Title —

S. 605 · 113th Congress · Mar 19, 2013 · Lineage

D Dairy

I Dairy production margin protection and dairy market stabilization programs

Sec. 1401 Definitions

In this part:

(1)

Actual dairy production margin— The term actual dairy production margin means the difference between the all-milk price and the average feed cost, as calculated under section 1402.

(2)

All-milk price— The term all-milk price means the average price received, per hundredweight of milk, by dairy operations for all milk sold to plants and dealers in the United States, as determined by the Secretary.

(3)

Annual production history— The term annual production history means the production history determined for a participating dairy operation under section 1413(b) whenever the participating dairy operation purchases supplemental production margin protection.

(4)

Average feed cost— The term average feed cost means the average cost of feed used by a dairy operation to produce a hundredweight of milk, determined under section 1402 using the sum of the following:

(A)

The product determined by multiplying 1.0728 by the price of corn per bushel.

(B)

The product determined by multiplying 0.00735 by the price of soybean meal per ton.

(C)

The product determined by multiplying 0.0137 by the price of alfalfa hay per ton.

(5)

Basic production history— The term basic production history means the production history determined for a participating dairy operation under section 1413(a) for provision of basic production margin protection.

(6)

Consecutive 2-month period— The term consecutive 2-month period refers to the 2-month period consisting of the months of January and February, March and April, May and June, July and August, September and October, or November and December, respectively.

(7)

Dairy operation—

(A)

In general— The term dairy operation means, as determined by the Secretary, 1 or more dairy producers that produce and market milk as a single dairy operation in which each dairy producer—

(i)

shares in the pooling of resources and a common ownership structure;

(ii)

is at risk in the production of milk on the dairy operation; and

(iii)

contributes land, labor, management, equipment, or capital to the dairy operation.

(B)

Additional ownership structures— The Secretary shall determine additional ownership structures to be covered by the definition of dairy operation.

(8)

Handler—

(A)

In general— The term handler means the initial individual or entity making payment to a dairy operation for milk produced in the United States and marketed for commercial use.

(B)

Producer-handler— The term includes a producer-handler when the producer satisfies the definition in subparagraph (A).

(9)

Participating dairy operation— The term participating dairy operation means a dairy operation that—

(A)

signs up under section 1412 to participate in the production margin protection program under subpart A; and

(B)

as a result, also participates in the stabilization program under subpart B.

(10)

Production margin protection program— The term production margin protection program means the dairy production margin protection program required by subpart A.

(11)

Secretary— The term Secretary means the Secretary of Agriculture.

(12)

Stabilization program— The term stabilization program means the dairy market stabilization program required by subpart B for all participating dairy operations.

(13)

Stabilization program base— The term stabilization program base, with respect to a participating dairy operation, means the stabilization program base calculated for the participating dairy operation under section 1431(b).

(14)

United States— The term United States, in a geographical sense, means the 50 States, the District of Columbia, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, the Virgin Islands of the United States, and any other territory or possession of the United States.

Sec. 1402 Calculation of average feed cost and actual dairy production margins

(a)

Calculation of average feed cost— The Secretary shall calculate the national average feed cost for each month using the following data:

(1)

The price of corn for a month shall be the price received during that month by farmers in the United States for corn, as reported in the monthly Agricultural Prices report by the Secretary.

(2)

The price of soybean meal for a month shall be the central Illinois price for soybean meal, as reported in the Market News–Monthly Soybean Meal Price Report by the Secretary.

(3)

The price of alfalfa hay for a month shall be the price received during that month by farmers in the United States for alfalfa hay, as reported in the monthly Agricultural Prices report by the Secretary.

(b)

Calculation of actual dairy production margins—

(1)

Production margin protection program— For use in the production margin protection program under subpart A, the Secretary shall calculate the actual dairy production margin for each consecutive 2-month period by subtracting—

(A)

the average feed cost for that consecutive 2-month period, determined in accordance with subsection (a); from

(B)

the all-milk price for that consecutive 2-month period.

(2)

Stabilization program— For use in the stabilization program under subpart B, the Secretary shall calculate each month the actual dairy production margin for the preceding month by subtracting—

(A)

the average feed cost for that preceding month, determined in accordance with subsection (a); from

(B)

the all-milk price for that preceding month.

(3)

Time for calculations— The calculations required by paragraphs (1) and (2) shall be made as soon as practicable using the full month price of the applicable reference month.

A Dairy production margin protection program

Sec. 1411 Establishment of dairy production margin protection program

Effective not later than 120 days after the effective date of this subtitle, the Secretary shall establish and administer a dairy production margin protection program under which participating dairy operations are paid—

(1)

basic production margin protection program payments under section 1414 when actual dairy production margins are less than the threshold levels for such payments; and

(2)

supplemental production margin protection program payments under section 1415 if purchased by a participating dairy operation.

