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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1715 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1715

  To replace current dairy product price support and milk income loss 
contract programs with a program to protect dairy producer income when 
   the difference between milk prices and feed costs is less than a 
 specified amount, to establish a dairy market stabilization program, 
                        and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            October 17, 2011

Mrs. Gillibrand introduced the following bill; which was read twice and 
   referred to the Committee on Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL

 
  To replace current dairy product price support and milk income loss 
contract programs with a program to protect dairy producer income when 
   the difference between milk prices and feed costs is less than a 
 specified amount, to establish a dairy market stabilization program, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Dairy Pricing 
Reform and Farmer Protection Act of 2011''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                 TITLE I--FEDERAL MILK MARKETING REFORM

Sec. 101. Federal milk marketing reform.
           TITLE II--DAIRY PRODUCER MARGIN PROTECTION PROGRAM

Sec. 201. Definitions.
Sec. 202. Dairy producer margin protection program.
Sec. 203. Eligibility and registration of dairy producers for program.
Sec. 204. Establishment of production history of registered dairy 
                            producers.
Sec. 205. Basic margin protection.
Sec. 206. Supplemental margin protection.
Sec. 207. No payment limitations.
Sec. 208. Use of Commodity Credit Corporation.
Sec. 209. Duration.
             TITLE III--DAIRY MARKET STABILIZATION PROGRAM

Sec. 301. Definitions.
Sec. 302. Dairy market stabilization program.
Sec. 303. Program threshold for implementation and reduction in dairy 
                            producer payments.
Sec. 304. Collection of producer milk marketings information.
Sec. 305. Calculation of reduced dairy producer payments.
Sec. 306. Limited availability of amounts remitted to Secretary.
Sec. 307. Suspension of reduced payment requirement.
Sec. 308. Audit of producer and handler compliance.
Sec. 309. Program board.
Sec. 310. Duration.
                        TITLE IV--MISCELLANEOUS

Sec. 401. Repeals.
Sec. 402. Regulations.
Sec. 403. Budgetary effects.

                 TITLE I--FEDERAL MILK MARKETING REFORM

SEC. 101. FEDERAL MILK MARKETING REFORM.

    (a) In General.--Not later than 180 days after the date of 
enactment of this Act, the Secretary of Agriculture shall conduct 
hearings to assess the implications of transitioning Federal milk 
marketing orders from end-product pricing to a competitive pay pricing 
system.
    (b) Requirements.--In conducting hearings under this section, the 
Secretary shall--
            (1) ensure that market administrators conduct a thorough 
        analysis of--
                    (A) the reforms to the Federal milk marketing 
                orders proposed by the Maine Dairy Industry Advisory 
                Council; and
                    (B) the reforms included in H.R. 3062, 112th 
                Congress, as introduced on September 23, 2011;
            (2) analyze the implications of transitioning from a 4-
        class system for milk products to a 2-class system;
            (3) explore methods to improve signals for price discovery 
        in the short- and long-term to allow dairy producers to better 
        use risk management tools;
            (4) 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; and
            (5) analyze the impact of eliminating a minimum regulated 
        price on price volatility in dairy markets.

           TITLE II--DAIRY PRODUCER MARGIN PROTECTION PROGRAM

SEC. 201. DEFINITIONS.

    In this title:
            (1) Actual dairy producer margin.--The term ``actual dairy 
        producer margin'' means the difference between the all-milk 
        price and the average feed cost, as calculated under section 
        202(d).
            (2) All-milk price.--The term ``all-milk price'' means the 
        average price received, per hundredweight of milk, by dairy 
        producers for all milk sold to plants and dealers in the United 
        States, as reported by the National Agricultural Statistics 
        Service.
            (3) 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 
        202(c) using the sum obtained by adding--
                    (A) the product obtained by multiplying--
                            (i) 1.192; by
                            (ii) the price of corn per bushel;
                    (B) the product obtained by multiplying--
                            (i) 0.00817; by
                            (ii) the price of soybean meal per ton; and
                    (C) the product obtained by multiplying--
                            (i) 0.0152; by
                            (ii) the price of alfalfa hay per ton.
            (4) 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.
            (5) Dairy producer.--The term ``dairy producer'' means an 
        individual or entity that directly or indirectly (as determined 
        by the Secretary)--
                    (A) shares in the risk of producing milk; and
                    (B) makes contributions (including land, labor, 
                management, equipment, or capital) to the dairy 
                operation of the individual or entity that are at least 
                commensurate with the share of the individual or entity 
                of the proceeds of the operation.
            (6) Production history.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``production history'', with respect to a 
                dairy producer, means the highest annual milk 
                production of the dairy producer during any 1 of the 3 
                calendar years immediately preceding the registration 
                of the dairy producer with the Secretary for 
                participation in the program.
                    (B) New producers.--If a dairy producer has been in 
                operation for less than a year, the Secretary shall 
                determine the production history of the dairy producer 
                by extrapolating the actual milk production for the 
                months the dairy producer has been in operation to a 
                yearly production amount.
            (7) Program.--The term ``program'' means the dairy producer 
        margin protection program required by this title.
            (8) Projected dairy producer margin.--The term ``projected 
        dairy producer margin'' means the estimate prepared by the 
        Secretary pursuant to section 202(b).
            (9) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.
            (10) United states.--The term ``United States'', in a 
        geographical sense, means the 50 States.

