The Milk Marketing Board is an independent state agency which primarily administers two laws: the Milk Marketing Law and the Milk Producers' Security Act. The Board is responsible for the economic regulation of milk in Pennsylvania from the cow to the consumer. The goal of that economic regulation is to provide a framework that
- enhances dairy farmer revenue,
- provides security for dairy farmers and milk dealers,
- allows fluid milk dealers and retailers to recover average costs.
To accomplish that legislative mandate, the Board administers a comprehensive milk pricing program that enhances the farm milk price while at the same time providing a fair and competitive price for consumers. The Board establishes minimum producer, wholesale, and retail prices. The minimum producer price includes a Board-mandated over-order premium on Class I milk produced, processed, and sold in Pennsylvania. The over-order premium is adjusted periodically based on evidence received at public hearings held by the Board. By maintaining minimum retail and wholesale prices, destructive price wars at those levels are eliminated and there is no pressure to reduce farm prices to meet competition. The key to the program is that Pennsylvania maintains the authority to regulate all sales of milk where possession transfers within the state's borders. It is also important to remember that the only transactions the Board may regulate are those that occur within our borders.
Each year the Board holds at least two public hearings to determine the level of the Board-mandated over-order premium. The over-order premium is an amount that is paid to Pennsylvania producers over the applicable Federal Order price for Class I milk produced, processed, and sold in Pennsylvania. Current federal order pricing is intended to reflect national supply and demand dynamics by basing producer prices on wholesale sales of dairy commodities. This pricing structure has led to increased milk price volatility. The Milk Marketing Law provides Pennsylvania with the opportunity to enhance producer revenue in response to more local conditions. In recent years, the over-order premium has primarily been established based on market conditions in Pennsylvania and surrounding states; the expert recommendations presented at recent hearings have generally advocated extracting the greatest return possible from the market to benefit Pennsylvania producers while at the same time not threatening the markets of those Pennsylvania producers and providing milk to Pennsylvania consumers at a reasonable cost. At over-order premium hearings, the Board typically hears testimony from dairy producer cooperatives and dairy farmers representing the Pennsylvania Farm Bureau, the Pennsylvania Grange, and the Progressive Agriculture Organization. The Pennsylvania Association of Milk Dealers and the Pennsylvania Food Merchants Association also participate and provide testimony at over-order premium hearings.
The Law requires the Board to establish minimum wholesale and retail prices for packaged fluid milk products. Each year the Board holds a public hearing for each of the six Pennsylvania Milk Marketing Areas to determine the costs incurred by milk dealers to process, package, and deliver milk to stores in each area. Those costs are based on the weighted average audited costs of a representative cross section of milk dealers doing business in each of the areas. In addition to determining milk dealer costs, the Board also receives evidence at each of the public hearings regarding the average cost incurred by stores to handle and sell the packaged milk. In recent years, a base in-store handling cost has been determined in each of the areas and that base cost has then been adjusted monthly based on changes in the Consumer Price Index.
Broadly speaking, the average dealer costs are added to the minimum producer price, including the over-order premium, to arrive at the minimum wholesale price. The in-store handling cost is then added to the minimum wholesale price to arrive at the minimum retail price.
The Milk Producers' Security Act provides protection for milk producers against non-payment by milk dealers. In simple terms, the Act requires purchasers of Pennsylvania producer milk to post a bond with the Board sufficient to cover one month's worth of purchases. Bonds are posted annually and are based on the value of each milk dealer's purchases during the prior year. The Act also contains a provision that allows seven of the approximately 200 milk dealers licensed by the Board to participate in a security fund; that limited number of dealers post a bond sufficient to cover approximately two weeks' worth of purchases and pay money into a security fund based on their purchases each month.
In addition to establishing minimum prices and administering the Milk Producers' Security Act, the Board operates a bulk tank calibration unit to ensure that farmers' milk is being weighed accurately. The Board also certifies milk weighers and samplers to ensure that producer milk is measured and tested accurately so that Pennsylvania producers receive accurate and timely payment for their milk.
More information can be found at
PMMB Overview and Fact Sheet