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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3062 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 3062

 To establish a program for dairy producers under which producers can 
   offset reductions in producer income when the margin between milk 
 prices and feed costs is less than a specified amount, to establish a 
 dairy market stabilization program for producers participating in the 
margin protection program, to provide for the amendment of Federal milk 
               marketing orders, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           September 23, 2011

   Mr. Peterson (for himself, Mr. Simpson, Mr. Welch, Mr. Costa, Mr. 
    Courtney, Mr. Schrader, Mr. Larsen of Washington, and Mr. Long) 
 introduced the following bill; which was referred to the Committee on 
                              Agriculture

_______________________________________________________________________

                                 A BILL

 
 To establish a program for dairy producers under which producers can 
   offset reductions in producer income when the margin between milk 
 prices and feed costs is less than a specified amount, to establish a 
 dairy market stabilization program for producers participating in the 
margin protection program, to provide for the amendment of Federal milk 
               marketing orders, 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 Security Act 
of 2011''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
      TITLE I--DAIRY PRODUCER MARGIN PROTECTION AND DAIRY MARKET 
                         STABILIZATION PROGRAMS

Sec. 101. Definitions.
Sec. 102. Calculation of average feed cost and actual dairy producer 
                            margins.
          Subtitle A--Dairy Producer Margin Protection Program

Sec. 111. Establishment of dairy producer margin protection program.
Sec. 112. Eligibility and registration of dairy producers for margin 
                            protection program.
Sec. 113. Production history and annual production quantity of 
                            participating dairy producers.
Sec. 114. Basic margin protection.
Sec. 115. Supplemental margin protection.
Sec. 116. Effect of failure to pay administrative fees or premiums.
Sec. 117. No payment limitations.
             Subtitle B--Dairy Market Stabilization Program

Sec. 131. Establishment of dairy market stabilization program.
Sec. 132. Threshold for implementation and reduction in dairy producer 
                            payments.
Sec. 133. Producer milk marketings information.
Sec. 134. Calculation and collection of reduced dairy producer 
                            payments.
Sec. 135. Remitting monies to Commodity Credit Corporation.
Sec. 136. Suspension of reduced payment requirement.
Sec. 137. Audit requirements.
Sec. 138. Board of directors.
                Subtitle C--Commodity Credit Corporation

Sec. 151. Use of Commodity Credit Corporation.
                          Subtitle D--Duration

Sec. 161. Duration.
             TITLE II--FEDERAL MILK MARKETING ORDER REFORM

Sec. 201. Required amendments to Federal milk marketing orders.
Sec. 202. Amendment process.
Sec. 203. Development of effective balancing programs for milk markets.
               TITLE III--REPEAL OF SUPERSEDED PROVISIONS

Sec. 301. Repeal of dairy product price support and milk income loss 
                            contract programs.
Sec. 302. Repeal of permanent price support authority for milk.
Sec. 303. Repeal of dairy export incentive program.
Sec. 304. Effective date.

      TITLE I--DAIRY PRODUCER MARGIN PROTECTION AND DAIRY MARKET 
                         STABILIZATION PROGRAMS

SEC. 101. 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 
        102.
            (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) Annual production quantity.--The term ``annual 
        production quantity'' means the quantity of annual milk 
        marketings determined for a dairy producer under section 113(b) 
        for each year in which the dairy producer participates in the 
        margin protection program.
            (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 102 
        using the sum of the following:
                    (A) The product determined by multiplying 1.192 by 
                the price of corn per bushel.
                    (B) The product determined by multiplying 0.00817 
                by the price of soybean meal per ton.
                    (C) The product determined by multiplying 0.0152 by 
                the price of alfalfa hay per ton.
            (5) Board of directors.--The term ``board of directors'' 
        means the board of directors appointed by the Secretary under 
        section 138.
            (6) Consecutive two-month period.--The term ``consecutive 
        two-month period'' refers to the two-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 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.
            (8) 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.
            (9) Margin protection program.--The term ``margin 
        protection program'' means the dairy producer margin protection 
        program required by subtitle A.
            (10) Participating dairy producer.--The term 
        ``participating dairy producer'' means a dairy producer that--
                    (A) registers under section 112(b) to participate 
                in the margin protection program under subtitle A; and
                    (B) as a result of such registration, also 
                participates in the stabilization program under 
                subtitle B.
            (11) Production history.--The term ``production history'' 
        means the quantity of annual milk marketings determined for a 
        dairy producer under section 113(a).
            (12) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.
            (13) Stabilization program.--The term ``stabilization 
        program'' means the dairy market stabilization program required 
        by subtitle B for all participating dairy producers.
            (14) Stabilization program base.--The term ``stabilization 
        program base'', with respect to a participating dairy producer, 
        means the stabilization program base calculated for the 
        producer under section 131(b).
            (15) United states.--The term ``United States'', in a 
        geographical sense, means the 50 States.

