I 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Dairy Security Act of 2011’’. 

4 (b) TABLE OF CONTENTS.—The table of contents for 

5 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 


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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. 

1 TITLE I—DAIRY PRODUCER 

2 MARGIN PROTECTION AND 

3 DAIRY MARKET STABILIZA4 TION PROGRAMS 

5 SEC. 101. DEFINITIONS. 

6 In this title: 

7 (1) ACTUAL DAIRY PRODUCER MARGIN.—The 

8 term ‘‘actual dairy producer margin’’ means the dif9 ference between the all-milk price and the average 

10 feed cost, as calculated under section 102. 

11 (2) ALL-MILK PRICE.—The term ‘‘all-milk 

12 price’’ means the average price received, per hun13 dredweight of milk, by dairy producers for all milk 

14 sold to plants and dealers in the United States, as 

15 reported by the National Agricultural Statistics 

16 Service. 

17 (3) ANNUAL PRODUCTION QUANTITY.—The 

18 term ‘‘annual production quantity’’ means the quan19 tity of annual milk marketings determined for a 

20 dairy producer under section 113(b) for each year in 

21 which the dairy producer participates in the margin 

22 protection program. 


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1 (4) AVERAGE FEED COST.—The term ‘‘average 

2 feed cost’’ means the average cost of feed used by 

3 a dairy operation to produce a hundredweight of 

4 milk, determined under section 102 using the sum of 

5 the following: 

6 (A) The product determined by multiplying 

7 1.192 by the price of corn per bushel. 

8 (B) The product determined by multiplying 

9 0.00817 by the price of soybean meal per ton. 

10 (C) The product determined by multiplying 

11 0.0152 by the price of alfalfa hay per ton. 

12 (5) BOARD OF DIRECTORS.—The term ‘‘board 

13 of directors’’ means the board of directors appointed 

14 by the Secretary under section 138. 

15 (6) CONSECUTIVE TWO-MONTH PERIOD.—The 

16 term ‘‘consecutive two-month period’’ refers to the 

17 two-month period consisting of the months of Janu18 ary and February, March and April, May and June, 

19 July and August, September and October, or No20 vember and December, respectively. 

21 (7) DAIRY PRODUCER.—The term ‘‘dairy pro22 ducer’’ means an individual or entity that directly or 

23 indirectly (as determined by the Secretary)— 

24 (A) shares in the risk of producing milk; 

25 and 


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1 (B) makes contributions (including land, 

2 labor, management, equipment, or capital) to 

3 the dairy operation of the individual or entity 

4 that are at least commensurate with the share 

5 of the individual or entity of the proceeds of the 

6 operation. 

7 (8) HANDLER.— 

8 (A) IN GENERAL.—The term ‘‘handler’’ 

9 means a person making payment to a dairy pro10 ducer for milk produced in the United States 

11 and marketed for commercial use. 

12 (B) PRODUCER-HANDLER.—The term in13 cludes a producer-handler. 

14 (9) MARGIN PROTECTION PROGRAM.—The term 

15 ‘‘margin protection program’’ means the dairy pro16 ducer margin protection program required by sub17 title A. 

18 (10) PARTICIPATING DAIRY PRODUCER.—The 

19 term ‘‘participating dairy producer’’ means a dairy 

20 producer that— 

21 (A) registers under section 112(b) to par22 ticipate in the margin protection program under 

23 subtitle A; and 


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1 (B) as a result of such registration, also 

2 participates in the stabilization program under 

3 subtitle B. 

4 (11) PRODUCTION HISTORY.—The term ‘‘pro5 duction history’’ means the quantity of annual milk 

6 marketings determined for a dairy producer under 

7 section 113(a). 

8 (12) SECRETARY.—The term ‘‘Secretary’’ 

9 means the Secretary of Agriculture. 

10 (13) STABILIZATION PROGRAM.—The term 

11 ‘‘stabilization program’’ means the dairy market sta12 bilization program required by subtitle B for all par13 ticipating dairy producers. 

14 (14) STABILIZATION PROGRAM BASE.—The 

15 term ‘‘stabilization program base’’, with respect to a 

16 participating dairy producer, means the stabilization 

17 program base calculated for the producer under sec18 tion 131(b). 

19 (15) UNITED STATES.—The term ‘‘United 

20 States’’, in a geographical sense, means the 50 

21 States. 


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1 SEC. 102. CALCULATION OF AVERAGE FEED COST AND AC2 TUAL DAIRY PRODUCER MARGINS. 

3 (a) CALCULATION OF AVERAGE FEED COST.—The 

4 Secretary shall calculate the national average feed cost for 

5 each month using the following data: 

6 (1) The price of corn for a month shall be the 

7 price received during that month by farmers in the 

8 United States for corn, as reported by the National 

9 Agricultural Statistics Service. 

10 (2) The price of soybean meal for a month shall 

11 be the central Illinois price for soybean meal, as re12 ported by the Agricultural Marketing Service. 

13 (3) The price of alfalfa hay for a month shall 

14 be the price received during that month by farmers 

15 in the United States for alfalfa hay, as reported by 

16 the National Agricultural Statistics Service. 

17 (b) CALCULATION OF ACTUAL DAIRY PRODUCER

18 MARGINS.— 

19 (1) MARGIN PROTECTION PROGRAM.—For use 

20 in the margin protection program under subtitle A, 

21 the Secretary shall calculate the actual dairy pro22 ducer margin for each consecutive two-month period 

23 by subtracting— 

24 (A) the average feed cost for that consecu25 tive two-month period, determined in accord26 ance with subsection (a); from 


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1 (B) the all-milk price for that consecutive 

2 two-month period. 

3 (2) STABILIZATION PROGRAM.—For use in the 

4 stabilization program under subtitle B, the Secretary 

5 shall calculate (not later than 20th of each month) 

6 the actual dairy producer margin for the preceding 

7 month by subtracting— 

8 (A) the average feed cost for that pre9 ceding month, determined in accordance with 

10 subsection (a); from 

11 (B) the all-milk price for that preceding 

12 month. 

