Attorneys Marvin Beshore and Jason Statler Secure New Cost Recovery on Behalf of Nearly 3,500 Pennsylvania Dairy Farmers
Two tanker loads of milk are ready to be received at a Pennsylvania Class I dealer plant. Each has 50,000 pounds of 3.8% butterfat milk, all from Pennsylvania dairy farms that neighbor each other. All quality tests for the tankers are identical. One tanker is from dairy cooperative member farms; one tanker is from farms of independent dairies. The milk from the two tankers will be commingled in the plant and processed, packaged, and sold to Pennsylvania consumers in the same containers. The price of milk the dealer must pay for each tanker is the same. However, prior to December 2, 2020, an inequity existed in the marketplace. The costs of procuring the milk from farm to plant were built into the wholesale and retail price for one tanker, but not for the other. Representing nearly 3,500 cooperative dairy farmers in Pennsylvania, Attorneys Marvin Beshore and Jason Statler successfully argued that the procurement costs of this cooperative milk supply should be built into the Pennsylvania Milk Marketing Board (“PMMB”) wholesale and retail price system.
The supply of Class I milk from Pennsylvania dairy farms to Pennsylvania consumers via Pennsylvania dealers originates in roughly equal volumes from independent dairy farms and cooperative member dairy farms. The procurement of this milk involves significant costs which are necessary in order to ensure that Pennsylvania consumers receive a wholesome, high-quality supply of milk on a timely basis. These costs include everything from field services and farm inspection, quality testing of the milk, calibration services, producer payroll, and logistics and hauling of the milk, among others. However, prior to recent PMMB action, for milk originating on independent farms, the purchasing dealer was responsible for all that is involved in arranging for the purchase and disposition of those farms’ milk supply, whereas for milk originating on cooperative-member farms, the cooperative was responsible for all of the same functions involved in getting the milk from farm to plant.
On December 2, 2020, following a multiyear hearing concerning the legal mechanism to recover these costs under the Pennsylvania Milk Marketing Law (“MML”), the calculation of these procurement costs, as well as the proper implementation of these costs under the PMMB pricing system, the PMMB adopted OGO A-1010. Under Section 801 of the MML, 31 P.S. § 801, the PMMB has the authority to base all milk prices upon all conditions affecting the milk industry in each marketing area, including a reasonable return on milk sales by dealers. In its Findings of Fact, the PMMB determined that under Section 103 of the MML, 31 P.S. § 103, cooperatives act as “milk dealers” when they distribute milk to other milk dealers in Pennsylvania. Additionally, Section 807 of the MML, 31 P.S. § 807, requires that cooperatives receive the minimum price for the milk they sell, plus the value of any service they provide in conjunction with selling the milk. Therefore, under the PMMB’s well-reasoned analysis, cooperative distribution of milk to a milk dealer should be considered a dealer-to-dealer transaction whereby the cooperative is required to receive the minimum value of the milk sold, as well as services provided in the transaction.
Pursuant to OGO A-1010, beginning in January 2021, the price of Class I milk produced, processed, and sold in Pennsylvania by a cooperative to a dealer will include a per hundredweight cooperative procurement cost which accurately reimburses Pennsylvania cooperative dairy farmers for the real-world, hands-on services involved in getting milk from farm to plant.