[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 605 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                 S. 605

                   To improve Federal dairy programs.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 19, 2013

Mrs. Gillibrand introduced the following bill; which was read twice and 
   referred to the Committee on Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL


 
                   To improve Federal dairy programs.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Dairy Income Fairness Act of 2013''.

SEC. 2. DEFINITION OF SECRETARY.

    In this Act, the term ``Secretary'' means the Secretary of 
Agriculture.

                           Subtitle D--Dairy

      PART I--DAIRY PRODUCTION MARGIN PROTECTION AND DAIRY MARKET 
                         STABILIZATION PROGRAMS

SEC. 1401. DEFINITIONS.

    In this part:
            (1) Actual dairy production margin.--The term ``actual 
        dairy production margin'' means the difference between the all-
        milk price and the average feed cost, as calculated under 
        section 1402.
            (2) All-milk price.--The term ``all-milk price'' means the 
        average price received, per hundredweight of milk, by dairy 
        operations for all milk sold to plants and dealers in the 
        United States, as determined by the Secretary.
            (3) Annual production history.--The term ``annual 
        production history'' means the production history determined 
        for a participating dairy operation under section 1413(b) 
        whenever the participating dairy operation purchases 
        supplemental production margin protection.
            (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 1402 
        using the sum of the following:
                    (A) The product determined by multiplying 1.0728 by 
                the price of corn per bushel.
                    (B) The product determined by multiplying 0.00735 
                by the price of soybean meal per ton.
                    (C) The product determined by multiplying 0.0137 by 
                the price of alfalfa hay per ton.
            (5) Basic production history.--The term ``basic production 
        history'' means the production history determined for a 
        participating dairy operation under section 1413(a) for 
        provision of basic production margin protection.
            (6) 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.
            (7) Dairy operation.--
                    (A) In general.--The term ``dairy operation'' 
                means, as determined by the Secretary, 1 or more dairy 
                producers that produce and market milk as a single 
                dairy operation in which each dairy producer--
                            (i) shares in the pooling of resources and 
                        a common ownership structure;
                            (ii) is at risk in the production of milk 
                        on the dairy operation; and
                            (iii) contributes land, labor, management, 
                        equipment, or capital to the dairy operation.
                    (B) Additional ownership structures.--The Secretary 
                shall determine additional ownership structures to be 
                covered by the definition of dairy operation.
            (8) Handler.--
                    (A) In general.--The term ``handler'' means the 
                initial individual or entity making payment to a dairy 
                operation for milk produced in the United States and 
                marketed for commercial use.
                    (B) Producer-handler.--The term includes a 
                ``producer-handler'' when the producer satisfies the 
                definition in subparagraph (A).
            (9) Participating dairy operation.--The term 
        ``participating dairy operation'' means a dairy operation 
        that--
                    (A) signs up under section 1412 to participate in 
                the production margin protection program under subpart 
                A; and
                    (B) as a result, also participates in the 
                stabilization program under subpart B.
            (10) Production margin protection program.--The term 
        ``production margin protection program'' means the dairy 
        production margin protection program required by subpart A.
            (11) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.
            (12) Stabilization program.--The term ``stabilization 
        program'' means the dairy market stabilization program required 
        by subpart B for all participating dairy operations.
            (13) Stabilization program base.--The term ``stabilization 
        program base'', with respect to a participating dairy 
        operation, means the stabilization program base calculated for 
        the participating dairy operation under section 1431(b).
            (14) United states.--The term ``United States'', in a 
        geographical sense, means the 50 States, the District of 
        Columbia, American Samoa, Guam, the Commonwealth of the 
        Northern Mariana Islands, the Commonwealth of Puerto Rico, the 
        Virgin Islands of the United States, and any other territory or 
        possession of the United States.

SEC. 1402. CALCULATION OF AVERAGE FEED COST AND ACTUAL DAIRY PRODUCTION 
              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 in the monthly Agricultural Prices report by 
        the Secretary.
            (2) 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.
            (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 in the monthly Agricultural Prices 
        report by the Secretary.
    (b) Calculation of Actual Dairy Production Margins.--
            (1) Production margin protection program.--For use in the 
        production margin protection program under subpart A, the 
        Secretary shall calculate the actual dairy production margin 
        for each consecutive 2-month period by subtracting--
                    (A) the average feed cost for that consecutive 2-
                month period, determined in accordance with subsection 
                (a); from
                    (B) the all-milk price for that consecutive 2-month 
                period.
            (2) Stabilization program.--For use in the stabilization 
        program under subpart B, the Secretary shall calculate each 
        month the actual dairy production margin for the preceding 
        month by subtracting--
                    (A) the average feed cost for that preceding month, 
                determined in accordance with subsection (a); from
                    (B) the all-milk price for that preceding month.
            (3) Time for calculations.--The calculations required by 
        paragraphs (1) and (2) shall be made as soon as practicable 
        using the full month price of the applicable reference month.

