Pa. milk’s over-order premium drops

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Holstein heifer standing in milking parlor
The Pennsylvania Milk Market Board reduce the Class I over-order premium price for milk from $1.60 per hundredweight to $.75 per hundredweight. (Farm and Dairy file photo)

HARRISBURG, Pa. — The Pennsylvania Milk Marketing Board reduced the Class I over-order premium price for milk, Dec. 14, from $1.60 to $0.75 per hundredweight for the nine-month period beginning Jan. 1.

Pennsylvania Farm Bureau recommended a more modest reduction in the over-order premium to $1 per hundredweight in an effort to combat price issues associated with an oversupply of milk in Pennsylvania and neighboring Northeast states.

“Dairy farmers continue to operate on razor thin margins, making the over-order premium an important resource to help them deal with serious financial challenges,” said PFB President Rick Ebert.

“Recent decisions by the PMMB to lower the base premium and fuel premium add-on will likely cut into those margins even further in the upcoming months, especially those farmers shipping milk within Pennsylvania,” Ebert said.

“Conversely, an insufficient level of reduction in premium could leave many dairy farm families vulnerable to the loss of marketing opportunities for their milk,” he said.

Producer perspective

During testimony before the PMMB earlier this month, Somerset County dairy farmer Glenn Stoltzfus said PFB was not excited about recommending a reduction in the premium that would cut the overall milk checks of some dairy farmers, but he said it was a balanced response to fit the needs of those who market milk and farmers who produce milk.

“Reducing the over-order premium may improve market conditions for those companies and co-ops that market milk in Pennsylvania. We are willing to support a reduction of the premium in hopes that it will boost the utilization of Class I milk in the Commonwealth and improve the bottom line for dairy farmers,” said Stoltzfus, a member of PFB’s board of directors.

The over-order premium and the fuel adjuster add-on mandated by PMMB are assessed on Class I (fluid) milk that is produced, processed and sold entirely within Pennsylvania.

Reduction support

The Pennsylvania Association of Dairy Cooperatives, representing approximately 3,500 producers, does not oppose the Pennsylvania Association of Milk Dealer’s request to reduce the over-order premium, said Dean Ellinwood, the chairman of the association during his testimony.

“Over the past three plus years the Northeast milkshed has been in an oversupply milk situation when compared to customer milk requirements,” he said.

“Every penny counts in our members’ paychecks. At the same time, we must keep in mind that our Pennsylvania dealer-customers cannot be placed in an unmanageable competitive disadvantage with out-of-state competitors,” Ellinwood said.

Balancing the market

“The PMMB over-order premium must balance protecting farmers from unprofitably low milk prices with requiring processors to pay competitive rates relative to surrounding markets.”

The association recognizes, PMMB cannot serve its vital function if there is a significant gap between the over-order premium and the prevailing milk price in surrounding markets, he said.

“We believe the request made by the PAMD is reasonable given current market conditions and that maintaining the current price gap would undercut the PMMB, which is ultimately not in the interest of either the farmers or the processors.”

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