HARRISBURG, Pa. – In a letter to members of the Pennsylvania General Assembly, the Pennsylvania State Grange has gone on record opposing pooling over-order premiums as not in the best interest of most dairy farmers.
Although the Grange maintains its support of the over-order premium system, it is opposed to the Pennsylvania Milk Marketing Board’s plan to pool 45 percent of the state Class I premium, according to Grange legislative director Brenda Shambaugh. The over-order premium is money added by the Pennsylvania Milk Marketing Board to the federal order price.
“The over-order premium most directly affects independent farmers who ship their milk to dairies in Pennsylvania,” Shambaugh said. “These farmers receive a significant increase to their milk check through the over-order premium since most of their milk is sold as fluid Class I milk.
“But these independent farmers are not the only ones who benefit from the over-order premium – almost all farmers in Pennsylvania benefit.”
Shambaugh said Pennsylvania dairy farmers ship to a variety of processors and co-operatives, and by doing so receive benefits not available to most of those producers who do receive substantial Class I premiums.
Those benefits include, but are not limited to, a share of the co-ops’ profits from manufacturing operations as well as premiums paid on other classes of milk.
Met market needs.
“Under the present handler pools, independent producers, who generally receive the highest premiums, have managed their production to meet the needs of the dealers purchasing their milk, while producers in other states have, for the most part, consistently increased production without regard to the needs of the marketplace,” Shambaugh said.
“Pennsylvania dairy farmers can be efficient and excellent managers and still be hindered by overproducing dairy farmers in other parts of the nation.”
Moreover, under the present system, milk co-operatives in Pennsylvania must voluntarily provide a premium to their members, which results in a larger milk check for producers.
“That is the way it should be – farmers benefiting directly and indirectly from the Pennsylvania Milk Marketing Board.” Shambaugh said. “After all, one of the Milk Marketing Board’s functions is to help producers within the industry.”
Shambaugh added that pooling the over-order premium will – for most independent producers – reduce their milk checks significantly.
“Independent farmers in Pennsylvania are a minority and do not have the same collective voice as organized dairy groups,” Shambaugh said. “Just as important, however, is that all other dairy producers will be hindered indirectly from pooling.
“After pooling, milk buyers for all uses will no longer have to be competitive and meet the over-order premium prices. Farmers will lose that competitive advantage because everyone will receive a portion of the premium.”
With the elimination of the current incentive to pay a premium, the pooled amount of the over-order premium will be less than the market-controlled premium, Shambaugh said.
“Consequently, the Grange’s position is that almost everyone loses with pooling. The only winners are those who buy the milk and who no longer have the incentive to offer market premiums.”