Dairy producer margin insurance program

Subtitle E of title I of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8771 et seq.) is amended by adding at the end the following new section:

1511.

Dairy producer margin insurance program

(a)

Definitions

In this section: (1)

Actual dairy producer margin

The term actual dairy producer margin means the difference between the all-milk price and the average feed cost, as calculated under subsection (b)(2). (2)

All-milk price

The term all-milk price means the average price received, per hundredweight of milk, by dairy producers for all milk sold to plants and dealers in the United States, as reported by the National Agricultural Statistics Service. (3)

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 subsection (b)(1) using the sum of the following: (A)The product determined by multiplying— (i)1.0728; by (ii)the price of corn per bushel. (B)The product determined by multiplying— (i)0.00735; by (ii)the price of soybean meal per ton. (C)The product determined by multiplying— (i)0.0137; by (ii)the price of alfalfa hay per ton. (4)

Consecutive 2-month period

The term consecutive 2-month period refers to the 2-month period consisting of the months of January and February, March and April, May and June, July and August, September and October, or November and December, respectively. (5)

Dairy producer

The term dairy producer means an individual or entity that directly or indirectly (as determined by the Secretary)— (A)shares in the risk of producing milk; and (B)makes contributions (including land, labor, management, equipment, or capital) to the dairy operation of the individual or entity that are at least commensurate with the share of the individual or entity of the proceeds of the operation. (6)

Margin insurance program

The term margin insurance program means the dairy producer margin insurance program required by this section. (7)

Participating dairy producer

The term participating dairy producer means a dairy producer that registers under subsection (d)(2) to participate in the margin insurance program. (8)

Production history

The term production history means the quantity of annual milk marketings determined for a dairy producer under subsection (e)(1). (9)

United States

The term United States, in a geographical sense, means the 50 States. (b)

Calculation of average feed cost and actual dairy producer margins

(1)

Calculation of average feed cost

The Secretary shall calculate the national average feed cost for each month using the following data: (A)The price of corn for a month shall be the price received during that month by agricultural producers in the United States for corn, as reported in the monthly Agriculture Prices report by the Secretary. (B)The price of soybean meal for a month shall be the central Illinois price for soybean meal, as reported in the Market News—Monthly Soybean Meal Price Report by the Secretary. (C)The price of alfalfa hay for a month shall be the price received during that month by agricultural producers in the United States for alfalfa hay, as reported in the monthly Agriculture Prices report by the Secretary. (2)

Calculation of actual dairy producer margins

The Secretary shall calculate the actual dairy producer margin for each consecutive 2-month period by subtracting— (A)the average feed cost for that consecutive 2-month period, determined in accordance with paragraph (1); from (B)the all-milk price for that consecutive 2-month period. (c)

Establishment of dairy producer margin insurance program

The Secretary shall establish and administer a dairy producer margin insurance program for the purpose of protecting dairy producer income by paying participating dairy producers margin insurance payments when actual dairy producer margins are less than the threshold levels for the payments. (d)

Eligibility and registration of dairy producers for margin insurance program

(1)

Eligibility

All dairy producers in the United States shall be eligible to participate in the margin insurance program. (2)

Registration process

(A)

Registration

(i)

In general

The Secretary shall register all interested dairy producers in the margin insurance program. (ii)

Manner and form

The Secretary shall specify the manner and form by which a dairy producer shall register for the margin insurance program. (B)

Treatment of multi-producer operations

If a dairy operation consists of more than 1 dairy producer, all of the dairy producers of the operation shall be treated as a single dairy producer for purposes of— (i)purchasing margin insurance; and (ii)payment of producer premiums under subsection (f)(4). (C)

Treatment of producers with multiple dairy operations

If a dairy producer operates 2 or more dairy operations, each dairy operation of the producer shall require a separate registration to participate and purchase margin insurance. (3)

Time for registration

(A)

Existing dairy producers

During the 1-year period beginning on the date of enactment of this section, a dairy producer that is actively engaged in a dairy operation as of that date may register with the Secretary to participate in the margin insurance program. (B)

New Entrants

A dairy producer that has no existing interest in a dairy operation as of the date of enactment of this section, but that, after that date, establishes a new dairy operation, may register with the Secretary during the 180-day period beginning on the date on which the dairy operation first markets milk commercially to participate in the margin insurance program. (4)

Retroactivity

(A)

Notice of availability of retroactive protection

Not later than 30 days after the effective date of this section, the Secretary shall publish a notice in the Federal Register to inform dairy producers of the availability of retroactive margin insurance, subject to the condition that interested producers must file a notice of intent (in such form and manner as the Secretary specifies in the Federal Register notice) to participate in the margin insurance program. (B)