13 Subtitle A—Dairy Producer Margin 

14 Protection Program 

15 SEC. 111. ESTABLISHMENT OF DAIRY PRODUCER MARGIN 

16 PROTECTION PROGRAM. 

17 The Secretary shall establish and administer a dairy 

18 producer margin protection program for the purpose of 

19 protecting dairy producer income by paying participating 

20 dairy producers— 

21 (1) basic margin protection payments when ac22 tual dairy producer margins are less than the 

23 threshold levels for such payments; and 

24 (2) supplemental margin protection payments if 

25 purchased by a participating dairy producer. 


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1 SEC. 112. ELIGIBILITY AND REGISTRATION OF DAIRY PRO2 DUCERS FOR MARGIN PROTECTION PRO3 GRAM. 

4 (a) ELIGIBILITY.—All dairy producers in the United 

5 States are eligible to participate in the margin protection 

6 program, except that a dairy producer must be registered 

7 with the Secretary before the producer may receive— 

8 (1) basic margin protection payments under 

9 section 114; and 

10 (2) if the dairy producer purchases supple11 mental margin protection under section 115, supple12 mental margin protection payments under such sec13 tion. 

14 (b) REGISTRATION PROCESS.— 

15 (1) IN GENERAL.—The Secretary shall register 

16 all interested dairy producers in the margin protec17 tion program. The Secretary shall specify the man18 ner and form by which a dairy producer must reg19 ister. 

20 (2) TREATMENT OF MULTI-PRODUCER OPER21 ATIONS.—If a dairy operation consists of more than 

22 one dairy producer, all of the dairy producers of the 

23 operation shall be treated as a single dairy producer 

24 for purposes of— 


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1 (A) registration to receive basic margin 

2 protection and purchase supplemental margin 

3 protection; 

4 (B) payment of the administrative fee 

5 under subsection (d) and producer premiums 

6 under section 115; and 

7 (C) participation in the stabilization pro8 gram under subtitle B. 

9 (3) TREATMENT OF PRODUCERS WITH MUL10 TIPLE DAIRY OPERATIONS.—If a dairy producer op11 erates two or more dairy operations, each dairy op12 eration of the producer shall require a separate reg13 istration to receive basic margin protection and pur14 chase supplemental margin protection. Only those 

15 dairy operations so registered shall be subject to the 

16 stabilization program. 

17 (c) TIME FOR REGISTRATION.— 

18 (1) EXISTING DAIRY PRODUCERS.—During the 

19 one-year period beginning on the date of the enact20 ment of this Act, a dairy producer that is actively 

21 engaged in a dairy operation as of such date may 

22 register with the Secretary— 

23 (A) to receive basic margin protection; and 

24 (B) if the producer elects, to purchase sup25 plemental margin protection. 


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1 (2) NEW ENTRANTS.—A dairy producer that 

2 has no existing interest in a dairy operation as of 

3 the date of the enactment of this Act, but that, after 

4 such date, establishes a new dairy operation, may 

5 register with the Secretary during the 180-day pe6 riod beginning on the date on which the dairy oper7 ation first markets milk commercially— 

8 (A) to receive basic margin protection; and 

9 (B) if the producer elects, to purchase sup10 plemental margin protection. 

11 (d) ADMINISTRATIVE FEE FOR REGISTRATION.— 

12 (1) ADMINISTRATIVE FEE REQUIRED.—A dairy 

13 producer shall pay an administrative fee under this 

14 subsection to register for the margin protection pro15 gram. The participating dairy producer shall pay the 

16 administrative fee annually thereafter to remain reg17 istered for the margin protection program. 

18 (2) FEE AMOUNT.—The administrative fee for 

19 a dairy producer shall be as follows: 

20 (A) If the dairy producer marketed less 

21 than 10 million pounds of milk in the previous 

22 calendar year, the administrative fee shall be 

23 equal to $100. 

24 (B) If the dairy producer marketed be25 tween 10 million and 40 million pounds of milk 


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1 in the previous calendar year, the administra2 tive fee shall be equal to $400. 

3 (C) If the dairy producer marketed more 

4 than 40 million pounds of milk in the previous 

5 calendar year, the administrative fee shall be 

6 equal to $1,000. 

7 (e) RECONSTITUTION.—The Secretary shall ensure 

8 that a dairy producer does not reconstitute a dairy oper9 ation for the sole purpose of receiving basic margin protec10 tion, purchasing supplemental margin protection, or avoid11 ing participation in the stabilization program. 

12 SEC. 113. PRODUCTION HISTORY AND ANNUAL PRODUC13 TION QUANTITY OF PARTICIPATING DAIRY 

14 PRODUCERS. 

15 (a) DETERMINATION OF PRODUCTION HISTORY.— 

16 (1) DETERMINATION REQUIRED.—The Sec17 retary shall determine the production history of the 

18 dairy operation of each participating dairy producer 

19 in the margin protection program. 

20 (2) CALCULATION.—Except as provided in 

21 paragraph (3), the production history of a partici22 pating dairy producer is equal to the highest annual 

23 milk marketings of the dairy producer during any 

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1 ceding the dairy producer’s registration for partici2 pation in the margin protection program. 

3 (3) NEW PRODUCERS.—If a dairy producer has 

4 been in operation for less than a year, the Secretary 

5 shall determine the production history of the dairy 

6 producer by extrapolating the actual milk mar7 ketings for the months the dairy producer has been 

8 in operation to a yearly amount. 

9 (4) NO CHANGE IN PRODUCTION HISTORY FOR

10 BASIC MARGIN PROTECTION.—Once the production 

11 history of a participating dairy producer is deter12 mined under paragraph (2) or (3), the production 

13 history shall not be subsequently changed for pur14 poses of determining the amount of any basic mar15 gin protection payments for the dairy producer made 

16 under section 114. 

