped cream pies.

And she reminisces about doing just about every chore on that diversified farm, pointing out a decades-old framed photo of her son as a child milking one of four Jersey cows the family kept at that time.

While her career has been in education and technology, she is quick to point out that she has been around farmers and agriculture all of her life.

“There is a passion people have for this life, this business. And the dairy industry is vital to the economy of our state and a big part of what defines us, of who we are,” the proud mother and grandmother two-generations removed from dairy farming explains.

Since her first day on the PMMB in early July, Hardbarger has encountered “no real surprises” but a fuller understanding of issues that have swirled for years.

What surprises her is “the differences of opinion among constituent groups and their differing opinions about what needs to be done,” and seeing how far the industry is from dealing with differences over coffee and a handshake.

“Now we have groups with lawyers and CPAs and very strong individual agendas,” Hardbarger observes. “That has surprised me. I wasn’t aware of how fractured it is. This is an observation, not a criticism, because each constituency has a business interest to protect.”

From staff development to planning a staff retreat, to emailing staff for their ideas, Hardbarger says the momentum is “forward,” even though it’s “frustrating” to learn that state bureaucracies do not move as quickly as desired and there are regulations for literally everything.

“We can’t” are words she does not like to hear.

“There are very few things in this world that cannot be done. It may be that we need to do them in a different or particular way,” says Hardbarger. “We have to fix this dairy crisis, and we can, if we get all the players involved.”

Toward that end, Hardbarger says her next goal is to have the PMMB work with other agencies in forming a “rapid response team” for dairy.

“We hear stories about how a vital bridge can be fixed within 40 days… how the state government made it easier to deal with regulatory processes and provided waivers to make something happen, fast, because it was economically feasible to do that,” she says. “Pennsylvania has a Dairy Development plan… and we need the same ‘rapid response’ in dealing with our dairy crisis.”

Looking ahead, she is most hopeful that, “We can get a working group together of one or two representatives of each constituency group… and start hammering out solutions to our problems, to talk honestly face-to-face about the issues and come up with a few solutions that will work, and that my time here will be productive.”

Adds Hardbarger: “The most rewarding thing so far is the people I’ve met. There is nothing like coming into the office in the morning and seeing smiles and enthusiasm among the staff and having positive responses and feedback from Senate and House staff, to see us moving in a direction.”

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PHOTO CAPTION Hardbarger9825

Retired education and technology expert Carol Hardbarger, Ph.D., of Newport, talks about the dairy crisis and her role as the new consumer representative on the Pennsylvania Milk Marketing Board during a recent interview at the PMMB offices in Harrisburg. She says the Bonnie Mohr painting behind her is a favorite reminder of youthful days spent on her grandparents’ dairy farm. “It also reminds me that the number of dairy farms throughout Pennsylvania help define who we are as a state,” she says. Photo by Sherry Bunting

 

Pa. Gov. Wolf names Barley to PMMB, Senate confirmation hearings in June

DairyFarm(EasternLancCo)7138w.jpg

By Sherry Bunting from Farmshine, May 25, 2018

HARRISBURG, Pa. — The Pennsylvania State Senate will take up consideration and confirmation of two new appointments from Governor Tom Wolf for the Pennsylvania Milk Marketing Board (PMMB)

The Governor’s appointment of Lancaster County farmer and dairy producer Rob Barley of Conestoga and education technology consultant Carol Hardbarger, Ph.D., require confirmation by the state Senate.

That process is anticipated for June and begins with a Senate hearing via the Senate Ag Committee, which could be scheduled as early as June 6.

RobBarley (1)

Rob Barley

While the Pennsylvania Milk Marketing Law does not specify two “farmer” representatives and one “consumer” representative, the familiar practice over the years is for the 3-member board to be comprised in this manner. Rob Barley has been nominated by the Governor, pending confirmation by the Senate, to fill the expired “farmer” seat of PMMB chairman Luke Brubaker, also a Lancaster County dairy producer.

According to the Milk Marketing Board website, Brubaker was first appointed by Gov. Tom Ridge in 1997 and re-appointed by Governors Ed Rendell and Tom Corbett. Brubaker’s third term expired in 2016.

“I am supporting Rob Barley’s nomination and think he will do a great job in this position, given the current challenges for dairy today,” said Senator Scott Martin of Lancaster in a phone interview Monday. “Even thought Rob comes from a larger dairy farm, I have already heard from many smaller farms who support his nomination because they see that Rob understands their plight.”

