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 mar-
keting 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 Ag-
riculture 
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 amend-
ment of Federal milk marketing orders, and for other 
purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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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 pay-
ments. 
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. 
TITLE 
I—DAIRY 
PRODUCER 
MARGIN 
PROTECTION 
AND 
DAIRY 
MARKET 
STABILIZA-
TION PROGRAMS 
SEC. 101. DEFINITIONS. 
In this title: 
(1) ACTUAL DAIRY PRODUCER MARGIN.—The 
term ‘‘actual dairy producer margin’’ means the dif-
ference 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 hun-
dredweight 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 quan-
tity 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. 
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(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 Janu-
ary and February, March and April, May and June, 
July and August, September and October, or No-
vember and December, respectively. 
(7) DAIRY PRODUCER.—The term ‘‘dairy pro-
ducer’’ means an individual or entity that directly or 
indirectly (as determined by the Secretary)— 
(A) shares in the risk of producing milk; 
and 
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(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 pro-
ducer for milk produced in the United States 
and marketed for commercial use. 
(B) PRODUCER-HANDLER.—The term in-
cludes a producer-handler. 
(9) MARGIN PROTECTION PROGRAM.—The term 
‘‘margin protection program’’ means the dairy pro-
ducer margin protection program required by sub-
title A. 
(10) PARTICIPATING
DAIRY
PRODUCER.—The 
term ‘‘participating dairy producer’’ means a dairy 
producer that— 
(A) registers under section 112(b) to par-
ticipate in the margin protection program under 
subtitle A; and 
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(B) as a result of such registration, also 
participates in the stabilization program under 
subtitle B. 
(11) PRODUCTION HISTORY.—The term ‘‘pro-
duction 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 sta-
bilization program required by subtitle B for all par-
ticipating 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 sec-
tion 131(b). 
(15) UNITED
STATES.—The term ‘‘United 
States’’, in a geographical sense, means the 50 
States. 
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SEC. 102. CALCULATION OF AVERAGE FEED COST AND AC-
TUAL 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 re-
ported 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 pro-
ducer margin for each consecutive two-month period 
by subtracting— 
(A) the average feed cost for that consecu-
tive two-month period, determined in accord-
ance with subsection (a); from 
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(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 pre-
ceding 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 ac-
tual 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. 
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SEC. 112. ELIGIBILITY AND REGISTRATION OF DAIRY PRO-
DUCERS FOR MARGIN PROTECTION PRO-
GRAM. 
(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 supple-
mental margin protection under section 115, supple-
mental margin protection payments under such sec-
tion. 
(b) REGISTRATION PROCESS.— 
(1) IN GENERAL.—The Secretary shall register 
all interested dairy producers in the margin protec-
tion program. The Secretary shall specify the man-
ner and form by which a dairy producer must reg-
ister. 
(2) TREATMENT
OF
MULTI-PRODUCER
OPER-
ATIONS.—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— 
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(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 pro-
gram under subtitle B. 
(3) TREATMENT
OF
PRODUCERS
WITH
MUL-
TIPLE DAIRY OPERATIONS.—If a dairy producer op-
erates two or more dairy operations, each dairy op-
eration of the producer shall require a separate reg-
istration to receive basic margin protection and pur-
chase 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 enact-
ment 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 sup-
plemental margin protection. 
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(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 pe-
riod beginning on the date on which the dairy oper-
ation first markets milk commercially— 
(A) to receive basic margin protection; and 
(B) if the producer elects, to purchase sup-
plemental 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 pro-
gram. The participating dairy producer shall pay the 
administrative fee annually thereafter to remain reg-
istered 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 be-
tween 10 million and 40 million pounds of milk 
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in the previous calendar year, the administra-
tive 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 oper-
ation for the sole purpose of receiving basic margin protec-
tion, purchasing supplemental margin protection, or avoid-
ing participation in the stabilization program. 
SEC. 113. PRODUCTION HISTORY AND ANNUAL PRODUC-
TION QUANTITY OF PARTICIPATING DAIRY 
PRODUCERS. 