SEC. 102. CALCULATION OF AVERAGE FEED COST AND ACTUAL DAIRY PRODUCER 
              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 by the National Agricultural Statistics 
        Service.
            (2) The price of soybean meal for a month shall be the 
        central Illinois price for soybean meal, as reported by the 
        Agricultural Marketing Service.
            (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 by the National Agricultural 
        Statistics Service.
    (b) Calculation of Actual Dairy Producer Margins.--
            (1) Margin protection program.--For use in the margin 
        protection program under subtitle A, the Secretary shall 
        calculate the actual dairy producer margin for each consecutive 
        two-month period by subtracting--
                    (A) the average feed cost for that consecutive two-
                month period, determined in accordance with subsection 
                (a); from
                    (B) the all-milk price for that consecutive two-
                month period.
            (2) Stabilization program.--For use in the stabilization 
        program under subtitle B, the Secretary shall calculate (not 
        later than 20th of each month) the actual dairy producer 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.

          Subtitle A--Dairy Producer Margin Protection Program

SEC. 111. ESTABLISHMENT OF DAIRY PRODUCER MARGIN PROTECTION PROGRAM.

    The Secretary shall establish and administer a dairy producer 
margin protection program for the purpose of protecting dairy producer 
income by paying participating dairy producers--
            (1) basic margin protection payments when actual dairy 
        producer margins are less than the threshold levels for such 
        payments; and
            (2) supplemental margin protection payments if purchased by 
        a participating dairy producer.

SEC. 112. ELIGIBILITY AND REGISTRATION OF DAIRY PRODUCERS FOR MARGIN 
              PROTECTION PROGRAM.

    (a) Eligibility.--All dairy producers in the United States are 
eligible to participate in the margin protection program, except that a 
dairy producer must be registered with the Secretary before the 
producer may receive--
            (1) basic margin protection payments under section 114; and
            (2) if the dairy producer purchases supplemental margin 
        protection under section 115, supplemental margin protection 
        payments under such section.
    (b) Registration Process.--
            (1) In general.--The Secretary shall register all 
        interested dairy producers in the margin protection program. 
        The Secretary shall specify the manner and form by which a 
        dairy producer must register.
            (2) Treatment of multi-producer operations.--If a dairy 
        operation consists of more than one dairy producer, all of the 
        dairy producers of the operation shall be treated as a single 
        dairy producer for purposes of--
                    (A) registration to receive basic margin protection 
                and purchase supplemental margin protection;
                    (B) payment of the administrative fee under 
                subsection (d) and producer premiums under section 115; 
                and
                    (C) participation in the stabilization program 
                under subtitle B.
            (3) Treatment of producers with multiple dairy 
        operations.--If a dairy producer operates two or more dairy 
        operations, each dairy operation of the producer shall require 
        a separate registration to receive basic margin protection and 
        purchase supplemental margin protection. Only those dairy 
        operations so registered shall be subject to the stabilization 
        program.
    (c) Time for Registration.--
            (1) Existing dairy producers.--During the one-year period 
        beginning on the date of the enactment of this Act, a dairy 
        producer that is actively engaged in a dairy operation as of 
        such date may register with the Secretary--
                    (A) to receive basic margin protection; and
                    (B) if the producer elects, to purchase 
                supplemental margin protection.
            (2) New entrants.--A dairy producer that has no existing 
        interest in a dairy operation as of the date of the enactment 
        of this Act, but that, after such 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 producer elects, to purchase 
                supplemental margin protection.
    (d) Administrative Fee for Registration.--
            (1) Administrative fee required.--A dairy producer shall 
        pay an administrative fee under this subsection to register for 
        the margin protection program. The participating dairy producer 
        shall pay the administrative fee annually thereafter to remain 
        registered for the margin protection program.
            (2) Fee amount.--The administrative fee for a dairy 
        producer shall be as follows:
                    (A) If the dairy producer marketed less than 10 
                million pounds of milk in the previous calendar year, 
                the administrative fee shall be equal to $100.
                    (B) If the dairy producer marketed between 10 
                million and 40 million pounds of milk in the previous 
                calendar year, the administrative fee shall be equal to 
                $400.
                    (C) If the dairy producer marketed more than 40 
                million pounds of milk in the previous calendar year, 
                the administrative fee shall be equal to $1,000.
    (e) Reconstitution.--The Secretary shall ensure that a dairy 
producer does not reconstitute a dairy operation for the sole purpose 
of receiving basic margin protection, purchasing supplemental margin 
protection, or avoiding participation in the stabilization program.

