Pennsylvania Milk Board Legal Developments

This issue tracker focuses on selected legislation, regulations, litigation or executive actions relating to the Pennsylvania Milk Marketing Board. The developments covered are not exhaustive. Legislation tracking begins in the 2019-2020 Pennsylvania legislative session. This issue tracker covers the period from 2016 to present.

This section tracks and records legislative actions pertaining to the Pennsylvania Milk Board. 

11.6.23 – Pennsylvania Governor Josh Shapiro signed into law H.B. 1170, known as Act No. 25 of 2023. 

1.3.24 – The Pennsylvania Milk Marketing Board (PMMB) issued cost replacement orders for areas No. 1 (Southeastern PA), No. 2 (East Central PA), and No. 4 (South Central PA). Under the new orders, the rate of return for dealers and to retailers remains unchanged from the areas’ respective May and July 2023 orders. All three areas sustain a 3.5% rate of return for dealers while areas No. 1 and No. 4 maintain a 2.5% rate of return to retailers and area No. 2 maintains a 2.7% rate of return to retailers. 

12.13.23 – The Pennsylvania Milk Marketing Board (PMMB) issued Official General Order A-1018, continuing the $1.00 per hundredweight over-order premium (OOP) for all Class 1 milk produced, processed and sold in Pennsylvania, effective January 1, 2024, until June 30, 2024. The order contains a dissent in opposition to the continued OOP that states, “[w]hile every Pennsylvania consumer pays the premium when they purchase fluid milk in Pennsylvania, every Pennsylvania dairy farmer does not receive a direct benefit from the premium.” The dissenter advocated for an OOP structure that would (1) “distribute over-order premium dollars uniformly among all Pennsylvania dairy farmers;” (2) “not charge consumers substantially more than what is paid to dairy farmers;” and (3) “not provide incentives by which payment of premium dollars can be avoided by moving milk across state lines.” 

12.6.23 – The Pennsylvania Milk Marketing Board (PMMB) issued cost replacement orders for areas No. 3 (Northeastern PA), No. 5 (Western PA), and No. 6 (West Central PA). Under the new orders, the rate of return to retailers remains at 2.7%, which remains unchanged for all three areas from the areas’ respective July 2023 orders. While the orders for areas No. 3 and No. 6 sustain the July 2023 rate of return for dealers at 3.4%, area No. 5 increases the rate of return for dealers to 3.5%. All three orders became effective January 1, 2024. 

11.23 – The Pennsylvania Milk Marketing Board (PMMB) released a report, titled Economic Impact of Elimination of Pennsylvania’s Minimum Milk Pricing System. The report discusses the potential outcomes of eliminating the minimum milk pricing system in Pennsylvania, including farm milk prices, Class I milk over-order premium, and wholesale/retail price floors. The report concluded that eliminating minimum milk pricing might benefit consumers slightly, but that the overall economic and social costs would be significant. The report determined that fluid milk consumption might increase slightly while farm milk prices would decrease. However, it projected that the state could lose $2.8 billion in economic activity, $683 million in wages, and 10,047 jobs. Additionally, eliminating minimum milk pricing could trigger a wage of bankruptcies and a loss of 66% of the state’s fluid milk processing volume. 

6.21.23 – The Pennsylvania Milk Marketing Board (PMMB) published General Order No. A-1017, extending the over-order premium of $1.00 per hundredweight for all Class 1 milk produced, processed, and sold in Pennsylvania. This premium will be in effect from July 1, 2023, through December 31, 2023. Additionally, the order requires that the premium must be reflected in monthly statements to independent producers and cooperatives.   

5.13.23 – The Pennsylvania Milk Marketing Board (PMMB) published in the Pennsylvania Bulletin a notice scheduling a public hearing concerning the level and duration of the Class I Over Order Premium (OOP) for June 7, 2023.

12.14.22 – The Pennsylvania Milk Marketing Board (PMMB) published General Order No. A-1015, renewing its over-order premium (OOP) of $1.00 per hundredweight for fluid milk produced, processed, and sold in Pennsylvania from January 1, 2023, through June 30, 2023. 

