The Pennsylvania Milk Marketing Board wants a state law changed to require milk dealers to give longer notice to dairies when ending contracts.
In a proposed regulation published by the board July 13, dealers would have to give farmers 90 days’ notice if they are ending a milk contract. The current required notice is 28 days.
It’s estimated that 1,100 independent dairy farmers will benefit from the longer notice period. There are about 20-25 Class I Pennsylvania milk dealers that purchase milk from independent producers at any given time.
The Pennsylvania Department of Agriculture petitioned the board to look at changing the law after Dean Foods terminated milk contracts in March 2018 with more than 100 dairy farms in eight states, including 27 in Pennsylvania.
Although Dean gave its producers a 90-day notice — longer than the law requires — it was still difficult for some of them to find new markets for their milk, according to the board. Twenty-eight days would have been impossible for some.
In distress
The board also included an exception for dealers experiencing hardship.
The exception was developed after Pennsylvania Association of Milk Dealers raised concerns about how the longer period would affect dealers in financial distress, said Rob Barley, chairman of the marketing board.
Barley said the marketing board came up with a formula to test whether or not a dealer’s financial viability allowed for the exception.
The board also proposed allowing dealers to make a charitable donation of packaged milk and maintain its purchasing agreement with a producer.
It’s complicated
The board held a public hearing in July 2018 on the proposed changes. A number of representatives from different parts of the dairy industry testified.
Jayne Sebright, executive director of the Center for Dairy Excellence, testified at the hearing. She said it would not have been possible for Dean’s dropped dairy farmers to find a new market and make the transition within the current 28-day window.
Sebright said many farms didn’t receive their notice letters until a week after they were sent, eating into the time period.
On top of that, before new processors and cooperatives decided to accept additional milk from the dropped farms, Sebright said they had to visit the farms, learn about their operations and evaluate the farm’s milk quality data — all things that took time over multiple visits and conversations.
Dealer concerns
Alec Dewey testified on behalf of the Pennsylvania Association of Milk Dealers in July 2018. He said the longer termination period is counter intuitive to their current business arrangements.
Many customer agreements are non-contractual. A school district can switch to a different dairy mid-school year if it so chooses, and retail customers can go out of business or switch vendors with little notice.
Dewey and his family run Harrisburg Dairies.
The hardship provision means well, but Dewey said in his testimony it would likely be too little too late when a company is stuck with surplus milk.
“Every additional day added to a surplus situation while requesting and waiting for a hearing to justify a hardship only makes the hardship worse and puts our remaining farmers at greater risk,” Dewey said.
Barley told Farm and Dairy he understands the milk dealer association’s concerns, but he feels the proposed changes provide for all parties involved.
“We look at everyone in our constituency. The farmer needs to have confidence that he’ll have a market for his milk.” Barley said. “The dealer needs to have confidence they can get their milk sold, and if they can’t, there’s a way out. And the consumer needs to have confidence they’ll have a supply.”
Next steps
The proposed regulation was formally published July 13, and the board is taking public comment on the proposal for 30 days until Aug. 12, said Doug Eberly, chief counsel for the Pennsylvania Milk Marketing Board.
Comments can be submitted by email to ra-pmmb@pa.gov or mailed to Doug Eberly at 2301 N. Cameron Street, Harrisburg, PA 17110.
After the public comment period, the state’s Independent Regulatory Review Commission has 30 days to review and make comments on the proposed regulation, Eberly said.
The state house and senate agriculture committees will also review the proposal and can make comments.
Eberly said they anticipate having the final draft issued by the end of October. After that, the review commission will hold a public hearing.
Ideally, the amended law will be published at the end of January 2020 and then go into effect after that, Eberly said.
(Reporter Rachel Wagoner can be contacted at 800-837-3419 or rachel@farmanddairy.com.)
