Last month I had the opportunity to sit in on the Pennsylvania Milk Marketing Board’s hearing, where they gathered testimony regarding the over-order premium and what should be done with the premium structure going forward.
Earlier in the summer the Pennsylvania Department of Agriculture asked the PMMB to evaluate the over-order premium structure to ensure it met three criteria: that the premium dollars are distributed fairly back to producers, the amount charged to consumers isn’t substantially more than what is distributed back to farmers, and that the system does not allow for any opportunities to circumvent it by purchasing or selling milk across state lines.
Representatives from various groups within the industry testified before the hearing and shared their perspectives on whether the current premium structure meets those three criteria.
There were even a few dairy farmers who testified before the board. While the representatives did not all agree on whether the current system met the criteria laid out by the department, they did all share a common goal — making sure the premium continues to strengthen Pennsylvania’s dairy industry and its individual dairy farms. They just had different perspectives on what it took to achieve that goal.
From a historical perspective, the over-order premium was established under the Milk Marketing Law and Milk Producer’s’ Security Acts. It has existed since 1988 to do three things: enhance dairy farmer revenue, provide security for Pennsylvania-based dairy farmers and milk dealers (or processors), and provide the framework for fluid milk dealers and retailers to recover average costs. The premium is collected and distributed back to dairy farmers through the marketplace.
Typically, the board holds a hearing semi-annually to hear testimony regarding the premium amount and adjusts the premium for six months at a time based on the testimony they hear. The premium is collected on all fluid milk sold in Pennsylvania and paid back to farmers based on the amount of milk they produced that is processed and sold in Pennsylvania.
A Changing Marketplace
The challenge the PMMB board has is making sure the over-order premium structure still resonates with the current milk market environment. Since the over-order premium was established, fluid milk consumption has continued to decline while other uses for milk continue to expand. Today just 20% of the nation’s milk production goes into Class I (or fluid) milk sales. In contrast, nearly 35% was consumed as fluid milk in 1988. When you consider a three-part litmus test that the milk must pass to qualify for the premium, the amount of milk produced in Pennsylvania that demands the $1 premium is well below 20%.
Dairy farmers in Pennsylvania receive a portion of that premium based on how much of their milk is produced, processed and sold as fluid milk in Pennsylvania. If their milk is delivered to an out-of-state processing plant to be bottled into fluid milk but then sold in Pennsylvania, it does not qualify. If it is bottled in Pennsylvania but sold in New York, it does not qualify. Only milk that meets all three criteria will garner the $1 per hundredweight. That is why only a handful of farmers receive the full dollar while many others receive a much smaller portion.
For example, one cooperative may send about 10% of their milk to a Pennsylvania-based fluid milk processor with 100% of that fluid milk distributed in Pennsylvania. The rest goes into butter, cheese, and other dairy products. Only 10% would then qualify for the premium, so the cooperative’s members based in Pennsylvania would receive 10 cents per hundredweight if the current over-order premium was $1 per hundredweight. Meanwhile, another group of dairy farmers who independently market their milk to a Pennsylvania-based fluid milk processor receiving all its milk from Pennsylvania farms and selling all its milk in Pennsylvania would qualify for the full dollar. In a third example, a group of farmers independently market their milk directly to a Pennsylvania-based fluid milk processor that receives 50% of its milk from Pennsylvania-based farm and sells 50% of its milk in Pennsylvania. In that example, the farms in Pennsylvania would receive 25 cents of a $1 premium.
So, with all the different ways milk can move in today’s marketplace, what the PMMB board must evaluate is, essentially, does the way the premium structure is distributed today still meet the original intent of the law established more than 30 years ago? That’s a question they can only answer after hearing all the different perspectives on the issue.
A Forum for Discussion
What impressed me most about the hearing last month is how amicable the entire process was, even though those testifying had very different perspectives on the issue. The board asked for testimony to be submitted beforehand. Different parties could ask questions of the witnesses after they testified, and the board chair oversaw the process to make sure questions asked were well meaning and thoughtful. Everyone involved seemed focused on listening, creating understanding, and engaging in the process.
It made me think of an article I just read about how important it is to have empathy in our culture today. The PMMB hearing was to me a testament to what can happen when we conduct business with empathy instead of a “Me versus you” approach. The article spoke about how important active listening and engaging in discussions, not debates, is to finding solutions to the challenges we face.
Even though they did not all agree on the best path forward, everyone in the room recognized the common goal of serving dairy farm families and the broader dairy industry. They actively listened to each other, and they remained present in the conversation. When they listened, they weren’t listening just to respond but to understand the perspective of those asking the question. Although those testifying were all very passionate about the issue, they remained thoughtful and intentional about embracing different perspectives as a way to learn and find solutions.
Like I said earlier, the PMMB board now has a challenging job of deciding the best path forward. My only observation in this is how impressed I was to see democracy and empathy at its best during the hearing last month. With so much controversy in our society today, it was refreshing and a true testament to the leadership that can and does exist within Pennsylvania’s dairy sector.