12.1.22 – The Pennsylvania Milk Marketing Board (PMMB) published a bulletin explaining the due date for filing milk dealer monthly reports is the 25th of each month, with adjustments for weekends or holidays. The Board noted that it had seen an increase in late filings and stated that it would begin referring late reports for legal enforcement action. 

11.2.22 – In response to a petition filed by Pennsylvania Grange, the PMMB entered an order scheduling a hearing “concerning the level and duration” of the OOP for December 7, 2022. 

10.26.22 – Pennsylvania State Senators Elder Vogel, Jr. and Judith Schwank sent a letter to the Pennsylvania Milk Marketing Board (PMMB) “implor[ing]” the PMMB to extend beyond December 31, 2022, the expiration date of its state-mandated “over order” producer price premium (OOP), currently $1.00 per hundredweight over the federal order price for fluid milk volumes “produced, processed and sold at wholesale” in Pennsylvania. On September 21, 2022, the PMMB ordered the December 31, 2022, expiration date in OGO No. A-1014 as part of the adjudication of a petition to reexamine OOP administration. The PMMB historically sets the OOP in six-month increments, but this order only carries a 90-day term. The expiration date is part of the PMMB’s overall approach to changing the OOP’s administration, which includes gaining additional statutory authority through Senate passage of House Bill 224 by the simultaneous expiration date of the Pennsylvania General Assembly’s 2021-2022 Legislative Session. Senators Vogel and Schwank are the majority and minority chairs of the Pennsylvania Senate Agriculture and Rural Affairs Committee where HB 224 has been pending since April 2022 (following a passage by a 198-0 vote in the Pennsylvania House). The letter articulates various reasons for Senators Vogel and Schwank’s opposition to HB 224 and states “it is imperative that this premium be maintained until further examination and consideration may be made” during the 2023-2024 Legislative Session commencing after January 1, 2023. 

9.21.22 – The Pennsylvania Milk Marketing Board (PMMB) entered a new 90-day over-order premium (OOP) order (OGO No. A-1014) as opposed to its customary 180-day order. The order continues Pennsylvania’s OOP at $1.00 cwt for the period October 1, 2022 through December 31, 2022. The order followed an August 30, 2022 hearing on a petition to consider the “level and duration” as well as the “existence” of the OOP. The current OOP mandates a producer price premium over the federal order price through a calculation intended to approximate the volume of Pennsylvania-produced milk utilized as fluid milk. The hearing aired complaints that (1) the current OOP calculation allows retailers and wholesalers to receive a mandated minimum retail and wholesale price on higher volumes of milk sold than the volumes of milk on which they are required to pay the over-order producer price; and (2) the OOP is only paid to producers deemed to be contributing to in-state fluid milk sales. The PMMB’s written decision states, “Section 801 of the Law requires the Board to establish minimum producer prices that allow producers to recover their cost of production plus a reasonable profit. . . . We believe that the current over-order premium system should be examined and modified, as and if necessary, to ensure all Pennsylvania producers receive a minimum producer price that approaches section 801’s requirements.” The Board went on to explain that legislative changes would be needed to allow it to act, stating that it “believes House Bill 224 would provide additional tools . . . to implement Section 801’s minimum producer price requirement in a way that would better align minimum retail prices with the amount received by producers . . . . The specific method or methods developed may take any number of forms, but we first need the tools and framework House Bill 224 would provide to begin to develop those specifics.”

9.8.21 – The Pennsylvania Milk Marketing Board (PMMB) issued Bulletin No. 1597, titled “Wholesale Sales to the United States Department of Agriculture, Minimum Price Enforcement Policy.” This bulletin was issued in response to a recent incident where a Pennsylvania sale to the U.S. Department of Agriculture (USDA) for the Emergency Food Assistance Program (TEFAP) was made by a Pennsylvania-licensed dealer at lower than PMMB-established minimum prices.

