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Legislature backs payments to dairy farmers from Milk Producer’s Security Fund



Sunday, December 29, 2013
The state Senate, agreeing with the House, has approved a bill to reimburse dairy farmers from a special insurance fund created in the 1980s to protect them when dairy processors go out of business without paying them.

The legislation, proponents said, would not cost the state any money. The state’s 100 or so dairy farmers would receive amounts ranging from $10,000 to $20,000, while the fund would remain fully capitalized at $1 million for future situations.

The fund, to which farmers pay in, has been used in the past but has been stagnant for years. Under the measure filed by state Rep. Stephen Kulik, D-Worthington, and approved by the House earlier this month, farmers would be reimbursed based on what they have contributed to the fund over the years.

The Milk Producer’s Security Fund was created more than 30 years ago to protect dairy farmers from economic loss when milk-processing plants were going bankrupt and were subsequently unable to pay farmers for milk already delivered for processing.

That fund, which has accumulated more than $1 million in interest, has stopped collecting nickel-per-hundredweight contributions, and supporters of the bill said releasing accrued interest would help farmers invest in their operations.

“It’s a good thing,” said Orange dairy farmer George Hunt Jr. “Dairy farmers put money into that fund for years and years. In light of grain prices and increased costs of making milk in Massachusetts, they thought it would it would be good to disperse the extra funds to the farmers, before the Legislature gets a bright idea for how to spend it.”

Hunt said the arrangement of having dairy farmers pay into a fund to insure processors is typical.

“The dairy plant should have had their own bond and paid for their own insurance. That’s the way anybody else would have had it done,” said Hunt, adding that dairy farmers “still pay over 13 or 14 cents a gallon to have our milk lugged from us.”

There are questions ab out how the payouts will work, Hunt said. “There’s probably twice as many farmers that have gone out of business that might also have put into the fund, and they’re going to want their fair share,” he added.

Hunt said because grain prices have backed off a bit, the price paid to farmers now is a little over $20 per dozen-gallon hundredweight of milk. That’s still less than it costs to produce that milk, he pointed out.

Kulik’s legislation was co-sponsored by 21 other House members including Reps. Paul Mark, D-Peru, and Denise Andrews, D-Orange.