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. (iii)

Survey

For purposes of 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

(aa)

In general

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 applicable Class I milk differential under Federal and State milk marketing orders. (bb)

Unregulated areas

For purposes of item (aa)(BB), the Secretary shall assign comparable Class I milk differentials to each unregulated area. (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)

Identification and determination of dairy products

(aa)

In general

Not less frequently than once each quarter, the Secretary shall— (AA)identify each dairy product (including cheeses, curds, butter, butterfat, butter oil, buttermilk, anhydrous milk fat, dairy spreads, milk, cream, concentrated milk, condensed milk, milk powder, yogurt, ice cream, whey, whey protein concentrate, milk protein concentrate, milk protein isolate, casein, caseinates, lactose, food preps containing milk, and milk chocolate) imported into, or exported from, the United States; and (BB)determine the quantity of raw milk contained in each such product. (bb)

Inclusions

In identifying dairy products under item (aa)(AA), the Secretary shall include any current or projected future import of a product used for dairy, a dairy substitute, or ingredient, including any product that does not have the status of generally recognized as safe, as determined by the Commissioner of Food and Drugs. (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 or farming operation 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

(aa)

In general

Subject to item (bb), 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. (bb)

Limitation

The Secretary shall not provide for a reduction in the price received by a producer under item (aa) unless the Secretary determines that there exists a positive trade balance in dairy products described in subclause (I)(aa)(AA) that are imported into, or exported from, the United States, based on— (AA)dollar value; and (BB)the quantity of milk represented by exports, as determined under subclause (I)(aa)(AA). (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 or farming operation that— (aa)produces more than 3,000,000 pounds of milk in a calendar year; and (bb)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, shall— (aa)during the 1-year period beginning on the date on which the new producer commences operation, be exempt from any applicable price reduction relating to the first 3,000,000 pounds of milk produced by the new producer; and (bb)after that 1-year period, be subject to each price reduction that applies to existing producers. (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 the conversion of raw milk to manufactured products. (ix)

Responsibilities of milk purchasing handlers

A milk handler that purchases milk from a producer shall 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. (x)

Applicability

This subparagraph applies to all producers and handlers of milk in the 48 contiguous States.