SESSION OF 2025
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2254
As Amended by House Committee on
Agriculture and Natural Resources
Brief*
HB 2254, as amended, would require a milk processor
to hold in trust all payments received from the sale of milk for
the benefit of the milk producer from whom the milk was
purchased until the milk producer has received full payment
of the purchase price for the milk.
Definitions (Section 1)
The bill would reference definitions in continuing law
regarding the terms “association,” “cooperative,” “milk
processor,” and “milk producer.”
The bill would define “milk producer” to also include any
cooperative association that sells or markets milk on behalf of
an individual milk producer.
The bill would also define the following terms:
●“Purchase price” would mean an amount of money,
based on estimated butterfat content at the time of
delivery, that a milk processor agrees to pay a milk
producer for a purchase of raw milk; and
●“Timely payment” would mean a payment made
within three days following the payment due date
under a milk marketing order or similar terms in a
contract.
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*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
https://klrd.gov/ Trust and Escrow Requirements (Section 2)
Trusts
The bill would require a milk processor (processor) to
hold in trust all payments received from the sale of milk for
the benefit of the milk producer (producer) from whom the
milk was purchased. This would continue until the producer
has received full payment of the purchase price for the milk.
Funds placed in escrow would be held in trust.
Escrow Account
The bill would allow a producer who sells milk to a
processor to require that processor to establish an escrow
account for the benefit of the producer. If a producer requires
the establishment of an escrow account, the processor would
deposit all payments into the escrow account until the
producer has received full payment.
Sum of money determination. The bill would then
require the processor to deposit into the account a sum of
money determined by multiplying the total amount of all
payments received by the processor from the sale of milk or
dairy products by the fraction determined by dividing the total
quantity of milk purchased by the processor for sale as milk
or dairy products into the quantity of milk sold by the producer
to the processor.
Full payment. The bill would require the processor to
continue making payments into the escrow account until the
producer has received full payment of the purchase price of
the milk.
Establishment of account. The bill would require the
escrow account to be established as a segregated, interest-
bearing account in a financial institution located in Kansas,
the deposits of which are insured by the Federal Deposit
2- 2254 Insurance Corporation or the Federal Savings and Loan
Insurance Corporation.
Combination of accounts. If a processor is required to
establish more than one escrow account for purposes of this
bill, the processor could combine the accounts into a single
account. If the accumulated funds in a combined escrow
account are insufficient to pay all producers, the agent of the
financial institution (agent) would distribute funds in
proportion to the amount due each producer.
Distribution of funds. The bill would require the agent
to distribute funds to producers upon proof of identity, or if
required by an applicable federal milk marketing order, to the
Federal Milk Administration.
Failure of timely payment. These provisions would not
apply to a processor until there has been failure to make a
timely payment to a producer.
Ownership of the Funds
The bill would determine that funds held in trust by a
processor or in an escrow account are the property of the
producer.
Exemption
A processor would not be required to establish an
escrow account or maintain payments in trust for a payment
if:
●Full payment of the purchase price is not received,
and the producer does not give written notice to the
processor by the end of the 30th business day after
the final date for payment of the purchase price; or
●A payment instrument received by the producer is
dishonored, and the producer does not give written
3- 2254 notice to the processor by the end of the 15th
business day after the day that the notice of
dishonor was received.
Prohibition of Purchase (Section 3)
The bill would prohibit a processor from purchasing raw
milk from a producer unless:
●Payment of the purchase price is made according
to the provisions prescribed by an applicable
federal milk marketing order;
●Any additional provisions are agreed on by both
the producer or the producer’s agent and the
processor; and
●The medium of exchange used is cash, a check for
the full amount of the purchase price, or a wire
transfer of money in the full amount.
A payment delivered by a processor to the applicable
federal milk market administrator on behalf of a producer in
compliance with the terms of an applicable federal milk
marketing order would be considered to be delivery of
payment to the producer.
Cooperative Associations (Section 4)
The bill would not apply to transactions between a
cooperative association, while acting as a marketing agent,
and its members.
Liability for Lack of Payment (Section 5)
A processor that fails to pay for raw milk, as provided by
this act, is liable to the producer for:
4- 2254 ●The purchase price of the raw milk;
●Interest on the purchase price at the highest legal
rate, from the date that possession is transferred
until the date the payment is made, in accordance
with this act; and
●A reasonable attorney fee for the collection of the
payment.
Background
The bill was introduced by the House Committee on
Agriculture and Natural Resources at the request of
Representative Rahjes.
House Committee on Agriculture
In the House Committee hearing, proponent testimony
was provided by representatives of Kansas Dairy and the
Kansas Livestock Association and by a dairy producer who is
a member of the Kansas Livestock Association. The
proponents stated the bill seeks to provide protection to dairy
producers who may be marketing directly to a processor or
together through their cooperative. The bill puts a process in
place in the event a processor misses a payment or goes
bankrupt. In addition, the bill is substantially similar to Texas
dairy law where some of the major milk processors operating
in Kansas also have processing facilities.
No other testimony was provided.
The House Committee amended the bill to adopt a
technical amendment.
5- 2254 Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department of
Agriculture indicates enactment of the bill would have no
measurable effect on operations; however, the Department
indicates the bill would impose a monetary burden which
could create a deterrent to milk plants conducting business in
the state or those considering Kansas for future development.
The Department states the bill could ultimately lead to lost
fees for the agency if businesses moved out of the state. Any
fiscal effect associated with enactment of the bill is not
reflected in The FY 2026 Governor’s Budget Report.
Milk; milk producers; funds; financial institutions; escrow; trusts; raw milk
6- 2254