Assembly Bill A9218

                                BILL NUMBER:A9218

TITLE OF BILL:  An act to amend the agriculture and markets law, in
relation to eliminating hauling costs for milk producers and in relation
to ownership of milk

PURPOSE OR GENERAL IDEA OF BILL:
To provide real and immediate assistance to dairy farmers during this
unprecedented dairy crisis.

SUMMARY OF SPECIFIC PROVISIONS:
The agriculture and markets law is amended by adding a new section
subdivision 5 to section 257-a and new section 257-b.

Section one:
*Provides definitions for hauling costs.

*Makes it unlawful to charge a milk producer any hauling costs incurred
in the process of picking up milk from the milk producer and delivering
it to a milk plant.

*Requires the Commissioner of Agriculture to adopt rules implementing
the cessation of hauling charges to milk producers consistent with this
section.

Section two:
              

*Redefines milk ownership to state that the ownership of milk shall pass
from the milk producer to the milk plant when the milk is placed in the
vehicle used to transfer it from the milk producer's facility to the
milk plant.

Section three:
Provides that this act shall take effect upon the enactment into law by
the state of New Hampshire and Vermont having identical effect with this
act.

JUSTIFICATION:
Dairy farming in New York State is the largest component of the agricul-
tural industry. There are nearly 6,000 dairy farms and we are ranked
third in the nation in milk production behind California and Wisconsin.
NY's dairy farms continue to provide consumers with a source of locally
produced, affordable supply of nutritious product that is needed for all
ages. The state's dairy farms are also economic engines as farms employ
22,000 people statewide while also keeping local businesses operating.
Many local building supply stores, fuel suppliers, insurance businesses,
feed and dairy supply businesses, financial services, and veterinarian
practices are dependent on farms.  In fact, the money generated from
dairy farms is also spent locally, turning over at least 3 times in
local areas. Farms also provide many environmental benefits such as
providing habitat for wildlife, open space, and scenic vistas for all
New Yorkers to enjoy.

Federal Agriculture Secretary, Tom Vilsack recently stated that we are
in, "one of the worst dairy crises in decades". In light of this crisis,
the Federal government needs to address long-term solutions on pricing,
and better tie what farmers receive for milk to the cost of production.
On this issue, there isn't a lot we can do on the state level, but we
must do something to help our hard-working struggling farmers and this
legislation provides an immediate and real revenue boost to them.

Currently, all farmers are suffering from the rising costs of opera-
tion-feed, energy, health care--just as the price their milk demands on
the market is at a 30-year low according to the united states Department
of Agriculture (USDA). All-milk prices will average $10.95-$11.65 per
hundredweight (cwt) this year (2009), the lowest since 1978 (according
to the USDA).

Dairy farming is a unique business as dairy farmers are price takers and
cannot pass along any increase in operating costs. When milk is loaded
onto the truck at the farm, the farmer does not know what price will be
received for that milk until the payment arrives the following month.
Milk is priced on a per hundredweight basis, unlike at the consumer
level where it is priced on a per gallon basis. There are approximately
12 gallons in one hundredweight of milk. A price of $11/cwt, equates to
approximately $0.90 per gallon received by the producer. Moreover, a
recent study out of Vermont shows that dairy farmers are only receiving
$0.91 of each gallon of milk sold in a store. Consumers pay a lot more
than $0.90 per for a gallon of milk.  That's the markup added by each
stage of the shipping, processing and retailing operation that stands
between their farms and consumer's fridge.  At the retail end, in New
York State, milk bottlers are sanctioned by law, to charge a 200 percent
margin on milk, a higher margin than consumers pay for most any other
staple item on the Consumer Price Index, which is compiled by the US
Labor Department. Currently, everyone seems to be profiting from dairy
farming, except farmers themselves.

The bottom line is that out of each dollar a consumer spends on a gallon
of milk the dairy farm nets a very small percentage of that dollar.
Farms, like any business, have costs. Operating costs, according to the
USDA Economic Research Service, include feed, veterinarian expenses,
bedding, marketing, fuel, electricity, repairs, and other miscellaneous
costs. In 2006, dairy farms in New York State were receiving around
$13/cwt, or $1.09 per gallon.  After factoring in operating costs, they
received a net of $0.03 per gallon of milk sold. This net is what the
farmer is left to live off of, to send their children to college with,
to pay for health care with, and to save for retirement. Currently, the
price of milk (between $11.00 $12.00/cwt) is nearly two dollars less per
cwt than it was in 2006, and production costs have increased to the
point that it costs farmers nearly $16.00/cwt just to break even.  so
farmers are receiving around $0.90 per gallon of milk and operating at a
loss.

The price that farmers receive for milk is based on a federal formula
derived from the price of four globally traded dairy commodities --

butter, dry milk powder, whey powder (a byproduct of cheese-making) and
cheddar cheese sold on the Chicago Mercantile Exchange (CME) and is
administered by the USDA Federal Milk Marketing Order Office. Then a
value is added based on the amount of protein, butterfat and solids in
each individual farm's milk. These 2 values are added together, along
with any quality premiums the farm may qualify for, and lastly, trans-
portation costs are deducted. This is called the mailbox price, or the
price that the farmer actually receives. Under this legislation, the
transportation costs would not be deducted, so farmers mailbox price
would increase. This is one real and immediate measure we can take to
help dairy farmers during this tumultuous time.

Hauling is a critical component to the entire milk marketing system.
Hauling charges will typically range from 3-4% of the gross value of the
milk the farm sells. Under current law, processors charge farmers haul-
ing costs incurred in the process of picking up milk from the milk
producer and delivering it to a milk plant, receiving station or trans-
fer station. If this bill is not passed, than faltering milk prices and
high production costs could spell the end for many of the state's local
dairy farmers. Farmers can only operate at a loss for so long and
borrowing money to fund operational costs can only be a temporary
option. If State and Federal legislator's do not act to help dairy farm-
ers, it is estimated that New York will lose over 1,000 family dairy
farms in the next year. This will decrease the volume of fresh dairy
products that are available to consumers, and could cause other local
businesses whose revenues are dependent on farms to close too.

PRIOR LEGISLATIVE HISTORY:
2009: New

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

EFFECTIVE DATE:
This act shall take effect immediately.