         Subpart A--Dairy Production Margin Protection Program

SEC. 1411. ESTABLISHMENT OF DAIRY PRODUCTION MARGIN PROTECTION PROGRAM.

    Effective not later than 120 days after the effective date of this 
subtitle, the Secretary shall establish and administer a dairy 
production margin protection program under which participating dairy 
operations are paid--
            (1) basic production margin protection program payments 
        under section 1414 when actual dairy production margins are 
        less than the threshold levels for such payments; and
            (2) supplemental production margin protection program 
        payments under section 1415 if purchased by a participating 
        dairy operation.

SEC. 1412. PARTICIPATION OF DAIRY OPERATIONS IN PRODUCTION MARGIN 
              PROTECTION PROGRAM.

    (a) Eligibility.--All dairy operations in the United States shall 
be eligible to participate in the production margin protection program, 
except that a participating dairy operation shall be required to 
register with the Secretary before the participating dairy operation 
may receive--
            (1) basic production margin protection program payments 
        under section 1414; and
            (2) if the participating dairy operation purchases 
        supplemental production margin protection under section 1415, 
        supplemental production margin protection program payments 
        under such section.
    (b) Registration Process.--
            (1) In general.--The Secretary shall specify the manner and 
        form by which a participating dairy operation may register to 
        participate in the production margin protection program.
            (2) Treatment of multiproducer dairy operations.--If a 
        participating dairy operation is operated by more than 1 dairy 
        producer, all of the dairy producers of the participating dairy 
        operation shall be treated as a single dairy operation for 
        purposes of--
                    (A) registration to receive basic production margin 
                protection and election to purchase supplemental 
                production margin protection;
                    (B) payment of the participation fee under 
                subsection (d) and producer premiums under section 
                1415; and
                    (C) participation in the stabilization program 
                under subtitle B.
            (3) Treatment of producers with multiple dairy 
        operations.--If a dairy producer operates 2 or more dairy 
        operations, each dairy operation of the producer shall 
        separately register to receive basic production margin 
        protection and purchase supplemental production margin 
        protection and only those dairy operations so registered shall 
        be covered by the stabilization program.
    (c) Time for Registration.--
            (1) Existing dairy operations.--During the 15-month period 
        beginning on the date of the initiation of the registration 
        period for the production margin protection program, a dairy 
        operation that is actively engaged as of such date may register 
        with the Secretary--
                    (A) to receive basic production margin protection; 
                and
                    (B) if the dairy operation elects, to purchase 
                supplemental production margin protection.
            (2) New entrants.--A dairy producer that has no existing 
        interest in a dairy operation as of the date of the initiation 
        of the registration period for the production margin protection 
        program, but that, after such date, establishes a new dairy 
        operation, may register with the Secretary during the 1-year 
        period beginning on the date on which the dairy operation first 
        markets milk commercially--
                    (A) to receive basic production margin protection; 
                and
                    (B) if the dairy operation elects, to purchase 
                supplemental production margin protection.
    (d) Transition From MILC to Production Margin Protection.--
            (1) Definition of transition period.--In this subsection, 
        the term ``transition period'' means the period during which 
        the milk income loss program established under section 1506 of 
        the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8773) 
        and the production margin protection program under this 
        subtitle are both in existence.
            (2) Notice of availability.--Not later than 30 days after 
        the date of enactment of this Act, the Secretary shall publish 
        a notice in the Federal Register to inform dairy operations of 
        the availability of basic production margin protection and 
        supplemental production margin protection, including the terms 
        of the protection and information about the option of dairy 
        operations during the transition period to make an election 
        described in paragraph (3).
            (3) Election.--Except as provided in paragraph (4), a dairy 
        operation may elect to participate in either the milk income 
        loss program established under section 1506 of the Food, 
        Conservation, and Energy Act of 2008 (7 U.S.C. 8773) or the 
        production margin protection program under this subtitle for 
        the duration of the transition period.
            (4) Transfer to production margin protection.--A dairy 
        operation that elects to participate in the milk income loss 
        program established under section 1506 of the Food, 
        Conservation, and Energy Act of 2008 (7 U.S.C. 8773) during the 
        transition period may, at any time, make a permanent transfer 
        to the production margin protection program.
    (e) Administration Fee.--
            (1) Administration fee required.--Except as provided in 
        paragraph (5), a participating dairy operation shall--
                    (A) pay an administration fee under this subsection 
                to register to participate in the production margin 
                protection program; and
                    (B) pay the administration fee annually thereafter 
                to continue to participate in the production margin 
                protection program.
            (2) Fee amount.--The administration fee for a participating 
        dairy operation for a calendar year shall be based on the 
        pounds of milk (in millions) marketed by the participating 
        dairy operation in the previous calendar year, as follows:


------------------------------------------------------------------------
   Pounds Marketed (in millions)              Administration Fee
------------------------------------------------------------------------
                 less than 1                                 $100
                      1 to 5                                 $250
           more than 5 to 10                                 $350
          more than 10 to 40                               $1,000
                more than 40                              $2,500.
------------------------------------------------------------------------