Sec. 1412 Participation of dairy operations in production margin protection program

(a)

Eligibility— All dairy operations in the United States shall be eligible to participate in the production margin protection program, except that a participating dairy operation shall be required to register with the Secretary before the participating dairy operation may receive—

(1)

basic production margin protection program payments under section 1414; and

(2)

if the participating dairy operation purchases supplemental production margin protection under section 1415, supplemental production margin protection program payments under such section.

(b)

Registration process—

(1)

In general— The Secretary shall specify the manner and form by which a participating dairy operation may register to participate in the production margin protection program.

(2)

Treatment of multiproducer dairy operations— If a participating dairy operation is operated by more than 1 dairy producer, all of the dairy producers of the participating dairy operation shall be treated as a single dairy operation for purposes of—

(A)

registration to receive basic production margin protection and election to purchase supplemental production margin protection;

(B)

payment of the participation fee under subsection (d) and producer premiums under section 1415; and

(C)

participation in the stabilization program under subtitle B.

(3)

Treatment of producers with multiple dairy operations— If a dairy producer operates 2 or more dairy operations, each dairy operation of the producer shall separately register to receive basic production margin protection and purchase supplemental production margin protection and only those dairy operations so registered shall be covered by the stabilization program.

(c)

Time for registration—

(1)

Existing dairy operations— During the 15-month period beginning on the date of the initiation of the registration period for the production margin protection program, a dairy operation that is actively engaged as of such date may register with the Secretary—

(A)

to receive basic production margin protection; and

(B)

if the dairy operation elects, to purchase supplemental production margin protection.

(2)

New Entrants— A dairy producer that has no existing interest in a dairy operation as of the date of the initiation of the registration period for the production margin protection program, but that, after such date, establishes a new dairy operation, may register with the Secretary during the 1-year period beginning on the date on which the dairy operation first markets milk commercially—

(A)

to receive basic production margin protection; and

(B)

if the dairy operation elects, to purchase supplemental production margin protection.

(d)

Transition from MILC to production margin protection—

(1)

Definition of transition period— In this subsection, the term transition period means the period during which the milk income loss program established under section 1506 of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773) and the production margin protection program under this subtitle are both in existence.

(2)

Notice of availability— Not later than 30 days after the date of enactment of this Act, the Secretary shall publish a notice in the Federal Register to inform dairy operations of the availability of basic production margin protection and supplemental production margin protection, including the terms of the protection and information about the option of dairy operations during the transition period to make an election described in paragraph (3).

(3)

Election— Except as provided in paragraph (4), a dairy operation may elect to participate in either the milk income loss program established under section 1506 of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773) or the production margin protection program under this subtitle for the duration of the transition period.

(4)

Transfer to production margin protection— A dairy operation that elects to participate in the milk income loss program established under section 1506 of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773) during the transition period may, at any time, make a permanent transfer to the production margin protection program.

(e)

Administration fee—

(1)

Administration fee required— Except as provided in paragraph (5), a participating dairy operation shall—

(A)

pay an administration fee under this subsection to register to participate in the production margin protection program; and

(B)

pay the administration fee annually thereafter to continue to participate in the production margin protection program.

(2)

Fee amount— The administration fee for a participating dairy operation for a calendar year shall be based on the pounds of milk (in millions) marketed by the participating dairy operation in the previous calendar year, as follows:

(3)

Deposit of Fees— All administration fees collected under this subsection shall be credited to the fund or account used to cover the costs incurred to administer the production margin protection program and the stabilization program and shall be available to the Secretary, without further appropriation and until expended, for use or transfer as provided in paragraph (4).

(4)

Use of Fees— The Secretary shall use administration fees collected under this subsection—

(A)

to cover administrative costs of the production margin protection program and stabilization program; and

(B)

to cover costs of the Department of Agriculture relating to reporting of dairy market news, carrying out the amendments made by section 1476, and carrying out section 273 of the Agricultural Marketing Act of 1946 (7 U.S.C. 1637b), to the extent funds remain available after operation of subparagraph (A).

(5)

Waiver— The Secretary shall waive or reduce the administration fee required under paragraph (1) in the case of a limited-resource dairy operation, as defined by the Secretary.

(f)

Limitation— A dairy operation may only participate in the production margin protection program or the livestock gross margin for dairy program under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.), but not both.

Sec. 1413 Production history of participating dairy operations

(a)

Production history for basic production margin protection—

(1)

Determination required— For purposes of providing basic production margin protection, the Secretary shall determine the basic production history of a participating dairy operation.

(2)

Calculation— Except as provided in paragraph (3), the basic production history of a participating dairy operation for basic production margin protection is equal to the highest annual milk marketings of the participating dairy operation during any 1 of the 3 calendar years immediately preceding the calendar year in which the participating dairy operation first signed up to participate in the production margin protection program.