SEC. 202. DAIRY PRODUCER MARGIN PROTECTION PROGRAM.

    (a) In General.--The Secretary shall establish and administer a 
dairy producer margin protection program for the purpose of protecting 
dairy producer income through the provision of basic margin protection 
payments and, if purchased by a dairy producer, supplemental margin 
protection payments when actual dairy producer margins are less than 
the threshold levels for the payments.
    (b) Estimation of Projected Dairy Producer Margin.--
            (1) In general.--The Secretary shall prepare an estimate of 
        the projected dairy producer margin for the 5-year period 
        beginning on January 1, 2012, consisting of the difference 
        between--
                    (A) an estimate of the average all-milk price, per 
                hundredweight of milk, for that period; and
                    (B) an estimate of average feed cost for that 
                period.
            (2) Publication.--The Secretary shall publish the estimate 
        of the projected dairy producer margin in the Federal Register 
        as soon as practicable after the date of enactment of this Act, 
        but in no case later than 90 days after that date.
    (c) Calculation of Average Feed Cost.--Not later than the fifth day 
after the end of each consecutive 2-month period, the Secretary shall 
calculate the national average feed cost for that consecutive 2-month 
period using the following data:
            (1) The price of corn for each month of that consecutive 2-
        month period shall be the price received during that month by 
        agricultural producers in the United States for corn, as 
        reported by the National Agricultural Statistics Service.
            (2) The price of soybean meal for each month of that 
        consecutive 2-month period shall be the price received during 
        that month by agricultural producers in the United States for 
        soybean meal, as reported by the Agricultural Marketing 
        Service.
            (3) The price of alfalfa hay for each month of that 
        consecutive 2-month period shall be the price received during 
        that month by agricultural producers in the United States for 
        alfalfa hay, as reported by the National Agricultural 
        Statistics Service.
    (d) Calculation of Actual Dairy Producer Margin.--The Secretary 
shall calculate the actual dairy producer margin for each consecutive 
2-month period by subtracting--
            (1) the average feed cost for that consecutive 2-month 
        period, determined in accordance with subsection (c); from
            (2) the all-milk price for that consecutive 2-month period.

SEC. 203. ELIGIBILITY AND REGISTRATION OF DAIRY PRODUCERS FOR PROGRAM.

    (a) Eligibility.--
            (1) In general.--Subject to paragraph (2), all dairy 
        producers in the United States shall be eligible to participate 
        in the program.
            (2) Requirement.--A dairy producer shall be required to be 
        registered with the Secretary before the producer may--
                    (A) receive basic margin protection payments under 
                section 205; and
                    (B) if purchased by the dairy producer, 
                supplemental margin protection payments under section 
                206.
    (b) Registration.--
            (1) In general.--The Secretary shall--
                    (A) register all interested dairy producers in the 
                program; and
                    (B) specify the manner and form by which a dairy 
                producer may register.
            (2) Existing dairy producers.--During the 1-year period 
        beginning on the date of enactment of this Act, a dairy 
        producer who is actively engaged in a dairy operation as of 
        that date may register with the Secretary--
                    (A) to receive basic margin protection; and
                    (B) if the dairy producer chooses, to purchase 
                supplemental margin protection.
            (3) New entrants.--A dairy producer who has no existing 
        interest in a dairy operation as of the date of enactment of 
        this Act, but who, after that date, establishes a new dairy 
        operation, may register with the Secretary during the 180-day 
        period beginning on the date on which the dairy operation first 
        markets milk commercially--
                    (A) to receive basic margin protection; and
                    (B) if the dairy producer chooses, to purchase 
                supplemental margin protection.
            (4) Treatment of multi-producer operations.--If a dairy 
        operation consists of more than 1 dairy producer, all of the 
        dairy producers of the operation shall be treated as a single 
        dairy producer for purposes of registration--
                    (A) to receive basic margin protection; and
                    (B) at the election of the producers, to purchase 
                supplemental margin protection.
            (5) Treatment of producers with multiple dairy 
        operations.--If a dairy producer operates 2 or more dairy 
        operations, each dairy operation of the producer shall require 
        a separate registration--
                    (A) to receive basic margin protection; and
                    (B) at the election of the producer, to purchase 
                supplemental margin protection.
    (c) Reconstitution.--The Secretary shall ensure that a dairy 
producer does not reconstitute a dairy operation for the sole purpose 
of receiving basic margin protection or supplemental margin protection.