            (3) Deposit of fees.--All administration fees collected 
        under this subsection shall be credited to the fund or account 
        used to cover the costs incurred to administer the production 
        margin protection program and the stabilization program and 
        shall be available to the Secretary, without further 
        appropriation and until expended, for use or transfer as 
        provided in paragraph (4).
            (4) Use of fees.--The Secretary shall use administration 
        fees collected under this subsection--
                    (A) to cover administrative costs of the production 
                margin protection program and stabilization program; 
                and
                    (B) to cover costs of the Department of Agriculture 
                relating to reporting of dairy market news, carrying 
                out the amendments made by section 1476, and carrying 
                out section 273 of the Agricultural Marketing Act of 
                1946 (7 U.S.C. 1637b), to the extent funds remain 
                available after operation of subparagraph (A).
            (5) Waiver.--The Secretary shall waive or reduce the 
        administration fee required under paragraph (1) in the case of 
        a limited-resource dairy operation, as defined by the 
        Secretary.
    (f) Limitation.--A dairy operation may only participate in the 
production margin protection program or the livestock gross margin for 
dairy program under the Federal Crop Insurance Act (7 U.S.C. 1501 et 
seq.), but not both.

SEC. 1413. PRODUCTION HISTORY OF PARTICIPATING DAIRY OPERATIONS.

    (a) Production History for Basic Production Margin Protection.--
            (1) Determination required.--For purposes of providing 
        basic production margin protection, the Secretary shall 
        determine the basic production history of a participating dairy 
        operation.
            (2) Calculation.--Except as provided in paragraph (3), the 
        basic production history of a participating dairy operation for 
        basic production margin protection is equal to the highest 
        annual milk marketings of the participating dairy operation 
        during any 1 of the 3 calendar years immediately preceding the 
        calendar year in which the participating dairy operation first 
        signed up to participate in the production margin protection 
        program.
            (3) Election by new dairy operations.--In the case of a 
        participating dairy operation that has been in operation for 
        less than a year, the participating dairy operation shall elect 
        1 of the following methods for the Secretary to determine the 
        basic production history of the participating dairy operation:
                    (A) The volume of the actual milk marketings for 
                the months the participating dairy operation has been 
                in operation extrapolated to a yearly amount.
                    (B) An estimate of the actual milk marketings of 
                the participating dairy operation based on the herd 
                size of the participating dairy operation relative to 
                the national rolling herd average data published by the 
                Secretary.
            (4) No change in production history for basic production 
        margin protection.--Once the basic production history of a 
        participating dairy operation is determined under paragraph (2) 
        or (3), the basic production history shall not be subsequently 
        changed for purposes of determining the amount of any basic 
        production margin protection payments for the participating 
        dairy operation made under section 1414.
    (b) Annual Production History for Supplemental Production Margin 
Protection.--
            (1) Determination required.--For purposes of providing 
        supplemental production margin protection for a participating 
        dairy operation that purchases supplemental production margin 
        protection for a year under section 1415, the Secretary shall 
        determine the annual production history of the participating 
        dairy operation under paragraph (2).
            (2) Calculation.--The annual production history of a 
        participating dairy operation for a year is equal to the actual 
        milk marketings of the participating dairy operation during the 
        preceding calendar year.
            (3) New dairy operations.--Subsection (a)(3) shall apply 
        with respect to determining the annual production history of a 
        participating dairy operation that has been in operation for 
        less than a year.
    (c) Required Information.--A participating dairy operation shall 
provide all information that the Secretary may require in order to 
establish--
            (1) the basic production history of the participating dairy 
        operation under subsection (a); and
            (2) the production history of the participating dairy 
        operation whenever the participating dairy operation purchases 
        supplemental production margin protection under section 1415.
    (d) Transfer of Production Histories.--
            (1) Transfer by sale or lease.--In promulgating the rules 
        to initiate the production margin protection program, the 
        Secretary shall specify the conditions under which and the 
        manner by which the production history of a participating dairy 
        operation may be transferred by sale or lease.
            (2) Coverage level.--
                    (A) Basic production margin protection.--A 
                purchaser or lessee to whom the Secretary transfers a 
                basic production history under this subsection shall 
                not obtain a different level of basic production margin 
                protection than the basic production margin protection 
                coverage held by the seller or lessor from whom the 
                transfer was obtained.
                    (B) Supplemental production margin protection.--A 
                purchaser or lessee to whom the Secretary transfers an 
                annual production history under this subsection shall 
                not obtain a different level of supplemental production 
                margin protection coverage than the supplemental 
                production margin protection coverage in effect for the 
                seller or lessor from whom the transfer was obtained 
                for the calendar year in which the transfer was made.
    (e) Movement and Transfer of Production History.--
            (1) Movement and transfer authorized.--Subject to paragraph 
        (2), if a participating dairy operation moves from one location 
        to another location, the participating dairy operation may 
        transfer the basic production history and annual production 
        history associated with the participating dairy operation.
            (2) Notification requirement.--A participating dairy 
        operation shall notify the Secretary of any move of a 
        participating dairy operation under paragraph (1).
            (3) Subsequent occupation of vacated location.--A party 
        subsequently occupying a participating dairy operation location 
        vacated as described in paragraph (1) shall have no interest in 
        the basic production history or annual production history 
        previously associated with the participating dairy operation at 
        such location.