8.11.21 – The Pennsylvania Milk Marketing Board (PMMB) voted to accept a proposed consent order with Upstate Niagara Cooperative (Upstate) acknowledging Upstate’s below Pennsylvania minimum price sales from its northern Pennsylvania plant, formerly Schneider Valley Farms, in violation of Pennsylvania’s Milk Marketing Law and consenting to Upstate’s citation settlement payment of $36,240. In May 2021, Upstate was awarded USDA contracts to supply fluid milk for the Emergency Food Assistance Program (TEFAP) based on bids below PMMB minimum prices. According to PMMB’s Sunshine Meeting minutes, PMMB will continue monitoring bid solicitations for compliance. On Aug. 23, 2021, PMMB Secretary Carol Hardbarger published an account of the incidentand other related facts and comments in Lancaster Farming. 

5.12.21 – The Pennsylvania Milk Marketing Board (PMMB) issued Bulletin No. 1594, titled “Policy Regarding Charitable Donations And Charitable Sales Of Price-Controlled Packaged Products,” which permanently expresses the PMMB policy that donations or discounted charitable sales of milk below Pennsylvania’s mandatory minimum prices are permissible if made to 501(c)(3) corporations and for bona fide charitable purposes. This does not apply to sales to the USDA pursuant to its various food purchasing programs, including for The Emergency Food Assistance Program (TEFAP). The new $400 million USDA Dairy Donation Program is not specifically addressed. PMMB reporting and recordkeeping parameters are also specified. Bulletin 1594 becomes effective upon the expiration of Pennsylvania Governor Wolf’s COVID-19 Proclamation of Disaster Emergency and will then replace Apr. 10, 2020’s Bulletin No. 1573, which temporarily accomplished the same outcome. 

5.12.21 – The Pennsylvania Milk Marketing Board (PMMB) submitted to the Independent Regulatory Review Commission (IRRC) for approval final form regulation 47-18 titled “Transactions between dealers and producers; Termination of dealer-producer contract.” It amends 7 Pa. Code § 143.31 to increase from 28 to 90 the number of days’ notice required to be provided to a dairy producer by a milk dealer when terminating an agreement or course of dealing to purchase that producers’ raw milk. The final form regulation provides for exceptions for financial distress, insolvency, insufficient customer sales and catastrophic events, all of which are defined very specifically in the regulation. Dealers may negotiate an agreement containing a lower (or higher) number of days’ notice. IRRC will consider the final form regulation for approval at its June 17, 2021 meeting. 

3.2.21 – The Pennsylvania Milk Marketing Board (PMMB) delivered to the Pennsylvania Independent Regulatory Review Commission (IRRC) and the General Assembly Agriculture Committees the final form regulation packet for Regulation 47-20, “Transactions Between Dealers and Producers; Payment,” originally published as proposed in the Pennsylvania Bulletin on Sep. 21, 2019. The regulation informally titled by the PMMB as the “Cooperative Over-Order Premium Line Item” initiative, will amend 7 Pa. Code § 143.15 to require cooperatives to furnish a line item on members’ monthly statements that identifies the over-order premium amount paid through a prescribed calculation that is consistent with the financial structure of a dairy cooperative. The IRRC will consider the regulation during its April 15, 2021 meeting. 

1.27.21 – The Pennsylvania Milk Marketing Board (PMMB) issued a bulletin (No. 1591) declaring that for cooperative members it will phase out farm bulk tank calibration services beginning Apr. 1, 2021 and will no longer perform such services by May 1, 2021. The PMMB will continue to provide this service for independent producers until the board permanently ends the farm bulk tank calibration program on Dec. 31, 2021. 

12.9.20 – Dean Foods Bankruptcy: The Pa. Milk Marketing Board, partnering with the Pennsylvania Office of Attorney General, announced that it had negotiated with the St. Paul, Minnesota, law firm representing the Chapter 11 bankruptcy estate of Dean Foods, ASK LLP. As a result, the Board prepared and posted on its website, forms which can be downloaded, completed by producers and milk haulers in any state in the country, and mailed to ASK, LLP as soon as possible as a response to the demand letters asserting claims for the repayment of thousands of dollars of milk check proceeds. Depending upon the content, accuracy and completeness of the information provided, the forms provide information that the bankruptcy estate’s legal counsel has agreed may be sufficient to prove all payments from Dean were made in the normal course of business and as required by law, and sufficient to have the claims for repayment completely withdrawn. 

