Bill
HB 2254
HB 2254 requires milk processors to hold producer payments in trust or escrow until full purchase price is paid, protecting producers from late or missing payments.
Status and timeline
- Introduced: January 30, 2025 (House Committee on Agriculture and Natural Resources).
- Approved by the Governor: March 26, 2025.
- Effective: upon publication in the statute book (per Sec. 6 of the act).
Purpose
- To protect milk producers by requiring milk processors to hold payments from the sale of milk in trust for the producing farm (or a cooperative acting on its behalf) until the producer receives full payment of the agreed purchase price. The law also treats escrow accounts established under the act as trust funds.
Key provisions
- Definitions
- “Milk producer” explicitly includes cooperative associations that sell or market milk on behalf of individual producers.
- “Purchase price” is based on estimated butterfat content at delivery.
- “Timely payment” = payment made within three days after the payment due date under a federal milk marketing order or similar contract term.
- Trust requirement (Sec. 2)
- Processors must hold all payments received from sale of milk in trust for the producer until full payment of the purchase price is made.
- Funds placed in escrow under the act are deemed held in trust.
- Escrow accounts (producer can require)
- A producer may require the processor to establish a segregated, interest-bearing escrow account in a Kansas financial institution whose deposits are FDIC or FSLIC insured.
- On each receipt of payment from milk/dairy-product sales, the processor must deposit into the escrow account an amount equal to: (total payments received by the processor) × (quantity of milk sold by the producer to the processor ÷ total quantity of milk purchased by the processor for sale as milk/dairy products).
- Multiple producer escrow accounts may be combined; if combined funds are insufficient, the financial institution agent distributes funds proportionally to amounts due.
- The agent must distribute funds to producers upon satisfactory proof of identity or, where required, to the federal milk market administrator.
- These escrow provisions apply only after a failure to make a timely payment to a producer.
- Ownership and exemptions
- Funds held in trust or escrow are the property of the milk producer.
- A processor is not required to establish/maintain trust/escrow for a payment if:
- The producer fails to give written notice to the processor within 30 business days after the final payment date when full payment is not received; or
- A payment instrument is dishonored and the producer fails to give written notice within 15 business days after receiving notice of dishonor.
- Purchase and payment rules (Sec. 3)
- A processor may not purchase raw milk unless: payment is made according to applicable federal milk marketing order provisions; any additional terms are mutually agreed; and payment medium is cash, a check for the full amount, or a wire transfer.
- Payment sent to the federal milk market administrator under a federal order is treated as payment to the producer.
- Cooperative transactions (Sec. 4)
- Transactions between a cooperative acting as a marketing agent and its members are exempt from the act.
- Remedies and liability (Sec. 5)
- A processor that fails to pay as required is liable for: the purchase price, interest at the highest legal rate from date of possession transfer until payment, and reasonable attorney fees for collection.
Who is affected
- Directly: milk processors doing business in the state; milk producers (including cooperative associations acting on behalf of members); in-state financial institutions used for required escrow accounts.
- Indirectly: federal milk market administrators (payment routing), state Department of Agriculture oversight, and potentially processors considering locating or expanding facilities in the state.
Fiscal and policy notes
- The Department of Agriculture reported no measurable operational effect but warned the law could impose monetary burdens on milk plants (escrow/accounting/liquidity requirements) that might deter processing facilities from operating or expanding in the state and could reduce agency fee revenues if businesses relocate.
- Proponents at committee hearings (Kansas Dairy, Kansas Livestock Association, and producers) said the bill provides protection if a processor misses payments or becomes insolvent; the measure resembles Texas dairy law used by some processors operating in the state.
Bottom line
- HB 2254 creates a statutory trust/escrow mechanism to safeguard milk producers’ payments, sets procedures for escrow deposits and distribution, establishes producer remedies for nonpayment, and includes procedural notice and cooperative exceptions.
Compiled from official sources — confirm details with the bill’s official record.
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