SEC. 1414. BASIC PRODUCTION MARGIN PROTECTION.

    (a) Payment Threshold.--The Secretary shall make a payment to 
participating dairy operations in accordance with subsection (b) 
whenever the average actual dairy production margin for a consecutive 
2-month period is less than $4.00 per hundredweight of milk.
    (b) Basic Production Margin Protection Payment.--The basic 
production margin protection payment for a participating dairy 
operation for a consecutive 2-month period shall be equal to the 
product obtained by multiplying--
            (1) the difference between the average actual dairy 
        production margin for the consecutive 2-month period and $4.00, 
        except that, if the difference is more than $4.00, the 
        Secretary shall use $4.00; by
            (2) the lesser of--
                    (A) 80 percent of the production history of the 
                participating dairy operation, divided by 6; or
                    (B) the actual quantity of milk marketed by the 
                participating dairy operation during the consecutive 2-
                month period.

SEC. 1415. SUPPLEMENTAL PRODUCTION MARGIN PROTECTION.

    (a) Election of Supplemental Production Margin Protection.--A 
participating dairy operation may annually purchase supplemental 
production margin protection to protect, during the calendar year for 
which purchased, a higher level of the income of a participating dairy 
operation than the income level guaranteed by basic production margin 
protection under section 1414.
    (b) Selection of Payment Threshold.--A participating dairy 
operation purchasing supplemental production margin protection for a 
year shall elect a coverage level that is higher, in any increment of 
$0.50, than the payment threshold for basic production margin 
protection specified in section 1414(a), but not to exceed $8.00.
    (c) Coverage Percentage.--A participating dairy operation 
purchasing supplemental production margin protection for a year shall 
elect a percentage of coverage equal to not more than 90 percent, nor 
less than 25 percent, of the annual production history of the 
participating dairy operation.
    (d) Premiums for Supplemental Production Margin Protection.--
            (1) Premiums required.--A participating dairy operation 
        that purchases supplemental production margin protection shall 
        pay an annual premium equal to the product obtained by 
        multiplying--
                    (A) the coverage percentage elected by the 
                participating dairy operation under subsection (c);
                    (B) the annual production history of the 
                participating dairy operation; and
                    (C) the premium per hundredweight of milk, as 
                specified in the applicable table under paragraph (2) 
                or (3).
            (2) 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 Level                      Premium per Cwt.
------------------------------------------------------------------------
                       $6.50                                $0.00
                       $7.00                                $0.40
                       $7.50                                $0.60
                       $8.00                               $0.95.
------------------------------------------------------------------------

            (3) 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 Level                      Premium per Cwt.
------------------------------------------------------------------------
                       $4.50                                $0.02
                       $5.00                                $0.04
                       $5.50                                $0.10
                       $6.00                                $0.15
                       $6.50                                $0.29
                       $7.00                                $0.62
                       $7.50                                $0.83
                       $8.00                               $1.06.
------------------------------------------------------------------------

            (4) Time for payment.--In promulgating the rules to 
        initiate the production margin protection program, the 
        Secretary shall provide more than 1 method by which a 
        participating dairy operation that purchases supplemental 
        production margin protection for a calendar year may pay the 
        premium under this subsection for that year in any manner that 
        maximizes participating dairy operation payment flexibility and 
        program integrity.
    (e) Premium Obligations.--
            (1) Pro-ration of premium for new dairy operations.--A 
        participating dairy operation described in section 1412(c)(2) 
        that purchases supplemental production margin protection for a 
        calendar year after the start of the calendar year shall pay a 
        pro-rated premium for that calendar year based on the portion 
        of the calendar year for which the participating dairy 
        operation purchases the coverage.
            (2) Legal obligation.--A participating dairy operation that 
        purchases supplemental production margin protection for a 
        calendar year shall be legally obligated to pay the applicable 
        premium for that calendar year, except that the Secretary may 
        waive that obligation, under terms and conditions determined by 
        the Secretary, for 1 or more producers in any participating 
        dairy operation in the case of death, retirement, permanent 
        dissolution of a participating dairy operation, or other 
        circumstances as the Secretary considers appropriate to ensure 
        the integrity of the program.
    (f) Supplemental Payment Threshold.--A participating dairy 
operation with supplemental production margin protection shall receive 
a supplemental production margin protection payment whenever the 
average actual dairy production margin for a consecutive 2-month period 
is less than the coverage level threshold selected by the participating 
dairy operation under subsection (b).
    (g) Supplemental Production Margin Protection Payments.--
            (1) In general.--The supplemental production margin 
        protection payment for a participating dairy operation is in 
        addition to the basic production margin protection payment.
            (2) Amount of payment.--The supplemental production margin 
        protection payment for the participating dairy operation shall 
        be determined as follows:
                    (A) The Secretary shall calculate the difference 
                between the coverage level threshold selected by the 
                participating dairy operation under subsection (b) and 
                the greater of--
                            (i) the average actual dairy production 
                        margin for the consecutive 2-month period; or
                            (ii) $4.00.
                    (B) The amount determined under subparagraph (A) 
                shall be multiplied by the percentage selected by the 
                participating dairy operation under subsection (c) and 
                by the lesser of the following:
                            (i) The annual production history of the 
                        participating dairy operation, divided by 6.
                            (ii) The actual amount of milk marketed by 
                        the participating dairy operation during the 
                        consecutive 2-month period.