(a) DETERMINATION OF PRODUCTION HISTORY.— 
(1) DETERMINATION
REQUIRED.—The Sec-
retary 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 partici-
pating dairy producer is equal to the highest annual 
milk marketings of the dairy producer during any 
one of the three calendar years immediately pre-
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ceding the dairy producer’s registration for partici-
pation 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 mar-
ketings 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 deter-
mined under paragraph (2) or (3), the production 
history shall not be subsequently changed for pur-
poses of determining the amount of any basic mar-
gin 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). 
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(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 pro-
ducer purchases supplemental margin protection, in-
cluding 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 oper-
ation 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 supple-
mental margin protection under section 115. 
(d) TRANSFER OF PRODUCTION HISTORY OR AN-
NUAL PRODUCTION QUANTITY.— 
(1) TRANSFER BY SALE.— 
(A) REQUEST FOR TRANSFER.—If an ex-
isting dairy producer, as described in section 
112(c)(1), sells an entire dairy operation to an-
other party, the seller and purchaser may joint-
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ly request that the Secretary transfer to the 
purchaser the seller’s interest in— 
(i) production history of the dairy op-
eration; and 
(ii) if applicable, the annual produc-
tion quantity of the dairy operation for 
each year in which the margin protection 
program has been in effect. 
(B) TRANSFER.—If the Secretary deter-
mines 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 in-
terest in— 
(i) the production history of the sold 
dairy operation; or 
(ii) if applicable, the annual produc-
tion quantity of the dairy operation. 
(2) TRANSFER BY LEASE.— 
(A) REQUEST FOR TRANSFER.—If an ex-
isting 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 
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for the duration of the term of the lease the les-
sor’s interest in— 
(i) production history of the dairy op-
eration; and 
(ii) if applicable, the annual produc-
tion quantity of the dairy operation for 
each year in which the margin protection 
program has been in effect. 
(B) TRANSFER.—If the Secretary deter-
mines that the lessor has leased the entire dairy 
operation to the lessee, the Secretary shall ap-
prove the transfer described in subparagraph 
(A), and, thereafter, the lessor shall have no in-
terest 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 produc-
tion quantity of the dairy operation. 
(3) COVERAGE LEVEL.— 
(A) BASIC MARGIN PROTECTION.—A pur-
chaser or lessee to whom the Secretary trans-
fers a production history or annual production 
quantity under this subsection may not obtain 
a different level of basic margin protection than 
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the basic margin protection coverage held by 
the seller or lessor from whom the transfer was 
obtained. 
(B) SUPPLEMENTAL
MARGIN
PROTEC-
TION.—A purchaser or lessee to whom the Sec-
retary transfers a production history or annual 
production quantity under this subsection may 
not obtain a different level of supplemental 
margin protection coverage than the supple-
mental margin protection coverage held by the 
seller or lessor from whom the transfer was ob-
tained. 
(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
AUTHOR-
IZED.—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. 
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(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 LO-
CATION.—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 pro-
ducers 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 hun-
dredweight 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. 
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(2) AMOUNT OF PAYMENT.—The basic margin 
protection payment for the dairy operation of a par-
ticipating dairy producer for a consecutive two- 
month period shall be determined as follows: 
(A) The Secretary shall calculate the dif-
ference between the average actual dairy pro-
ducer margin for the consecutive two-month pe-
riod 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 less-
er of the following: 
(i) Eighty percent of the production 
history of the dairy producer, divided by 
six. 
(ii) The actual amount of milk mar-
keted by the dairy operation of the dairy 
producer during the consecutive two-month 
period. 
SEC. 115. SUPPLEMENTAL MARGIN PROTECTION. 
(a) ELECTION OF SUPPLEMENTAL MARGIN PROTEC-
TION.—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 protec-
tion to protect a higher level of the income of a partici-
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pating dairy producer than the income level guaranteed 
by basic margin protection under section 114. 