12.2.20 – The Pa. Milk Marketing Board issued Official General Order No. A-1010 and an accompanying decision, titled “Cooperative Procurement Cost,” concluding a multi-year administrative proceeding commenced by petition of the Pennsylvania Association of Dairy Cooperatives to include in the Board’s producer/wholesale pricing structure an obligation for milk dealers to reimburse dairy cooperatives for certain procurement costs avoided when buying cooperative milk. The cost for things such as field, laboratory and calibration services, producer payroll, sales invoicing, and dispatch and logistics are incurred by milk dealers when buying milk from independent producers but not when buying from dairy producer cooperatives who provide those services. Effective Jan. 1, 2021, the price of milk utilized in Pennsylvania as Class I, and which is produced and sold to a milk dealer by a cooperative in Pennsylvania, shall include $0.24 per hundredweight (cwt) as reimbursement of cooperative procurement costs. The amount shall be recoverable by dealers in the minimum wholesale price obtained from retailers. This is believed to be the first instance of government-mandated producer and wholesale pricing including a specific amount for, and recovery of, cooperative procurement costs which are avoided when milk dealers buy from cooperatives.

11.24.20 – A commercial collections law firm named ASK LLP, headquartered in St. Paul Minnesota and hired to represent the Southern Foods Group, LLC formerly d/b/a Dean Foods (“Dean”) Chapter 11 bankruptcy estate, mailed demand letters asserting legal claims for the repayment of milk check proceeds against thousands of dairy producers (including cooperatives) throughout the United States. The claims seek the recovery of milk checks received from Dean with ninety days preceding Dean’s filing of bankruptcy (i.e. between Aug. 14, 2019 and Nov. 12, 2019). The payments are alleged to be so-called “preference payments” recoverable under Section 547 of the U.S. Bankruptcy Code. Section 547 states, among other things, that a person or entity that receives payment (in this case for milk delivered) from a bankrupt entity within ninety days prior to a bankruptcy filing may be compelled to return that money to the bankruptcy estate under certain conditions. This provision is designed to allow the bankruptcy trustee the discretion to recoup payments that may have been made outside the normal course of business which result in some unsecured creditors receiving preferential treatment by the debtor in the 90 days leading to bankruptcy, thereby receiving an unfair advantage over other unsecured creditors. The amount claimed against each dairy producer in the demand letters varies depending upon the history of deliveries and payments in the subject 90-day window. The claims asserted range from thousands of dollars in claims against a dairy producer cooperative for repayment. The demand letters state that if a “compromise” amount of 90% of the amount claimed to be due is not paid by Dec. 24, 2020, or the dairy producer does not respond with certain requested information by Dec. 15, 2020, a lawsuit (called an “avoidance action”) to collect the amount claimed to be due will be filed during the week of Dec. 28, 2020, against the dairy producer in the United States Bankruptcy Court for the Southern District of Texas located in Houston, Texas. A Disclosure Statement for Dean’s Chapter 11 Plan filed with the Bankruptcy Court on Nov. 30, 2020, states that as of that date, 2,500 demands for the return of alleged preference payments were mailed, but only a portion of those would have been directed to dairy producers. Excluding non-dairy producers, and excluding the demand letters sent to a cooperative (treated as one producer), it is estimated that nationwide somewhere between 1000-1500 demand letters would have been directed to independent producers selling to Dean plants. In Pennsylvania, approximately 50-75 independent producers sold to Dean plants. This is the only known usage of Bankruptcy Code Section 547 to try to recover milk check payments from dairy producers as the result of a dairy processor bankruptcy in recent times. There are multiple complete legal defenses to the claims for repayment and the American Farm Bureau Federation has issued a public letter to legal counsel for Dean Bankruptcy Estate on Dec. 4, 2020, demanding that all demands be withdrawn within ten (10) days and stating that “AFBF will consider all remedies that it can seek as an advocate of the producers, including asking the court to enjoin any litigation against the producers and to hold any funds received by the Debtor in settlement in escrow.”