The PMMB completed the second of two listening sessions last week on ideas presented by the Pennsylvania Department of Agriculture through a petition by Ag Secretary Russell Redding as well as ideas presented by the public.

The dairy farming community has brought concerns over the past 10 to 15 years about the transparency of the PMMB over-order premium and other regulatory and statutory aspects of the Milk Marketing Law, as well as questions about the modern-day impact of this unique system not found in other states at a time when milk moves coast to coast and around the world.

“This (appointment) is just one step in us looking at the dairy issue and how it impacts our communities and our local farmers,” said Sen. Martin. “We can’t continue to allow expired positions to go as long as it has in this case. We need to show that we care about these issues, and get this confirmation done.”

Martin notes he is “glad the Governor nominated these individuals for the farmer and consumer representation. We need to get them confirmed and move forward to address the dairy issues.”

Barley operates Star Rock Farms, a diversified dairy, livestock and cropping enterprise, with his brother Tom and cousin Abe. They were recognized as 2017 Mid-Atlantic Master Farmers. Among other involvements, Barley has served on the board of the Lancaster County Ag Council and the township planning commission. He has also served as president of the Dairy Policy Action Coalition and has testified in past years before both the Senate and House Ag Committees when various bills were considered to address transparency in the PMMB pricing system.

If confirmed by the Senate, Barley would fill the expired seat of Luke Brubaker, who has served on the Milk Marketing Board for 21 years, including the past nine as chairman.

Dr. Hardbarger, an education technology consultant, earned her degrees in agriculture and education at Penn State University. She is a former assistant professor at Cornell and has applied her specialized skills to various positions in public and private education with interest in technology and resource utilization, professional development, and grant and proposal writing.

If confirmed by the Senate, Hardbarger would fill the expired board seat of Lynda Bowman, a Lancaster resident who was appointed by Governor Tom Corbett in 2011. She previously served as secretary of the PMMB and is a past president and lifetime member of the International Association of Milk Control Agencies.

The third member of the board unaffected by these appointments is Jim Van Blarcom, a farmer and dairy producer from Columbia Cross Roads, Bradford County. He was appointed by Gov. Tom Corbett in June of 2014.

To support the Governor’s appointments to the PMMB, contact your state Senator. Also contact the Senate Ag Committee chairman Elder Vogel at 717.787.3076 and Senate President Joe Scarnati at 717.787.7084 by June 6. To locate your state Senator, use this guide

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PMMB responds to Pa. Dept. of Ag with hearings May 2 and 16

Public comment must be pre-submitted by Apr. 30 and May 11 to speak at the hearings on May 2 and 16. Separate from the PMMB hearings, the Pa. Dept. of Ag is seeking public comment to improve the market for dairy in the state and invites the public and industry to provide suggestions or comments online to be considered moving forward.

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By Sherry Bunting, @agmoos

HARRISBURG, Pa. — In responding to Pennsylvania Secretary of Agriculture Russell Redding’s petition for hearings and review, the Pennsylvania Milk Marketing Board (PMMB) announced April 18 that it will conduct the first of two public hearings on May 2 with an expedited process requiring testimony to be provided in advance by noon on April 30.

The first hearing is set for May 2, 2018 at 9:00 a.m. in Room 309 of the Agriculture Building across from the Farm Show Complex on North Cameron Street, Harrisburg.

A second hearing is set for May 16, 2018 at 9:00 a.m. in the Monongahela Room of the Pennsylvania Farm Show Complex. The second hearing was announced this week, and like the first hearing, stipulates pre-registration with copy of comments provided in advance by noon on May 11.

PMMB states that the purpose of the first hearing on May 2 is to receive testimony and comments regarding the specific “Recommendations for Statutory Changes” found in the Ag Department’s April 5 petition.

The hearing will occur before the PMMB Sunshine Meeting already scheduled on that day, which sources indicate will address another portion of the PDA petition — asking PMMB to amend regulatory provisions dealing with termination of dealer-producer contracts. Since this portion of the petition involves a board-level action rather than a statutory change, steps to begin the regulatory review process will begin during the Sunshine Meeting that follows the public hearing on May 2.