SEC. 113. PRODUCTION HISTORY AND ANNUAL PRODUCTION QUANTITY OF 
              PARTICIPATING DAIRY PRODUCERS.

    (a) Determination of Production History.--
            (1) Determination required.--The Secretary shall determine 
        the production history of the dairy operation of each 
        participating dairy producer in the margin protection program.
            (2) Calculation.--Except as provided in paragraph (3), the 
        production history of a participating dairy producer is equal 
        to the highest annual milk marketings of the dairy producer 
        during any one of the three calendar years immediately 
        preceding the dairy producer's registration for participation 
        in the margin protection program.
            (3) 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 marketings for the months the dairy producer 
        has been in operation to a yearly amount.
            (4) No change in production history for basic margin 
        protection.--Once the production history of a participating 
        dairy producer is determined under paragraph (2) or (3), the 
        production history shall not be subsequently changed for 
        purposes of determining the amount of any basic margin 
        protection payments for the dairy producer made under section 
        114.
    (b) Determination of Annual Production Quantity for Supplemental 
Margin Protection.--
            (1) Determination required.--If a dairy producer selects 
        the growth option when purchasing supplemental margin 
        protection under section 115, the Secretary shall determine the 
        annual production quantity of the dairy operation of the dairy 
        producer under paragraph (2).
            (2) Calculation.--The annual production quantity of a 
        participating dairy producer is equal to the actual milk 
        marketings of the dairy producer during each calendar year in 
        which the dairy producer purchases supplemental margin 
        protection, including the calendar year during which the dairy 
        producer first purchases such supplemental margin protection.
    (c) Required Information.--A participating dairy producer shall 
provide all information that the Secretary may require in order to 
establish--
            (1) the production history of the dairy operation of the 
        dairy producer; and
            (2) the annual production quantity of the dairy operation 
        of the dairy producer if the dairy producer selects the growth 
        option when purchasing supplemental margin protection under 
        section 115.
    (d) Transfer of Production History or Annual Production Quantity.--
            (1) Transfer by sale.--
                    (A) Request for transfer.--If an existing dairy 
                producer, as described in section 112(c)(1), sells an 
                entire dairy operation to another party, the seller and 
                purchaser may jointly request that the Secretary 
                transfer to the purchaser the seller's interest in--
                            (i) production history of the dairy 
                        operation; and
                            (ii) if applicable, the annual production 
                        quantity of the dairy operation for each year 
                        in which the margin protection program has been 
                        in effect.
                    (B) Transfer.--If the Secretary determines that the 
                seller has sold the entire dairy operation to the 
                purchaser, the Secretary shall approve the transfer 
                described in subparagraph (A), and, thereafter, the 
                seller shall have no interest in--
                            (i) the production history of the sold 
                        dairy operation; or
                            (ii) if applicable, the annual production 
                        quantity of the dairy operation.
            (2) Transfer by lease.--
                    (A) Request for transfer.--If an existing dairy 
                producer, as described in section 112(c)(1), leases an 
                entire dairy operation to another party, the lessor and 
                lessee may jointly request that the Secretary transfer 
                to the lessee for the duration of the term of the lease 
                the lessor's interest in--
                            (i) production history of the dairy 
                        operation; and
                            (ii) if applicable, the annual production 
                        quantity of the dairy operation for each year 
                        in which the margin protection program has been 
                        in effect.
                    (B) Transfer.--If the Secretary determines that the 
                lessor has leased the entire dairy operation to the 
                lessee, the Secretary shall approve the transfer 
                described in subparagraph (A), and, thereafter, the 
                lessor shall have no interest for the duration of the 
                term of the lease in--
                            (i) the production history of the leased 
                        dairy operation; or
                            (ii) if applicable, the annual production 
                        quantity of the dairy operation.
            (3) Coverage level.--
                    (A) Basic margin protection.--A purchaser or lessee 
                to whom the Secretary transfers a production history or 
                annual production quantity under this subsection may 
                not obtain a different level of basic margin protection 
                than the basic margin protection coverage held by the 
                seller or lessor from whom the transfer was obtained.
                    (B) Supplemental margin protection.--A purchaser or 
                lessee to whom the Secretary transfers a production 
                history or annual production quantity under this 
                subsection may not obtain a different level of 
                supplemental margin protection coverage than the 
                supplemental margin protection coverage held by the 
                seller or lessor from whom the transfer was obtained.
            (4) New entrants.--The Secretary may not transfer the 
        production history or annual production quantity determined for 
        a dairy producer described in section 112(c)(2) to another 
        person.
    (e) Movement and Transfer of Production History or Annual 
Production Quantity.--
            (1) Movement and transfer authorized.--Subject to paragraph 
        (2), if a dairy producer moves from one location to another 
        location, the dairy producer may maintain the production 
        history and annual production quantity 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 or annual production quantity previously 
        associated with the operation at such location.