SEC. 204. ESTABLISHMENT OF PRODUCTION HISTORY OF REGISTERED DAIRY 
              PRODUCERS.

    (a) Establishment of Production History.--
            (1) Establishment.--When a dairy producer registers with 
        the Secretary for participation in the program, the dairy 
        producer shall provide all information required by the 
        Secretary to establish the production history of the dairy 
        operation of the producer.
            (2) Duration.--Once the production history is established 
        for a dairy producer upon registration, the production history 
        shall not be changed for the duration of the participation by 
        the dairy producer in the program.
    (b) Transfer of Production History of Existing Dairy Producers.--
            (1) Transfer by sale.--
                    (A) Request for transfer.--If an existing dairy 
                producer, as described in section 203(b)(2), sells an 
                entire dairy operation to another party, the seller and 
                purchaser may jointly request that the Secretary 
                transfer the production history of the seller to the 
                purchaser.
                    (B) Transfer.--If the Secretary determines that the 
                seller has sold the entire dairy operation to the 
                purchaser--
                            (i) the Secretary shall approve the 
                        transfer; and
                            (ii) after the approval of the transfer, 
                        the seller shall have no interest in that 
                        production history.
            (2) Transfer by lease.--
                    (A) Request for transfer.--If an existing dairy 
                producer, as described in section 203(b)(2), leases an 
                entire dairy operation to another party, the lessor and 
                lessee may jointly request that the Secretary transfer 
                the production history of the lessor to the lessee for 
                the duration of the term of the lease.
                    (B) Transfer.--If the Secretary determines that the 
                lessor has leased the entire dairy operation to the 
                lessee--
                            (i) the Secretary shall approve the 
                        transfer; and
                            (ii) after the approval of the transfer, 
                        the lessor shall have no interest in that 
                        production history for the duration of the term 
                        of the lease.
            (3) Coverage level.--A purchaser or lessee to whom the 
        Secretary transfers a production history under this subsection 
        may not obtain a different level of basic margin protection or 
        supplemental margin protection coverage than the basic margin 
        protection or supplemental margin protection coverage held by 
        the seller or lessor from whom the purchaser or lessee obtained 
        the production history.
    (c) Transfer of Production History of New Entrants.--The Secretary 
may not transfer the production history of a dairy producer described 
in section 203(b)(3) to another person.
    (d) Movement and Transfer of Production History.--
            (1) Movement and transfer authorized.--Subject to paragraph 
        (2), if a dairy producer moves from 1 location to another 
        location, the dairy producer may maintain the production 
        history associated with the operation.
            (2) Notification requirement.--A dairy producer shall 
        notify the Secretary of any move of a dairy operation under 
        paragraph (1).
            (3) Subsequent occupation of vacated location.--A party 
        subsequently occupying a dairy operation location vacated as 
        described in paragraph (1) shall have no interest in the 
        production history previously associated with the operation at 
        the location.

SEC. 205. BASIC MARGIN PROTECTION.

