SB 354-PRICES PAID BY MILK PROCESSING PLANTS    CHAIRMAN TORGERSON announced SB 354 to be up for consideration. MS. JANEY WINEGAR, staff to Senator Lyda Green, sponsor of SB 354, said this bill has to do with farmers receiving fair pricing for their milk, which has become fairly complex in today's market place and is based upon a combination of factors including protein, butter fat, non-fat solids and bacteria content of the milk. This bill injects fairness into the milk market place in Alaska by stipulating that if a milk processor opts to penalize a dairy farmer for a low milk fat content, the processors must also reward those farmers whose product has a high milk fat content. MR. WAYNE BROST said he was from Mackenzie and supported SB 354. He got a letter from the processing plant telling him that the butter fat of his cows' milk was a little lower than the standard, which is 3.25%. In the summer he turns his cows out to graze and they get a higher volume of high moisture feed and the butter fat drops. Most of the time it's above 3.25%. He remarked, "I was threatened there to get a dock on my pay if it was below, but I was never offered anything when it was above. So, I'm in support of this bill so there's some reciprocity and fairness for the producer here." MR. LARRY DE VILBISS said it has been 20 years since he ran a dairy, but he remembered that he was actually penalized for too much butter fat. He commented, "But we're living in a different world and there's a commercial value there that I think dairymen ought to be getting so I support it." MS. LADERE said she had been in Alaska for 55 years and ever since she was nine she had been involved with agriculture. She explained: Very simply, more butter fat figures into a higher value product for the processing plant. That increased butter fat has a dollar advantage and so anyone who produces a milk, a dairy product or milk that goes into a processing plant should logically get a higher price for his milk and I think it just is that simple. SENATOR WILKEN asked if a milk producing plant under this legislation must pay a premium for more than 3.25% butter fat, whether the plant has the option of buying milk elsewhere so that it doesn't have to pay the premium. He questioned, "Doesn't that give the supplier a reason to go somewhere else?" REPRESENTATIVE HARRIS responded that there is a national standard for whole milk. If Matanuska Maid purchases that milk, generally it will skim it down to the standard and buy it at a certain price. This bill basically says if your milk has a higher fat content than that standard, then it has a value. He added: If the processing plant decides to dock you for a reduction in that value, then they must pay you the same value on the other end. So, we're not saying that they have to pay a premium. All we're saying in this legislation is that if the plant decides to dock you for not having high enough butter fat, then they must also pay you when you are above the national standard. SENATOR WILKEN asked if they also docked the outside supplier. REPRESENTATIVE HARRIS explained when they bring milk in from the Lower 48, generally they specify what fat content they want and they pay for that value. He said, "If Mat-Maid says instead of 3.25%, we would like 3.5%, then they would pay for that additional fat when they bring it in." SENATOR WILKEN asked if this bill jeopardizes their ability to market greater than 3.25% butterfat milk. REPRESENTATIVE HARRIS answered no. SENATOR STEVENS asked if there is a relationship between a standard plate count [SPC] and butterfat content. REPRESENTATIVE HARRIS replied: Indirectly. It's pretty involved and I can explain it. Standard plate count is your bacteria count and so usually the standard plate count comes from dirty equipment and that causes your plate count to go up. However, dirty equipment can cause your e-coli to go up and your e-coli can affect the quality of your milk and it could reduce the percent of butterfat that is produced by the milk cow. So, it could have an effect. SENATOR STEVENS read from a rate sheet released by Mat-Maid on January 1, 2001, about a quality bonus incentive program. He asked if that was based on the quality of the facility, for example the use of clean equipment, or the quality of the milk produced by the animal. REPRESENTATIVE HARRIS responded: No, when the standard plate count and the coliform counts are indications of what's in the milk, it doesn't necessarily determine how it gets there, but it helps determine how it gets there. So, if you milk a cow with some equipment that hasn't been kept up to the standard, then your plate count will go up in your tank of milk and if your plate count goes up, then the value of your milk drops. That's why they have the quality bonus. The same thing with e-coli. If a cow happens to have an e-coli bacteria in their mammary system, it comes through and gets into the whole tank of milk and if that's the case, the value of that milk drops. SENATOR STEVENS said on the flip side, if you had a lower SPC count, the bonus goes up. REPRESENTATIVE HARRIS said that was right. SENATOR STEVENS asked if there was no correlation between butterfat content and the SPC or coliform. REPRESENTATIVE HARRIS replied, "Not that it can be directly proven. Generally, the SPC and the e-coli counts have to do with either equipment or the health of the mammary system." SENATOR STEVENS asked if the butter fat plan had ever been revised from 3.3% for Grade A, currently priced at $19.75 per cubic weight ton. REPRESENTATIVE HARRIS said that was for a hundred weight of milk. SENATOR STEVENS noted that it said they would dock a penalty of 1/10th of 1% for content under 3.25%. REPRESENTATIVE HARRIS replied there was more documentation from Mat-Maid saying that the standard for whole milk is 3.25. 4:25 p.m. TAPE 02-15, SIDE B  REPRESENTATIVE HARRIS said: In the Lower 48 they have milk marketing orders, which is a federal system that helps provide for guidance and money for the farmers to get together and establish a milk marketing order and then establish what these standards are. The milk marketing order - they go to the processing plant and say if you want all of our milk, this is the price that we need to have. The State of Alaska has a state-owned processing plant and one private plant and we have - I think we're down to eight dairy farms. So, we just don't have the volume of people to be able to dictate what we have to get, because Matanuska Maid is already bringing in 75% of the milk from Outside. So, it's just as easy for them not to negotiate. SENATOR STEVENS asked if the other cooperatives use a structure so that if you have high fat content, you're rewarded and if you have low content, you're penalized. He asked if that is an industry norm. REPRESENTATIVE HARRIS replied, "Yes." SENATOR WILKEN asked if Mat-Maid had commented on this bill. REPRESENTATIVE HARRIS said that the Director of Agriculture, Rob Wells, had seen the bill. Matanuska Maid has the creamery board, which meets and dictates the policy of the creamers and Mr. Wells attends those meetings, but he had nothing in writing. SENATOR WILKEN asked what will keep them from buying milk somewhere else where they don't have to pay the premium. REPRESENTATIVE HARRIS replied that there's no place else in the Lower 48 where they don't have a premium. CHAIRMAN TORGERSON said he wanted to pass this bill, but they would set it aside for lack of a quorum. SB 354-PRICES PAID BY MILK PROCESSING PLANTS    CHAIRMAN TORGERSON announced SB 354 to be back before the committee. SENATOR WILKEN moved to pass SB 354 from committee with individual recommendations and attached zero fiscal note. There were no objections and it was so ordered.