(3)

Election by new dairy operations— In the case of a participating dairy operation that has been in operation for less than a year, the participating dairy operation shall elect 1 of the following methods for the Secretary to determine the basic production history of the participating dairy operation:

(A)

The volume of the actual milk marketings for the months the participating dairy operation has been in operation extrapolated to a yearly amount.

(B)

An estimate of the actual milk marketings of the participating dairy operation based on the herd size of the participating dairy operation relative to the national rolling herd average data published by the Secretary.

(4)

No change in production history for basic production margin protection— Once the basic production history of a participating dairy operation is determined under paragraph (2) or (3), the basic production history shall not be subsequently changed for purposes of determining the amount of any basic production margin protection payments for the participating dairy operation made under section 1414.

(b)

Annual production history for supplemental production margin protection—

(1)

Determination required— For purposes of providing supplemental production margin protection for a participating dairy operation that purchases supplemental production margin protection for a year under section 1415, the Secretary shall determine the annual production history of the participating dairy operation under paragraph (2).

(2)

Calculation— The annual production history of a participating dairy operation for a year is equal to the actual milk marketings of the participating dairy operation during the preceding calendar year.

(3)

New dairy operations— Subsection (a)(3) shall apply with respect to determining the annual production history of a participating dairy operation that has been in operation for less than a year.

(c)

Required information— A participating dairy operation shall provide all information that the Secretary may require in order to establish—

(1)

the basic production history of the participating dairy operation under subsection (a); and

(2)

the production history of the participating dairy operation whenever the participating dairy operation purchases supplemental production margin protection under section 1415.

(d)

Transfer of production histories—

(1)

Transfer by sale or lease— In promulgating the rules to initiate the production margin protection program, the Secretary shall specify the conditions under which and the manner by which the production history of a participating dairy operation may be transferred by sale or lease.

(2)

Coverage level—

(A)

Basic production margin protection— A purchaser or lessee to whom the Secretary transfers a basic production history under this subsection shall not obtain a different level of basic production margin protection than the basic production margin protection coverage held by the seller or lessor from whom the transfer was obtained.

(B)

Supplemental production margin protection— A purchaser or lessee to whom the Secretary transfers an annual production history under this subsection shall not obtain a different level of supplemental production margin protection coverage than the supplemental production margin protection coverage in effect for the seller or lessor from whom the transfer was obtained for the calendar year in which the transfer was made.

(e)

Movement and transfer of production history—

(1)

Movement and transfer authorized— Subject to paragraph (2), if a participating dairy operation moves from one location to another location, the participating dairy operation may transfer the basic production history and annual production history associated with the participating dairy operation.

(2)

Notification requirement— A participating dairy operation shall notify the Secretary of any move of a participating dairy operation under paragraph (1).

(3)

Subsequent occupation of vacated location— A party subsequently occupying a participating dairy operation location vacated as described in paragraph (1) shall have no interest in the basic production history or annual production history previously associated with the participating dairy operation at such location.

Sec. 1414 Basic production margin protection

(a)

Payment threshold— The Secretary shall make a payment to participating dairy operations in accordance with subsection (b) whenever the average actual dairy production margin for a consecutive 2-month period is less than $4.00 per hundredweight of milk.

(b)

Basic production margin protection payment— The basic production margin protection payment for a participating dairy operation for a consecutive 2-month period shall be equal to the product obtained by multiplying—

(1)

the difference between the average actual dairy production margin for the consecutive 2-month period and $4.00, except that, if the difference is more than $4.00, the Secretary shall use $4.00; by

(2)

the lesser of—

(A)

80 percent of the production history of the participating dairy operation, divided by 6; or

(B)

the actual quantity of milk marketed by the participating dairy operation during the consecutive 2-month period.

Sec. 1415 Supplemental production margin protection

(a)

Election of supplemental production margin protection— A participating dairy operation may annually purchase supplemental production margin protection to protect, during the calendar year for which purchased, a higher level of the income of a participating dairy operation than the income level guaranteed by basic production margin protection under section 1414.

(b)

Selection of payment threshold— A participating dairy operation purchasing supplemental production margin protection for a year shall elect a coverage level that is higher, in any increment of $0.50, than the payment threshold for basic production margin protection specified in section 1414(a), but not to exceed $8.00.

(c)

Coverage percentage— A participating dairy operation purchasing supplemental production margin protection for a year shall elect a percentage of coverage equal to not more than 90 percent, nor less than 25 percent, of the annual production history of the participating dairy operation.

(d)

Premiums for supplemental production margin protection—

(1)

Premiums required— A participating dairy operation that purchases supplemental production margin protection shall pay an annual premium equal to the product obtained by multiplying—

(A)

the coverage percentage elected by the participating dairy operation under subsection (c);

(B)

the annual production history of the participating dairy operation; and

(C)

the premium per hundredweight of milk, as specified in the applicable table under paragraph (2) or (3).

