The over-order premium, regulated by the Milk Marketing Board, no longer treats Pennsylvania farmers equally, Deputy Ag Secretary Greg Hostetter said in testimony submitted ahead of a March 2 hearing.
“The time has come for the board to take a hard look at the current system,” Hostetter said.
To qualify for the over-order premium, milk must be produced, processed and sold in Pennsylvania. It applies only to fluid milk, not to milk used in cheese or other products.
Moreover, if the milk leaves the state for processing or sale, farmers get no premium on it. The Ag Department said this setup creates an incentive for processors to circumvent the premium.
The agency also said the premium must be distributed uniformly among all Pennsylvania dairy producers, and not cost consumers substantially more than what Pennsylvania farmers receive.
The over-order premium was created in 1988 in response to a statewide drought that affected dairy farmers.
In the decades since then, fluid milk has declined as a share of the dairy market, and transportation improvements have allowed milk to be moved long distances. Those changes have reduced the amount of milk eligible for the premium.
Farmers have groused about the premium for years. The board is well aware of the complaints and is in a multiyear process of retooling the premium, but some steps in the process depend on the Legislature.
To address one of the loudest complaints, the board has required cooperatives to tell farmers how much of their pay comes from the over-order premium.
Still, after a string of rocky years for dairy farmers, pressure on the board is mounting. At its annual meeting in November, the Pennsylvania Farm Bureau approved a resolution calling for an end to the premium.
Rob Barley, chairman of the Milk Marketing Board, declined to comment on the Ag Department’s testimony ahead of the hearing.
But the board, the Ag Department and key senators agree on the next step toward salvaging the premium — expanded distributor licensing.
The board is not authorized to collect data on milk being brought in from out of state, so the data it needs to design a new premium is incomplete.
Sens. Elder Vogel and Judy Schwank, who lead the Senate ag committee, have proposed legislation that would give the board the power to gather this information.
In the meantime, the board will meet March 2 to receive the testimony it will use to set the over-order premium for the next six months.
The Pennsylvania State Grange has asked the board to maintain the current premium at $1 per hundredweight. The Pennsylvania Association of Milk Dealers said it does not oppose that plan.
Testimony from other organizations that normally testify at board hearings had not been posted as of Feb. 22.