SEC. 1416. EFFECT OF FAILURE TO PAY ADMINISTRATION FEES OR PREMIUMS.

    (a) Loss of Benefits.--A participating dairy operation that fails 
to pay the required administration fee under section 1412 or is in 
arrears on premium payments for supplemental production margin 
protection under section 1415--
            (1) remains legally obligated to pay the administration fee 
        or premiums, as the case may be; and
            (2) may not receive basic production margin protection 
        payments or supplemental production margin protection payments 
        until the fees or premiums are fully paid.
    (b) Enforcement.--The Secretary may take such action as necessary 
to collect administration fees and premium payments for supplemental 
production margin protection.

             Subpart B--Dairy Market Stabilization Program

SEC. 1431. ESTABLISHMENT OF DAIRY MARKET STABILIZATION PROGRAM.

    (a) Program Required; Purpose.--Effective not later than 120 days 
after the effective date of this subtitle, the Secretary shall 
establish and administer a dairy market stabilization program 
applicable to participating dairy operations for the purpose of 
assisting in balancing the supply of milk with demand when 
participating dairy operations are experiencing low or negative 
operating margins.
    (b) Election of Stabilization Program Base Calculation Method.--
            (1) Election.--When a dairy operation signs up under 
        section 1412 to participate in the production margin protection 
        program, the dairy operation shall inform the Secretary of the 
        method by which the stabilization program base for the 
        participating dairy operation will be calculated under 
        paragraph (3).
            (2) Change in calculation method.--A participating dairy 
        operation may change the stabilization program base calculation 
        method to be used for a calendar year by notifying the 
        Secretary of the change not later than a date determined by the 
        Secretary.
            (3) Calculation methods.--A participating dairy operation 
        may elect either of the following methods for calculation of 
        the stabilization program base for the participating dairy 
        operation:
                    (A) The volume of the average monthly milk 
                marketings of the participating dairy operation for the 
                3 months immediately preceding the announcement by the 
                Secretary that the stabilization program will become 
                effective.
                    (B) The volume of the monthly milk marketings of 
                the participating dairy operation for the same month in 
                the preceding year as the month for which the Secretary 
                has announced the stabilization program will become 
                effective.
            (4) Exemption.--The stabilization program base for a 
        participating dairy producer shall not include the first 
        4,000,000 pounds of production of the participating dairy 
        producer per calendar year, as determined by the Secretary.

SEC. 1432. THRESHOLD FOR IMPLEMENTATION AND REDUCTION IN DAIRY 
              PAYMENTS.

    (a) When Stabilization Program Required.--Except as provided in 
subsection (b), the Secretary shall announce that the stabilization 
program is in effect and order reduced payments by handlers to 
participating dairy operations that exceed the applicable percentage of 
the participating dairy operation's stabilization program base 
whenever--
            (1) the actual dairy production margin has been $6.00 or 
        less per hundredweight of milk for each of the immediately 
        preceding 2 months; or
            (2) the actual dairy production margin has been $4.00 or 
        less per hundredweight of milk for the immediately preceding 
        month.
    (b) Exception.--If any of the conditions described in section 
1436(b) have been met during the 2-month period immediately preceding 
the month in which the announcement under subsection (a) would 
otherwise be made by the Secretary in the absence of this exception, 
the Secretary shall--
            (1) suspend the stabilization program;
            (2) refrain from making the announcement under subsection 
        (a) to implement order the stabilization payment; or
            (3) order reduced payments.
    (c) Effective Date for Implementation of Payment Reductions.--
Reductions in dairy payments shall commence beginning on the first day 
of the month immediately following the date of the announcement by the 
Secretary under subsection (a).

SEC. 1433. MILK MARKETINGS INFORMATION.