(2)

Premium per hundredweight for first 4 million pounds of production— For the first 4,000,000 pounds of milk marketings included in the annual production history of a participating dairy operation, the premium per hundredweight corresponding to each coverage level specified in the following table is as follows:

(3)

Premium per hundredweight for production in excess of 4 million pounds— For milk marketings in excess of 4,000,000 pounds included in the annual production history of a participating dairy operation, the premium per hundredweight corresponding to each coverage level is as follows:

(4)

Time for payment— In promulgating the rules to initiate the production margin protection program, the Secretary shall provide more than 1 method by which a participating dairy operation that purchases supplemental production margin protection for a calendar year may pay the premium under this subsection for that year in any manner that maximizes participating dairy operation payment flexibility and program integrity.

(e)

Premium obligations—

(1)

Pro-ration of premium for new dairy operations— A participating dairy operation described in section 1412(c)(2) that purchases supplemental production margin protection for a calendar year after the start of the calendar year shall pay a pro-rated premium for that calendar year based on the portion of the calendar year for which the participating dairy operation purchases the coverage.

(2)

Legal obligation— A participating dairy operation that purchases supplemental production margin protection for a calendar year shall be legally obligated to pay the applicable premium for that calendar year, except that the Secretary may waive that obligation, under terms and conditions determined by the Secretary, for 1 or more producers in any participating dairy operation in the case of death, retirement, permanent dissolution of a participating dairy operation, or other circumstances as the Secretary considers appropriate to ensure the integrity of the program.

(f)

Supplemental payment threshold— A participating dairy operation with supplemental production margin protection shall receive a supplemental production margin protection payment whenever the average actual dairy production margin for a consecutive 2-month period is less than the coverage level threshold selected by the participating dairy operation under subsection (b).

(g)

Supplemental production margin protection payments—

(1)

In general— The supplemental production margin protection payment for a participating dairy operation is in addition to the basic production margin protection payment.

(2)

Amount of payment— The supplemental production margin protection payment for the participating dairy operation shall be determined as follows:

(A)

The Secretary shall calculate the difference between the coverage level threshold selected by the participating dairy operation under subsection (b) and the greater of—

(i)

the average actual dairy production margin for the consecutive 2-month period; or

(ii)

$4.00.

(B)

The amount determined under subparagraph (A) shall be multiplied by the percentage selected by the participating dairy operation under subsection (c) and by the lesser of the following:

(i)

The annual production history of the participating dairy operation, divided by 6.

(ii)

The actual amount of milk marketed by the participating dairy operation during the consecutive 2-month period.

Sec. 1416 Effect of failure to pay administration fees or premiums

(a)

Loss of benefits— A participating dairy operation that fails to pay the required administration fee under section 1412 or is in arrears on premium payments for supplemental production margin protection under section 1415—

(1)

remains legally obligated to pay the administration fee or premiums, as the case may be; and

(2)

may not receive basic production margin protection payments or supplemental production margin protection payments until the fees or premiums are fully paid.

(b)

Enforcement— The Secretary may take such action as necessary to collect administration fees and premium payments for supplemental production margin protection.

B Dairy market stabilization program

Sec. 1431 Establishment of dairy market stabilization program

(a)

Program required; purpose— Effective not later than 120 days after the effective date of this subtitle, the Secretary shall establish and administer a dairy market stabilization program applicable to participating dairy operations for the purpose of assisting in balancing the supply of milk with demand when participating dairy operations are experiencing low or negative operating margins.

(b)

Election of stabilization program base calculation method—

(1)

Election— When a dairy operation signs up under section 1412 to participate in the production margin protection program, the dairy operation shall inform the Secretary of the method by which the stabilization program base for the participating dairy operation will be calculated under paragraph (3).

(2)

Change in calculation method— A participating dairy operation may change the stabilization program base calculation method to be used for a calendar year by notifying the Secretary of the change not later than a date determined by the Secretary.

(3)

Calculation methods— A participating dairy operation may elect either of the following methods for calculation of the stabilization program base for the participating dairy operation:

(A)

The volume of the average monthly milk marketings of the participating dairy operation for the 3 months immediately preceding the announcement by the Secretary that the stabilization program will become effective.

(B)

The volume of the monthly milk marketings of the participating dairy operation for the same month in the preceding year as the month for which the Secretary has announced the stabilization program will become effective.

(4)

Exemption— The stabilization program base for a participating dairy producer shall not include the first 4,000,000 pounds of production of the participating dairy producer per calendar year, as determined by the Secretary.

Sec. 1432 Threshold for implementation and reduction in dairy payments

(a)

When stabilization program required— Except as provided in subsection (b), the Secretary shall announce that the stabilization program is in effect and order reduced payments by handlers to participating dairy operations that exceed the applicable percentage of the participating dairy operation’s stabilization program base whenever—

(1)

the actual dairy production margin has been $6.00 or less per hundredweight of milk for each of the immediately preceding 2 months; or

(2)

the actual dairy production margin has been $4.00 or less per hundredweight of milk for the immediately preceding month.

