A bill to amend the Agricultural Adjustment Act to require the Secretary of Agriculture to determine the price of all milk used for manufactured purposes, which shall be classified as Class II milk, by using the national average cost of production, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Milk Marketing Improvement 
Act of 2007''.

SEC. 2. PRICES RECEIVED FOR MILK UNDER MILK MARKETING ORDERS.

    Section 8c(5)(B) of the Agricultural Adjustment Act (7 U.S.C. 
608c(5)(B)), reenacted with amendments by the Agricultural Marketing 
Agreement Act of 1937, is amended--
            (1) in the first clauses (i) and (ii), by inserting 
        ``(based on the blended price of all milk covered by the 
        order)'' after ``uniform prices'' each place it appears; and
            (2) in clause (b) of the matter following the first clause 
        (ii), by inserting ``and the component value'' after 
        ``quality''.

SEC. 3. CLASS II MILK PRICING.

    Section 8c(5) of the Agricultural Adjustment Act (7 U.S.C. 
608c(5)), reenacted with amendments by the Agricultural Marketing 
Agreement Act of 1937, is amended by adding at the end the following:
                    ``(P) Class ii milk pricing.--
                            ``(i) Minimum price.--The Secretary shall 
                        base the minimum price for Class II milk on the 
                        average cost of producing all milk in the 48 
                        contiguous States, as determined by the 
                        Economic Research Service of the Department of 
                        Agriculture in accordance with clause (ii) 
                        (referred to in this subparagraph as the 
                        `national average cost of production').
                            ``(ii) National average cost of 
                        production.--For purposes of this subparagraph, 
                        the national average cost of production shall 
                        equal the national average of the operating 
                        cost and the allocated overhead cost of 
                        producing all milk, less--
                                    ``(I) the opportunity cost of 
                                unpaid labor for producing all milk; 
                                and
                                    ``(II) the cost of custom services, 
                                as determined by the Secretary.
                            ``(iii) Survey.--For purposes of carrying 
                        out clause (ii), the Secretary shall survey 
                        producers and associations of producers subject 
                        to Federal and State milk marketing orders and 
                        in all unregulated areas applicable to all 
                        milk.
                            ``(iv) Price announcement.--
                                    ``(I) In general.--Not later than 
                                November 1 of each calendar year, the 
                                Secretary shall announce the minimum 
                                price for Class II milk for the next 
                                calendar year, as determined in 
                                accordance with clause (i).
                                    ``(II) Adjustments.--Using the most 
                                currently available national average 
                                cost of production, the Secretary shall 
                                adjust the price announced under 
                                subclause (I) for a calendar year on 
                                April 1, July 1, and October 1 of the 
                                calendar year.
                            ``(v) Basic formula price.--
                                    ``(I) In general.--The Secretary 
                                shall use the Class II milk price 
                                announced under clause (iv) as the 
                                basic formula price for all Federal and 
                                State milk marketing orders and all 
                                unregulated milk production areas.
                                    ``(II) Class i milk.--The price of 
                                Class I milk in all Federal and State 
                                milk marketing orders and all 
                                unregulated milk production areas shall 
                                be equal to--
                                            ``(aa) the basic formula 
                                        price under subclause (I); plus
                                            ``(bb) the opportunity cost 
                                        of unpaid labor for producing 
                                        all milk.
                            ``(vi) Estimation of annual milk production 
                        and domestic consumption.--Not later than 
                        November 1 of each calendar year and taking 
                        into consideration the import projections for 
                        all milk products, the Secretary shall estimate 
                        the quantity of all milk to be produced in the 
                        48 contiguous States and marketed by producers 
                        for commercial use during the next 12 months.
                            ``(vii) Inventory management program.--
                                    ``(I) In general.--In any case in 
                                which the dollar value of exported milk 
                                products is equal to the dollar value 
                                of imported milk products, the 
                                Secretary shall carry out this clause 
                                in a manner that is necessary to manage 
                                the inventory of all milk in the United 
                                States.
                                    ``(II) Milk production totals.--Not 
                                later than February 1 of each calendar 
                                year, the Secretary shall determine the 
                                total quantity of all milk produced by 
                                each producer during the preceding 
                                calendar year.
                                    ``(III) Excess production 
                                determination.--Not more than once 
                                every 2 months, if the Secretary, 
                                acting through the Commodity Credit 
                                Corporation, has purchased the maximum 
                                quantity practicable of excess milk and 
                                milk products, the Secretary may 
                                determine whether an excess quantity of 
                                milk and milk products is being 
                                produced for the national domestic 
                                market.
                                    ``(IV) Reduction in price 
                                received.--If the Secretary determines 
                                under subclause (III) that there is 
                                excess production, the Secretary may 
                                provide for a reduction in the price 
                                received by producers for not more than 
                                5 percent of all milk produced in the 
                                48 contiguous States and marketed by 
                                producers for commercial use.
                                    ``(V) Amount.--The amount of the 
                                reduction under subclause (IV) in the 
                                price received by producers shall not 
                                exceed half the minimum price of Class 
                                II milk.
                                    ``(VI) Additional reduction.--If 
                                the Secretary determines that the 
                                reduction described in subclause (IV) 
                                is insufficient to reduce excess 
                                production, subject to subclauses (VII) 
                                and (VIII), the Secretary may reduce 
                                the price received by any producer that 
                                has increased the production of all 
                                milk in a calendar year as compared to 
                                the immediately preceding calendar 
                                year.
                                    ``(VII) Application.--A reduction 
                                in price under subclause (VI) shall 
                                apply only to the quantity of milk 
                                produced in excess of the quantity of 
                                milk produced during the previous 
                                calendar year.
                                    ``(VIII) New producer exception.--A 
                                new producer, as defined by the 
                                Secretary, may produce up to the 
                                average annual production of milk under 
                                the Federal or State milk marketing 
                                order of the producer or the 
                                unregulated area of the producer 
                                without being subject to an additional 
                                reduction under subclause (VI).
                                    ``(IX) Appeals.--A producer subject 
                                to an additional reduction under 
                                subclause (VI) may appeal to the 
                                Federal or State milk marketing 
                                administrator to provide evidence that 
                                the producer did not increase 
                                production in the calendar year that 
                                the reduction was in effect when 
                                compared to the immediately preceding 
                                calendar year.
                                    ``(X) Extraordinary 
                                circumstances.--In deciding an appeal 
                                under subclause (IX), a Federal or 
                                State milk marketing administrator may 
                                take into consideration production 
                                losses due to severe weather conditions 
                                or severe disease outbreaks.
                                    ``(XI) Collection.--Except as 
                                provided in subclause (XII), reductions 
                                in price required under subclause (IV) 
                                or (VI) shall be collected by Federal 
                                and State milk marketing administrators 
                                and timely remitted to the Commodity 
                                Credit Corporation to offset the cost 
                                of purchasing excess milk products.
                                    ``(XII) Collection in unregulated 
                                areas.--Reductions in price required 
                                for unregulated areas under subclause 
                                (IV) or (VI) shall be collected by the 
                                Secretary and timely remitted to the 
                                Commodity Credit Corporation to offset 
                                the cost of purchasing excess milk 
                                products.
                            ``(viii) Prohibition on certain charges.--
                        In carrying out this Act, the Secretary shall 
                        not impose charges on producers for the cost of 
                        hauling milk or the conversion of raw milk to 
                        manufactured products.
                            ``(ix) Responsibilities of milk purchasing 
                        handlers.--A milk handler that purchases milk 
                        from a producer shall--
                                    ``(I) assume title for the milk at 
                                the time at which the milk is pumped 
                                into a milk truck provided by or 
                                otherwise delivered to the milk 
                                handler; and
                                    ``(II) incur all transportation 
                                costs of the purchased milk.
                            ``(x) Applicability.--This subparagraph 
                        applies to all producers and handlers of milk 
                        in the 48 contiguous States.''.

