A34-Lancaster Fanning, Saturday, December 6, 1997
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VERNON ACHENBACH JR.
Lancaster Fanning Staff
HARRISBURG (Dauphin
Co.) It was only mid-October
that the Pennsylvania Milk Mark
eting Board (PMMB) held a spe
cial hearing and meeting to consid
er changing the state’s over-order
premium on fluid milk because of
drought and continued low dairy
prices received at the farm.
This week the PMMB held
another special hearing to consider
implementing a statewide Class I
milk price to offset a possible
national dairy price crisis resulting
from a recent federal district court
judge’s ruling in a civil suit about
how the United States agriculture
secretary establish the price of
drinking milk in 1992.
Backtracking a little to the mid-
October action by the PMMB, a
40-cent per hundredweight (cwt.)
of milk premium increase was
approved by the PMMB in a follo
wup public meeting, to provide
Pennsylvania producers whose
milk is produced, processed and
retailed as drinking milk within
Pennsylvania with a total of an
extra $1.20 premium per cwt of
their milk actually sold as drinking
milk.
That premium increase was
approved because the state's dairy
producers have been suffering
badly from drought, crop damage,
high feed costs, and a somewhat
suspect severe decline in dairy
prices.
Without a doubt, the effect and
purpose of the narrowly applied
PMMB premium is to benefit Pen
nsylvania consumers by ensuring
that they will always have locally
available drinking milk.
The way it does this is by
attempting to ensure marginal pro
fitability of Pennsylvania daily
producers and processors of drink
ing milks.
These premiums are not signif
icant as enticements to enter or
expand dairy business.
It is generally understood that,
from a business standpoint, the
premium benefits producers and
processors who are in the business
as much, if not more, out of a love
for it than for its profits.
The premium is intended to help
them tread water during periods of
economic hardships, instead of
succumbing to bankruptcy and
leaving the state’s fresh milk supp
ly up to surviving out-of-state or
instate monopolistic corporate
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PMMB Hears Testimony On Class I Premium
interests.
The goal of the PMMB is stabil
ity of the dairy industry, so as to
assure a consistent, safe and inex
pensive milk supply for an indefi
nite time to all Pennsylvanians,
rural and urban.
The danger in allowing the
instate producers and processer to
fail because of temporary price
instability is that it would seriously
risk the availability and affordabil
ity of fresh drinking milk in many
out-of-the way areas.
With the largest rural population
in the nation, Pennsylvania still
has many out-of-the way areas.
Any fresh milk supplier to Pen
nsylvania, without a vested inter
est in the local community, pre
sents a risk to that local communi
ty’s ability to receive fresh milk.
A non-local dairy products pro
vider, operating strictly from
bottom-line profit motivations,
could well find that long-distance
hauling of drinking milk into rural
Pennsylvania not worth the effort.
History shows that consoli
dated, downsized businesses cut
out marginally profitable routes, or
raise the price to consumers to cov
er the higher cost of hauling small
er quantities longer distances.
That’s nothing but common
sense, as well as modem business
practice.
Pennsylvania consumers, espe
cially those in the low-income rur
al areas, could likely lose their loc
al fresh milk supply.
But, the PMMB not only has the
authority to establish a premium. It
also has the authority to establish a
statewide Class I price.
On Tuesday this week, the dairy
industry of Pennsylvania told the
PMMB to use that authority.
The PMMB is expected to soon
announce a date for a public meet
ing to consider and act upon the
testimony.
That meeting is expected to be
held near or before mid-month.
The state dairy industry’s
request of the PMMB this week:
Set a statewide Class I price that is
equivalent to what it would be
under regular pricing calculations
by the U.S. Department of
Agriculture.
For those not familiar with the
current United States dairy crisis,
on Nov. 3 a federal district court
judge in Minnesota ruled that the
USDA’s setting of Class I diffe
rentials (in effect a premium for
drinking milk) is illegal in 28 fed-
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cral milk marketing orders.
The effect of that ruling would
mean that dairy producers would
receive a lot less for their milk;
much less than it cost to produce.
It is widely agreed that a great
percentage of family-dairy farms
in Pennsylvania would most likely
be wiped out quickly and perma
nently under the judge’s ruling.
PMMB Opponents Relatively Quiet Lately
VERNON ACHENBACH JR.