(b) SELECTION OF PAYMENT THRESHOLD.—A par-
ticipating 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 par-
ticipating 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 oper-
ation 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 op-
eration of the dairy producer, to be used for the 
calendar year during which the dairy producer 
registers for participation in the margin protec-
tion program; and 
(B) for subsequent calendar years in which 
the margin protection program is in effect, the 
greater of— 
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(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 pro-
gram 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 author-
izes the use of the annual production quantity of the dairy 
operation of the dairy producer, in lieu of production his-
tory, as provided in subsection (c)(2) to determine supple-
mental 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 pro-
duction quantity applicable to the dairy pro-
ducer under such subsection; and 
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(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 pro-
ducer 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 subse-
quent years in accordance with one of the fol-
lowing schedules: 
(i) SINGLE ANNUAL PAYMENT.—The 
participating dairy producer may elect to 
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under subsection (e) for each year in which the mar-
gin protection program is in effect. 
(3) LEGAL OBLIGATION.—A participating dairy 
producer that purchases supplemental margin pro-
tection shall be legally obligated to pay the applica-
ble 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, ex-
cept— 
(A) if the dairy producer dies, the estate of 
the deceased may cancel the supplemental mar-
gin protection and shall not be responsible for 
any further premium payments; or 
(B) if the dairy producer retires, the pro-
ducer 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 par-
ticipating dairy producer with supplemental margin pro-
tection shall receive a supplemental margin protection 
payment whenever the average actual dairy producer mar-
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gin 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
PAY-
MENTS.— 
(1) IN
GENERAL.—The supplemental margin 
protection payment for a participating dairy pro-
ducer 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 dif-
ference between the coverage level threshold se-
lected by the dairy producer under subsection 
(b) and the greater of— 
(i) the average actual dairy producer 
margin for the consecutive two-month pe-
riod; or 
(ii) $4.00. 
(B) The amount determined under sub-
paragraph (A) shall be multiplied by the per-
centage selected by the dairy producer under 
subsection (c) and by the lesser of the following: 
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(i) The production history or annual 
production quantity applicable to the pro-
ducer under subsection (c), divided by six. 
(ii) The actual amount of milk mar-
keted 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 pro-
ducer 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 admin-
istrative fee or premiums, as the case may be; and 
(2) may not receive basic margin protection 
payments or supplemental margin protection pay-
ments until the fees or premiums are fully paid. 
(b) ENFORCEMENT.—The Secretary may take such 
action as necessary to collect administrative fees and pre-
mium payments for supplemental margin protection. 
SEC. 117. NO PAYMENT LIMITATIONS. 
Notwithstanding any other provision of law (except 
section 116), basic margin protection payments and sup-
plemental margin protection payments received by a par-
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ticipating dairy producer shall not be subject to limitations 
for any reason. 
Subtitle B—Dairy Market 
Stabilization Program 
SEC. 131. ESTABLISHMENT OF DAIRY MARKET STABILIZA-
TION 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 sta-
bilization 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. 
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(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 an-
nouncement by the Secretary that the stabiliza-
tion program will become effective. 
(B) The volume of the monthly milk mar-
ketings of the dairy producer for the same 
month in the preceding year as the month for 
which the Secretary has announced the sta-
bilization program will become effective. 
(c) 
TREATMENT
OF
MULTI-PRODUCER
OPER-
ATIONS.—As provided in section 112(b)(2), if a dairy op-
eration 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 oper-
ation of the stabilization program with respect to the pro-
ducers. 
(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 
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producer registered under section 112 shall be subject to 
the stabilization program. 
SEC. 132. THRESHOLD FOR IMPLEMENTATION AND REDUC-
TION IN DAIRY PRODUCER PAYMENTS. 
(a) WHEN STABILIZATION PROGRAM REQUIRED.— 
The Secretary shall announce that the stabilization pro-
gram is in effect and order reduced payments for any par-
ticipating dairy producer that exceeds the applicable per-
centage of the producer’s stabilization program base when-
ever— 
(1) the actual dairy producer margin has been 
$6.00 or less per hundredweight of milk for the im-
mediately preceding two months; or 
(2) the actual dairy producer margin has been 
$4.00 or less per hundredweight of milk for the im-
mediately 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: 
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(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 announce-
ment that the stabilization program will be in effect. 
(b) EFFECT OF CHANGING HANDLERS.—If a partici-
pating 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 ef-
fect 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 PRO-
DUCER MARGIN.— 
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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 pro-
gram and terminates payment reductions in accordance 
with section 136. 