(Author’s note: As you read on, please keep in mind that most Pennsylvania dairy farmers I speak with want transparency. They are not seeking a more complex system. They are seeking truth and a level playing field from which to compete. Pennsylvania is unique in having this lawyered-up state-level milk pricing system cohabitating with two Federal Order milk pricing systems. The state system (PMMB) sets a minimum retail milk price and minimum wholesale milk price for 6 regions of Pennsylvania, and the farm premium built into it only passes back to the farm IF the milk is audited to have met three specific criteria: produced, processed and sold in PA. However, the money is collected from all Pennsylvania consumers on ALL milk sold in Pennsylvania no matter where it came from or what pathway of logistics it utilized in getting to a PA store shelf. In turn, the very high per-gallon minimum price creates an uneven playing field for PA-produced milk as the state has become a magnet for increasing numbers of out-of-state dealer licenses as well as out-of-state milk usage, as well as out-of-state distribution warehouses and companies that specialize in logistics while the nation is overcome by supermarket loss-leading and price wars for customer acquisition).

In Wednesday’s hearing (May 2), PMMB will receive testimony on the following statutory items specifically mentioned in the Ag Department’s petition, many of which were suggested by PMMB staff as far back as 2009, but were never moved on, nor implemented!

LICENSING OF RETAILERS

In its petition, the Pa. Dept. of Ag mentions a recommendation by PMMB staff back in 2009 that was never implemented. It would have enabled the Board to require retailer reporting of volumes of fluid milk purchased and volumes sold in Pennsylvania “to track the amount of fluid milk sold at retail, the amount of consumer dollars being generated by the various components that make up the minimum retail price, and to identify the wholesalers and other sources of all fluid milk sold in Pennsylvania.”

The PDA petition notes that this is “a noted absence of data which prevented Drs. Novakovic, Stephenson and Nicholson’s study from being more conclusive on PMMB pricing’s impact on retail prices and Pennsylvania processing volumes. Such data is necessary for the continuation of credible, industry-supported and publicly-supported, PMMB pricing.”

TITLE TO MILK

Regarding Title to Milk, the PDA petition cites another amendment suggested by the PMMB staff in 2009, but never implemented, “to declare by statute, for the purposes of producer pricing only, that title to milk transfers to a milk dealer at the farm pick-up.”

In its petition, PDA notes that, “This (amendment) enables the Board to account for milk transported for out-of-state processing and to track that milk if it comes back in-state via wholesale or, coupled with the above, by a retailer.”

RETURN ABOVE COST OF PRODUCTION

The PDA petition also cites portions of the statute that result in “a return above the cost of production must always be guaranteed in the wholesale and retail price but not in the producer price.”

The petition recognizes that while the producer price under Section 801 must be, according to statute, “cost of production and a reasonable profit to the producer,” there is this exception stating that ‘the market for Pennsylvania-produced milk is threatened,’ which has “so permanently swallowed the rule that increasingly producers question the legitimacy of the entire PMMB pricing system,” PDA states in its petition.

“This is a major problem that must be addressed with transparency and clarity. This petition specifically requests that the PMMB staff be charged with investigating and recommending options to the Board for a statutory revision that has industry acceptance and equitably allocates the impact of market conditions across producers, milk dealers and retailers. If that is not deemed advisable, consideration of a statutory amendment nevertheless remains necessary to replace the existing language,” the petition states.

(Author’s Note: In other words, in times when the minimum price must be lowered to protect the market, the “pain” should be allocated to the other sectors and not taken on solely at the farm level. For example, when supermarkets loss-lead and get into price wars to acquire customers, should they not calculate that cost to their business rather than pass it back through the chain to the farm? It’s the retailer’s decision to use the price on a staple to acquire customers. It’s the processor’s decision to negotiate for large contracts. In the same sense, farmers cooperatives have admitted (in at least one civil proceeding) to doing the same by “sharing” profits gained by collective distribution efficiencies in the form of rebates to processors that are then passed on to retailers. Meanwhile, farmers are told the efficiencies of these collective distribution efforts are meant to reduce the cost of the hauling that is passed on to the farmer and that cost been steadily rising.)

RETURN OF BENEFIT TO PRODUCERS

Finally, the May 2 hearing will receive testimony on the point in paragraph 18 of the Pa. Ag Department’s petition concerning the return to producers of the benefit of minimum wholesale pricing.

The PDA petition explains it this way: “Much has been said over the years about the language of Section 805 of the Milk Marketing Law and whether the price increase built into the minimum wholesale price for payment of the over-order premium is being ‘given to producers’ as required.

“The allowed exception (‘ … necessary in order lawfully to maintain proper milk markets and outlets for producers and consumers’) has, again, permanently swallowed the rule. As with Section 801 producer pricing, consideration should be given to amending Section 805 to clarify the intended result. This is another area where positive perception of PMMB pricing appears to have been eroded by a perceived lack of clarity and transparency, the petition explains.

