Newspaper Page Text
A3O-Lancaster Farming, Saturday, September 12, 1998
PMMB Hears Requests To Reduce
VERNON ACHENBACH JR.
Lancaster Farming Staff
Co.) Representatives for the
state’s major farm and dairy orga
nizations presented testimony last
week to the Pennsylvania Milk
Marketing Board (PMMB) to low
er the Class I over-order premium
as of Nov. 1.
The current over-order premium
is set at 80 cents per hundred
pounds of milk produced, pro
cessed and sold in Pennsylvania
for use as drinking milk.
The purpose of the premium is
to help maintain the instate pro
duction of fluid milk, the most per
ishable dairy product, during per
iods when producers suffer tem
porary economic difficulties.
The loss of instate fluid milk
production during temporary eco
nomic bad times could eventually
make the state dependent upon
imported fresh milk, and in the
long run, drive up the cost of living
for all Pennsylvanians, school dis
tricts, etc., or make fresh drinking
milk difflcult to get or more expen
sive to purchase in rural areas.
The PMMB held the hearing as
part of its normal operations. The
current over-order premium level
is set to terminate Oct. 31, and the
agency regularly holds hearings in
advance of such scheduled events.
The over-order premium had
been 50 cents and was raised in
September 1996 to 80 cents, and
raised from 80 cents to $1.20 from
in Sept 1997. In April this year,
though scheduled to drop back to
50 cents, dropped back to 80 cents
because of continued profltability
difficulties for producers.
It is now scheduled to drop to 50
cents on Oct 31.
Testimony about the effect of
the scheduled premium level was
received late last week from Bob
Pardoe on behalf of the Pennsylva
nia Slate Grange; David Hay and
Bob Junk on behalf of the Pennsyl
vania Farmers Union (Hay on
behalf of the PFU Milk Producers
Association, Junk on behalf of the
whole organization); Joel Rotz,
daily specialist with the Pennsyl
vania Farm Bureau; David Eyster
representing Dairylea; and Dennis
Schad, representing the Middle
Atlantic Cooperative Milk Mark
eting Association (MACMMA), a
marketing coalition of regional
and national dairy cooperatives.
All except Schad, represent
ing MACMMA, and Dairylea’s
Eyster requested that the over
order premium be lowered from 80
cents to 50 cents, as is scheduled.
given the better position presented
to dairy producers for making
profit better raw milk prices
and lower grain prices.
In the testimony presented,
Schad said the multi-state/
national/global cooperatives he
represents are seeking a reduction
in the Pennsylvania premium to 40
In his submitted testimony for
Dairylea, Eyster requested that the
PMMB maintain its 80-cent pre
The cooperatives under
MACMMA include Dairy Far
mers of America (DFA), Land O’
Lakes, and the Maryland and Vir
ginia Dairy Producers Coopera
tive. Last year, DFA went global
when it entered into a contract with
New Zealand to supply cheese
components for the cooperative’s
United States Italian cheese manu
facturing operations in the Mid
New Zealand is the world’s
leader of inexpensive milk and
daily products. Through its gov
ernment it is a world leader in
exporting dairy product. It also has
lobbied heavily in Washington
D.C. to influence American
domestic daily policy.
Drop It To
While all arguments presented
to the PMMB were based on inter
pretations of statistical data, the
MACMMA position was tem
pered with apparent concern for
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of the state.
“MACMMA supports setting a
40-cent Class I over-order pre
mium, based on the current
method of premium distribution,”
Schad stated, though his testimony
didn’t specify what aspect of the
current method of distribution
would cause the organization’s
leaders to seek lowering the over
order beyond the 50-cent per hun
dredweight (cwt) rate that has
served as a minimum for years.
“Further, MACMMA recom
mends that this (40-percent) rate
remain in effect until a chance in
dairy production or marketing con
ditions occurs, or a change in the
distribution methodology warrants
an adjustment to the Class I
Schad also urged the PMMB to
move quickly on their decision.
Schad stated that MACMMA
markets the milk of mote than 50
percent of the daily producers in
the state (though he didn’t state
how much of the state’s milk pro
duction is represented by those
The bottom line from MACM
MA is that a 40-ccnts per cwt.
over-order premium is all that is
needed to ”... generate an adequate
return to Pennsylvania dairy far
mers and will reasonably align
Pennsylvania Class I prices with
competitive market prices.”
Keep It At
According to Dairylca’s Eyster,
while the price of milk paid to the
producer has been revived during
previous months into the current
month, the market indicators are
that the price will drop significant-
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ly between October and January.
He based this opinion on the
Chicogo Mercantile Exchange
Basic Formula Price futures
Dairy producers have been
advised for the past year and more,
with the elimination of effective
dairy support prices and wildly
fluctuating prices, how to manage
their operational profits through
the purchase of future’s contracts.
(The goal is to minimize fluctua
tions in profits, both highs and
lows, by locking in a price with a
future cash contract, so that profits
or lasses from the future contract
are used to offset the price received
for actual dairy product sold.)
The CME Basic Formula Price
contracts are relatively new, but
based on the fact that the U.S.
Department of Agriculture pricing
of milk is based on an official Bas
ic Formula Price.
The market BFP levels, while
speculative on what the actual
USDA BFP will be, arc considered
to be fairly close to what the actual
BFP will be, since those involved
with the buying and selling of them
are considered to be balancing
Eyster said that CME BFP
future’s contracts indicate a drop
in the price of milk by about $2.73
per hundredweight from the cur
“Instead of giving consideration
to lowering the Class I over-order
premium, it is more appropriate to
consider an increase in the pre
mium to offset the erosion in farm
income that will be occuring due to
Class I prices that ate expected to
be sharply below year-earlier
levels, in early 1999."
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Though not directly related to
the issue of the premium, Eysler
also requested that the PMMB
issue its public support for Pen
nsylvania to join the North East
50 Cents Is Fine
David Hay spoke on behalf of
the Farmers Union Milk Producers
Association, with its 110 members
who market 8 million pounds of
milk per month.
He emphasized, in his com
ments, that the PFUMPA mem
bers’ farms are located along the
western edge of Pennsylvania.
While most of Pennsylvania
dairy producers may have exper
ienced good crop weather and low
predation. Hay said western Pen
nsylvania didn’t receive that
He said his members didn’t
receive good crop weather earlier
this year and are short in quality
forages, which are essential to a
good milk-producing diet for
cows, despite the low grain prices.
He urged the board to “hold (he
line" on the 50-cent premium, and
that he didn’t understand how it
could be justiGed at 40 cents.
On behalf of the Pa. State
Grange, Bob Pardoc a Northum
berland dairy farmer with 150 ani
mals and 360 acres, said that while
dairy producers have recovered
some of their losses from last year
and early this year, that the market
will bear the 50-ccnt premium.
Joel Rotz, representative for the
Pennsylvania Farm Bureau, pre
sented evidence of the price/cost of
production factors for dairy pro
ducers, and requested the PMMB
keep its scheduled over-order pre
mium change to 50 cents per cwt
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East Earl, PA 17519