    (a) Eligibility.--Each dairy producer registered to participate in 
the program shall be eligible to receive basic margin protection under 
the program through a 2-tier system described in subsection (c).
    (b) No Cost to Dairy Producer.--Basic margin protection shall be 
provided to a registered dairy producer at no cost to the dairy 
producer.
    (c) Payment Threshold.--
            (1) First tier.--All registered dairy producers shall 
        receive a basic margin protection payment for the first 
        2,985,000 pounds of actual milk production of the dairy 
        producer for the calendar year whenever the average actual 
        dairy producer margin for a consecutive 2-month period is less 
        than $6.00 per hundredweight of milk (referred to in this 
        section as the ``first tier payment threshold'').
            (2) Second tier.--All registered dairy producers shall 
        receive a basic margin protection payment for all pounds of 
        actual milk production of the dairy producer for the calendar 
        year that is in excess of 2,985,000 pounds whenever the average 
        actual dairy producer margin for a consecutive 2-month period 
        is less than $4.00 per hundredweight of milk (referred to in 
        this section as the ``second tier payment threshold'').
    (d) Basic Margin Protection Payment.--
            (1) Payment required.--The Secretary shall make a basic 
        margin protection payment to each registered dairy producer for 
        a consecutive 2-month period whenever the payment is required 
        by subsection (c) for that period.
            (2) Amount of payment.--The basic margin protection payment 
        for the dairy operation of a dairy producer for a consecutive 
        2-month period shall be equal to (as determined by the 
        Secretary) the product obtained by multiplying--
                    (A) the difference between--
                            (i) the average actual dairy producer 
                        margin for the consecutive 2-month period; and
                            (ii)(I) in the case of milk under the first 
                        tier payment threshold, $6.00; and
                            (II) in the case of milk under the second 
                        tier payment threshold, $4.00; and
                    (B) the lesser of--
                            (i) the quotient obtained by dividing--
                                    (I)(aa) in the case of milk under 
                                the first tier payment threshold, 90 
                                percent of the production history of 
                                the dairy producer; and
                                    (bb) in the case of milk under the 
                                second tier payment threshold, 70 
                                percent of the production history of 
                                the dairy producer; by
                                    (II) 6; and
                            (ii) the actual amount of milk produced by 
                        the dairy operation of the dairy producer 
                        during the consecutive 2-month period.

SEC. 206. SUPPLEMENTAL MARGIN PROTECTION.

    (a) Election of Supplemental Margin Protection.--At the time of 
program registration of a dairy producer, the dairy producer may 
purchase supplemental margin protection under the program.
    (b) Payment Threshold and Percentage of Production History 
Covered.--
            (1) Election of payment threshold.--A dairy producer 
        purchasing supplemental margin protection may elect a coverage 
        level that is higher, in any increment of $0.50, than the 
        payment threshold for basic margin protection specified in 
        section 205(c), but not to exceed the lesser of--
                    (A) the projected dairy producer margin; or
                    (B) $8.00.
            (2) Election of production history percentage.--A dairy 
        producer purchasing supplemental margin protection shall elect 
        a percentage, equal to not more than 90 percent nor less than 
        25 percent, of the production history of the producer to be 
        covered by supplemental margin protection.
    (c) Producer Premiums.--Not later than January 15 of each year for 
which supplemental margin protection is available, a dairy producer 
purchasing supplemental margin protection shall pay a premium equal to 
the product obtained by multiplying--
            (1) the percentage of production history elected by the 
        producer under subsection (b)(3);
            (2) the production history of the producer for the calendar 
        year; and
            (3) the premium per hundredweight of milk, as follows:

------------------------------------------------------------------------
           Coverage Level                      Premium per Cwt.
------------------------------------------------------------------------
                       $4.50                               $0.015
                       $5.00                               $0.036
                       $5.50                               $0.081
                       $6.00                               $0.155
                       $6.50                               $0.230
                       $7.00                               $0.434
                       $7.50                               $0.590
                       $8.00                              $0.922.
------------------------------------------------------------------------