(b)

Exception— If any of the conditions described in section 1436(b) have been met during the 2-month period immediately preceding the month in which the announcement under subsection (a) would otherwise be made by the Secretary in the absence of this exception, the Secretary shall—

(1)

suspend the stabilization program;

(2)

refrain from making the announcement under subsection (a) to implement order the stabilization payment; or

(3)

order reduced payments.

(c)

Effective date for implementation of payment reductions— Reductions in dairy payments shall commence beginning on the first day of the month immediately following the date of the announcement by the Secretary under subsection (a).

Sec. 1433 Milk marketings information

(a)

Collection of milk marketing data— The Secretary shall establish, by regulation, a process to collect from participating dairy operations and handlers such information that the Secretary considers necessary for each month during which the stabilization program is in effect.

(b)

Reduce regulatory burden— When implementing the process under subsection (a), the Secretary shall minimize the regulatory burden on participating dairy operations and handlers.

Sec. 1434 Calculation and collection of reduced dairy operation payments

(a)

Reduced participating dairy operation payments required— During any month in which payment reductions are in effect under the stabilization program, each handler shall reduce payments to each participating dairy operation from whom the handler receives milk.

(b)

Reductions based on actual dairy production margin—

(1)

Reduction requirement 1— If the Secretary determines that the average actual dairy production margin has been less than $6.00 but greater than $5.00 per hundredweight of milk for 2 consecutive months, the handler shall make payments to a participating dairy operation for a month based on the greater of the following:

(A)

98 percent of the stabilization program base of the participating dairy operation.

(B)

94 percent of the marketings of milk for the month by the participating dairy operation.

(2)

Reduction requirement 2— If the Secretary determines that the average actual dairy production margin has been less than $5.00 but greater than $4.00 for 2 consecutive months, the handler shall make payments to a participating dairy operation for a month based on the greater of the following:

(A)

97 percent of the stabilization program base of the participating dairy operation.

(B)

93 percent of the marketings of milk for the month by the participating dairy operation.

(3)

Reduction requirement 3— If the Secretary determines that the average actual dairy production margin has been $4.00 or less for any 1 month, the handler shall make payments to a participating dairy operation for a month based on the greater of the following:

(A)

96 percent of the stabilization program base of the participating dairy operation.

(B)

92 percent of the marketings of milk for the month by the participating dairy operation.

(c)

Continuation of reductions— The largest level of payment reduction required under paragraph (1), (2), or (3) of subsection (b) shall be continued for each month until the Secretary suspends the stabilization program and terminates payment reductions in accordance with section 1436.

(d)

Payment reduction exception— Notwithstanding any preceding subsection of this section, a handler shall make no payment reductions for a participating dairy operation for a month if the participating dairy operation’s milk marketings for the month are equal to or less than the percentage of the stabilization program base applicable to the participating dairy operation under paragraph (1), (2), or (3) of subsection (b).

Sec. 1435 Remitting funds to the Secretary and use of funds

(a)

Remitting funds— As soon as practicable after the end of each month during which payment reductions are in effect under the stabilization program, each handler shall remit to the Secretary an amount equal to the amount by which payments to participating dairy operations are reduced by the handler under section 1434.

(b)

Deposit of remitted funds— All funds received under subsection (a) shall be available to the Secretary, without further appropriation and until expended, for use or transfer as provided in subsection (c).

(c)

Use of funds—

(1)

Availability for certain commodity donations— Not later than 90 days after the funds described in subsection (a) are due as determined by the Secretary, the Secretary shall obligate the funds for the purpose of—

(A)

purchasing dairy products for donation to food banks and other programs that the Secretary determines appropriate; and

(B)

expanding consumption and building demand for dairy products.

(2)

No duplication of effort— The Secretary shall ensure that expenditures under paragraph (1) are compatible with, and do not duplicate, programs supported by the dairy research and promotion activities conducted under the Dairy Production Stabilization Act of 1983 (7 U.S.C. 4501 et seq.).

(3)

Accounting— The Secretary shall keep an accurate account of all funds expended under paragraph (1).

(d)

Annual Report— Not later than December 31 of each year that the stabilization program is in effect, the Secretary shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that provides an accurate accounting of—

(1)

the funds received by the Secretary during the preceding fiscal year under subsection (a);

(2)

all expenditures made by the Secretary under subsection (b) during the preceding fiscal year; and

(3)

the impact of the stabilization program on dairy markets.

(e)

Enforcement— If a participating dairy operation or handler fails to remit or collect the amounts by which payments to participating dairy operations are reduced under section 1434, the participating dairy operation or handler responsible for the failure shall be liable to the Secretary for the amount that should have been remitted or collected, plus interest. In addition to the enforcement authorities available under section 1437, the Secretary may enforce this subsection in the courts of the United States.

