For Immediate Release
June 29, 2010
Contact: Kristin Crawford
(717) 787-4420
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Senate Agriculture and Rural Affairs Committee Examines Stranded Dairy Premiums 

HARRISBURG – The Senate Agriculture and Rural Affairs Committee today explored ways to ensure that struggling state dairy farmers receive premiums intended to be paid to producers for milk sold in Pennsylvania, according to committee chairman Senator Mike Brubaker (R-36). 

At a hearing in Harrisburg, the committee examined the over-order premium that is intended to be paid to Pennsylvania dairy farmers. This 27-cent premium is paid by consumers to be transmitted to dairy farmers for each gallon of milk produced, processed and sold in Pennsylvania. However, the premium is not paid to dairy farmers for milk that is processed at out-of-state plants or sold wholesale out-of-state and then sold to consumers in Pennsylvania, resulting in a stranded premium for dairy farmers. 

"The stranded premium was one of the primary concerns expressed by dairy farmers during the committee's hearing on milk pricing in December," Brubaker said. "It is important to understand how much of this premium is stranded to ensure that we take the appropriate action to protect our dairy farmers." 

Pennsylvania Secretary of Agriculture Russell Redding testified that 40-45 percent of milk produced in the state is sold in Pennsylvania as fluid milk, but the current over-order premium is only paid on 15-20 percent of all Pennsylvania-produced fluid milk. Pennsylvania Milk Marketing Board records show that the stranded premium was at least $12 million in 2008, and producers at the hearing suggested the stranded premium could be as high as $26 million. 

Redding recommended statutory changes to the state's Milk Marketing Law to report and audit all retail sales of milk to ensure that dairy farmers receive the stranded premium and to transfer ownership of the milk at the farm gate to allow more milk to qualify for the premium. Brubaker said the committee would examine the recommendations made by Redding and other participants in the hearing to determine the appropriate course of action to ensure that the stranded premiums reach Pennsylvania dairy farmers. 

The committee heard testimony from representatives from the Pennsylvania Department of Agriculture, Pennsylvania Milk Marketing Board, Pennsylvania Farm Bureau, Dairy Policy Action Committee, Ahold USA Retail, Pennsylvania Association of Milk Dealers, and the Greater Northeast Milk Marketing Agency. Audio of the hearing is available online at senatorbrubaker.com.