Retroactive margin insurance

(i)

Availability

If a dairy producer files a notice of intent under subparagraph (A) to participate in the margin insurance program before the initiation of the sign-up period for the margin insurance program and subsequently signs up for the margin insurance program, the producer shall receive margin insurance retroactive to the effective date of this section. (ii)

Duration

Retroactive margin insurance under this paragraph for a dairy producer shall apply from the effective date of this section until the date on which the producer signs up for the margin insurance program. (C)

Notice of intent and obligation to participate

In no way does filing a notice of intent under this paragraph obligate a dairy producer to sign up for the margin insurance program once the program rules are final, but if a producer does file a notice of intent and subsequently signs up for the margin insurance program, that dairy producer is obligated to pay premiums for any retroactive margin insurance selected in the notice of intent. (5)

Reconstitution

The Secretary shall ensure that a dairy producer does not reconstitute a dairy operation for the sole purpose of purchasing margin insurance. (e)

Production history of participating dairy producers

(1)

Determination of production history

(A)

In general

The Secretary shall determine the production history of the dairy operation of each participating dairy producer in the margin insurance program. (B)

Calculation

Except as provided in subparagraph (C), the production history of a participating dairy producer shall be equal to the highest annual milk marketings of the dairy producer during any 1 of the 3 calendar years immediately preceding the registration of the dairy producer for participation in the margin insurance program. (C)

New producers

If a dairy producer has been in operation for less than 1 year, the Secretary shall determine the production history of the dairy producer by extrapolating the actual milk marketings for the months that the dairy producer has been in operation to a yearly amount. (2)

Required information

A participating dairy producer shall provide all information that the Secretary may require in order to establish the production history of the dairy operation of the dairy producer. (3)

Transfer of production history

(A)

Transfer by sale

(i)

Request for transfer

If an existing dairy producer sells an entire dairy operation to another party, the seller and purchaser may jointly request that the Secretary transfer to the purchaser the interest of the seller in the production history of the dairy operation. (ii)

Transfer

If the Secretary determines that the seller has sold the entire dairy operation to the purchaser, the Secretary shall approve the transfer and, thereafter, the seller shall have no interest in the production history of the sold dairy operation. (B)

Transfer by Lease

(i)

Request for transfer

If an existing dairy producer leases an entire dairy operation to another party, the lessor and lessee may jointly request that the Secretary transfer to the lessee for the duration of the term of the lease the interest of the lessor in the production history of the dairy operation. (ii)

Transfer

If the Secretary determines that the lessor has leased the entire dairy operation to the lessee, the Secretary shall approve the transfer and, thereafter, the lessor shall have no interest for the duration of the term of the lease in the production history of the leased dairy operation. (C)

Coverage level

A purchaser or lessee to whom the Secretary transfers a production history under this paragraph may not obtain a different level of margin insurance coverage held by the seller or lessor from whom the transfer was obtained. (D)

New entrants

The Secretary may not transfer the production history determined for a dairy producer described in subsection (d)(3)(B) to another person. (4)

Movement and transfer of production history

(A)

Movement and transfer authorized

Subject to subparagraph (B), if a dairy producer moves from 1 location to another location, the dairy producer may maintain the production history associated with the operation. (B)

Notification requirement

A dairy producer shall notify the Secretary of any move of a dairy operation under subparagraph (A). (C)

Subsequent occupation of vacated location

A party subsequently occupying a dairy operation location vacated as described in subparagraph (A) shall have no interest in the production history previously associated with the operation at that location. (f)

Margin insurance

(1)

In general

At the time of the registration of a dairy producer in the margin insurance program under subsection (d) and annually thereafter during the duration of the margin insurance program, an eligible dairy producer may purchase margin insurance. (2)

Selection of payment threshold

A participating dairy producer purchasing margin insurance shall elect a coverage level in any increment of $0.50, with a minimum of $4.00 and a maximum of $8.00. (3)

Selection of coverage percentage

A participating dairy producer purchasing margin insurance shall elect a percentage of coverage, equal to not more than 80 percent nor less than 25 percent, of the production history of the dairy operation of the participating dairy producer. (4)

Producer Premiums

(A)

Premiums required

A participating dairy producer that purchases margin insurance shall pay an annual premium equal to the product obtained by multiplying— (i)the percentage selected by the dairy producer under paragraph (3); (ii)the production history applicable to the dairy producer; and (iii)the premium per hundredweight of milk, as specified in the applicable table under paragraph (B) or (C). (B)

Premium per hundredweight for first 4 million pounds of production

For the first 4,000,000 pounds of milk marketings included in the annual production history of a participating dairy operation, the premium per hundredweight corresponding to each coverage level specified in the following table is as follows: Coverage LevelPremium per Cwt. $4.00$0.000 $4.50$0.01 $5.00$0.02 $5.50$0.035 $6.00$0.045 $6.50$0.09 $7.00$0.18 $7.50$0.60 $8.00$0.95.