Sec. 1436 Suspension of reduced payment requirement

(a)

Determination of prices— For purposes of this section:

(1)

The price in the United States for cheddar cheese and nonfat dry milk shall be determined by the Secretary.

(2)

The world price of cheddar cheese and skim milk powder shall be determined by the Secretary.

(b)

Suspension thresholds— The stabilization program shall be suspended or the Secretary shall refrain from making the announcement under section 1432(a) if the Secretary determines that—

(1)

the actual dairy production margin is greater than $6.00 per hundredweight of milk for 2 consecutive months;

(2)

the actual dairy production margin is equal to or less than $6.00 (but greater than $5.00) for 2 consecutive months, and during the same 2 consecutive months—

(A)

the price in the United States for cheddar cheese is equal to or greater than the world price of cheddar cheese; or

(B)

the price in the United States for nonfat dry milk is equal to or greater than the world price of skim milk powder;

(3)

the actual dairy production margin is equal to or less than $5.00 (but greater than $4.00) for 2 consecutive months, and during the same 2 consecutive months—

(A)

the price in the United States for cheddar cheese is more than 5 percent above the world price of cheddar cheese; or

(B)

the price in the United States for nonfat dry milk is more than 5 percent above the world price of skim milk powder; or

(4)

the actual dairy production margin is equal to or less than $4.00 for 2 consecutive months, and during the same 2 consecutive months—

(A)

the price in the United States for cheddar cheese is more than 7 percent above the world price of cheddar cheese; or

(B)

the price in the United States for nonfat dry milk is more than 7 percent above the world price of skim milk powder.

(c)

Implementation by handlers— Effective on the day after the date of the announcement by the Secretary under subsection (b) of the suspension of the stabilization program, the handler shall cease reducing payments to participating dairy operations under the stabilization program.

(d)

Condition on resumption of stabilization program— Upon the announcement by the Secretary under subsection (b) that the stabilization program has been suspended, the stabilization program may not be implemented again until, at the earliest—

(1)

2 months have passed, beginning on the first day of the month immediately following the announcement by the Secretary; and

(2)

the conditions of section 1432(a) are again met.

Sec. 1437 Enforcement

(a)

Unlawful act— It shall be unlawful and a violation of the this subpart for any person subject to the stabilization program to willfully fail or refuse to provide, or delay the timely reporting of, accurate information and remittance of funds to the Secretary in accordance with this subpart.

(b)

Order— After providing notice and opportunity for a hearing to an affected person, the Secretary may issue an order against any person to cease and desist from continuing any violation of this subpart.

(c)

Appeal— An order of the Secretary under subsection (b) shall be final and conclusive unless an affected person files an appeal of the order of the Secretary in United States district court not later than 30 days after the date of the issuance of the order. A finding of the Secretary in the order shall be set aside only if the finding is not supported by substantial evidence.

(d)

Noncompliance with order— If a person subject to this subpart fails to obey an order issued under subsection (b) after the order has become final and unappealable, or after the appropriate United States district court has entered a final judgment in favor of the Secretary, the United States may apply to the appropriate United States district court for enforcement of the order. If the court determines that the order was lawfully made and duly served and that the person violated the order, the court shall enforce the order.

Sec. 1438 Audit requirements

(a)

Audits of dairy operation and handler compliance—

(1)

Audits authorized— If determined by the Secretary to be necessary to ensure compliance by participating dairy operations and handlers with the stabilization program, the Secretary may conduct periodic audits of participating dairy operations and handlers.

(2)

Sample of dairy operations— Any audit conducted under this subsection shall include, at a minimum, investigation of a statistically valid and random sample of participating dairy operations.

(b)

Submission of results— The Secretary shall submit the results of any audit conducted under subsection (a) to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate and include such recommendations as the Secretary considers appropriate regarding the stabilization program.

Sec. 1439 Study; report

(a)

In general— The Secretary shall direct the Office of the Chief Economist to conduct a study of the impacts of the program established under section 1431(a).

(b)

Considerations— The study conducted under subsection (a) shall consider—

(1)

the economic impact of the program throughout the dairy product value chain, including the impact on producers, processors, domestic customers, export customers, actual market growth and potential market growth, farms of different sizes, and different regions and States; and

(2)

the impact of the program on the competitiveness of the United States dairy industry in international markets.

(c)

Report— Not later than December 1, 2016, the Office of the Chief Economist shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study conducted under subsection (a).

C Administration

Sec. 1451 Duration

The production margin protection program and the stabilization program shall end on December 31, 2017.

Sec. 1452 Administration and enforcement

(a)

In general— The Secretary shall promulgate regulations to address administrative and enforcement issues involved in carrying out the production margin protection, supplemental production margin protection, and market stabilization programs.