17 (b) DETERMINATION OF ANNUAL PRODUCTION

18 QUANTITY FOR SUPPLEMENTAL MARGIN PROTECTION.— 

19 (1) DETERMINATION REQUIRED.—If a dairy 

20 producer selects the growth option when purchasing 

21 supplemental margin protection under section 115, 

22 the Secretary shall determine the annual production 

23 quantity of the dairy operation of the dairy producer 

24 under paragraph (2). 


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1 (2) CALCULATION.—The annual production 

2 quantity of a participating dairy producer is equal to 

3 the actual milk marketings of the dairy producer 

4 during each calendar year in which the dairy pro5 ducer purchases supplemental margin protection, in6 cluding the calendar year during which the dairy 

7 producer first purchases such supplemental margin 

8 protection. 

9 (c) REQUIRED INFORMATION.—A participating dairy 

10 producer shall provide all information that the Secretary 

11 may require in order to establish— 

12 (1) the production history of the dairy oper13 ation of the dairy producer; and 

14 (2) the annual production quantity of the dairy 

15 operation of the dairy producer if the dairy producer 

16 selects the growth option when purchasing supple17 mental margin protection under section 115. 

18 (d) TRANSFER OF PRODUCTION HISTORY OR AN19 NUAL PRODUCTION QUANTITY.— 

20 (1) TRANSFER BY SALE.— 

21 (A) REQUEST FOR TRANSFER.—If an ex22 isting dairy producer, as described in section 

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1 ly request that the Secretary transfer to the 

2 purchaser the seller’s interest in— 

3 (i) production history of the dairy op4 eration; and 

5 (ii) if applicable, the annual produc6 tion quantity of the dairy operation for 

7 each year in which the margin protection 

8 program has been in effect. 

9 (B) TRANSFER.—If the Secretary deter10 mines that the seller has sold the entire dairy 

11 operation to the purchaser, the Secretary shall 

12 approve the transfer described in subparagraph 

13 (A), and, thereafter, the seller shall have no in14 terest in— 

15 (i) the production history of the sold 

16 dairy operation; or 

17 (ii) if applicable, the annual produc18 tion quantity of the dairy operation. 

19 (2) TRANSFER BY LEASE.— 

20 (A) REQUEST FOR TRANSFER.—If an ex21 isting dairy producer, as described in section 

22 112(c)(1), leases an entire dairy operation to 

23 another party, the lessor and lessee may jointly 

24 request that the Secretary transfer to the lessee 


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1 for the duration of the term of the lease the les2 sor’s interest in— 

3 (i) production history of the dairy op4 eration; and 

5 (ii) if applicable, the annual produc6 tion quantity of the dairy operation for 

7 each year in which the margin protection 

8 program has been in effect. 

9 (B) TRANSFER.—If the Secretary deter10 mines that the lessor has leased the entire dairy 

11 operation to the lessee, the Secretary shall ap12 prove the transfer described in subparagraph 

13 (A), and, thereafter, the lessor shall have no in14 terest for the duration of the term of the lease 

15 in— 

16 (i) the production history of the leased 

17 dairy operation; or 

18 (ii) if applicable, the annual produc19 tion quantity of the dairy operation. 

20 (3) COVERAGE LEVEL.— 

21 (A) BASIC MARGIN PROTECTION.—A pur22 chaser or lessee to whom the Secretary trans23 fers a production history or annual production 

24 quantity under this subsection may not obtain 

25 a different level of basic margin protection than 


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1 the basic margin protection coverage held by 

2 the seller or lessor from whom the transfer was 

3 obtained. 

4 (B) SUPPLEMENTAL MARGIN PROTEC5 TION.—A purchaser or lessee to whom the Sec6 retary transfers a production history or annual 

7 production quantity under this subsection may 

8 not obtain a different level of supplemental 

9 margin protection coverage than the supple10 mental margin protection coverage held by the 

11 seller or lessor from whom the transfer was ob12 tained. 

13 (4) NEW ENTRANTS.—The Secretary may not 

14 transfer the production history or annual production 

15 quantity determined for a dairy producer described 

16 in section 112(c)(2) to another person. 

17 (e) MOVEMENT AND TRANSFER OF PRODUCTION

18 HISTORY OR ANNUAL PRODUCTION QUANTITY.— 

19 (1) MOVEMENT AND TRANSFER AUTHOR20 IZED.—Subject to paragraph (2), if a dairy producer 

21 moves from one location to another location, the 

22 dairy producer may maintain the production history 

23 and annual production quantity associated with the 

24 operation. 


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1 (2) NOTIFICATION REQUIREMENT.—A dairy 

2 producer shall notify the Secretary of any move of 

3 a dairy operation under paragraph (1). 

4 (3) SUBSEQUENT OCCUPATION OF VACATED LO5 CATION.—A party subsequently occupying a dairy 

6 operation location vacated as described in paragraph 

7 (1) shall have no interest in the production history 

8 or annual production quantity previously associated 

9 with the operation at such location. 

10 SEC. 114. BASIC MARGIN PROTECTION. 

11 (a) ELIGIBILITY.—All participating dairy producers 

12 are eligible to receive basic margin protection under the 

13 margin protection program. 

14 (b) PAYMENT THRESHOLD.—Participating dairy pro15 ducers shall receive a basic margin protection payment 

16 whenever the average actual dairy producer margin for a 

17 consecutive two-month period is less than $4.00 per hun18 dredweight of milk. 

19 (c) BASIC MARGIN PROTECTION PAYMENT.— 

20 (1) PAYMENT REQUIRED.—The Secretary shall 

21 make a basic margin protection payment to each 

22 participating dairy producer for a consecutive two23 month period whenever such a payment is required 

24 by subsection (b) for that period. 