(C)

Premium per hundredweight for production in excess of 4 million pounds

For milk marketings in excess of 4,000,000 pounds included in the annual production history of a participating dairy operation, the premium per hundredweight corresponding to each coverage level is as follows: Coverage LevelPremium per Cwt. $4.00$0.030 $4.50$0.045 $5.00$0.066 $5.50$0.11 $6.00$0.185 $6.50$0.29 $7.00$0.38 $7.50$0.83 $8.00$1.06.

(D)

Time for payment

(i)

First year

As soon as practicable after a dairy producer registers to participate in the margin insurance program and purchases margin insurance, the dairy producer shall pay the premium determined under subparagraph (A) for the dairy producer for the first calendar year of the margin insurance. (ii)

Subsequent years

(I)

In general

When the dairy producer first purchases margin insurance, the dairy producer shall also elect the method by which the dairy producer will pay premiums under this subsection for subsequent years in accordance with 1 of the schedules described in subclauses (II) and (III). (II)

Single annual payment

The participating dairy producer may elect to pay 100 percent of the annual premium determined under subparagraph (A) for the dairy producer for a calendar year by not later than January 15 of the calendar year. (III)

Semi-annual payments

The participating dairy producer may elect to pay— (aa)50 percent of the annual premium determined under subparagraph (A) for the dairy producer for a calendar year by not later than January 15 of the calendar year; and (bb)the remaining 50 percent of the premium by not later than June 15 of the calendar year. (5)

Producer premium obligations

(A)

Pro-ration of first year premium

A participating dairy producer that purchases margin insurance after initial registration in the margin insurance program shall pay a pro-rated premium for the first calendar year based on the date on which the producer purchases the coverage. (B)

Subsequent premiums

Except as provided in subparagraph (A), the annual premium for a participating dairy producer shall be determined under paragraph (4) for each year in which the margin insurance program is in effect. (C)

Legal obligation

(i)

In general

Except as provided in clauses (ii) and (iii), a participating dairy producer that purchases margin insurance shall be legally obligated to pay the applicable premiums for the entire period of the margin insurance program (as provided in the payment schedule elected under paragraph (4)(B)), and may not opt out of the margin insurance program. (ii)

Death

If the dairy producer dies, the estate of the deceased may cancel the margin insurance and shall not be responsible for any further premium payments. (iii)

Retirement

If the dairy producer retires, the producer may request that Secretary cancel the margin insurance 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 7 years. (6)

Payment threshold

A participating dairy producer with margin insurance shall receive a margin insurance payment whenever the average actual dairy producer margin for a consecutive 2-month period is less than the coverage level threshold selected by the dairy producer under paragraph (2). (7)

Margin insurance payments

(A)

In general

The Secretary shall make a margin insurance protection payment to each participating dairy producer whenever the average actual dairy producer margin for a consecutive 2-month period is less than the coverage level threshold selected by the dairy producer under paragraph (2). (B)

Amount of payment

The margin insurance payment for the dairy operation of a participating dairy producer shall be determined as follows: (i)The Secretary shall calculate the difference between— (I)the coverage level threshold selected by the dairy producer under paragraph (2); and (II)the average actual dairy producer margin for the consecutive 2-month period. (ii)The amount determined under clause (i) shall be multiplied by— (I)the percentage selected by the dairy producer under paragraph (3); and (II)the lesser of— (aa)the quotient obtained by dividing— (AA)the production history applicable to the producer under subsection (e)(1); by (BB)6; and (bb)the actual quantity of milk marketed by the dairy operation of the dairy producer during the consecutive 2-month period. (g)

Effect of failure To pay premiums

(1)

Loss of benefits

A participating dairy producer that is in arrears on premium payments for margin insurance— (A)remains legally obligated to pay the premiums; and (B)may not receive margin insurance until the premiums are fully paid. (2)

Enforcement

The Secretary may take such action as is necessary to collect premium payments for margin insurance. (h)

Duration

The Secretary shall conduct the margin insurance program during the period beginning on October 1, 2014, and ending on September 30, 2018.