    (a) Collection of Milk Marketing Data.--The Secretary shall 
establish, by regulation, a process to collect from participating dairy 
operations and handlers such information that the Secretary considers 
necessary for each month during which the stabilization program is in 
effect.
    (b) Reduce Regulatory Burden.--When implementing the process under 
subsection (a), the Secretary shall minimize the regulatory burden on 
participating dairy operations and handlers.

SEC. 1434. CALCULATION AND COLLECTION OF REDUCED DAIRY OPERATION 
              PAYMENTS.

    (a) Reduced Participating Dairy Operation Payments Required.--
During any month in which payment reductions are in effect under the 
stabilization program, each handler shall reduce payments to each 
participating dairy operation from whom the handler receives milk.
    (b) Reductions Based on Actual Dairy Production Margin.--
            (1) Reduction requirement 1.--If the Secretary determines 
        that the average actual dairy production margin has been less 
        than $6.00 but greater than $5.00 per hundredweight of milk for 
        2 consecutive months, the handler shall make payments to a 
        participating dairy operation for a month based on the greater 
        of the following:
                    (A) 98 percent of the stabilization program base of 
                the participating dairy operation.
                    (B) 94 percent of the marketings of milk for the 
                month by the participating dairy operation.
            (2) Reduction requirement 2.--If the Secretary determines 
        that the average actual dairy production margin has been less 
        than $5.00 but greater than $4.00 for 2 consecutive months, the 
        handler shall make payments to a participating dairy operation 
        for a month based on the greater of the following:
                    (A) 97 percent of the stabilization program base of 
                the participating dairy operation.
                    (B) 93 percent of the marketings of milk for the 
                month by the participating dairy operation.
            (3) Reduction requirement 3.--If the Secretary determines 
        that the average actual dairy production margin has been $4.00 
        or less for any 1 month, the handler shall make payments to a 
        participating dairy operation for a month based on the greater 
        of the following:
                    (A) 96 percent of the stabilization program base of 
                the participating dairy operation.
                    (B) 92 percent of the marketings of milk for the 
                month by the participating dairy operation.
    (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 program and terminates payment reductions in accordance 
with section 1436.
    (d) Payment Reduction Exception.--Notwithstanding any preceding 
subsection of this section, a handler shall make no payment reductions 
for a participating dairy operation for a month if the participating 
dairy operation's milk marketings for the month are equal to or less 
than the percentage of the stabilization program base applicable to the 
participating dairy operation under paragraph (1), (2), or (3) of 
subsection (b).

SEC. 1435. REMITTING FUNDS TO THE SECRETARY AND USE OF FUNDS.

    (a) Remitting Funds.--As soon as practicable after the end of each 
month during which payment reductions are in effect under the 
stabilization program, each handler shall remit to the Secretary an 
amount equal to the amount by which payments to participating dairy 
operations are reduced by the handler under section 1434.
    (b) Deposit of Remitted Funds.--All funds received under subsection 
(a) shall be available to the Secretary, without further appropriation 
and until expended, for use or transfer as provided in subsection (c).
    (c) Use of Funds.--
            (1) Availability for certain commodity donations.--Not 
        later than 90 days after the funds described in subsection (a) 
        are due as determined by the Secretary, the Secretary shall 
        obligate the funds for the purpose of--
                    (A) purchasing dairy products for donation to food 
                banks and other programs that the Secretary determines 
                appropriate; and
                    (B) expanding consumption and building demand for 
                dairy products.
            (2) No duplication of effort.--The Secretary shall ensure 
        that expenditures 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.).
            (3) Accounting.--The Secretary shall keep an accurate 
        account of all funds expended under paragraph (1).
    (d) Annual Report.--Not later than December 31 of each year that 
the stabilization program is in effect, the Secretary shall submit to 
the Committee on Agriculture of the House of Representatives and the 
Committee on Agriculture, Nutrition, and Forestry of the Senate a 
report that provides an accurate accounting of--
            (1) the funds received by the Secretary during the 
        preceding fiscal year under subsection (a);
            (2) all expenditures made by the Secretary under subsection 
        (b) during the preceding fiscal year; and
            (3) the impact of the stabilization program on dairy 
        markets.
    (e) Enforcement.--If a participating dairy operation or handler 
fails to remit or collect the amounts by which payments to 
participating dairy operations are reduced under section 1434, the 
participating dairy operation or handler responsible for the failure 
shall be liable to the Secretary for the amount that should have been 
remitted or collected, plus interest. In addition to the enforcement 
authorities available under section 1437, the Secretary may enforce 
this subsection in the courts of the United States.

SEC. 1436. SUSPENSION OF REDUCED PAYMENT REQUIREMENT.

