May 1, 2025

I am writing on behalf of Pennsylvania Farm Bureau (PFB), the state’s largest general agriculture organization, to express our support for Senate Bill 689, which reforms Pennsylvania’s Over-Order Premium (OOP) for dairy farmers. This bill aims to modernize the OOP system, which is a state-mandated price adjustment added to the federal order price for Class 1 milk produced, processed, and sold within Pennsylvania. However, the current system is outdated, and as a result has created significant challenges in the equitable distribution of premiums.

In 1988 under the Milk Marketing Law, the OOP was created as a safety net to help farmers manage fluctuating federal milk prices and input cost while ensuring a stable local fluid milk supply that also provided a secure framework for fluid milk dealers and retailers to recover average costs. Unfortunately, the allocation process has become overly complex, particularly with issues related to the movement of milk across state lines, leading to an inequitable distribution that fails to adequately support all dairy farmers in the state.

Pennsylvania consumers pay a premium on milk to support the Commonwealth’s dairy industry, but under the current system, there is no certainty that all premium dollars stay in Pennsylvania to benefit local producers as intended.

Senate Bill 689 addresses these issues by granting the Pennsylvania Milk Board (PMB) the authority to establish a uniform premium rate for milk retailed in the state, ensuring a fairer distribution system. The bill also requires the PMB to coordinate with the Department of Revenue to facilitate the collection of premiums, promoting transparency and uniformity in how premiums are applied. Furthermore, the bill’s provision for board-established premiums will be based on evidence related to the cost of production, price received and return on equity. This data-driven approach ensures that premium determinations are transparent and fair, and it will help prevent milk from being moved out of state to bypass the premium system.

By supporting Senate Bill 689, we will have a more equitable and transparent system that ensures Pennsylvania dairy farmers are fairly compensated, modernizing the OOP system to meet current challenges while maintaining its original purpose of supporting our local dairy industry. We urge you to vote yes on Senate Bill 689 for the benefit of Pennsylvania’s dairy farmers and the long-term sustainability of the dairy industry in our state.

Thank you for your attention to this important matter, and please do not hesitate to reach out with any questions.

Respectfully,

Mitchell Kurek, State and Local Affairs Specialist