(b)

Reconstitution and eligibility issues—

(1)

Reconstitution— Using authorities under section 1001(f) and 1001B of the Food Security Act of 1985 (7 U.S.C. 1308(f), 1308–2), the Secretary shall promulgate regulations to prohibit a dairy producer from reconstituting a dairy operation for the sole purpose of the dairy producer—

(A)

receiving basic margin protection;

(B)

purchasing supplemental margin protection; or

(C)

avoiding participation in the market stabilization program.

(2)

Eligibility issues— Using authorities under section 1001(f) and 1001B of the Food Security Act of 1985 (7 U.S.C. 1308(f), 1308–2), the Secretary shall promulgate regulations—

(A)

to prohibit a scheme or device;

(B)

to provide for equitable relief; and

(C)

to provide for other issues affecting eligibility and liability issues.

(3)

Administrative appeals— Using authorities under section 1001(h) of the Food Security Act of 1985 (7 U.S.C. 1308(h)) and subtitle H of the Department of Agriculture Reorganization Act (7 U.S.C. 6991 et seq.), the Secretary shall promulgate regulations to provide for administrative appeals of decisions of the Secretary that are adverse to participants of the programs described in subsection (a).

II Dairy market transparency

Sec. 1461 Dairy product mandatory reporting

(a)

Definitions— Section 272(1)(A) of the Agricultural Marketing Act of 1946 (7 U.S.C. 1637a(1)(A)) is amended by inserting “, or any other products that may significantly aid price discovery in the dairy markets, as determined by the Secretary” after “of 1937”.

(b)

Mandatory reporting for dairy products— Section 273(b) of the Agricultural Marketing Act of 1946 (7 U.S.C. 1637b(b)) is amended—

(1)

by striking paragraph (1) and inserting the following new paragraph:

“(1) In general—In establishing the program, the Secretary shall only—

“(A)

“(i) subject to the conditions described in paragraph (2), require each manufacturer to report to the Secretary, more frequently than once per month, information concerning the price, quantity, and moisture content of dairy products sold by the manufacturer and any other product characteristics that may significantly aid price discovery in the dairy markets, as determined by the Secretary; and

“(ii) modify the format used to provide the information on the day before the date of enactment of this subtitle to ensure that the information can be readily understood by market participants; and

“(B) require each manufacturer and other person storing dairy products (including dairy products in cold storage) to report to the Secretary, more frequently than once per month, information on the quantity of dairy products stored.”

(2)

in paragraph (2), by inserting “or those that may significantly aid price discovery in the dairy markets” after “Federal milk marketing order” each place it appears in subparagraphs (A), (B), and (C).

Sec. 1462 Federal milk marketing order information

(a)

Information clearinghouse—

(1)

In general— The Secretary shall, on behalf of each milk marketing order issued under the Agricultural Adjustment Act (7 U.S.C. 601 et seq.), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937, establish an information clearinghouse for the purposes of educating the public about the Federal milk marketing order system and any marketing order referenda, including proposal information and timelines that shall be kept current and updated as information becomes available.

(2)

Requirements— Information under paragraph (1) shall include—

(A)

information on procedures by which cooperatives vote;

(B)

if applicable, information on the manner by which producers may cast an individual ballot;

(C)

in applicable, instructions on the manner in which to vote online;

(D)

due dates for each specific referendum;

(E)

the text of each referendum question under consideration;

(F)

a description in plain language of the question;

(G)

any relevant background information to the question; and

(H)

any other information that increases Federal milk marketing order transparency.

(b)

Notification list for upcoming referendum— Each Federal milk marketing order shall—

(1)

make available the information described in subsection (b) through an Internet site; and

(2)

publicize the information in major agriculture and dairy-specific publications on upcoming referenda.

(c)

Study—

(1)

In general— The Secretary shall conduct a study of the feasibility of establishing 2 classes of milk, a fluid class and a manufacturing class, to replace the 4-class system in effect on the date of enactment of this Act in administering Federal milk marketing orders.

(2)

Federal Milk Market Order Review Commission— The Secretary may elect to use the Federal Milk Market Order Review Commission established under section 1509(a) of the Food, Conservation, and Energy Act of 2008 (Public Law 110–246; 122 Stat. 1726), or documents of the Commission, to conduct all or part of the study.

(3)

Report— Not later than 180 days after the date of enactment of this Act, the Secretary shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study required under this subsection, including any recommendations.

III Repeal or reauthorization of other dairy-related provisions

Sec. 1471 Repeal of dairy product price support and milk income loss contract programs

(a)

Repeal of dairy product price support program— Section 1501 of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8771) is repealed.

