Code of Maine Rules › 01 - DEPARTMENT OF AGRICULTURE, CONSERVATION AND FORESTRY › 015 - MAINE MILK COMMISSION › Chapter 29 - DEALER MARGINS › Appendix 015-29-A - MILK PRICING BY THE MAINE MILK COMMISSION

Current through 2024-29, July 17, 2024
In 1937, the federal government began regulating milk pricing
				  in southern New England (the regulated area does not include Maine), and
				  continues to the present setting minimum prices on all classes of milk. Two
				  years earlier, in 1935, the Maine Milk Commission (Commission) was established.
				  The Commission regulates milk prices by using federal prices as a base on to
				  which a premium is added to adjust Maine prices to those prevailing in southern
				  New England. Maine's regulations cover the price paid by dairies per hundred
				  pounds of milk delivered by producers, the minimum margin per gallon that
				  dairies must receive for processing and delivering milk, and the minimum price
				  per gallon paid for milk by consumers at retail stores.
The Commission establishes minimum milk prices, monthly, for
				  milk sold in gallons (the price also applies to quarts through 20-quart
				  containers). The price per gallon established by the Commission is based on the
				  Federal Market Administrator's price announcements; however, the Commission has
				  the authority to add special premiums to the price based on market conditions
				  in southern New England.
The producer milk price
begins at the Federal
				  Market announced minimum price for milk sold to a dairy. Pricing is based on
				  100 pounds (CWT) of milk with standards of 3.5 % butterfat, 2.99 % Protein and
				  5.69 % Other Solids.
The producer is paid for his milk produced in the calendar
				  month based on butterfat, protein, and other solids contents plus a Producer
				  Price Differential (PPD). (The PPD is sort of a clearinghouse method to
				  distribute revenue left over in the federal milk pool after the producers'
				  class obligations are set aside). The Commission adopts these prices monthly
				  and, in addition, requires payments be made to producers for any premiums added
				  by the Commission. To this base minimum payment are added any premiums and
				  other distributions paid by the handler and, in total, becomes the producer's
				  pay for milk produced during that month.
Minimum prices for processors
(dairies) are
				  established to reflect the lowest price at which milk purchased from Maine
				  producers at Maine minimum prices can be received, processed, packaged and
				  distributed to retailers within the state at a just and reasonable return. To
				  arrive at the dairy processing cost, also known as the dealer margin, the
				  Commission conducts a cost study for the operation of hypothetical model milk
				  processing facilities. Using the models and current cost data for supplies,
				  labor, electricity, trucking, etc., a theoretically, lowest achievable price is
				  calculated, which is the theoretical price at which a dairy should be able to
				  process milk from raw product to finished product and deliver it to the
				  retailer. The Commission adjusts the theoretical price to take into account
				  Maine conditions to arrive at a proposed processor margin. The Commission
				  conducts a public hearing on the proposed processor margin and after
				  considering the input of processors, any other interested parties, and the
				  public, the Commission adopts a rule establishing the processor margin. This
				  margin is the return that processors are guaranteed until a new study is
				  completed. Processors may obtain a higher price for a gallon of milk from
				  retailers, but the price paid by retailers cannot be below the minimum
				  processor margin. By statute, a cost study is required every three
				  years.
Retail minimum prices
paid by consumers are
				  based on the minimum processor margin and a reasonable rate of return to the
				  retailer. To arrive at the cost of selling milk at the retail level, the
				  Commission conducts a cost study of Maine supermarkets. The cost study
				  identifies methods currently in practice for the delivery of milk to Maine
				  supermarkets and for in-store handling and selling of milk. It also considers
				  changes that could be made to make this process more efficient. The Commission
				  conducts a public hearing on the proposed retail margin, and after considering
				  the input of retailers, any other interested parties, and the public, the
				  Commission adopts a rule establishing the retail margin. As with the dealer
				  margin, the retail margin does not change until a new study is completed and a
				  public hearing is held to receive comment on the margin.