7.8.20 – Dean Foods Bond Claims: The Pa. Milk Marketing Board issued multiple consent orders establishing over $9.2. million in claims against the Milk Dealer Corporate Surety Bonds of four Dean Foods subsidiaries for failing to pay dairy farmer cooperative Dairy Farmers of America (DFA) for Pennsylvania-produced milk delivered to Dean Foods facilities during the course of the Dean Foods bankruptcy. Bond claims were filed against Dean Dairy Holdings, LLC ($900,198.79); Garelick Farms, LLC Burlington ($3,262,196.63); Suiza Dairy Group, LLC ($13,420.80); and Tuscan/Lehigh Dairies, Inc. – Lansdale and Schuylkill licenses ($5,085,399.68). 

6.10.20 – Dean Foods Company Milk Shipping Payment: The Pa. Milk Marketing Board acknowledged in a press release that Dean Foods Company has paid Pennsylvania independent dairy farmers for the shipping of milk to its plants following the company’s filing for bankruptcy in November 2019. The Board, however, pointed out that “Unfortunately, dairy cooperatives with Pennsylvania members have not been paid.” The Board added, “When the amounts owed are finalized, the Board will proceed with bond claims to recover the money owed to cooperatives.”

4.23.20 – Over-Order Premium: After an emergency hearing on April 20, 2020, the Pennsylvania Milk Marketing Board (PMMB) ordered that the producer price for milk on which Pennsylvania’s current Over-Order Premium (OOP) is paid shall be supplemented, from May 1, 2020 through June 30, 2020, by a “market relief surcharge,” calculated by subtracting the Class I “mover” (as that term is defined for purposes of its inclusion in the Federal Order Price calculations) from $15. The May 2020 PMMB price announcement includes the new market relief surcharge and results in the OOP increasing from $1.00 per hundredweight to $3.11 per hundredweight.

3.28.20 – Milk Marketing Fees Regulation Amendment: The Pa. Milk Marketing Board published in the Pa. Bulletin final rulemaking raising milk marketing fees for dealers, subdealers and haulers as well as the examination and certificate fees for weigher-samplers and testers.

3.19.20 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-1005 providing an over-order premium of $1 per hundredweight for Class I milk produced, processed and sold in Pennsylvania. The general order will be effective from April 1, 2019 to September 30, 2020.

12.4.19 – Cooperative Procurement Costs Premium: The Pa. Milk Marketing Board entered an interim order A-1004 regarding the costs of procurement of cooperative-sourced milk. The interim order provides for an interim additional charge of $0.20 per hundredweight paid to dairy cooperatives for milk produced, processed and sold in Pennsylvania as part of the minimum dealer obligation. This interim additional charge must be included in calculating the minimum wholesale and retail prices for all milk marketing areas. The provisions of this interim order will be enforced from January 1, 2020 to December 31, 2020.

11.6.19 – Trickling Springs Dairy Bond Distribution: The Pa. Milk Marketing Board issued an order distributing the proceeds of Trickling Springs Creamery’s bond in the amount of $453,749.40 to three producers who were not paid for milk purchases.

10.9.19 – Trickling Springs Dairy Bond Claim: The Pennsylvania Milk Marketing Board announced a claim against the milk dealer bond of Trickling Springs Creamery. Under the PA Milk Producer’s Security Act, milk dealers must secure deposits “equal to one month’s purchases,” which are then used to compensate milk producers if the dealer is unable to provide payment. According to the release, Trickling Springs informed producers on Sept. 26, 2019 of its termination and discontinuation of milk purchases, effective the following day, and disclosed its inability to pay its producers for milk received throughout September 2019 to the Board. According to the Board, auditors are still determining how much money is owed to the unpaid producers, and that once determined, it will distribute the bond amounts accordingly. All producers affected by the Trickling Springs closure have secured alternate markets.