SEC. 114. BASIC MARGIN PROTECTION.

    (a) Eligibility.--All participating dairy producers are eligible to 
receive basic margin protection under the margin protection program.
    (b) Payment Threshold.--Participating dairy producers shall receive 
a basic margin protection payment whenever the average actual dairy 
producer margin for a consecutive two-month period is less than $4.00 
per hundredweight of milk.
    (c) Basic Margin Protection Payment.--
            (1) Payment required.--The Secretary shall make a basic 
        margin protection payment to each participating dairy producer 
        for a consecutive two-month period whenever such a payment is 
        required by subsection (b) for that period.
            (2) Amount of payment.--The basic margin protection payment 
        for the dairy operation of a participating dairy producer for a 
        consecutive two-month period shall be determined as follows:
                    (A) The Secretary shall calculate the difference 
                between the average actual dairy producer margin for 
                the consecutive two-month period and $4.00, except 
                that, if the difference is more than $4.00, the 
                Secretary shall use $4.00.
                    (B) The Secretary shall multiply the amount under 
                subparagraph (A) by of the lesser of the following:
                            (i) Eighty percent of the production 
                        history of the dairy producer, divided by six.
                            (ii) The actual amount of milk marketed by 
                        the dairy operation of the dairy producer 
                        during the consecutive two-month period.

SEC. 115. SUPPLEMENTAL MARGIN PROTECTION.

    (a) Election of Supplemental Margin Protection.--At the time of the 
registration of a dairy producer in the margin protection program under 
section 112, the dairy producer may purchase supplemental margin 
protection to protect a higher level of the income of a participating 
dairy producer than the income level guaranteed by basic margin 
protection under section 114.
    (b) Selection of Payment Threshold.--A participating dairy producer 
purchasing supplemental margin protection shall elect a coverage level 
that is higher, in any increment of $0.50, than the payment threshold 
for basic margin protection specified in section 114(b), but not to 
exceed $8.00.
    (c) Selection of Coverage Percentage.--A participating dairy 
producer purchasing supplemental margin protection shall elect a 
percentage of coverage, equal to not more than 90 percent nor less than 
25 percent, of--
            (1) the production history of the dairy operation of the 
        participating dairy producer; or
            (2) if the participating dairy producer elects the growth 
        option under subsection (d)--
                    (A) the production history of the dairy operation 
                of the dairy producer, to be used for the calendar year 
                during which the dairy producer registers for 
                participation in the margin protection program; and
                    (B) for subsequent calendar years in which the 
                margin protection program is in effect, the greater 
                of--
                            (i) the production history of the dairy 
                        operation of the dairy producer; or
                            (ii) the highest annual production quantity 
                        of the dairy operation of the dairy producer 
                        during any previous calendar year in which the 
                        margin protection program was in effect.
    (d) Availability of Growth Option.--When a dairy producer purchases 
supplemental margin protection, the dairy producer may elect a growth 
option that authorizes the use of the annual production quantity of the 
dairy operation of the dairy producer, in lieu of production history, 
as provided in subsection (c)(2) to determine supplemental margin 
protection payments for the dairy producer under subsection (h).
    (e) Producer Premiums.--
            (1) Premiums required.--A participating dairy producer that 
        purchases supplemental margin protection shall pay an annual 
        premium equal to the product obtained by multiplying--
                    (A) the percentage selected by the dairy producer 
                under subsection (c);
                    (B) the production history or annual production 
                quantity applicable to the dairy producer under such 
                subsection; and
                    (C) 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.
------------------------------------------------------------------------