Lancaster Farming Staff
HARRISBURG (Dauphin Co.) Political pres
sure and support to tear down all government
commodity support programs appears to be
declining.
Especially with regards to the Pennsylvania Milk
Marketing Board (PMMB).
With dairy prices received by fanners running
from mostly below- to at-farm production cost levels,
and the only thing coming between disaster and sur
vival for many dairy farmers being a request by U.S.
Secretary of Agriculture Dan Glickman for a stay of
the Nov. 3 judgement of a Minnesota federal district
court judge, political efforts in the state to gut the
PMMB recently have been mostly quiet
In fact, if nothing else, the recent decision by the
federal district court judge that Class I differen
tials in 28 federal milk marketing orders are illegal,
and therefore buyers don’t have to pay extra to far
mers for milk used for Class I purposes has
brought a renewed national spotlight upon the
PMMB.
A growing number of other states have begun
looking into developing their own milk marketing
boards to establish their own Class I over-order
premiums.
In fact, the Land O’Lakes Cooperative recently
testiGed before the New Jersey Division of Dairy and
Commodity Regulation that it is requesting the Pen
nsylvania neighbor to create its own version of the
PMMB.
And quickly.
For independent dairy producers and processors,
this can be expected to be good news.
While it doesn’t mean that the market can take an
oversupply of dairy product without further reducing
the value of the commodity, it does mean it is less
likely that some in the industry will be able to elimi
nate completely government influence on milk prices
and quality.
What the recent federal dairy pricing crisis demon
strates is that, if Pennsylvania didn’t have the
PMMB, it wouldn’t have any mechanism for dealing
with the effects of the federal court’s ruling.
Without the PMMB, the dairy industry in Pennsyl
vania would be much more vuncrable to a complete
takeover by a corporate force.
As many have noticed, and others are beginning to
discover, competition within many day-to-day public
service industries has not increased, but decreased
with the loss of some governmental oversight.
Short term, predatory price cutting by deep-
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The predicament is the same in
other states. Only Pennsylvania,
with the PMMB, has' the admini
strative tools and authority to pre
vent chaos and an implosion of the
dairy industry.
In effort to prevent a national
calamity, U.S. Secretary of Agri
culture Dan Glickman requested a
stay of the federal court judge’s
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pocketed coporations can quickly eliminate most
independent competition.
Especially in production industries that requite
substantial overhead and arc characterized by low
profit margins and many, but small independent
businesses, there have been many examples of how a
large, deep-pocketed corporations have been able to
enter the field of business, force bankruptcy level
wholesale and retail prices, and sit back and outlast
the smaller competitors.
A recent article in the Wall Street Journal com
mented on the phenomenon.
According to an article in the Dec. 4 edition of the
Journal, staff reporter Timothy Aeppel wrote about
how, in the face of an already saturated market for
their product, that leaders of businesses apparently
continue to keep expanding their production, until
there is only one left standing.
“But if people know this will happen,” he wrote,
“why keep building?
“Call it the psychology of overcapacity. The fact is
that most top executive are well aware of impending
gluts in their industries, but many are hping they will
emerge as one of the winners after the inevitable
bloodbath.”
He went on to state that it is his finding that some of
the reason for this self-destructive behavior is
because people apparently like to play follow-the
leader.
“Part of it is herd behavior. Everyone else is
expanding, so you do it too,” Aeppel wrote. “But '■
there are also good reason to think that what you’re
building is essential to your survival.”
In his article, Aeppel cites business leaders who
state that it has become the ethic of modem business
to keep growing until there is early one provider left
remaining.
That sensibility in business has been creeping into
agriculture, down from the large international agri
cultural giants to the local and regional businesses,
and to fanners.
For the dairy industry, the affect of that sense of
business may ultimately cause the loss of local con
trol and production of dairy foods, as has happened in
the poultry, beef and pork industries.
In fact the dairy industry doesn’t seem to be too far
behind those other industries in bow the production/
processing/delivery system has evolved.
For a variety of reasons, local butchers and
slaughterhouses and producers have been largely
locked out of the business of delivering local product
However, with the authority and support of the
PMMB, local dairy production, processing and retail
can be expected to have a foothold in Pennsylvania.
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order, which would at least nulify
the ruling until an official appeal
could be heard.
A hearing on Glickman’s
request for a stay was scheduled to
be held after presstime Friday,
Dec. 5.
Nevertheless, the dairy industry
in Pennsylvania supports the
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