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1 (2) AMOUNT OF PAYMENT.—The basic margin 

2 protection payment for the dairy operation of a par3 ticipating dairy producer for a consecutive two4 month period shall be determined as follows: 

5 (A) The Secretary shall calculate the dif6 ference between the average actual dairy pro7 ducer margin for the consecutive two-month pe8 riod and $4.00, except that, if the difference is 

9 more than $4.00, the Secretary shall use $4.00. 

10 (B) The Secretary shall multiply the 

11 amount under subparagraph (A) by of the less12 er of the following: 

13 (i) Eighty percent of the production 

14 history of the dairy producer, divided by 

15 six. 

16 (ii) The actual amount of milk mar17 keted by the dairy operation of the dairy 

18 producer during the consecutive two-month 

19 period. 

20 SEC. 115. SUPPLEMENTAL MARGIN PROTECTION. 

21 (a) ELECTION OF SUPPLEMENTAL MARGIN PROTEC22 TION.—At the time of the registration of a dairy producer 

23 in the margin protection program under section 112, the 

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1 pating dairy producer than the income level guaranteed 

2 by basic margin protection under section 114. 

3 (b) SELECTION OF PAYMENT THRESHOLD.—A par4 ticipating dairy producer purchasing supplemental margin 

5 protection shall elect a coverage level that is higher, in 

6 any increment of $0.50, than the payment threshold for 

7 basic margin protection specified in section 114(b), but 

8 not to exceed $8.00. 

9 (c) SELECTION OF COVERAGE PERCENTAGE.—A par10 ticipating dairy producer purchasing supplemental margin 

11 protection shall elect a percentage of coverage, equal to 

12 not more than 90 percent nor less than 25 percent, of— 

13 (1) the production history of the dairy oper14 ation of the participating dairy producer; or 

15 (2) if the participating dairy producer elects the 

16 growth option under subsection (d)— 

17 (A) the production history of the dairy op18 eration of the dairy producer, to be used for the 

19 calendar year during which the dairy producer 

20 registers for participation in the margin protec21 tion program; and 

22 (B) for subsequent calendar years in which 

23 the margin protection program is in effect, the 

24 greater of— 


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1 (i) the production history of the dairy 

2 operation of the dairy producer; or 

3 (ii) the highest annual production 

4 quantity of the dairy operation of the dairy 

5 producer during any previous calendar 

6 year in which the margin protection pro7 gram was in effect. 

8 (d) AVAILABILITY OF GROWTH OPTION.—When a 

9 dairy producer purchases supplemental margin protection, 

10 the dairy producer may elect a growth option that author11 izes the use of the annual production quantity of the dairy 

12 operation of the dairy producer, in lieu of production his13 tory, as provided in subsection (c)(2) to determine supple14 mental margin protection payments for the dairy producer 

15 under subsection (h). 

16 (e) PRODUCER PREMIUMS.— 

17 (1) PREMIUMS REQUIRED.—A participating 

18 dairy producer that purchases supplemental margin 

19 protection shall pay an annual premium equal to the 

20 product obtained by multiplying— 

21 (A) the percentage selected by the dairy 

22 producer under subsection (c); 

23 (B) the production history or annual pro24 duction quantity applicable to the dairy pro25 ducer under such subsection; and 


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1 (C) the premium per hundredweight of 

2 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. 

3 (2) TIME FOR PAYMENT.— 

4 (A) FIRST YEAR.—As soon as practicable 

5 after a dairy producer registers to participate in 

6 the margin protection program and purchases 

7 supplemental margin protection, the dairy pro8 ducer shall pay the premium determined under 

9 paragraph (1) for the dairy producer for the 

10 first calendar year of such supplemental margin 

11 protection. 

12 (B) SUBSEQUENT YEARS.—When the dairy 

13 producer first purchases supplemental margin 

14 protection, the dairy producer shall also elect 

15 the method by which the dairy producer will 

16 pay premiums under this subsection for subse17 quent years in accordance with one of the fol18 lowing schedules: 

19 (i) SINGLE ANNUAL PAYMENT.—The 

20 participating dairy producer may elect to 


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1 pay 100 percent of the annual premium 

2 determined under paragraph (1) for the 

3 dairy producer for a calendar year not 

4 later than January 15 of the calendar 

5 year. 

6 (ii) SEMI-ANNUAL PAYMENT.—The 

7 participating dairy producer may elect to 

8 pay 50 percent of the annual premium de9 termined under paragraph (1) for the 

10 dairy producer for a calendar year not 

11 later than January 15 of the calendar year 

12 and the remaining 50 percent of the pre13 mium not later than June 15 of the cal14 endar year. 

15 (f) PRODUCER’S PREMIUM OBLIGATIONS.— 

16 (1) PRO-RATION OF FIRST YEAR PREMIUM.—A 

17 participating dairy producer that purchases supple18 mental margin protection after initial registration in 

19 the margin protection program shall pay a pro-rated 

20 premium for the first calendar year based on the 

21 date on which the producer purchases the coverage. 

22 (2) SUBSEQUENT PREMIUMS.—Other than as 

23 provided in paragraph (1), the annual premium for 

24 a participating dairy producer shall be determined 


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1 under subsection (e) for each year in which the mar2 gin protection program is in effect. 

3 (3) LEGAL OBLIGATION.—A participating dairy 

4 producer that purchases supplemental margin pro5 tection shall be legally obligated to pay the applica6 ble premiums for the entire period of the margin 

7 protection program (as provided in the payment 

8 schedule elected under subsection (e)(2)), and may 

9 not opt out of the margin protection program, ex10 cept— 

11 (A) if the dairy producer dies, the estate of 

12 the deceased may cancel the supplemental mar13 gin protection and shall not be responsible for 

14 any further premium payments; or 

15 (B) if the dairy producer retires, the pro16 ducer may request that Secretary cancel the 

17 supplemental margin protection if the producer 

18 has terminated the dairy operation entirely and 

19 certifies under oath that the producer will not 

20 be actively engaged in any dairy operation for 

21 at least the next seven years. 

