To provide supplemental payments to dairy producers based upon their annual milk marketings and to provide additional payments to dairy producers for any month in which the prices received by producers for milk for the preceding three months is less than a target price of $12.50 per hundredweight.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Family Farm Dairy Equity 
Act of 2001''.

SEC. 2. DIRECT PAYMENTS TO DAIRY PRODUCERS BASED ON ANNUAL MILK 
              MARKETINGS.

    (a) Payments Required.--The Secretary of Agriculture shall make 
payments under this section to qualified producers on a farm for milk 
produced in the United States and marketed by the producers for 
commercial use.
    (b) Amount of Payment.--Subject to the production limitations in 
subsection (c), the total amount paid to producers on a farm under this 
section for a calendar year shall be equal to $0.50 per hundredweight 
on the smaller of--
            (1) the producers' total milk production during that 
        calendar year; and
            (2) 2,600,000 pounds.
    (c) Production Agreement.--To be eligible to receive a payment 
under this section, the producers on a farm shall enter into an 
agreement with the Secretary to limit total milk marketings from the 
farm during the calendar year to not more than the sum of--
            (1) the base milk production history for the farm, as 
        determined under subsection (d); and
            (2) the demand adjustment factor for the farm, as 
        determined under subsection (e).
    (d) Base Production History.--
            (1) Determination.--The base milk production history for a 
        farm for a calendar year shall be equal to the average annual 
        quantity of milk produced and marketed from the farm for 
        commercial use, determined using the production and marketing 
        records for the previous two calendar years. After the first 
        year in which payments are made under this section to producers 
        on a farm, the base production history for the farm for each 
        subsequent year shall be adjusted by the percentage change in 
        the demand adjustment factor for the previous year.
            (2) New producers.--In the case of a farm that does not 
        have a production history for the previous two calendar years, 
        the Secretary shall establish an appropriate production base 
        for the farm based on the size of the dairy operation.
    (e) Demand Adjustment Factor.--The demand adjustment factor 
applicable to a farm for a calendar year is the amount equal to the 
product of--
            (1) the base production history in effect for the farm; and
            (2) the percentage change in the estimated United States 
        consumption of milk and dairy products on a per-capita basis 
        and the percentage change in the population of the United 
        States during the previous calendar year, as determined by the 
        Secretary.
    (f) Repayment.--If the Secretary determines that annual milk 
marketings on a farm exceed the quantity permitted for the farm under 
the agreement entered into under subsection (c), the Secretary shall 
require the producers on the farm to repay all payments made under this 
section to the producers for that calendar year. The amount repaid 
shall include interest calculated at the rate equal, to the extent 
practicable, to the cost to the Commodity Credit Corporation of 
borrowings from the United States Treasury for the relevant time 
period.
    (g) Relation to Other Payment Authority.--Payments under this 
section for a calendar year do not count toward the $50,000 per farm 
limitation in section 3(d)(1).
    (h) Time for Payments.--Payments required under this section shall 
be made on a quarterly basis during the calendar year.

SEC. 3. ADDITIONAL PAYMENTS TO DAIRY PRODUCERS TO OFFSET LOW MILK 
              PRICES.

    (a) Definitions.--In this section:
            (1) Average milk price.--The term ``average milk price'' 
        means the average price under the Federal milk marketing orders 
        of Class III milk (or milk used to produce cheese) and Class IV 
        milk (or milk used to produce butter and nonfat dry milk) for 
        the preceding three-month period.
            (2) Class i milk.--The term ``Class I milk'' means milk 
        classified as Class I milk under a Federal milk marketing 
        order.
            (3) Class ii milk.--The term ``Class II milk'' means milk 
        classified as Class II milk under a Federal milk marketing 
        order.
            (4) Class iii milk.--The term ``Class III milk'' means milk 
        classified as Class III milk under a Federal milk marketing 
        order.
            (5) Class iv milk.--The term ``Class IV milk'' means milk 
        classified as Class IV milk under a Federal milk marketing 
        order.
            (6) Federal milk marketing order.--The term ``Federal milk 
        marketing order'' means a milk marketing order issued under 
        section 8c of the Agricultural Adjustment Act (7 U.S.C. 608c), 
        reenacted with amendments by the Agricultural Marketing 
        Agreement Act of 1937.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.
            (8) Target price.--The term ``target price'' means $12.50 
        per hundredweight for milk containing 3.50 percent butterfat.
    (b) Payments Required.--The Secretary shall make a payment under 
this section to producers on a farm for any month in which the average 
milk price applicable to that month is less than the target price. 
Producers shall be eligible for payments regardless of whether they 
market their milk within the Federal milk marketing order system. 
Payments for producers operating outside the Federal order system shall 
be calculated to be equivalent to payments for producers operating 
within the Federal order system.
    (c) Amount of Payment.--Subject to subsection (d), the amount of 
the payment to be made to producers on a farm under subsection (b) for 
a month shall be equal to the following:
            (1) The difference between the target price and the average 
        Class III milk price multiplied by the percentage of milk used 
        as Class III milk of the total amount of milk marketed by the 
        producer, as determined by the Secretary.
            (2) The difference between the target price and the average 
        Class IV milk price multiplied by the percentage of milk used 
        as Class IV milk of the total amount of milk marketed by the 
        producer, as determined by the Secretary.
            (3) The difference between the target price and the average 
        Class I milk price multiplied by the percentage of milk used as 
        Class I milk of the total amount of milk marketed by the 
        producer, as determined by the Secretary.
            (4) The difference between the target price and the average 
        Class II milk price multiplied by the percentage of milk used 
        as Class II milk of the total amount of milk marketed by the 
        producer, as determined by the Secretary.
    (d) Limitations.--
            (1) Payment limitation.--Maximum payments under this 
        section for a calendar year may not exceed $50,000 per farm.
            (2) Quantity limitation.--The producers on a farm shall be 
        eligible for payments under this section for a month for not 
        more than the smaller of the following:
                    (A) The producers' average monthly production, 
                determined using the production during the previous 
                calendar year and the current calendar year.
                    (B) 216,666 pounds produced monthly.
                    (C) Some other production base for the farm 
                considered appropriate by the Secretary.
            (3) New producers.--In the case of producers on a farm who 
        do not have a production base for the previous calendar year, 
        the quantity limitation otherwise applicable under paragraph 
        (2)(A) shall be based on current monthly production only.
    (e) Time for Payments.--Payments required under this section for a 
month shall be made not later than the 21st day after the end of the 
month.

SEC. 4. GENERAL PROVISIONS.

    (a) Farm Reconstitution.--The Secretary shall carry out this Act in 
such a manner that there are no additional outlays under section 2 or 3 
as a result of the reconstitution of a farm that the Secretary 
determines occurred in whole or in part for the purpose of increasing 
the amounts received as payments under such section.
    (b) Administration; Funding Source.--The Secretary shall carry out 
this Act using the funds, facilities, and authorities of the Commodity 
Credit Corporation.
    (c) Period of Effectiveness.--This Act shall be effective only 
during the period beginning on January 1, 2002, and ending on December 
31, 2006.
    (d) Comptroller General Report.--Not later than three years after 
the date of the enactment of this Act, the Comptroller General shall 
submit to Congress a report that analyzes the effect of the operation 
of this Act on farm income, milk production levels, milk prices, and 
Government and consumer costs.

Summary: National Family Farm Dairy Equity Act of 2001 - Directs the Secretary of Agriculture to make direct payments to milk producers: (1) who agree to make specified milk marketing reductions: and (2) whenever the (three-month) average milk price for a given month is less than a specified target price.