    (d) Premium Obligations of Producer.--
            (1) Pro-ration of first year premium.--A dairy producer who 
        purchases supplemental margin protection after initial program 
        registration shall pay a prorated premium for the first year 
        based on the date on which the producer purchases the coverage.
            (2) Subsequent premiums.--Except as otherwise provided in 
        paragraph (1), the annual premium for a dairy producer shall be 
        fixed at the level determined under subsection (c) for each 
        year of the program.
            (3) Legal obligation.--
                    (A) In general.--Except as provided in 
                subparagraphs (B) and (C), a dairy producer who elects 
                to purchase supplemental margin protection shall be 
                legally obligated to pay the applicable premiums for 
                the entire period of the program, and may not opt out 
                of the program.
                    (B) Death of dairy producer.--If a dairy producer 
                dies, the estate of the deceased may cancel the 
                supplemental margin protection and shall not be 
                responsible for any further premium payments.
                    (C) Retirement of dairy producer.--If a dairy 
                producer retires, the producer may request that the 
                Secretary cancel the supplemental margin protection if 
                the producer has terminated the dairy operation 
                entirely and certifies under oath that the producer 
                will not be actively engaged in any dairy operation for 
                at least the subsequent 7 years.
            (4) Loss of benefits; repayment.--A dairy producer who is 
        in arrears on premium payments for supplemental margin 
        protection for more than 90 days shall--
                    (A) remain legally obligated to pay the premiums;
                    (B) repay supplemental margin protection payments 
                previously paid to the producer; and
                    (C) lose the right to receive any further 
                supplemental margin protection payments.
    (e) Supplemental Payment Threshold.--A dairy producer who has 
purchased supplemental margin protection shall receive a payment 
whenever the average actual dairy producer margin for a consecutive 2-
month period is less than the coverage level elected by the dairy 
producer under subsection (b)(2).
    (f) Supplemental Margin Protection Payments.--
            (1) In general.--The supplemental margin protection payment 
        for a dairy producer shall be--
                    (A) made on the actual milk production of the dairy 
                producer for the calendar year; and
                    (B) in addition to the basic margin protection 
                payment that is made on the actual milk production of 
                the dairy producer for the calendar year.
            (2) Amount of payment.--The supplemental margin protection 
        payment for the dairy operation of a dairy producer shall be 
        equal to (as determined by the Secretary) the product obtained 
        by multiplying--
                    (A) the difference between the elected coverage 
                level under subsection (b)(2) and the greater of--
                            (i) the average actual dairy producer 
                        margin for the consecutive 2-month period; or
                            (ii) $6.00;
                    (B) the percentage of production history elected by 
                the dairy producer under subsection (b)(3); and
                    (C) the lesser of--
                            (i) the quotient obtained by dividing--
                                    (I) the production history of the 
                                dairy producer for the calendar year; 
                                by
                                    (II) 6; and
                            (ii) the actual amount of milk produced by 
                        the dairy operation of the dairy producer 
                        during the consecutive 2-month period.

SEC. 207. NO PAYMENT LIMITATIONS.

    Notwithstanding any other provision of law, basic margin protection 
payments and supplemental margin protection payments received by a 
dairy producer under the program shall not be subject to limitations 
for any reason.

SEC. 208. USE OF COMMODITY CREDIT CORPORATION.

    The Secretary shall use the funds, facilities, and the authorities 
of the Commodity Credit Corporation to carry out this title.

SEC. 209. DURATION.

    The Secretary shall conduct the program during the period beginning 
on January 1, 2012, and ending on December 31, 2017.

             TITLE III--DAIRY MARKET STABILIZATION PROGRAM

SEC. 301. DEFINITIONS.

    In this title:
            (1) Dairy producer.--The term ``dairy producer'' means an 
        individual or entity that directly or indirectly (as determined 
        by the Secretary)--
                    (A) shares in the risk of producing milk; and
                    (B) makes contributions (including land, labor, 
                management, equipment, or capital) to the dairy farming 
                operation of the individual or entity that are at least 
                commensurate with the share of the individual or entity 
                of the proceeds of the operation.
            (2) Handler.--
                    (A) In general.--The term ``handler'' means a 
                person making payment to a dairy producer for milk 
                produced in the United States and marketed for 
                commercial use.
                    (B) Producer-handler.--The term includes a 
                producer-handler.
            (3) Program.--The term ``program'' means the dairy market 
        stabilization program established under this title.
            (4) Program base.--The term ``program base'', with respect 
        to a dairy producer, means the program base calculated for the 
        producer under section 302(b).
            (5) Program board.--The term ``program board'' means the 
        board of directors appointed by the Secretary under section 
        309.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.
            (7) United states.--The term ``United States'', in a 
        geographical sense, means the 50 States.

SEC. 302. DAIRY MARKET STABILIZATION PROGRAM.