SEC. 4. AMENDMENTS TO FEDERAL MILK MARKETING ORDERS.

    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, is amended by adding at the end the following: 
``In the case of an order covering milk or milk products, disapproval 
of an amendment to the order shall not be considered disapproval of the 
order or of other terms of the order.''.

Summary: Federal Milk Marketing Improvement Act of 2007 - Amends the Agricultural Adjustment Act, reenacted with amendments by the Agricultural Marketing Agreement Act of 1937, to direct the Secretary of Agriculture to base the minimum Class II milk price on the average production cost of producing all milk in the 48 contiguous states.

Directs the Secretary to: (1) announce the minimum price for Class II milk by November 1 of each year, with specified price adjustment dates; (2) use the Class II milk price as the basic formula price for all federal and state milk marketing orders and all unregulated milk production areas; and (3) estimate annual milk production and domestic consumption.

States that the price of Class I (fluid) milk price in all federal and state milk marketing orders and all unregulated milk production areas shall be equal to the basic formula price plus the opportunity cost of unpaid labor for producing all milk.

Prohibits imposition of producer charges for the cost of hauling milk or the conversion of raw milk to manufactured products.

Sets forth provisions respecting: (1) milk inventory management; and (2) milk handler responsibilities.

States that in the case of a federal milk order, disapproval of an amendment to the order shall not be considered disapproval of the order or of other terms of the order.