            (2) Time for payment.--
                    (A) First year.--As soon as practicable after a 
                dairy producer registers to participate in the margin 
                protection program and purchases supplemental margin 
                protection, the dairy producer shall pay the premium 
                determined under paragraph (1) for the dairy producer 
                for the first calendar year of such supplemental margin 
                protection.
                    (B) Subsequent years.--When the dairy producer 
                first purchases supplemental margin protection, the 
                dairy producer shall also elect the method by which the 
                dairy producer will pay premiums under this subsection 
                for subsequent years in accordance with one of the 
                following schedules:
                            (i) Single annual payment.--The 
                        participating dairy producer may elect to pay 
                        100 percent of the annual premium determined 
                        under paragraph (1) for the dairy producer for 
                        a calendar year not later than January 15 of 
                        the calendar year.
                            (ii) Semi-annual payment.--The 
                        participating dairy producer may elect to pay 
                        50 percent of the annual premium determined 
                        under paragraph (1) for the dairy producer for 
                        a calendar year not later than January 15 of 
                        the calendar year and the remaining 50 percent 
                        of the premium not later than June 15 of the 
                        calendar year.
    (f) Producer's Premium Obligations.--
            (1) Pro-ration of first year premium.--A participating 
        dairy producer that purchases supplemental margin protection 
        after initial registration in the margin protection program 
        shall pay a pro-rated premium for the first calendar year based 
        on the date on which the producer purchases the coverage.
            (2) Subsequent premiums.--Other than as provided in 
        paragraph (1), the annual premium for a participating dairy 
        producer shall be determined under subsection (e) for each year 
        in which the margin protection program is in effect.
            (3) Legal obligation.--A participating dairy producer that 
        purchases supplemental margin protection shall be legally 
        obligated to pay the applicable premiums for the entire period 
        of the margin protection program (as provided in the payment 
        schedule elected under subsection (e)(2)), and may not opt out 
        of the margin protection program, except--
                    (A) if the dairy producer dies, the estate of the 
                deceased may cancel the supplemental margin protection 
                and shall not be responsible for any further premium 
                payments; or
                    (B) if the dairy producer retires, the producer may 
                request that 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 next seven years.
    (g) Supplemental Payment Threshold.--A participating dairy producer 
with supplemental margin protection shall receive a supplemental margin 
protection payment whenever the average actual dairy producer margin 
for a consecutive two-month period is less than the coverage level 
threshold selected by the dairy producer under subsection (b).
    (h) Supplemental Margin Protection Payments.--
            (1) In general.--The supplemental margin protection payment 
        for a participating dairy producer is in addition to the basic 
        margin protection payment.
            (2) Amount of payment.--The supplemental margin protection 
        payment for the dairy operation of a participating dairy 
        producer shall be determined as follows:
                    (A) The Secretary shall calculate the difference 
                between the coverage level threshold selected by the 
                dairy producer under subsection (b) and the greater 
                of--
                            (i) the average actual dairy producer 
                        margin for the consecutive two-month period; or
                            (ii) $4.00.
                    (B) The amount determined under subparagraph (A) 
                shall be multiplied by the percentage selected by the 
                dairy producer under subsection (c) and by the lesser 
                of the following:
                            (i) The production history or annual 
                        production quantity applicable to the producer 
                        under subsection (c), divided by six.
                            (ii) The actual amount of milk marketed by 
                        the dairy operation of the dairy producer 
                        during the consecutive two-month period.

SEC. 116. EFFECT OF FAILURE TO PAY ADMINISTRATIVE FEES OR PREMIUMS.

    (a) Loss of Benefits.--A participating dairy producer that fails to 
pay the required administrative fee under section 112 or is in arrears 
on premium payments for supplemental margin protection under section 
115--
            (1) remains legally obligated to pay the administrative fee 
        or premiums, as the case may be; and
            (2) may not receive basic margin protection payments or 
        supplemental margin protection payments until the fees or 
        premiums are fully paid.
    (b) Enforcement.--The Secretary may take such action as necessary 
to collect administrative fees and premium payments for supplemental 
margin protection.

SEC. 117. NO PAYMENT LIMITATIONS.

    Notwithstanding any other provision of law (except section 116), 
basic margin protection payments and supplemental margin protection 
payments received by a participating dairy producer shall not be 
subject to limitations for any reason.

             Subtitle B--Dairy Market Stabilization Program

SEC. 131. ESTABLISHMENT OF DAIRY MARKET STABILIZATION PROGRAM.

    (a) Program Required; Purpose.--The Secretary shall establish and 
administer a dairy market stabilization program applicable to 
participating dairy producers for the purpose of assisting in balancing 
the supply of milk with demand when dairy producers are experiencing 
low or negative operating margins.
    (b) Election of Stabilization Program Base Calculation Method.--
            (1) Deadline for election.--Not later than January 15, 
        2012, each participating dairy producer shall inform the 
        Secretary of the method by which the stabilization program base 
        for the dairy producer for 2012 will be calculated under 
        paragraph (3).
            (2) Change in calculation method.--A participating dairy 
        producer 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 January 15 of that year.
            (3) Calculation methods.--A participating dairy producer 
        may elect either of the following methods for calculation of 
        the stabilization program base for the producer:
                    (A) The volume of the average monthly milk 
                marketings of the dairy producer for the three 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 dairy producer for the same month in the preceding 
                year as the month for which the Secretary has announced 
                the stabilization program will become effective.
    (c) Treatment of Multi-Producer Operations.--As provided in section 
112(b)(2), if a dairy operation consists of more than one dairy 
producer, all of the dairy producers of the operation shall be treated 
as a single participating dairy producer for purposes of operation of 
the stabilization program with respect to the producers.
    (d) Treatment of Producers With Multiple Dairy Operations.--As 
provided in section 112(b)(3), if a participating dairy producer 
operates two or more dairy operations, only those dairy operations of 
the dairy producer registered under section 112 shall be subject to the 
stabilization program.