    (a) Determination of Prices.--For purposes of this section:
            (1) The price in the United States for cheddar cheese and 
        nonfat dry milk shall be determined by the Secretary.
            (2) The world price of cheddar cheese and skim milk powder 
        shall be determined by the Secretary.
    (b) Suspension Thresholds.--The stabilization program shall be 
suspended or the Secretary shall refrain from making the announcement 
under section 1432(a) if the Secretary determines that--
            (1) the actual dairy production margin is greater than 
        $6.00 per hundredweight of milk for 2 consecutive months;
            (2) the actual dairy production margin is equal to or less 
        than $6.00 (but greater than $5.00) for 2 consecutive months, 
        and during the same 2 consecutive months--
                    (A) the price in the United States for cheddar 
                cheese is equal to or greater than the world price of 
                cheddar cheese; or
                    (B) the price in the United States for nonfat dry 
                milk is equal to or greater than the world price of 
                skim milk powder;
            (3) the actual dairy production margin is equal to or less 
        than $5.00 (but greater than $4.00) for 2 consecutive months, 
        and during the same 2 consecutive months--
                    (A) the price in the United States for cheddar 
                cheese is more than 5 percent above the world price of 
                cheddar cheese; or
                    (B) the price in the United States for nonfat dry 
                milk is more than 5 percent above the world price of 
                skim milk powder; or
            (4) the actual dairy production margin is equal to or less 
        than $4.00 for 2 consecutive months, and during the same 2 
        consecutive months--
                    (A) the price in the United States for cheddar 
                cheese is more than 7 percent above the world price of 
                cheddar cheese; or
                    (B) the price in the United States for nonfat dry 
                milk is more than 7 percent above the world price of 
                skim milk powder.
    (c) Implementation by Handlers.--Effective on the day after the 
date of the announcement by the Secretary under subsection (b) of the 
suspension of the stabilization program, the handler shall cease 
reducing payments to participating dairy operations under the 
stabilization program.
    (d) Condition on Resumption of Stabilization Program.--Upon the 
announcement by the Secretary under subsection (b) that the 
stabilization program has been suspended, the stabilization program may 
not be implemented again until, at the earliest--
            (1) 2 months have passed, beginning on the first day of the 
        month immediately following the announcement by the Secretary; 
        and
            (2) the conditions of section 1432(a) are again met.

SEC. 1437. ENFORCEMENT.

    (a) Unlawful Act.--It shall be unlawful and a violation of the this 
subpart for any person subject to the stabilization program to 
willfully fail or refuse to provide, or delay the timely reporting of, 
accurate information and remittance of funds to the Secretary in 
accordance with this subpart.
    (b) Order.--After providing notice and opportunity for a hearing to 
an affected person, the Secretary may issue an order against any person 
to cease and desist from continuing any violation of this subpart.
    (c) Appeal.--An order of the Secretary under subsection (b) shall 
be final and conclusive unless an affected person files an appeal of 
the order of the Secretary in United States district court not later 
than 30 days after the date of the issuance of the order. A finding of 
the Secretary in the order shall be set aside only if the finding is 
not supported by substantial evidence.
    (d) Noncompliance With Order.--If a person subject to this subpart 
fails to obey an order issued under subsection (b) after the order has 
become final and unappealable, or after the appropriate United States 
district court has entered a final judgment in favor of the Secretary, 
the United States may apply to the appropriate United States district 
court for enforcement of the order. If the court determines that the 
order was lawfully made and duly served and that the person violated 
the order, the court shall enforce the order.

SEC. 1438. AUDIT REQUIREMENTS.

    (a) Audits of Dairy Operation and Handler Compliance.--
            (1) Audits authorized.--If determined by the Secretary to 
        be necessary to ensure compliance by participating dairy 
        operations and handlers with the stabilization program, the 
        Secretary may conduct periodic audits of participating dairy 
        operations and handlers.
            (2) Sample of dairy operations.--Any audit conducted under 
        this subsection shall include, at a minimum, investigation of a 
        statistically valid and random sample of participating dairy 
        operations.
    (b) Submission of Results.--The Secretary shall submit the results 
of any audit conducted under subsection (a) to the Committee on 
Agriculture of the House of Representatives and the Committee on 
Agriculture, Nutrition, and Forestry of the Senate and include such 
recommendations as the Secretary considers appropriate regarding the 
stabilization program.

SEC. 1439. STUDY; REPORT.

    (a) In General.--The Secretary shall direct the Office of the Chief 
Economist to conduct a study of the impacts of the program established 
under section 1431(a).
    (b) Considerations.--The study conducted under subsection (a) shall 
consider--
            (1) the economic impact of the program throughout the dairy 
        product value chain, including the impact on producers, 
        processors, domestic customers, export customers, actual market 
        growth and potential market growth, farms of different sizes, 
        and different regions and States; and
            (2) the impact of the program on the competitiveness of the 
        United States dairy industry in international markets.
    (c) Report.--Not later than December 1, 2016, the Office of the 
Chief Economist shall submit to the Committee on Agriculture of the 
House of Representatives and the Committee on Agriculture, Nutrition, 
and Forestry of the Senate a report that describes the results of the 
study conducted under subsection (a).

                       Subpart C--Administration

SEC. 1451. DURATION.

    The production margin protection program and the stabilization 
program shall end on December 31, 2017.