    (a) In General.--The Secretary shall establish and administer a 
dairy market stabilization program applicable to all dairy producers in 
the United States for the purpose of balancing the supply of milk with 
demand when the total percent production growth in milk products in a 
Federal milk marketing order exceeds the combined percent growth in 
Class I, II, and III milk products.
    (b) Election of Program Base Calculation Method.--
            (1) Deadline for election.--Not later than January 15, 
        2012, each dairy producer shall inform the Secretary of the 
        method by which the program base for the producer for 2012 will 
        be calculated under paragraph (5).
            (2) Change in calculation method.--For each year after 
        2012, a dairy producer may change the program base calculation 
        method to be used for a calendar year by notifying the 
        Secretary of the change not later than January 15 of that year.
            (3) Treatment of multi-producer operations.--If a dairy 
        operation consists of more than 1 dairy producer, all of the 
        dairy producers of the operation shall jointly make the 
        election under paragraph (1) with respect to the operation and 
        jointly make any change to that election under paragraph (2).
            (4) Treatment of producers with multiple dairy 
        operations.--If a dairy producer operates 2 or more dairy 
        operations, each dairy operation of the producer shall require 
        a separate election under paragraph (1).
            (5) Calculation methods.--A dairy producer may elect either 
        of the following methods for calculation of the program base 
        for the producer:
                    (A) The volume of the average monthly milk 
                marketings of the dairy producer for the 3 months 
                immediately preceding the announcement by the Secretary 
                that the program will become effective.
                    (B) The volume of the monthly milk marketings of 
                the dairy producer for the same month in the preceding 
                year as the month for which the Secretary has announced 
                the program will become effective.

SEC. 303. PROGRAM THRESHOLD FOR IMPLEMENTATION AND REDUCTION IN DAIRY 
              PRODUCER PAYMENTS.

    (a) In General.--The Secretary shall announce that the program is 
in effect and order reduced payments to any dairy producer who exceeds 
the applicable percentage of the program base of the producer whenever 
the total percent production growth in milk products in a Federal milk 
marketing order exceeds the combined percent growth in Class I, II, and 
III milk products for the immediately preceding 2 months.
    (b) Effective Date for Implementation of Payment Reductions.--
Reductions in dairy producer payments shall commence beginning on the 
first day of the month immediately following the announcement by the 
Secretary under subsection (a).

SEC. 304. COLLECTION OF PRODUCER MILK MARKETINGS INFORMATION.

    (a) Collection by Handlers.--For each month during which the 
program is in effect, each handler shall calculate the following:
            (1) The volume of milk marketings the handler has received 
        from each dairy producer during that month.
            (2) The volume of milk marketings the handler has received 
        from each dairy producer during the same month of the preceding 
        year.
            (3) The volume of milk marketings the handler has received 
        from each dairy producer during each of the 3 months preceding 
        the month in which the Secretary makes the announcement that 
        the program will be in effect.
    (b) Effect of Changing Handlers.--If a dairy producer changes 
handlers, the producer shall ensure that milk marketings data required 
to make the calculations under subsection (a) is provided to the new 
handler.

SEC. 305. CALCULATION OF REDUCED DAIRY PRODUCER PAYMENTS.

    (a) Reduced Producer Payments Required.--During any month in which 
payment reductions are in effect under the program, each handler 
shall--
            (1) reduce payments to each dairy producer from whom the 
        handler receives milk, if payment reductions are required by 
        this section; and
            (2) remit to the Secretary the amount by which payments are 
        reduced.
    (b) Reconstitution.--The Secretary shall ensure that a dairy 
producer does not reconstitute a dairy operation for the sole purpose 
of altering the level of payment reductions required by this section.

SEC. 306. LIMITED AVAILABILITY OF AMOUNTS REMITTED TO SECRETARY.

    (a) Availability for Program Board Activities.--As soon as 
practicable after the end of each month during which payment reductions 
are in effect under the program, the Secretary shall make available to 
the program board 50 percent of the amounts remitted to the Secretary 
under section 305 during that month.
    (b) Use of Remaining Amounts.--The Secretary shall deposit all 
amounts remitted to the Secretary under section 305 that are not made 
available to the program board under subsection (a) into the general 
fund of the Treasury.

SEC. 307. SUSPENSION OF REDUCED PAYMENT REQUIREMENT.

    (a) Suspension Thresholds.--The Secretary shall suspend the program 
whenever the Secretary determines that the price in the United States 
for either cheddar cheese or skim milk powder (non-fat dry milk) is 
more than 20 percent above the world price for that same commodity for 
2 consecutive months.
    (b) Implementation by Handlers.--Handlers shall cease reducing 
payments to dairy producers under the program upon receiving notice of 
the suspension of the program from the Secretary.