The PMMB hearing announcement states that intent to present testimony, and a written copy must be provided by noon on April 30, 2018 either electronically at  deberly@pa.gov or by filing at the PMMB office, Rm 110, Agriculture Building, 2301 North Cameron Street, Harrisburg, PA 17110.

For the May 16 hearing, the purpose is to solicit and consider suggestions for statutory changes to the Milk Marketing Law as requested by the PDA in its petition.

Those wanting to give testimony or comments on May 16 must provide notification and a written copy in advance to the PMMB by noon on May 11 either electronically at ra-pmmb@pa.gov or by filing at the PMMB office, Rm 110, Ag Building, 2301 North Cameron St., Harrisburg, PA 17110.

Announcements for the May 2 and May 16 public hearings indicate that both will be listening sessions with no examination or cross examination by interested parties.

A copy of the Pennsylvania Department of Agriculture Petition can be found at the Board’s website and drafts of the proposed amendments may be obtained on the Board’s website at http://www.mmb.pa.gov/Legal/Documents/Petition%20for%20Hearing%20MMB.pdf.

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‘This is the face of the dairy crisis’

(Author’s note: Look for an update here soon about developments since this town hall meeting on 3/19. As of 3/31, in eastern Pennsylvania, 9 Lebanon County dairy farms have been picked up by Harrisburg Dairies, 2 have been picked up by a cooperative and 2 have decided to exit the dairy business, leaving 2 Lebanon County farms and 11 Lancaster County farms still seeking a market. In western Pennsylvania, 4 of the 16 farms have been picked up by Schneider’s Dairy based in Pittsburgh, leaving 12 still needing a market for their milk.)

Lebanon9490(crowd)Emotional town hall meeting in Lebanon, Pa. draws over 200 people urging contract extensions for Dean’s dropped dairies

By Sherry Bunting, Farmshine, March 23, 2018

LEBANON, Pa. – “Family is a treasure for all of us here, and we have a family crisis concerning our dairy farms,” said Randy Ebersole, a local car dealer whose family has been part of the Lebanon community surrounded by dairy farms for generations. He moderated a “Save Pennsylvania Dairy Farms” town hall meeting about the 26 Lebanon and Lancaster County dairy farms that received 90-day milk contract termination letters from the Lebanon Swiss Premium plant owned by Dean Foodd on March 3.

The meeting drew 200 people to the Expo Center Monday (March 19) and was covered by three television stations and a host of other media.

State representatives Frank Ryan, Russ Diamond and Sue Helm also attended and spoke about their commitment to work with farmers on solutions.

Jayne Sebright, executive director of the Center for Dairy Excellence also attended, mentioning the Center’s resources for counseling and support as well as a joint venture with the Pennsylvania Dairymen’s Association to launch a “local and real milk” promotion by June Dairy Month.

Pa. Ag Secretary Russell Redding was not present, but Sebright said he will be sending a letter to Dean Foods in support of an extension of terminated contracts for 42 Pennsylvania dairy farms, the 26 in eastern Pennsylvania and 16 shipping to Dean plants in western Pennsylvania.

“This is the face of the dairy crisis. This is not fake news. This is real,” said Ebersole of the panel of three producers, a nutritionist, a veterinarian and a feed mill manager who shared their stories of the impact to the farms whose milk contracts will end May 31, 2018. This represents about half of the Lebanon plant’s daily milk intake.

The message of the town hall meeting was simple: Don’t blame or boycott Dean Foods because there are still another 40 local farms who did not get letters and are supplying the Swiss plant in Lebanon. But do, write, call or email support for a contract extension for these terminated farms until fall or winter.

And yes, drink more milk and eat more dairy products, especially locally-sourced dairy, knowing how it supports healthy bodies and healthy communities.

All told, Dean Foods ended marketing agreements with over 100 farms in eight states as the company says it adjusted its milk volume because of a supply and demand imbalance made worse by the trend among retailers, namely Walmart, to vertically integrate into bottling their store brands and compressing the supply-chain with consolidated intakes and wider distributions.

The emotional 2-hour meeting revealed community support for these farms by those who recognize how these farms touch many of its jobs and businesses.

Yes. A legacy is on the line here. And there were plenty of youth among the 200 attendees, many of them from local dairy farms where the future is uncertain due to the current dairy economics and especially for those in the families whose farms have been blind-sided by these 90-day termination letters.