SEC. 132. THRESHOLD FOR IMPLEMENTATION AND REDUCTION IN DAIRY PRODUCER 
              PAYMENTS.

    (a) When Stabilization Program Required.--The Secretary shall 
announce that the stabilization program is in effect and order reduced 
payments for any participating dairy producer that exceeds the 
applicable percentage of the producer's stabilization program base 
whenever--
            (1) the actual dairy producer margin has been $6.00 or less 
        per hundredweight of milk for the immediately preceding two 
        months; or
            (2) the actual dairy producer margin has been $4.00 or less 
        per hundredweight of milk for the immediately preceding month.
    (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. 133. PRODUCER MILK MARKETINGS INFORMATION.

    (a) Collection of Milk Marketing Data.--For each month during which 
the stabilization program is in effect, each handler shall calculate 
the following:
            (1) The volume of milk marketings the handler has received 
        from each participating dairy producer during that month.
            (2) The volume of milk marketings the handler has received 
        from each participating dairy producer during the same month of 
        the preceding year.
            (3) The volume of milk marketings the handler has received 
        from each participating dairy producer during each of the three 
        months preceding the month in which the Secretary makes the 
        announcement that the stabilization program will be in effect.
    (b) Effect of Changing Handlers.--If a participating 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. 134. CALCULATION AND COLLECTION OF REDUCED DAIRY PRODUCER 
              PAYMENTS.

    (a) Reduced Producer 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 producer from 
whom the handler receives milk.
    (b) Reductions Based on Actual Dairy Producer Margin.--
            (1) Reduction requirement 1.--Unless the reduction required 
        by paragraph (2) or (3) applies, when the actual dairy producer 
        margin has been $6.00 or less per hundredweight of milk for two 
        consecutive months, the handler shall make payments to a 
        participating dairy producer for a month based on the greater 
        of the following:
                    (A) Ninety-eight percent of the stabilization 
                program base of the dairy producer.
                    (B) Ninety-four percent of the marketings of milk 
                for the month by the producer.
            (2) Reduction requirement 2.--Unless the reduction required 
        by paragraph (3) applies, when the actual dairy producer margin 
        has been $5.00 or less per hundredweight of milk for two 
        consecutive months, the handler shall make payments to a 
        participating dairy producer for a month based on the greater 
        of the following:
                    (A) Ninety-seven percent of the stabilization 
                program base of the dairy producer.
                    (B) Ninety-three percent of the marketings of milk 
                for the month by the producer.
            (3) Reduction requirement 3.--When the actual dairy 
        producer margin has been $4.00 or less for any one month, the 
        handler shall make payments to a participating dairy producer 
        for a month based on the greater of the following:
                    (A) Ninety-six percent of the stabilization program 
                base of the dairy producer.
                    (B) Ninety-two percent of the marketings of milk 
                for the month by the producer.
    (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 136.
    (d) Payment Reduction Exception.--Notwithstanding any preceding 
subsection of this section, a handler shall make no payment reductions 
for a dairy producer for a month if the producer's milk marketings for 
the month are equal to or less than the percentage of the stabilization 
program base applicable to the producer under paragraph (1), (2), or 
(3) of subsection (b).

SEC. 135. REMITTING MONIES TO COMMODITY CREDIT CORPORATION.

    (a) Remitting Monies.--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 Commodity Credit 
Corporation an amount equal to the amount by which payments to 
participating dairy producers are reduced by the handler under section 
134.
    (b) Availability of Monies.--As soon as practicable after receipt 
of monies under subsection (a), the Commodity Credit Corporation shall 
make the monies available to the board of directors under section 138.

SEC. 136. SUSPENSION OF REDUCED PAYMENT REQUIREMENT.

    (a) Suspension Thresholds.--The Secretary shall suspend the 
stabilization program whenever the Secretary determines that--
            (1) the actual dairy producer margin is greater than $6.00 
        per hundredweight of milk for two consecutive months; or
            (2) 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 two 
        consecutive months.
    (b) Implementation by Handlers.--Handlers shall cease reducing 
payments to participating dairy producers under the stabilization 
program upon receiving notice of the suspension of the stabilization 
program from the Secretary.