22 (g) SUPPLEMENTAL PAYMENT THRESHOLD.—A par23 ticipating dairy producer with supplemental margin pro24 tection shall receive a supplemental margin protection 

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1 gin for a consecutive two-month period is less than the 

2 coverage level threshold selected by the dairy producer 

3 under subsection (b). 

4 (h) SUPPLEMENTAL MARGIN PROTECTION PAY5 MENTS.— 

6 (1) IN GENERAL.—The supplemental margin 

7 protection payment for a participating dairy pro8 ducer is in addition to the basic margin protection 

9 payment. 

10 (2) AMOUNT OF PAYMENT.—The supplemental 

11 margin protection payment for the dairy operation 

12 of a participating dairy producer shall be determined 

13 as follows: 

14 (A) The Secretary shall calculate the dif15 ference between the coverage level threshold se16 lected by the dairy producer under subsection 

17 (b) and the greater of— 

18 (i) the average actual dairy producer 

19 margin for the consecutive two-month pe20 riod; or 

21 (ii) $4.00. 

22 (B) The amount determined under sub23 paragraph (A) shall be multiplied by the per24 centage selected by the dairy producer under 

25 subsection (c) and by the lesser of the following: 


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1 (i) The production history or annual 

2 production quantity applicable to the pro3 ducer under subsection (c), divided by six. 

4 (ii) The actual amount of milk mar5 keted by the dairy operation of the dairy 

6 producer during the consecutive two-month 

7 period. 

8 SEC. 116. EFFECT OF FAILURE TO PAY ADMINISTRATIVE 

9 FEES OR PREMIUMS. 

10 (a) LOSS OF BENEFITS.—A participating dairy pro11 ducer that fails to pay the required administrative fee 

12 under section 112 or is in arrears on premium payments 

13 for supplemental margin protection under section 115— 

14 (1) remains legally obligated to pay the admin15 istrative fee or premiums, as the case may be; and 

16 (2) may not receive basic margin protection 

17 payments or supplemental margin protection pay18 ments until the fees or premiums are fully paid. 

19 (b) ENFORCEMENT.—The Secretary may take such 

20 action as necessary to collect administrative fees and pre21 mium payments for supplemental margin protection. 

22 SEC. 117. NO PAYMENT LIMITATIONS. 

23 Notwithstanding any other provision of law (except 

24 section 116), basic margin protection payments and sup25 plemental margin protection payments received by a parVerDate Mar 15 2010 22:00 Sep 28, 2011 Jkt 099200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H3062.IH H3062

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1 ticipating dairy producer shall not be subject to limitations 

2 for any reason. 

3 Subtitle B—Dairy Market 

4 Stabilization Program 

5 SEC. 131. ESTABLISHMENT OF DAIRY MARKET STABILIZA6 TION PROGRAM. 

7 (a) PROGRAM REQUIRED; PURPOSE.—The Secretary 

8 shall establish and administer a dairy market stabilization 

9 program applicable to participating dairy producers for 

10 the purpose of assisting in balancing the supply of milk 

11 with demand when dairy producers are experiencing low 

12 or negative operating margins. 

13 (b) ELECTION OF STABILIZATION PROGRAM BASE

14 CALCULATION METHOD.— 

15 (1) DEADLINE FOR ELECTION.—Not later than 

16 January 15, 2012, each participating dairy producer 

17 shall inform the Secretary of the method by which 

18 the stabilization program base for the dairy producer 

19 for 2012 will be calculated under paragraph (3). 

20 (2) CHANGE IN CALCULATION METHOD.—A 

21 participating dairy producer may change the sta22 bilization program base calculation method to be 

23 used for a calendar year by notifying the Secretary 

24 of the change not later than January 15 of that 

25 year. 


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1 (3) CALCULATION METHODS.—A participating 

2 dairy producer may elect either of the following 

3 methods for calculation of the stabilization program 

4 base for the producer: 

5 (A) The volume of the average monthly 

6 milk marketings of the dairy producer for the 

7 three months immediately preceding the an8 nouncement by the Secretary that the stabiliza9 tion program will become effective. 

10 (B) The volume of the monthly milk mar11 ketings of the dairy producer for the same 

12 month in the preceding year as the month for 

13 which the Secretary has announced the sta14 bilization program will become effective. 

15 (c) TREATMENT OF MULTI-PRODUCER OPER16 ATIONS.—As provided in section 112(b)(2), if a dairy op17 eration consists of more than one dairy producer, all of 

18 the dairy producers of the operation shall be treated as 

19 a single participating dairy producer for purposes of oper20 ation of the stabilization program with respect to the pro21 ducers. 

22 (d) TREATMENT OF PRODUCERS WITH MULTIPLE

23 DAIRY OPERATIONS.—As provided in section 112(b)(3), 

24 if a participating dairy producer operates two or more 

25 dairy operations, only those dairy operations of the dairy 


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1 producer registered under section 112 shall be subject to 

2 the stabilization program. 

3 SEC. 132. THRESHOLD FOR IMPLEMENTATION AND REDUC4 TION IN DAIRY PRODUCER PAYMENTS. 

5 (a) WHEN STABILIZATION PROGRAM REQUIRED.— 

6 The Secretary shall announce that the stabilization pro7 gram is in effect and order reduced payments for any par8 ticipating dairy producer that exceeds the applicable per9 centage of the producer’s stabilization program base when10 ever— 

11 (1) the actual dairy producer margin has been 

12 $6.00 or less per hundredweight of milk for the im13 mediately preceding two months; or 

14 (2) the actual dairy producer margin has been 

15 $4.00 or less per hundredweight of milk for the im16 mediately preceding month. 

17 (b) EFFECTIVE DATE FOR IMPLEMENTATION OF

18 PAYMENT REDUCTIONS.—Reductions in dairy producer 

19 payments shall commence beginning on the first day of 

20 the month immediately following the announcement by the 

21 Secretary under subsection (a). 

22 SEC. 133. PRODUCER MILK MARKETINGS INFORMATION. 

23 (a) COLLECTION OF MILK MARKETING DATA.—For 

24 each month during which the stabilization program is in 

25 effect, each handler shall calculate the following: 


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1 (1) The volume of milk marketings the handler 

2 has received from each participating dairy producer 

3 during that month. 