One after another, people voiced their concern that 90 days is not enough time to find a new market at the worst time of year, ahead of spring flush, nor is it enough time for these families to unwind their businesses by selling cows, assets, even their farms and their homes to settle their lifetime investments in a way that allows these farm families to find a path forward.

“You will not find a more dedicated and hard-working people than dairy farmers,” said Ebersole. “They have invested their money, their time and their lives developing their herds and their businesses. We understand the world is changing, and that we are not an island, but what has not changed is the expectation of fair and reasonable treatment.”

A local pastor asked a blessing on the meeting and referenced Psalms 139 where David asks God ‘search me… and know my heart; test me and know my anxious thoughts. See if there is any offensive way in me and lead me in the way everlasting.’

The parallels of this passage to what these farmers are facing were obvious in the emotion that followed as each of six panelists told their stories and as others attending lent their support and as 8-oz chugs of Dean’s TruMoo milk and trays of cheese from the Lebanon County dairy royalty were enjoyed.

No one blamed Dean Foods.

Producers talked of a good relationship with the plant. They talked of how the letters completely turned their worlds upside down. They talked of how they have called eight to 10 other milk buyers in the region, none of them stepping up to accept new milk.

“Our cows are like our children,” said Kirby Horst of Lynncrest Holsteins, which has produced milk for the Lebanon Swiss Premium plant for 60 years across two generations. “The thought of 90 days and no market for our milk and no place for our cows to go… the thought of looking out at the pastures and not seeing the cows … I don’t know if I can handle that.”

The affected producers and the businesses that serve them stressed that with a little more time, they could do what is best for their families.

“Just like all the 26 farms affected in this community, our minds are missing right now,” said Alisha Risser. She and her husband have been shipping their milk to the Swiss plant for 17 years. She described how they worked full time jobs and saved and rented a barn before purchasing a herd and then building a dairy full time on their farm in 2001, when they began shipping milk to the plant in Lebanon.

“We have been lucky to have our passion be our job every day and to share this with our kids,” said Risser, her voice tinged with emotion as she described how her husband and youngest son bounce ideas off each other about the cows and the crops. “Our children wonder what future we have now. This is such a feeling of helplessness.

“We are proud of our milk that we produce on our farm, and we are proud of the Swiss Premium milk in our community,” she added. “We are just asking the community to support us with letters to Dean Foods to provide a contract extension until fall or winter.”

As milk pricing, promotion, regulatory environments and dietary guidelines are sorted out in the coming months, these farms are left without a milk market, without an opportunity to compete, to survive.

“God is always faithful, and we know we will be okay in the end, but an extension would allow all 26 farms here to make decisions for our families and our futures,” Risser said.

Ebersole added that, “These farms have developed their cow herds over a long period of time. They are rooted in our community. It’s not like a car dealership where you can just go to the Manheim Auto Auction and get in the business of selling cars.”

Lebanon5278(ProducerPanel).jpgIndeed, a legacy is on the line in Lebanon and Lancaster Counties, as in other communities similarly affected.

“I am not sure how we are going to handle this going forward. We have put all we have into the farm. Nothing will settle like it should,” said Brent Hostetter, who received his letter a week after the other farms on his milk hauling route were notified. Hostetter and his wife have been shipping to the plant for 19 years.

“Our kids love the farm. It has been going three generations, and now I am not sure how we can see a fourth,” said Hostetter. Like the others, he said a contract extension would give them some time to figure things out.

He also encouraged the public to “support our Pennsylvania farmers” to buy local milk and to look at the plant codes.

Lebanon5282(AgBizPanel).jpgRick Stehr, a nutritionist and owner of R&J Consulting, directed some of his comments to the significant number of youth in the audience, saying that these farms are where the next generation learns morals, values, work ethic and the joys and failures of life.

“This is worth fighting for,” said Stehr, “worth fighting all together for.”

He noted that for every 9 milk cows in Pennsylvania, one job is supported in the related business infrastructure. In Lebanon County, alone, one job is supported by six cows. The impact is deep if these cows and farms are lost, he said.

“Each cow here produces $14,000 in revenue for our community,” said Stehr, “16% of U.S. dairy farms are located in Pennsylvania where the average farm size is 80 cows. We are not California or New Mexico. We are located well within a day’s drive from 50% of the U.S. population. It seems our location would be pretty good, and yet this is happening.”

The emotion was palpable as Stehr and others offered to do whatever is needed in terms of counseling and assistance through this.