(d) PAYMENT REDUCTION EXCEPTION.—Notwith-
standing any preceding subsection of this section, a han-
dler shall make no payment reductions for a dairy pro-
ducer 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 reduc-
tions are in effect under the stabilization program, each 
handler shall remit to the Commodity Credit Corporation 
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an amount equal to the amount by which payments to par-
ticipating dairy producers are reduced by the handler 
under section 134. 
(b) AVAILABILITY OF MONIES.—As soon as prac-
ticable 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 REQUIRE-
MENT. 
(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 con-
secutive 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 pro-
ducers under the stabilization program upon receiving no-
tice of the suspension of the stabilization program from 
the Secretary. 
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SEC. 137. AUDIT REQUIREMENTS. 
(a) AUDITS OF PRODUCER AND HANDLER COMPLI-
ANCE.— 
(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 con-
duct 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 sec-
ond year of operation of the stabilization program, 
the Inspector General of the Department of Agri-
culture 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 as-
certain the effectiveness, operation, and administra-
tion 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 
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Secretary, who shall make such recommendations to 
Congress as the Secretary considers appropriate re-
garding 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 Sec-
retary 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 var-
ious States and regions. 
(2) REIMBURSEMENT
OF
EXPENSES.—Monies 
made available to the board of directors under sec-
tion 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. 
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(c) DECISIONMAKING.—The board of directors shall 
reach decisions by an affirmative vote of 2⁄3 of its mem-
bers. 
(d) REMOVAL OF DAIRY PRODUCTS AND EXPANSION 
OF DEMAND.— 
(1) SPENDING AUTHORITY.—The board of di-
rectors 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 deter-
mines appropriate, within three months of col-
lecting the funds; and 
(B) to expand consumption and build de-
mand 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.). 
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(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 avail-
able to the board of directors under section 135. 
(2) REPORTING.—Not later than December 31 
of each year that the stabilization program is in ef-
fect, the board of directors shall provide to the Com-
mittee on Agriculture of the House of Representa-
tives 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 expendi-
tures 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. 
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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 Adjust-
ment Act (7 U.S.C. 608c), reenacted with amend-
ments by the Agricultural Marketing Agreement Act 
of 1937 (in this title referred to as a ‘‘milk mar-
keting 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 re-
gard to any provision of section 8c of the Agricul-
tural Adjustment Act (7 U.S.C. 608c), reenacted 
with amendments by the Agricultural Marketing 
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Agreement Act of 1937, as in effect on the day be-
fore 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 for-
mulas 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 re-
quired by this section. 
SEC. 202. AMENDMENT PROCESS. 
(a) IN GENERAL.—The amendments to milk mar-
keting 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) 
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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 no-
tice 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 deci-
sion on the proposed amendments under para-
graph (1), the Secretary shall conduct a pro-
ducer referendum regarding the final decision 
on the proposed amendments. 
(B) TERMS
OF
REFERENDUM; 
EXCEP-
TIONS.—The producer referendum shall be con-
ducted 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 
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of the proposed amendments to all milk 
marketing orders shall depend; and 
(ii) the proposed amendments shall re-
quire 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 ref-
erendum 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 mar-
keting orders required by section 201, the length of time 
for which that injunction or other restraining order is ef-
fective 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 AUTHOR-
ITY.—Nothing in this title affects the authority of the Sec-
retary to subsequently amend milk marketing orders, or 
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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 PRO-
GRAMS FOR MILK MARKETS. 
(a) ADVANCED
NOTICE
OF
PROPOSED
RULE-
MAKING.—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 Rule-
making seeking public comment on, and proposals recom-
mending, 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 han-
dlers who provide balancing services; and 
(3) provide compensation that is in line with 
the costs of providing the services and with the bene-
fits 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— 
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(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 PRO-
GRAMS. 
(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 PRO-
GRAM.—Section 1506 of the Food, Conservation, and En-
ergy Act of 2008 (7 U.S.C. 8773) is repealed. 
SEC. 302. REPEAL OF PERMANENT PRICE SUPPORT AU-
THORITY 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 
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of the Agricultural Act of 1949 (7 U.S.C. 1447) is amend-
ed 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. 
Æ 
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