Milk farms not getting share of premium, legislator says
When you buy a bottle of milk at the grocery store, there's a premium built in intended to pay dairy farmers, but a state senator says that not all of that money is reaching Pennsylvania farmers.
Sen. Mike Brubaker, R-Lancaster County, has introduced legislation to "make sure that it does, indeed, go back to the dairy farmer who does produce the milk," said Kristin Crawford, Brubaker's legislative director.
The 27-cent premium per gallon goes to farmers whose milk is produced, processed and sold in Pennsylvania.
Brubaker's office cites figures showing that $15 million to $25 million in premiums paid by consumers in 2009 did not reach dairy farmers. Those numbers are estimates from former state Secretary of Agriculture Dennis Wolff.
So where is that money going?
"We're not really sure," Crawford said.
One problem comes when a Pennsylvania grocery store sells milk produced in another state, she said.
"When that grocery sells that milk to a Pennsylvania consumer, the quarter is still collected, but there's no farmer for that quarter to go back to," Crawford said. "So what happens to that quarter is the question because the test is, the milk must be produced, processed and sold in Pennsylvania."
Processors are not supposed to get any cut of the premium.
"They're not supposed to be keeping any of that money, and that's part of the problem," Crawford said. "Some of it's disappearing into thin air. ... By law, it's supposed to come back to the dairy farmer."
The Milk Marketing Board, a state agency that regulates dairy economics, disputes the $15 million to $25 million number, according to Tim Moyer, the board's acting secretary.
"The board's position is before we look to make fairly significant changes, there should be some kind of a study done to have someone give an opinion about what the results might be," Moyer said.
If the Legislature passes the bill or something similar to it, Moyer said, the board will enforce it.
If you take the amount of premium dollars that qualify to be paid out to farmers and then look at the amount of milk that's purchased in the state, there's a gap, said John Frey, executive director of the Center for Dairy Excellence, a nonprofit initiative of the Pennsylvania Department of Agriculture.
"The processors pay the producer for the milk," Frey said. "So the premiums are -- the dollars that are available to be paid as premiums -- are somewhere.
"They're either part of the processor's balance sheet, or they're a part of the dairy farmer's balance sheet."
The bigger question, Frey said, is how money from premiums should be distributed back to farmers.
Local farmer Ed Goldscheitter said his farm receives a premium paid by the state. He owns Goldscheitter Dairy Farm in Clinton Township, a 650-acre farm home to 138 milking cows, plus another 30 to 40 so-called dry cows.
"It's a small premium, but it also helps," he said.
In addition to that, dairies can provide premiums to farmers.
"There are other premiums for high quality that the dairy gives the farmers," Goldscheitter said. "So we have an incentive to do the best job we can."
Turner Dairy Farms in Penn Hills, Marburger Farm Dairy in Evans City and United Dairy's parent company in Ohio did not return calls for comment.
Neither did the Pennsylvania Association of Milk Dealers.
There are three entities in the process of selling milk in a grocery store, Crawford said: the dairy farmer, the processor, then the retailer.
The processor and the retailer are guaranteed a profit, she said, but the dairy farmer is not.
Brubaker's legislation would set up a producer settlement fund to collect the state-mandated premium that consumers pay. Then that fund would be distributed among dairy farmers.
It's a way to capture what's called "the stranded premium," she said.
The fund would be divided among farmers, based on how much they produce.
"They are certainly getting a portion of the overall premium, and the majority I would say," Crawford said.
But, she said, even a small portion of the premium amounts to millions of dollars.
Brubaker wants the issue to have an open and fair hearing, Crawford said.
The Pennsylvania Farm Bureau supports the bill because it would provide a higher level of accountability of producer premiums, said Mark O'Neill, bureau spokesman.
"It would ensure that more dollars that consumers believe they're paying to help dairy farmers actually does get into the hands of dairy farmers," O'Neill said.
O'Neill said the organization is not looking to place blame. The bill would allow better tracking of milk from the farm to the consumer, he said.
"As it gets lost in this maze of transference throughout the system," O'Neill said, "it can end up falling in the hands of processors or what-have-you, as opposed to making it back to the dairy farmer."
