K.S.A. § 65-794 — KS Code / Chapter 65 / Article 7 / Section 65-794
65-794 - Statutory trust for milk producer funds; establishment of escrow accounts; distribution of funds.
Status: in_force

65-794. Statutory trust for milk producer funds; establishment of escrow accounts; distribution of funds. (a) (1) Except as provided by subsections (b) and (d), a milk processor shall hold in trust all payments received from the sale of milk for the benefit of the milk producer from whom the milk was purchased until the milk producer has received full payment of the purchase price for the milk.

(2) For the purposes of this subsection, funds placed in escrow in compliance with subsections (b) through (e) are held in trust.

(b) (1) (A) Except as provided by subsection (d), a milk producer who sells milk to a milk processor may require the milk processor to establish an escrow account for the benefit of the milk producer.

(B) If a milk producer requires a milk processor to establish an escrow account under this subsection, the milk processor shall deposit all payments received from the sale of any milk or dairy product into the escrow account until the milk producer has received full payment of the purchase price for the milk.

(2) (A) A milk processor required to establish an escrow account under this section shall, on receipt of a payment from the sale of milk or dairy products, deposit into the account a sum of money determined by multiplying the total amount of all payments received by the milk processor from the sale of milk or dairy products by the fraction determined by dividing the total quantity of milk purchased by the milk processor for sale as milk or dairy products into the quantity of milk sold by the milk producer to the milk processor.

(B) The milk processor shall continue to make payments into the escrow account until the milk producer has received full payment of the purchase price for the milk.

(3) (A) An escrow account required under this section shall be established for the benefit of the milk producer as a segregated, interest-bearing account with a financial institution located in this state, the deposits of which are insured by the federal deposit insurance corporation or the federal savings and loan insurance corporation.

(B) If a milk processor is required to establish more than one escrow account under this section, the milk processor may combine the accounts into a single account.

(C) If the funds accumulated in a combined escrow account are insufficient to pay all the milk producers who have not received full payment and for whose benefit the account was established, the agent of the institution with whom the escrow account is established shall distribute the funds in proportion to the amount then due to each milk producer.

(4) On presentation of proof of identity satisfactory to an agent of the institution with which the escrow account is established, the agent shall promptly distribute any funds accumulated for the benefit of the milk producer to the milk producer or, if required by an applicable federal milk marketing order, to the federal milk administration.

(5) This subsection shall not apply to a purchase of raw milk by a milk processor until there has been a failure to make a timely payment to a milk producer in accordance with K.S.A. 2025 Supp. 65-795, and amendments thereto. Once the entire amount due for the purchase is received by the milk producer, the requirements of this subsection shall terminate in regard to such purchase.

(c) Funds held in trust by a milk processor or in an escrow account are the property of the milk producer.

(d) A milk processor is not required to establish an escrow account or maintain payments in trust under subsection (a) or (b) for a payment if:

(1) Full payment of the purchase price is not received, and the milk producer does not give written notice to the milk processor, by the end of the 30 th business day after the final date for payment of the purchase price in accordance with K.S.A. 2025 Supp. 65-795, and amendments thereto; or

(2) a payment instrument received by the milk producer is dishonored, and the milk producer does not give written notice to the milk processor, by the end of the 15 th business day after the day that the notice of dishonor was received.