HARRISBURG, Pa. — Next year, Pennsylvania dairy farmers will look to renew the fight to change the state’s milk pricing system and end the issue of stranded premiums.
An effort to reform the state’s over-order premium failed to win passage in the state house and will not likely be acted upon by the end of the year.
Last month, Sen. Michael Brubaker, a Lancaster County Republican and chairman of the Senate Agriculture and Rural Affairs committee, introduced legislation that would have closed a loophole in the over-order system, and return an estimated $16 million in stranded premiums back to farmers.
After a hearing on the bill during an Agriculture and Rural Affairs committee meeting, Brubaker agreed to continue to craft the legislation and reintroduce it in January.
And dairy farmers are hopeful that 2011 will prove the year that reform is finally brought to the milk pricing system.
“We are expecting that this will move next year,” said Clifford Hawbaker, a Franklin County dairy farmer who is president of the Dairy Policy Action Coalition.
“We farmers are like little kids, we want it now. But we know this is better off looking it over next year.”
Shoppers in Pennsylvania stores pay a 25-cent fee that is supposed to go back to dairy farmers. That fee is assessed on milk that is produced, processed and sold in Pennsylvania.
However, using a loophole in the system, milk producers can ship milk over state lines for temporary storage, sell it in a Pennsylvania stores, and collect the fee. But they are not obligated to return that money to the farmers, leaving it “stranded” in the system.
“Our consumers pay this fee and it is not getting back to the dairy farmer,” said Kristin Crawford, Brubaker’s legislative director. “The dairy farmer needs to come out on top of this equation.”
Under Brubaker’s bill, fees collected at the store would be returned to the state, not individual processors, and then distributed to farmers, Crawford said.
Under the proposal, every dairy farmer would share in a portion of that fee, although that provision will prove to be a discussion point in the coming months, Crawford said.
There is also consideration of increasing the number of members on the Milk Marketing Board from its current slate of three, she said.
Sen. Elder Vogel Jr., who represents Allegheny, Beaver and Lawrence counties, said there was no reason to rush the legislation through at the last minute. Instead, lawmakers can review and refine the bill and get the money back to farmers, he said.
“There are good points to the whole proposal,” said Vogel, who is also a dairy farmer. “We have to recoup those stranded premiums.”
Pennsylvania has already been dealt a temporary setback in improving the marketing system this year after a federal injunction had halted a Milk Marketing Board order.
Milk processors who buy milk from Pennsylvania and neighboring states had been mixing that milk, selling it in Pennsylvania stores, and collecting the over-order fee. However, those processors used a prorated system that only sent a portion of the fee back to Pennsylvania farmers, said Mark O’Neill, a spokesman for the Pennsylvania Farm Bureau.
Under a change enacted by the Milk Marketing Board, a milk processor would have to pay the full fee to Pennsylvania farmers.
Producers have won a temporary injunction in federal court until the legality of order.
Vogel said he would expect to see a similar pushback from some milk bottlers if the loopholes to stranded premiums are closed. But the issue is about transparency and tracking where the money goes, he said.
“We need to find a way to audit the money and make sure it is being returned,” he said.