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Have a question? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Army Veteran Owned | Expert Surety Bonds Since 2004
The Pennsylvania milk dealer bond is sized to your own milk checks, so the right number comes from your purchase records, not a flat figure. File a surety bond instead of tying up cash, collateral or a bank letter of credit, and have it with the Board by June 15 so the license is ready for July 1.
Pennsylvania requires every licensed milk dealer that buys milk from producers to file a corporate surety bond or collateral bond with the Pennsylvania Milk Board under the Milk Producers' Security Act. The bond must equal at least 75% of the highest total the dealer owed all producers for any 40 day period during the preceding 12 months. It guarantees producers are paid for their milk, and it is filed each license year no later than June 15 for the year starting July 1.
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There is no flat bond amount. Section 7(c) of the Milk Producers' Security Act (31 P.S. 626.7) sets a floor of 75% of the highest aggregate amount owed by the dealer to all producers for a 40 day period during the preceding 12 months. Take your largest 40 day stretch of producer payables in the last year, multiply by 0.75, and that is the minimum. A dealer growing its milk supply should expect the number to rise year over year.
A vested milk dealer, meaning one that was participating in the Milk Producers' Security Fund when that definition took effect and has not dropped out since, may file at a minimum of 30% instead and pays into the fund on top of the bond. A dealer that leaves the fund loses vested status. A new dealer cannot join it.
Milk bought from producers outside Pennsylvania and sold as fluid milk in Pennsylvania counts toward the amount, unless the dealer has already filed producer security in the state where the milk was bought.
The Board defines a milk dealer as any person who purchases or receives or handles on consignment or otherwise milk within the Commonwealth for processing or manufacture and further sale. A producer that only delivers milk to a dealer is not a dealer. A cooperative is treated as a producer, not a dealer, for the milk of its own producer members and certain nonmember patrons, once it makes the required filings and waivers with the Board.
Under Section 10a, the Board may require additional security if a dealer's financial condition is not adequate to reasonably assure prompt payment, or if the value of milk purchased has increased, or is expected to increase, so that the security on file no longer meets Section 7 for any consecutive two month period. A dealer not in good standing may be barred from buying milk from producers except on terms the Board sets.
Form PMMB-10 names the Commonwealth of Pennsylvania Milk Marketing Board as obligee and covers one license year from July 1 through June 30. The condition is that the dealer pays all amounts due under the law and the Board's orders and regulations, including amounts for milk purchased from producers, within the required time periods. The Act requires final payment for producer milk no later than the 50th day after the milk was received. The surety's obligation is separate from and independent of the dealer's own debt. On a default, the Board holds a hearing and distributes the security to the unpaid producers, pro rata if it falls short.
At least 75% of the highest amount you owed all producers combined for any 40 day period in the preceding 12 months. Vested dealers in the Security Fund may file at 30%. The Board can raise the requirement during the year if your volume, milk prices or financial condition change.
Yes. The Act allows a collateral bond backed by cash, bank deposits, federal government obligations or irrevocable letters of credit, and the Board publishes collateral bond and letter of credit forms. A surety bond avoids locking up that capital for the full license year.
A cooperative is deemed a producer, not a dealer, for the milk of its own producer members and patrons under qualifying marketing agreements, provided it files the required documents and waivers with the Board. A cooperative that makes milk available to other dealers or acts as agent for members still needs a dealer license.
The license year runs July 1 through June 30, and the Act requires bonds for the license year to be filed no later than the 15th of the month before it begins, which is June 15.
The surety underwrites the dealer's financial statements, payment history with producers and the size of the required bond. Because the bond guarantees producer payments, the dealer's balance sheet and cash flow carry most of the weight.
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