SEC. 308. AUDIT OF PRODUCER AND HANDLER COMPLIANCE.

    (a) In General.--If determined by the Secretary to be necessary to 
ensure dairy producer and handler compliance with the program, the 
Secretary may conduct periodic audits of participating dairy operations 
and handlers.
    (b) Sample of Dairy Producers.--Any audit conducted under 
subsection (a) shall include, at a minimum, investigation of a 
statistically valid and random sample of dairy producers.

SEC. 309. PROGRAM BOARD.

    (a) In General.--The Secretary shall establish a board of directors 
for the program for the purpose of--
            (1) administering the amounts remitted to the Secretary 
        under section 305 that are made available to the program board 
        under section 306; and
            (2) determining the most effective use of such funds.
    (b) Appointment of Directors.--
            (1) Number and qualifications.--The Secretary shall appoint 
        24 members to serve on the program board, who shall be 
        representative of the United States dairy producer community, 
        taking into account geographical diversity, cooperative 
        membership, and volumes of milk produced in various States and 
        regions.
            (2) Reimbursement of expenses.--From the amounts made 
        available to the program board under section 306, the Secretary 
        shall reimburse members of the program board for those costs of 
        service on the program board that the Secretary determines 
        reasonable and appropriate.
    (c) Decisionmaking.--The program board shall reach decisions by an 
affirmative vote of \2/3\ of the members of the program board.
    (d) Removal of Dairy Products and Expansion of Demand.--
            (1) Spending authority.--The program board may use amounts 
        made available to the program board under section 306--
                    (A) to purchase dairy products through commercial 
                sources for donation to food banks and other food 
                programs that the Board determines appropriate, not 
                later than 3 months after the date on which the 
                Secretary collected the funds; and
                    (B) to expand consumption and build demand for 
                dairy products.
            (2) No duplication of effort.--The program board shall 
        ensure that projects supported 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) Management contract.--The program board may enter into 
        a contract with a managing entity to carry out this subsection.
    (e) Program Evaluation.--
            (1) Contract authority.--
                    (A) In general.--Using amounts made available to 
                the program board under section 306, the program board 
                shall enter into a contract for an evaluation of the 
                program after the program has been in operation for 2 
                years.
                    (B) Requirements.--The evaluation shall include the 
                use of established dairy economic models to ascertain 
                the effectiveness and operation of the program.
            (2) Submission of results.--
                    (A) In general.--The program board shall submit to 
                the Secretary the results of evaluations conducted 
                under paragraph (1).
                    (B) Recommendations.--The Secretary shall review 
                the evaluations under paragraph (1) and submit to 
                Congress such recommendations as the Secretary 
                considers appropriate regarding the program.

SEC. 310. DURATION.

    The Secretary shall conduct the program during the period beginning 
on January 1, 2012, and ending on December 31, 2017.

                        TITLE IV--MISCELLANEOUS

SEC. 401. REPEALS.

    (a) Dairy Product Price Support Program, Dairy Forward Pricing 
Program, and Milk Income Loss Contract Program.--Sections 1501, 1502, 
and 1506 of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 
8771, 8772, 8773) are repealed.
    (b) Dairy Export Incentive Program.--
            (1) In general.--Section 153 of the Food Security Act of 
        1985 (15 U.S.C. 713a-14) is repealed.
            (2) Conforming amendments.--Section 902(2) of the Trade 
        Sanctions Reform and Export Enhancement Act of 2000 (22 U.S.C. 
        7201(2)) is amended--
                    (A) by striking subparagraph (D); and
                    (B) by redesignating subparagraphs (E) and (F) as 
                subparagraphs (D) and (E), respectively.
    (c) Application.--The amendments made by this section apply 
beginning on the date on which the regulations required under section 
402 take effect.

SEC. 402. REGULATIONS.

    Not later than 270 days after the date of enactment of this Act, 
the Secretary of Agriculture shall promulgate such regulations as are 
necessary to carry out this Act and the amendments made by this Act.

SEC. 403. BUDGETARY EFFECTS.

    The budgetary effects of this Act, for the purpose of complying 
with the Statutory Pay-As-You-Go Act of 2010, shall be determined by 
reference to the latest statement titled ``Budgetary Effects of PAYGO 
Legislation'' for this Act, submitted for printing in the Congressional 
Record by the Chairman of the Senate Budget Committee, provided that 
such statement has been submitted prior to the vote on passage.
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