Alan Graves, manager of Mark Hershey Farms, a prominent feed mill in Lebanon County, said 80% of the mill’s feed business is dairy.

“We have been in business 45 years and employ 55 people in this community,” said Graves. “This day is about the producers and how they affect everything else in our communities. Our mill employees and their families rely on these dairies for their jobs. We don’t make business projections for 90 days, we are out a few years in our projections.

“The extension these producers are asking for is a fair request,” he added. “They have spent their lives improving their cows and improving the product they produce. The thought of taking that away in 90 days is almost unjust.”

Ebersole described the community impact this way: “These folks write out checks to other businesses in our community. There has to be a check coming back the other way. In 90 days that will all stop.”

Dr. Bruce Keck of Annville-Cleona Veterinary Service talked about how the public is unaware of what has been happening over the past 30 days and the past 10 years of consolidation and change. He asked the three television stations represented to raise awareness.

“We want to bombard Dean Foods with letters and emails and phone calls,” he said.

“These dairy farmers are so invested in cows and equipment that they can’t just quickly turn around,” said Keck, who has worked with local dairy farmers as a veterinarian for 25 years and took over the practice started by his father in 1961. He understands the family business dynamics.

“Without an extension, these families will be forced to sell their herds, and even their farms, for a fraction of their worth in this environment,” said Keck, “and that will trickle down to affect truckers, nutritionists, equipment companies, feed mills, veterinarians and more. This is like asking a loaded tractor trailer to turn as fast as a speeding car. It’s not enough time.”

To communicate support for the farms facing 90-day termination of contracts, call Dean Foods at 214-303-3767, email dairydirectsupport@deanfoods.com, or mail a letter to Dean Foods, 2711 North Haskell Avenue, Suite 3400, Dallas, TX, 75204.

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Lebanon5240(Hostetter)Brent Hostetter, Lebanon County dairy producer: “I am not sure how we are going to handle this going forward. We have put all we have into the farm. Nothing will settle like it should.”

 

Lebanon5228(Risser)Alisha Risser, Lebanon County dairy producer: “We are proud of our milk that we produce on our farm, and we are proud of the Swiss Premium milk in our community. We are just asking the community to support us with letters to Dean Foods to provide a contract extension until fall or winter.”

Lebanon5216(Horst)Kirby Horst, Lebanon County dairy producer: “The thought of looking out at the pastures and not seeing the cows … I don’t know if I can handle that.”

Randy Ebersole, local car dealer and panel moderator: “This is not about blaming or boycotting Dean Foods. Please do the opposite, fill yourselves up with these dairy products.”

Lebanon5260(Kreck)Dr. Bruce Keck, Annville-Cleona Veterinary Service: “Without a contract extension…This is like asking a loaded tractor trailer to turn as fast as a speeding car. It’s not enough time.”

Lebanon5272(Stehr&Moderator)Rick Stehr, R&J Consulting: “This is worth fighting for…worth fighting all together for.”

Lebanon5257(Graves)

Alan Graves, Mark Hershey Farms: “These producers have spent their lives improving their cows and improving the product they produce. The thought of taking that away in 90 days is almost unjust.”

Lebanon9500(Helms)Rep. Sue Helm: “A group of representatives are writing a letter Dean Foods. We want farmers to stay in contact with us.”

Lebanon5291(RepDiamond)Rep. Russ Diamond: “We wanted to get Pennsylvania milk into Pennsylvania schools but have been told that with the product stream in Pennsylvania, this is hard to do. This Pa. Milk Marketing Board issue is a hard issue to get to the bottom, and people get very protective of it.”

Lebanon5303(RepRyan)Rep. Frank Ryan: “Keep faith first and foremost and your sense of humor and talk with your bankers. This is emotionally draining and people want to run from it. There is a solution and we need to work together to find it.”

Lebanon5314(Morrissey)

Bernie Morrissey, retired agribusinessman: “Dairy farmer Nelson Troutman got me involved in this nine years ago, and I have given up my retirement to work on this issue because it’s important to our farms. No matter who buys your milk, this is all connected… There are over 25 milk contracts from outside dairies selling milk in Pennsylvania while you guys are under the Pa. Milk Marketing Law. You have been shafted.”

Lebanon5318(EbyMike Eby, chairman National Dairy Producers Organization and former Lancaster County dairy farmer: “The media are our friends. We can work with the media to advertise our product in ways the (check off) promotion programs can’t.”

 

Lebanon9495(Signs)