HARRISBURG, Pa. — A Pennsylvania Milk Board (PMB) hearing Wed., June 3 considered the State Grange petition requesting the state’s over-order premium (OOP) continue for the next six months at $1.00 per hundredweight, plus fuel adjuster. The hearing became a broader debate over whether the OOP is delivering the intended benefit to dairy farmers as farm losses continue mounting across the Commonwealth.

The Board’s current order established a $1 premium from January through March before reducing it to 50 cents beginning April 1 through June 30, to which 24 to 28 cents per hundredweight so far this year was added in the form of fuel adjuster.

The Pennsylvania Association of Milk Dealers (PAMD) supported continuation of the $1 premium. Pennsylvania Farm Bureau also supported this premium level, while stressing in testimony the need for OOP reform. The Pennsylvania Association of Dealer Cooperatives took no position, while Dairy Farmers of America (DFA), the nation’s largest dairy cooperative, declined to endorse a specific premium level and urged reform to spread the premium among producers serving all classes of milk.

While the Board’s immediate task is deciding the premium level effective July 1, testimony repeatedly returned to a larger question: Why Pennsylvania consumers pay among the nation’s highest milk prices while Pennsylvania dairy farmers often receive lower mailbox prices than neighboring states and continue exiting the industry.

USDA AMS mailbox milk price data for 2025 showed Pennsylvania averaging $20.92 per cwt compared with $21.23 in New York and $21.76 in Ohio. At the same time, USDA’s revised dairy farm count in February showed Pennsylvania lost 490 dairy farms during 2025, representing roughly 40% of the nation’s dairy farm exits last year.

Farmers divided on next steps

The sharpest divide emerged among dairy farmers themselves.

Pennsylvania State Grange President Matt Espenshade, a seventh-generation Lancaster County dairy farmer, testified that farms continue facing severe pressure from rising costs and volatile milk prices. He reported receiving blend prices through his cooperative of $16.35 per cwt in January, $15.89 in February and $17.34 in March and receiving an average 13 cents per cwt in OOP.

Pennsylvania Farm Bureau witness Paul Hartman of Berks County, who markets milk through an independent bottler, reported mailbox prices of approximately $18.20 and $19.20 per cwt during January and February, that are almost exactly what USDA AMS reported as weighted average mailbox price for those months in eastern Pennsylvania. He said the farm received 19 cents in OOP.

The strongest call for change came from Tioga County dairy farmer Johnny Painter, a fourth-generation dairy farmer, who argued that the current system “does not work for the majority of farmers in the state and is no longer fair and equitable.” While acknowledging some farms benefit from the premium, he urged the Board to “push pause” by setting the premium at zero until a replacement system can be developed.

Consumer perspective

The hearing also featured a perspective rarely heard. Madison Weaver, a Lancaster County consumer and granddaughter of a Berks County dairy farmer, testified that consumers increasingly question why Pennsylvania milk prices remain among the highest in the nation while dairy farms continue disappearing with lower mailbox milk prices than surrounding states despite the OOP.

Cross-examination focused on the complexities of milk pricing and mailbox calculations, but Weaver maintained her central concern regarding the apparent disconnect between consumer prices and farm-level returns.

One attorney on cross examination remarked that it was the first time in his experience that a retail consumer had appeared specifically from a consumer standpoint. Consumer board member Kristi Kassimer Harper similarly noted it was the first such testimony during her time on the board.

Dealers defend premium

Craig Marburger, president of Marburger Farm Dairy in Butler County, testified that independent Pennsylvania processors face increasing competition for tight milk supplies while continuing to serve schools, hospitals, retailers and institutions.

He warned that major dairy processing expansions underway in New York and elsewhere could intensify competition for milk and argued the state OOP remains an important tool for helping Pennsylvania processors maintain local milk supplies.

Jeffrey Ansell, a Butler County dairy farmer and agronomy consultant testifying for the milk dealers offered one of the hearing’s strongest economic defenses of the premium. He said his family’s 55-cow dairy farm received $7155 in OOP revenue during 2025, or about 2.5% of their milk income. He also cited examples of farms receiving $55,000 to $91,000 annually through the premium and argued those dollars are spent in local communities, reinvesting directly into farm operations

“Equal is not necessarily fair,” Ansell testified in opposing proposals that would spread premium dollars evenly across all Pennsylvania milk production.