4 (2) The volume of milk marketings the handler 

5 has received from each participating dairy producer 

6 during the same month of the preceding year. 

7 (3) The volume of milk marketings the handler 

8 has received from each participating dairy producer 

9 during each of the three months preceding the 

10 month in which the Secretary makes the announce11 ment that the stabilization program will be in effect. 

12 (b) EFFECT OF CHANGING HANDLERS.—If a partici13 pating dairy producer changes handlers, the producer shall 

14 ensure that milk marketings data required to make the 

15 calculations under subsection (a) is provided to the new 

16 handler. 

17 SEC. 134. CALCULATION AND COLLECTION OF REDUCED 

18 DAIRY PRODUCER PAYMENTS. 

19 (a) REDUCED PRODUCER PAYMENTS REQUIRED.— 

20 During any month in which payment reductions are in ef21 fect under the stabilization program, each handler shall 

22 reduce payments to each participating dairy producer 

23 from whom the handler receives milk. 

24 (b) REDUCTIONS BASED ON ACTUAL DAIRY PRO25 DUCER MARGIN.— 


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1 (1) REDUCTION REQUIREMENT 1.—Unless the 

2 reduction required by paragraph (2) or (3) applies, 

3 when the actual dairy producer margin has been 

4 $6.00 or less per hundredweight of milk for two con5 secutive months, the handler shall make payments to 

6 a participating dairy producer for a month based on 

7 the greater of the following: 

8 (A) Ninety-eight percent of the stabiliza9 tion program base of the dairy producer. 

10 (B) Ninety-four percent of the marketings 

11 of milk for the month by the producer. 

12 (2) REDUCTION REQUIREMENT 2.—Unless the 

13 reduction required by paragraph (3) applies, when 

14 the actual dairy producer margin has been $5.00 or 

15 less per hundredweight of milk for two consecutive 

16 months, the handler shall make payments to a par17 ticipating dairy producer for a month based on the 

18 greater of the following: 

19 (A) Ninety-seven percent of the stabiliza20 tion program base of the dairy producer. 

21 (B) Ninety-three percent of the marketings 

22 of milk for the month by the producer. 

23 (3) REDUCTION REQUIREMENT 3.—When the 

24 actual dairy producer margin has been $4.00 or less 

25 for any one month, the handler shall make payments 


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1 to a participating dairy producer for a month based 

2 on the greater of the following: 

3 (A) Ninety-six percent of the stabilization 

4 program base of the dairy producer. 

5 (B) Ninety-two percent of the marketings 

6 of milk for the month by the producer. 

7 (c) CONTINUATION OF REDUCTIONS.—The largest 

8 level of payment reduction required under paragraph (1), 

9 (2), or (3) of subsection (b) shall be continued for each 

10 month until the Secretary suspends the stabilization pro11 gram and terminates payment reductions in accordance 

12 with section 136. 

13 (d) PAYMENT REDUCTION EXCEPTION.—Notwith14 standing any preceding subsection of this section, a han15 dler shall make no payment reductions for a dairy pro16 ducer for a month if the producer’s milk marketings for 

17 the month are equal to or less than the percentage of the 

18 stabilization program base applicable to the producer 

19 under paragraph (1), (2), or (3) of subsection (b). 

20 SEC. 135. REMITTING MONIES TO COMMODITY CREDIT 

21 CORPORATION. 

22 (a) REMITTING MONIES.—As soon as practicable 

23 after the end of each month during which payment reduc24 tions are in effect under the stabilization program, each 

25 handler shall remit to the Commodity Credit Corporation 


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1 an amount equal to the amount by which payments to par2 ticipating dairy producers are reduced by the handler 

3 under section 134. 

4 (b) AVAILABILITY OF MONIES.—As soon as prac5 ticable after receipt of monies under subsection (a), the 

6 Commodity Credit Corporation shall make the monies 

7 available to the board of directors under section 138. 

8 SEC. 136. SUSPENSION OF REDUCED PAYMENT REQUIRE9 MENT. 

10 (a) SUSPENSION THRESHOLDS.—The Secretary shall 

11 suspend the stabilization program whenever the Secretary 

12 determines that— 

13 (1) the actual dairy producer margin is greater 

14 than $6.00 per hundredweight of milk for two con15 secutive months; or 

16 (2) the price in the United States for either 

17 cheddar cheese or skim milk powder (non-fat dry 

18 milk) is more than 20 percent above the world price 

19 for that same commodity for two consecutive 

20 months. 

21 (b) IMPLEMENTATION BY HANDLERS.—Handlers 

22 shall cease reducing payments to participating dairy pro23 ducers under the stabilization program upon receiving no24 tice of the suspension of the stabilization program from 

25 the Secretary. 


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1 SEC. 137. AUDIT REQUIREMENTS. 

2 (a) AUDITS OF PRODUCER AND HANDLER COMPLI3 ANCE.— 

4 (1) AUDITS AUTHORIZED.—If determined by 

5 the Secretary to be necessary to ensure compliance 

6 by participating dairy producers and handlers with 

7 the stabilization program, the Secretary may con8 duct periodic audits of participating dairy producers 

9 and handlers. 

10 (2) SAMPLE OF DAIRY PRODUCERS.—Any audit 

11 conducted under this subsection shall include, at a 

12 minimum, investigation of a statistically valid and 

13 random sample of participating dairy producers. 

14 (b) AUDIT BY INSPECTOR GENERAL.— 

15 (1) AUDIT REQUIRED.—At the end of the sec16 ond year of operation of the stabilization program, 

17 the Inspector General of the Department of Agri18 culture shall audit and evaluate the effectiveness of 

19 the stabilization program. In conducting the audit 

20 and evaluation, the Inspector General shall include 

21 the use of established dairy economic models to as22 certain the effectiveness, operation, and administra23 tion of the program. 

