In March of 2018 nearly 30 independent Pennsylvania dairy farmers received termination notices from the milk dealer purchasing their milk.
These producers received 90-day notices that their agreements would be terminated, and many had difficulty finding new markets.
In response, the Pennsylvania Department of Agriculture petitioned the Pennsylvania Milk Marketing Board to increase the legal dealer termination notice to producers from a 28-day requirement to 180 days.
Once the board’s decision was made, our legal and management team engaged in the process to officially change the existing regulation (Title 7, Chapter 143.31).
There was a time when a 28-day notice did not present a problem to producers. Just about any independent dealer or cooperative operating within the state would be willing to take on additional suppliers, and there were no problems selling the additional milk or milk products.
Those in the industry clearly understand the many factors that have converged to shape today’s dairy markets that operate within very thin margins. Plant-based alternatives, government subsidies, consolidation of farms and global markets are among the most critical factors, all of which have led to overproduction and an inflexible milk pipeline that cannot withstand even minor disruptions.
Acknowledging and Assisting Both Sides
Pennsylvania is in a unique situation in that its geography does not lend itself to many large farms, at least not with contiguous acreage. Our cultural heritage of smaller farms has flourished over time and has been valued by communities, government and the tourism industry. If the dairy industry in the commonwealth needs “fixing,” it is very unlikely that modeling it after what other states are doing will work or be beneficial.
One of the things that we can do is recognize and work within the realities that exist in our state. Changing regulations to meet the needs of a current market is one avenue that is open to the board.
Title 7, Chapter 143.31, states that “No dealer shall terminate his contract or purchasing agreement with a producer and no producer shall terminate his contract or selling agreement with a dealer except by giving such producer or dealer at least a 28-day written notice before termination.”
In today’s tight market situation, dairy producers cannot afford to be uncertain about where their milk will be sold, and few dealers or cooperatives are in the market to take on additional producers.
At any time, there are 20-25 dealers that process raw milk from the one-third of Pennsylvania producers who do not belong to cooperatives. The regulation change will have no impact on the relationship that exists between cooperatives and their members, which comprise approximately two-thirds of Pennsylvania’s dairy farmers.
The Pennsylvania Association of Milk Dealers, most of whose membership consists of small businesses, had expressed concern about its members who may experience financial difficulties due to the 90-day notice of termination requirement. Working with the milk dealers, board staff developed and tested a waiver process that would incorporate review of a dealer’s financial statements over a two-year period. If granted, and considering the review and notification periods, the notice period would be reduced to about 45 days.
Board staff often find themselves in positions of having to deal with conflicting interests between our constituent groups. The process of working on the notice of termination regulation change is a perfect example of how staff consider the effects of our decisions on all groups and attempt to develop outcomes that are the best for the industry.
PMMB is always available to respond to questions and concerns. I can be reached at 717-210-8244 or by email at email@example.com.