DFA wants ‘equitable’ distribution

Some of the hearing’s most significant discussion emerged during testimony by Drew Frommelt, dairy economics and analysis manager for the Northeast Area of Dairy Farmers of America, Inc.. He stated that DFA  could not support eliminating the premium because of continued economic hardship on dairy farms. However, it also declined to support the proposed $1 level, arguing that years of promised reforms have failed to materialize.

Instead, the cooperative focused on what it described as inequities within the current system. According to DFA, declining Class I utilization means some farmers receive substantially greater benefit from the premium than others depending on where their milk is marketed.

As a result, DFA supported concepts that would collect premium dollars at retail and distribute them more equitably among Pennsylvania dairy farmers. As a cooperative, DFA is defined as a ‘producer’ in the current State Milk Marketing Law, which means they would receive the equitable distribution on behalf of members and re-distribute.

Cross-examination explored how premium dollars currently move through cooperative systems. DFA acknowledged that premiums collected from the marketplace are pooled and distributed across its Northeast Area Council membership spanning multiple states from Maine through Pennsylvania and west to Ohio.

Related testimony from Espenshade explained that premium dollars received through the Mount Joy Co-op he belongs to, may be used for direct member payments, transportation, balancing services, quality premiums, office expenses and other cooperative purposes decided by leaders elected by membership.

Federal reforms shifted Class I value

Economist Sara Dorland, testifying on behalf of the milk dealers, argued that recent Federal Milk Marketing Order (FMMO) reforms have fundamentally changed the economics facing Pennsylvania’s Class I milk sector.

Dorland testified that Pennsylvania milk production declined 5.3% from 2020 to 2025 while the state’s population increased by nearly 64,000 residents. She argued the Commonwealth increasingly receives dairy products imported from outside the state even as it remains one of the nation’s largest Class I milk states with 15 bottling plants in Federal Order 1, second only to New York.

Much of her testimony focused on the 2025 federal pricing reforms. Dorland argued that while Class I differentials increased, revised location-adjustment formulas and federal pooling mechanics have redirected a portion of that additional value away from Pennsylvania’s Class I sector and into broader federal pool distributions.

She further testified that processing expansions in New York, Michigan and other states are increasing competition for milk supplies and argued that maintaining Pennsylvania’s OOP remains important for preserving local fluid milk processing capacity.

Her testimony added another layer to the hearing’s central debate. While DFA focused on how premium dollars are distributed, Dorland argued federal reforms have already shifted significant Class I value away from Pennsylvania’s fluid milk sector.

OOP just one part of system

The OOP represents only one component of Pennsylvania’s minimum retail and wholesale milk pricing structure. Through periodic cost-recovery proceedings, the PMB incorporates processor and distribution costs into minimum prices, including labor, energy, transportation, containers, ingredients, handling expenses and other costs associated with processing and delivering milk, as well as a 2.5 to 3.5% return that is part of the State Milk Marketing Law.

For example, container allowances for school half-pint cartons currently range from roughly 33 to 47 cents per gallon equivalent depending on package type, while flavored milk ingredients, school stop charges, energy costs and other approved expenses are likewise reflected in minimum pricing formulas.

Furthermore, the PMB in 2021 adopted a cooperative procurement allowance of approximately 24.16 cents per hundredweight into minimum price calculations to recognize costs associated with cooperatives servicing Pennsylvania’s Class I fluid milk market.

Decision pending

Overall, the testimony revealed three distinct viewpoints. Some witnesses argued the current system is broken and should be suspended until reform occurs. Others argued the premium is imperfect but provides meaningful financial support that farms cannot afford to lose. Still others focused on how premium dollars move through cooperatives, processors and federal milk pools before ultimately reaching producers.

While witnesses disagreed on the causes, many pointed to the same outcome: Pennsylvania consumers continue paying among the highest retail milk prices in the nation while Pennsylvania continues leading the nation in dairy farm exits and trailing neighboring states in terms of mailbox milk price.

The Milk Board is expected to vote on the July 1 through December 31, 2026 over-order premium at a special sunshine meeting scheduled for June 12 at 9:00 a.m.