24 (2) SUBMISSION OF RESULTS.—The Inspector 

25 General shall submit the results of the audit and 

26 evaluation conducted under paragraph (1) to the 


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1 Secretary, who shall make such recommendations to 

2 Congress as the Secretary considers appropriate re3 garding the stabilization program. 

4 SEC. 138. BOARD OF DIRECTORS. 

5 (a) ESTABLISHMENT; PURPOSE.—The Secretary 

6 shall establish a board of directors for the stabilization 

7 program for the purpose of— 

8 (1) administering the monies made available to 

9 the board of directors under section 135; and 

10 (2) determining the most effective use of such 

11 monies. 

12 (b) APPOINTMENT OF DIRECTORS.— 

13 (1) NUMBER AND QUALIFICATIONS.—The Sec14 retary shall appoint 15 members to serve on the 

15 board of directors, who shall be representative of the 

16 United States dairy producer community, taking 

17 into account geographical diversity, cooperative 

18 membership, and volumes of milk produced in var19 ious States and regions. 

20 (2) REIMBURSEMENT OF EXPENSES.—Monies 

21 made available to the board of directors under sec22 tion 135 may be used to reimburse a member of the 

23 board of directors for reasonable and appropriate 

24 costs incurred by the member to serve on the board 

25 of directors. 


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1 (c) DECISIONMAKING.—The board of directors shall 

reach decisions by an affirmative vote of 2 2 ⁄3 of its mem3 bers. 

4 (d) REMOVAL OF DAIRY PRODUCTS AND EXPANSION

5 OF DEMAND.— 

6 (1) SPENDING AUTHORITY.—The board of di7 rectors shall have the authority to use monies made 

8 available to the board of directors under section 

9 135— 

10 (A) to purchase dairy products through 

11 commercial sources for donation to food banks 

12 and other food programs that the Board deter13 mines appropriate, within three months of col14 lecting the funds; and 

15 (B) to expand consumption and build de16 mand for dairy products. 

17 (2) NO DUPLICATION OF EFFORT.—The board 

18 of directors shall ensure that projects supported 

19 under paragraph (1) are compatible with, and do not 

20 duplicate, programs supported by the dairy research 

21 and promotion activities conducted under the Dairy 

22 Production Stabilization Act of 1983 (7 U.S.C. 4501 

23 et seq.). 


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1 (3) MANAGEMENT CONTRACT.—The board of 

2 directors may enter into a contract with a managing 

3 entity to carry out this subsection. 

4 (e) ACCOUNTING AND REPORTING REQUIREMENT.— 

5 (1) ACCOUNTING.—The board of directors shall 

6 keep an accurate account of all monies made avail7 able to the board of directors under section 135. 

8 (2) REPORTING.—Not later than December 31 

9 of each year that the stabilization program is in ef10 fect, the board of directors shall provide to the Com11 mittee on Agriculture of the House of Representa12 tives and the Committee on Agriculture, Nutrition, 

13 and Forestry of the Senate a report that provides an 

14 accurate accounting of the monies received by the 

15 board of directors during that year and all expendi16 tures made by the board of directors during that 

17 year. 

18 Subtitle C—Commodity Credit 

19 Corporation 

20 SEC. 151. USE OF COMMODITY CREDIT CORPORATION. 

21 The Secretary shall use the funds, facilities, and the 

22 authorities of the Commodity Credit Corporation to carry 

23 out this title. 


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1 Subtitle D—Duration 

2 SEC. 161. DURATION. 

3 The Secretary shall conduct the margin protection 

4 program and the stabilization program during the period 

5 beginning on January 1, 2012, and ending on December 

6 31, 2017. 

7 TITLE II—FEDERAL MILK 

8 MARKETING ORDER REFORM 

9 SEC. 201. REQUIRED AMENDMENTS TO FEDERAL MILK 

10 MARKETING ORDERS. 

11 (a) AMENDMENTS REQUIRED.— 

12 (1) IN GENERAL.—The Secretary of Agriculture 

13 shall amend each Federal milk marketing order 

14 issued under section 8c of the Agricultural Adjust15 ment Act (7 U.S.C. 608c), reenacted with amend16 ments by the Agricultural Marketing Agreement Act 

17 of 1937 (in this title referred to as a ‘‘milk mar18 keting order’’), as required by this section. 

19 (2) RELATION TO OTHER LAWS.—Except as 

20 provided in section 202, the Secretary shall execute 

21 the amendments required by this section without re22 gard to any provision of section 8c of the Agricul23 tural Adjustment Act (7 U.S.C. 608c), reenacted 

24 with amendments by the Agricultural Marketing 


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1 Agreement Act of 1937, as in effect on the day be2 fore the date of the enactment of this Act. 

3 (b) USE OF END-PRODUCT PRICE FORMULAS.—The 

4 Secretary shall eliminate the use of end-product price for5 mulas for setting prices for Class III milk, and instead 

6 use a competitive price for setting prices for Class III 

7 milk. 

8 (c) ADMINISTRATIVE AUTHORITY.—In addition to 

9 and notwithstanding the authority provided under section 

10 8d of the Agricultural Adjustment Act (7 U.S.C. 608d), 

11 reenacted with amendments by the Agricultural Marketing 

12 Agreement Act of 1937, the Secretary may— 

13 (1) require handlers to report, maintain, and 

14 make available all information and records as the 

15 Secretary considers necessary for the administration 

16 of any milk marketing order; and 

17 (2) adopt only such conforming amendments to 

18 milk marketing orders as the Secretary determines 

19 to be necessary to implement the amendments re20 quired by this section. 