9.21.19 – Over-Order Premium Regulation Amendment: The Pa. Milk Marketing Board published notice in the Pa. Bulletin of a proposed rulemaking amending Chapter 143 of Title 7 of the Pa. Code and adding a section § 143.15 imposing an over-order premium to be paid to Pennsylvania producers based on milk produced, processed, and sold in Pennsylvania. The comment period closed on October 21, 2019.

9.18.19 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-1003 establishing an over-order premium of $1 per hundredweight for Class I milk produced, processed and sold in Pennsylvania. The general order will be effective from October 1, 2019 to March 31, 2020.

8.31.19 – Milk Marketing Fees Regulation Amendment: The Pa. Milk Marketing Board published notice in the Pa. Bulletin of a proposed rulemaking amending Chapter 150 of Title 7 of the Pa. Code and raising milk marketing license fees for dealers, subdealers, and haulers as well as the examination and certificate fees for weigher-samplers and testers. The public comment period closed on September 30, 2019.

7.13.19 – Termination Notice Regulation Amendment: The Pa. Milk Marketing Board published a proposed rulemaking notice in the Pa. Bulletin to extend the current dealer-producer contract termination notice requirement from 28 days to 90 days. This proposed extension will allow dairy producers additional time to secure alternate outlet for their products prior to a termination. The proposed rule provides milk dealers with an exception to the 90-day termination notice requirement in case of financial distress or events leading to financial distress. The public comment period closed on August 12, 2019.  

3.19.19 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-1002 imposing an over-order premium of $1 per hundredweight for Class 1 milk produced, processed and sold in Pennsylvania. The general order will be effective from April 1, 2019 to September 30, 2019.

9.18.18 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-1001 establishing an over-order premium of $0.75 per hundredweight for milk. This order applies to the Class 1 price for milk produced, processed and sold in Pennsylvania and will become effective from October 1, 2018 to March 31, 2019.

3.10.18 – Uniform System of Accounts Regulation Amendment: The Pa. Milk Marketing Board published notice in the Pa. Bulletin of a final rulemaking removing obsolete dealer cost categories, adding new categories, and clarifying category descriptions, and mandating licensed cooperatives to report dealer costs.

12.14.17 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-1000 establishing an over-order premium $0.75 per hundredweight for milk. This order applies to the Class 1 price for milk produced, processed and sold in Pennsylvania and will become effective from January 1, 2018 to September 30, 2018.

9.20.17 – Fuel Adjuster: The Pa. Milk Marketing Board entered a general order A-999 providing a diesel full-add on to the Class I over-order premium for all milk marketing areas; thus, setting aside Official General Order A-988 dated December 1, 2014. This order became effective on October 1, 2017.

9.20.17 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-998 imposing an over-order premium of $1.60 per hundredweight for milk in all milk marketing areas. This applies to Class I milk produced, processed, and sold in Pennsylvania. order will be effective from October 1, 2017 to March 31, 2018.

3.21.17 – Over-Order Premium: The Pa. Milk Marketing Board issued a general order A-997 providing that dairy cooperative marketing associations may deduct a market adjustment charge from the dairy producers they work with. The general order specifies that the market adjustment charge “shall not be greater than the lowest such charge which is applied to the cooperative marketing association’s member dairy producers.” This charge applies to producer milk purchased from April 1, 2017 through September 30, 2017. The provisions of this order will become effective on April 1, 2017.

3.21.17 – Over-Order Premium: The Pa. Milk Marketing Board entered a general order A-996 establishing an over-order premium of $1.60 per hundredweight for milk. This applies to Class I milk produced, processed, and sold in Pennsylvania and to all milk marketing areas. This order will be effective from April 1, 2017 to September 30, 2017.

7.9.16 – Uniform System of Accounts Regulation Amendment: The Pa. Milk Marketing Board published notice in the Pa. Bulletin of a proposed rulemaking amending section § 149.43 of Title 7 the Pa. Code to remove obsolete dealer cost categories, add new categories and clarify category descriptions. The proposed regulations would also add a section § 149.46 and impose licensed cooperatives to report dealer costs.