(b)

Repeal of milk income loss contract program—

(1)

Payments under milk income loss contract program— Section 1506(c) of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773(c)) is amended—

(A)

in paragraph (2)(A), by striking “$16.94” and inserting “$18.85”; and

(B)

in paragraph (3)—

(i)

in subparagraph (A), by inserting “and” after the semicolon;

(ii)

in subparagraph (B), by striking “August 31, 2013, 45 percent; and” and inserting “on the date that is 270 days after the date of enactment of the Dairy Income Fairness Act of 2013, 45 percent.”; and

(iii)

by striking subparagraph (C).

(2)

Extension— Section 1506(h)(1) of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773(h)(1)) is amended by striking “September 30, 2013” and inserting “the date that is 270 days after the date of enactment of the Dairy Income Fairness Act of 2013”.

(3)

Repeal— Effective on the date that is 271 days after the date of enactment of the Dairy Income Fairness Act of 2013, section 1506 of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773) is repealed.

Sec. 1472 Repeal of dairy export incentive program

(a)

Repeal— Section 153 of the Food Security Act of 1985 (15 U.S.C. 713a–14) is repealed.

(b)

Conforming amendments— Section 902(2) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (22 U.S.C. 7201(2)) is amended—

(1)

by striking subparagraph (D); and

(2)

by redesignating subparagraphs (E) and (F) as subparagraphs (D) and (E), respectively.

Sec. 1473 Extension of dairy forward pricing program

Section 1502(e) of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8772(e)) is amended—

(1)

in paragraph (1), by striking “2012” and inserting “2017”; and

(2)

in paragraph (2), by striking “2015” and inserting “2020”.

Sec. 1474 Extension of dairy indemnity program

Section 3 of Public Law 90–484 (7 U.S.C. 450l) is amended by striking “2012” and inserting “2017”.

Sec. 1475 Extension of dairy promotion and research program

Section 113(e)(2) of the Dairy Production Stabilization Act of 1983 (7 U.S.C. 4504(e)(2)) is amended by striking “2012” and inserting “2017”.

Sec. 1476 Extension of Federal Milk Marketing Order Review Commission

Section 1509(a) of the Food, Conservation, and Energy Act of 2008 (Public Law 110–246; 122 Stat. 1726) is amended by inserting “or other funds” after “Subject to the availability of appropriations”.

IV Federal milk marketing order reform

Sec. 1481 Federal milk marketing order program pre-hearing procedure for Class III pricing

(a)

In general— The Secretary shall use the pre-hearing procedure described in this section to determine to conduct a hearing to consider alternative formulas for Class III milk product pricing under section 8c of the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937.

(b)

Requests for proposals—

(1)

In general— Not later than 60 days after the date of enactment of this Act, the Secretary shall issue a request for the submission by interested persons of preliminary proposals for replacement of the Class III milk product pricing formula.

(2)

Preliminary proposals— Preliminary proposals submitted under paragraph (1)—

(A)

may include competitive pay price formulas; and

(B)

shall provide sufficient detail in concept to serve as the basis for the convening by the Secretary of a public information session for review and discussion in accordance with section 900.24 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act), but need not conform with the other procedural requirements of part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).

(c)

Pre-Hearing information session review—

(1)

In general— Not later than 180 days after the date of enactment of this Act, the Secretary shall convene a public information session under section 900.24 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).

(2)

Requirements— The Secretary shall review all preliminary proposals submitted under this section that are of sufficient conceptual detail to allow for the review described in paragraph (1).

(d)

Hearing determination—

(1)

In general— Not later than 90 days after the conduct of the public information session under subsection (c), the Secretary shall determine whether to conduct a formal hearing in accordance with part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).

(2)

Hearing to be conducted— If the Secretary determines under paragraph (1) to conduct a formal hearing, the Secretary shall issue notice and conduct the hearing in accordance with part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).

(3)

Hearing not to be conducted— If the Secretary determines under paragraph (1) not to conduct a formal hearing, not later than 90 days after that determination, the Secretary shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition and Forestry of the Senate a written report that explains the basis for the decision.

(e)

Proceeding with a hearing at any time— Consistent with the purposes of this section, the Secretary may dispense with the pre-hearing requirements of this section and initiate at any time a formal hearing under part 900 of title 7, Code of Federal Regulations (as in effect on the date of enactment of this Act).

Sec. 1482 Federal milk marketing orders

Not later than 180 days after the date of enactment of this Act, the Secretary shall conduct hearings—

(1)

to analyze the implications of transitioning from a 4-class system for milk products to a 2-class system;

(2)

to explore methods to improve signals for price discovery in the short- and long-term to allow dairy producers to better use risk management tools; and

(3)

to assess whether a 2-class competitive pay pricing system for milk products would be more or less transparent than the system in effect as of the day before the date of enactment of this Act.

V Effective date

Sec. 1491 Effective date

Except as otherwise provided in this subtitle, this subtitle and the amendments made by this subtitle take effect on October 1, 2012.