21 SEC. 202. AMENDMENT PROCESS. 

22 (a) IN GENERAL.—The amendments to milk mar23 keting orders required to be made by section 201 shall 

24 be subject to the provisions of sections 8c(17) and 8c(19) 

25 of the Agricultural Adjustment Act (7 U.S.C. 608c(17) 


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1 and (19)), reenacted with amendments by the Agricultural 

2 Marketing Agreement Act of 1937, except as follows: 

3 (1) NOTICE OF FINAL DECISION ON PROPOSED

4 AMENDMENTS.—Not later than 270 days after the 

5 date of the enactment of this Act, the Secretary of 

6 Agriculture shall publish in the Federal Register no7 tice of a final decision on the proposed amendments 

8 to be made to milk marketing orders in order to 

9 comply with the requirements of section 201. 

10 (2) PRODUCER REFERENDUM.— 

11 (A) REFERENDUM REQUIRED.—As soon as 

12 practicable after publication of the final deci13 sion on the proposed amendments under para14 graph (1), the Secretary shall conduct a pro15 ducer referendum regarding the final decision 

16 on the proposed amendments. 

17 (B) TERMS OF REFERENDUM; EXCEP18 TIONS.—The producer referendum shall be con19 ducted in the manner provided by section 

20 8c(19) of the Agricultural Adjustment Act (7 

21 U.S.C. 608c(19)), reenacted with amendments 

22 by the Agricultural Marketing Agreement Act 

23 of 1937, except that— 

24 (i) the referendum shall be a single 

25 referendum upon which approval or failure 


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1 of the proposed amendments to all milk 

2 marketing orders shall depend; and 

3 (ii) the proposed amendments shall re4 quire approval by one-half of participating 

5 producers or by volume of production 

6 (rather than two-thirds) in order for the 

7 referendum to pass and the proposed 

8 amendments to take effect. 

9 (C) EFFECT OF FAILURE.—If the ref10 erendum fails, the milk marketing orders shall 

11 remain in force as in effect before the proposed 

12 amendments were published. 

13 (b) EFFECT OF COURT ORDER.—In the event that 

14 the Secretary is enjoined or otherwise restrained by a 

15 court order from executing the amendments to milk mar16 keting orders required by section 201, the length of time 

17 for which that injunction or other restraining order is ef18 fective shall be added to any time limitation in effect under 

19 paragraph (1) or (2) of subsection (a), thereby extending 

20 those time limitations by a period of time equal to the 

21 period of time for which the injunction or other restraining 

22 order is in effect. 

23 (c) RELATION TO OTHER AMENDMENT AUTHOR24 ITY.—Nothing in this title affects the authority of the Sec25 retary to subsequently amend milk marketing orders, or 


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1 the ability of producers or other persons to seek such 

2 amendments, in accordance with the rulemaking process 

3 provided by section 8c(17) of the Agricultural Adjustment 

4 Act (7 U.S.C. 608c(17)), reenacted with amendments by 

5 the Agricultural Marketing Agreement Act of 1937. 

6 SEC. 203. DEVELOPMENT OF EFFECTIVE BALANCING PRO7 GRAMS FOR MILK MARKETS. 

8 (a) ADVANCED NOTICE OF PROPOSED RULE9 MAKING.—Not later than 90 days after the enactment of 

10 this Act, the Secretary of Agriculture shall publish in the 

11 Federal Register an Advanced Notice of Proposed Rule12 making seeking public comment on, and proposals recom13 mending, effective programs that address the issues of the 

14 costs of balancing milk markets, including the use of inter15 and intra-marketing transportation credits. The Secretary 

16 shall solicit comments and proposals that— 

17 (1) address the market’s balancing needs; 

18 (2) target support to those producers and han19 dlers who provide balancing services; and 

20 (3) provide compensation that is in line with 

21 the costs of providing the services and with the bene22 fits to the market of the services. 

23 (b) TIMELINESS OF RULEMAKING.—Not later than 

24 one year after the date of the enactment of this Act, the 

25 Secretary shall— 


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1 (1) initiate formal rulemaking (by publishing in 

2 the Federal Register a hearing notice) in response to 

3 the public comments received under subsection (a); 

4 or 

5 (2) publish notice of the reasons that such a 

6 rulemaking is not to be initiated. 

7 TITLE III—REPEAL OF 

8 SUPERSEDED PROVISIONS 

9 SEC. 301. REPEAL OF DAIRY PRODUCT PRICE SUPPORT 

10 AND MILK INCOME LOSS CONTRACT PRO11 GRAMS. 

12 (a) REPEAL OF DAIRY PRODUCT PRICE SUPPORT

13 PROGRAM.—Section 1501 of the Food, Conservation, and 

14 Energy Act of 2008 (7 U.S.C. 8771) is repealed. 

15 (b) REPEAL OF MILK INCOME LOSS CONTRACT PRO16 GRAM.—Section 1506 of the Food, Conservation, and En17 ergy Act of 2008 (7 U.S.C. 8773) is repealed. 

18 SEC. 302. REPEAL OF PERMANENT PRICE SUPPORT AU19 THORITY FOR MILK. 

20 (a) REPEAL.—Section 201 of the Agricultural Act of 

21 1949 (7 U.S.C. 1446) is amended— 

22 (1) in subsection (a), by striking ‘‘milk,’’; and 

23 (2) by striking subsections (c) and (d). 

24 (b) EXCLUSION FROM PRICE SUPPORT FOR OTHER

25 NONBASIC AGRICULTURAL COMMODITIES.—Section 301 


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1 of the Agricultural Act of 1949 (7 U.S.C. 1447) is amend2 ed by inserting ‘‘(other than milk)’’ after ‘‘agricultural 

3 commodity’’. 

4 SEC. 303. REPEAL OF DAIRY EXPORT INCENTIVE PROGRAM. 

5 Section 153 of the Food Security Act of 1985 (15 

6 U.S.C. 713a–14) is repealed. 

7 SEC. 304. EFFECTIVE DATE. 

8 The amendments made by this title shall take effect 

9 on January 1, 2012. 

Æ 


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