SEC. 137. AUDIT REQUIREMENTS.

    (a) Audits of Producer and Handler Compliance.--
            (1) Audits authorized.--If determined by the Secretary to 
        be necessary to ensure compliance by participating dairy 
        producers and handlers with the stabilization program, the 
        Secretary may conduct periodic audits of participating dairy 
        producers and handlers.
            (2) Sample of dairy producers.--Any audit conducted under 
        this subsection shall include, at a minimum, investigation of a 
        statistically valid and random sample of participating dairy 
        producers.
    (b) Audit by Inspector General.--
            (1) Audit required.--At the end of the second year of 
        operation of the stabilization program, the Inspector General 
        of the Department of Agriculture shall audit and evaluate the 
        effectiveness of the stabilization program. In conducting the 
        audit and evaluation, the Inspector General shall include the 
        use of established dairy economic models to ascertain the 
        effectiveness, operation, and administration of the program.
            (2) Submission of results.--The Inspector General shall 
        submit the results of the audit and evaluation conducted under 
        paragraph (1) to the Secretary, who shall make such 
        recommendations to Congress as the Secretary considers 
        appropriate regarding the stabilization program.

SEC. 138. BOARD OF DIRECTORS.

    (a) Establishment; Purpose.--The Secretary shall establish a board 
of directors for the stabilization program for the purpose of--
            (1) administering the monies made available to the board of 
        directors under section 135; and
            (2) determining the most effective use of such monies.
    (b) Appointment of Directors.--
            (1) Number and qualifications.--The Secretary shall appoint 
        15 members to serve on the board of directors, 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.--Monies made available to 
        the board of directors under section 135 may be used to 
        reimburse a member of the board of directors for reasonable and 
        appropriate costs incurred by the member to serve on the board 
        of directors.
    (c) Decisionmaking.--The board of directors shall reach decisions 
by an affirmative vote of \2/3\ of its members.
    (d) Removal of Dairy Products and Expansion of Demand.--
            (1) Spending authority.--The board of directors shall have 
        the authority to use monies made available to the board of 
        directors under section 135--
                    (A) to purchase dairy products through commercial 
                sources for donation to food banks and other food 
                programs that the Board determines appropriate, within 
                three months of collecting the funds; and
                    (B) to expand consumption and build demand for 
                dairy products.
            (2) No duplication of effort.--The board of directors 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 board of directors may enter 
        into a contract with a managing entity to carry out this 
        subsection.
    (e) Accounting and Reporting Requirement.--
            (1) Accounting.--The board of directors shall keep an 
        accurate account of all monies made available to the board of 
        directors under section 135.
            (2) Reporting.--Not later than December 31 of each year 
        that the stabilization program is in effect, the board of 
        directors shall provide 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 the monies received by the board of 
        directors during that year and all expenditures made by the 
        board of directors during that year.

                Subtitle C--Commodity Credit Corporation

SEC. 151. 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.

                          Subtitle D--Duration

SEC. 161. DURATION.

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

             TITLE II--FEDERAL MILK MARKETING ORDER REFORM

SEC. 201. REQUIRED AMENDMENTS TO FEDERAL MILK MARKETING ORDERS.

    (a) Amendments Required.--
            (1) In general.--The Secretary of Agriculture shall amend 
        each Federal milk marketing order issued under section 8c of 
        the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with 
        amendments by the Agricultural Marketing Agreement Act of 1937 
        (in this title referred to as a ``milk marketing order''), as 
        required by this section.
            (2) Relation to other laws.--Except as provided in section 
        202, the Secretary shall execute the amendments required by 
        this section without regard to any provision of section 8c of 
        the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with 
        amendments by the Agricultural Marketing Agreement Act of 1937, 
        as in effect on the day before the date of the enactment of 
        this Act.
    (b) Use of End-Product Price Formulas.--The Secretary shall 
eliminate the use of end-product price formulas for setting prices for 
Class III milk, and instead use a competitive price for setting prices 
for Class III milk.
    (c) Administrative Authority.--In addition to and notwithstanding 
the authority provided under section 8d of the Agricultural Adjustment 
Act (7 U.S.C. 608d), reenacted with amendments by the Agricultural 
Marketing Agreement Act of 1937, the Secretary may--
            (1) require handlers to report, maintain, and make 
        available all information and records as the Secretary 
        considers necessary for the administration of any milk 
        marketing order; and
            (2) adopt only such conforming amendments to milk marketing 
        orders as the Secretary determines to be necessary to implement 
        the amendments required by this section.

SEC. 202. AMENDMENT PROCESS.

