Session: State Capitol, Room 125 Juneau, AK 99801-1182 Phone: (907) 465-6600 Fax: (907) 465-3805 Interim: 600 E. Railroad Ave. Wasilla, AK 99654-7035 Phone: (907) 376-3370 Fax: (907) 376-3157

Sponsor Statement for SB 354
Prices Paid By Milk Processing Plants

An Act relating to the prices paid by milk processing plants to suppliers of fluid milk.

Sente Bill 354 will help dairy farmers receive fair pricing for the milk they supply to processing plants. Milk pricing has become fairly complex in today's marketplace and is based on a combination of factors including protein, butterfat, non-fat solids and bacteria content of the product. Milk fat, because it is used in high-value products such as ice cream, is more valuable to the processor.

Farmers should be encouraged to manage their herds for higher milk fat content. In Alaska, if the fat content of a particular dairy farmer's milk drops below a rate established by the processor, the creamery reduces the amount the farmer is paid. On the other hand, if the fat content rises above the established rate, the creamery does not increase the payment to the farmer.

In the Lower 48, federal and state laws have devised a system of milk marketing orders which guarantee the farmer gets a fair price for the milk he produced. Milk fat content is an important part of those marketing orders and, for example, when Matanuska Maid purchases bulk milk (from other states or from Canada) for its processing plant in Anchorage, the percentage of milk fat is a consideration.

SB 354 simply injects this fairness into the milk marketplace in Alaska by stipulating that if a milk processor opts to penalize a dairy farmer for low milk fat content, it must also reward those farmers whose product has a high milk fat content.

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