"As one of the few states with the ability to affect pricing, Pennsylvania is taking decisive action to help its dairy producers," Rendell said.

 

The projected payments are small in Pennsylvania's US$1.5 billion industry, but given the industry's difficulties, any revenue that is out there that can be returned to the farmer is positive, no matter how small, said John Frey, executive director of the state's Centre for Dairy Excellence. Over the last three years, the number of Pennsylvania dairy farms has fallen to 7,200 from 8,400 as farmers have struggled with a long bout of low prices, he said.

 

Pennsylvania's milk-pricing system, administered by the Milk Marketing Board, is on top of a federal price-support apparatus. The additional bureaucracy in Pennsylvania was established in 1937 to ensure industry stability.

 

The board's support to farmers comes through a premium - currently 25 cents per gallon - tacked onto the price farmers receive based on complex federal rules.

 

This week's board decision changed the formula used to calculate that premium when it is paid to Pennsylvania farmers who sell their milk to a processor that also buys milk from other states. For example, if a Pennsylvania processor buys 50% of its milk from Maryland, the current formula reduces the premium it pays to Pennsylvania farmers 50%. The new rule will ensure that those farmers get more of the premium, which is included in the retail price of milk in Pennsylvania stores.

 

The milk board has not yet dealt with a bigger issue for the state's dairy farmers.

 

Some Pennsylvania milk is shipped out of state for bottling or sale to distributors and brought back in for sale to consumers. In that case, farmers do not get the premium at all, even though Pennsylvania consumers pay it.

 

"That's what we're all hoping that the board deals with," said Lancaster county dairy farmer Don Ranck.