    (a) In General.--The amendments to milk marketing orders required 
to be made by section 201 shall be subject to the provisions of 
sections 8c(17) and 8c(19) of the Agricultural Adjustment Act (7 U.S.C. 
608c(17) and (19)), reenacted with amendments by the Agricultural 
Marketing Agreement Act of 1937, except as follows:
            (1) Notice of final decision on proposed amendments.--Not 
        later than 270 days after the date of the enactment of this 
        Act, the Secretary of Agriculture shall publish in the Federal 
        Register notice of a final decision on the proposed amendments 
        to be made to milk marketing orders in order to comply with the 
        requirements of section 201.
            (2) Producer referendum.--
                    (A) Referendum required.--As soon as practicable 
                after publication of the final decision on the proposed 
                amendments under paragraph (1), the Secretary shall 
                conduct a producer referendum regarding the final 
                decision on the proposed amendments.
                    (B) Terms of referendum; exceptions.--The producer 
                referendum shall be conducted in the manner provided by 
                section 8c(19) of the Agricultural Adjustment Act (7 
                U.S.C. 608c(19)), reenacted with amendments by the 
                Agricultural Marketing Agreement Act of 1937, except 
                that--
                            (i) the referendum shall be a single 
                        referendum upon which approval or failure of 
                        the proposed amendments to all milk marketing 
                        orders shall depend; and
                            (ii) the proposed amendments shall require 
                        approval by one-half of participating producers 
                        or by volume of production (rather than two-
                        thirds) in order for the referendum to pass and 
                        the proposed amendments to take effect.
                    (C) Effect of failure.--If the referendum fails, 
                the milk marketing orders shall remain in force as in 
                effect before the proposed amendments were published.
    (b) Effect of Court Order.--In the event that the Secretary is 
enjoined or otherwise restrained by a court order from executing the 
amendments to milk marketing orders required by section 201, the length 
of time for which that injunction or other restraining order is 
effective shall be added to any time limitation in effect under 
paragraph (1) or (2) of subsection (a), thereby extending those time 
limitations by a period of time equal to the period of time for which 
the injunction or other restraining order is in effect.
    (c) Relation to Other Amendment Authority.--Nothing in this title 
affects the authority of the Secretary to subsequently amend milk 
marketing orders, or the ability of producers or other persons to seek 
such amendments, in accordance with the rulemaking process provided by 
section 8c(17) of the Agricultural Adjustment Act (7 U.S.C. 608c(17)), 
reenacted with amendments by the Agricultural Marketing Agreement Act 
of 1937.

SEC. 203. DEVELOPMENT OF EFFECTIVE BALANCING PROGRAMS FOR MILK MARKETS.

    (a) Advanced Notice of Proposed Rulemaking.--Not later than 90 days 
after the enactment of this Act, the Secretary of Agriculture shall 
publish in the Federal Register an Advanced Notice of Proposed 
Rulemaking seeking public comment on, and proposals recommending, 
effective programs that address the issues of the costs of balancing 
milk markets, including the use of inter- and intra-marketing 
transportation credits. The Secretary shall solicit comments and 
proposals that--
            (1) address the market's balancing needs;
            (2) target support to those producers and handlers who 
        provide balancing services; and
            (3) provide compensation that is in line with the costs of 
        providing the services and with the benefits to the market of 
        the services.
    (b) Timeliness of Rulemaking.--Not later than one year after the 
date of the enactment of this Act, the Secretary shall--
            (1) initiate formal rulemaking (by publishing in the 
        Federal Register a hearing notice) in response to the public 
        comments received under subsection (a); or
            (2) publish notice of the reasons that such a rulemaking is 
        not to be initiated.

               TITLE III--REPEAL OF SUPERSEDED PROVISIONS

SEC. 301. 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.--Section 1506 of 
the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773) is 
repealed.

SEC. 302. REPEAL OF PERMANENT PRICE SUPPORT AUTHORITY FOR MILK.

    (a) Repeal.--Section 201 of the Agricultural Act of 1949 (7 U.S.C. 
1446) is amended--
            (1) in subsection (a), by striking ``milk,''; and
            (2) by striking subsections (c) and (d).
    (b) Exclusion From Price Support for Other Nonbasic Agricultural 
Commodities.--Section 301 of the Agricultural Act of 1949 (7 U.S.C. 
1447) is amended by inserting ``(other than milk)'' after 
``agricultural commodity''.

SEC. 303. REPEAL OF DAIRY EXPORT INCENTIVE PROGRAM.

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

SEC. 304. EFFECTIVE DATE.

    The amendments made by this title shall take effect on January 1, 
2012.
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