SEC. 1452. ADMINISTRATION AND ENFORCEMENT.

    (a) In General.--The Secretary shall promulgate regulations to 
address administrative and enforcement issues involved in carrying out 
the production margin protection, supplemental production margin 
protection, and market stabilization programs.
    (b) Reconstitution and Eligibility Issues.--
            (1) Reconstitution.--Using authorities under section 
        1001(f) and 1001B of the Food Security Act of 1985 (7 U.S.C. 
        1308(f), 1308-2), the Secretary shall promulgate regulations to 
        prohibit a dairy producer from reconstituting a dairy operation 
        for the sole purpose of the dairy producer--
                    (A) receiving basic margin protection;
                    (B) purchasing supplemental margin protection; or
                    (C) avoiding participation in the market 
                stabilization program.
            (2) Eligibility issues.--Using authorities under section 
        1001(f) and 1001B of the Food Security Act of 1985 (7 U.S.C. 
        1308(f), 1308-2), the Secretary shall promulgate regulations--
                    (A) to prohibit a scheme or device;
                    (B) to provide for equitable relief; and
                    (C) to provide for other issues affecting 
                eligibility and liability issues.
            (3) Administrative appeals.--Using authorities under 
        section 1001(h) of the Food Security Act of 1985 (7 U.S.C. 
        1308(h)) and subtitle H of the Department of Agriculture 
        Reorganization Act (7 U.S.C. 6991 et seq.), the Secretary shall 
        promulgate regulations to provide for administrative appeals of 
        decisions of the Secretary that are adverse to participants of 
        the programs described in subsection (a).

                   PART II--DAIRY MARKET TRANSPARENCY

SEC. 1461. DAIRY PRODUCT MANDATORY REPORTING.

    (a) Definitions.--Section 272(1)(A) of the Agricultural Marketing 
Act of 1946 (7 U.S.C. 1637a(1)(A)) is amended by inserting ``, or any 
other products that may significantly aid price discovery in the dairy 
markets, as determined by the Secretary'' after ``of 1937''.
    (b) Mandatory Reporting for Dairy Products.--Section 273(b) of the 
Agricultural Marketing Act of 1946 (7 U.S.C. 1637b(b)) is amended--
            (1) by striking paragraph (1) and inserting the following 
        new paragraph:
            ``(1) In general.--In establishing the program, the 
        Secretary shall only--
                    ``(A)(i) subject to the conditions described in 
                paragraph (2), require each manufacturer to report to 
                the Secretary, more frequently than once per month, 
                information concerning the price, quantity, and 
                moisture content of dairy products sold by the 
                manufacturer and any other product characteristics that 
                may significantly aid price discovery in the dairy 
                markets, as determined by the Secretary; and
                    ``(ii) modify the format used to provide the 
                information on the day before the date of enactment of 
                this subtitle to ensure that the information can be 
                readily understood by market participants; and
                    ``(B) require each manufacturer and other person 
                storing dairy products (including dairy products in 
                cold storage) to report to the Secretary, more 
                frequently than once per month, information on the 
                quantity of dairy products stored.''; and
            (2) in paragraph (2), by inserting ``or those that may 
        significantly aid price discovery in the dairy markets'' after 
        ``Federal milk marketing order'' each place it appears in 
        subparagraphs (A), (B), and (C).

SEC. 1462. FEDERAL MILK MARKETING ORDER INFORMATION.

    (a) Information Clearinghouse.--
            (1) In general.--The Secretary shall, on behalf of each 
        milk marketing order issued under the Agricultural Adjustment 
        Act (7 U.S.C. 601 et seq.), reenacted with amendments by the 
        Agricultural Marketing Agreement Act of 1937, establish an 
        information clearinghouse for the purposes of educating the 
        public about the Federal milk marketing order system and any 
        marketing order referenda, including proposal information and 
        timelines that shall be kept current and updated as information 
        becomes available.
            (2) Requirements.--Information under paragraph (1) shall 
        include--
                    (A) information on procedures by which cooperatives 
                vote;
                    (B) if applicable, information on the manner by 
                which producers may cast an individual ballot;
                    (C) in applicable, instructions on the manner in 
                which to vote online;
                    (D) due dates for each specific referendum;
                    (E) the text of each referendum question under 
                consideration;
                    (F) a description in plain language of the 
                question;
                    (G) any relevant background information to the 
                question; and
                    (H) any other information that increases Federal 
                milk marketing order transparency.
    (b) Notification List for Upcoming Referendum.--Each Federal milk 
marketing order shall--
            (1) make available the information described in subsection 
        (b) through an Internet site; and
            (2) publicize the information in major agriculture and 
        dairy-specific publications on upcoming referenda.
    (c) Study.--
            (1) In general.--The Secretary shall conduct a study of the 
        feasibility of establishing 2 classes of milk, a fluid class 
        and a manufacturing class, to replace the 4-class system in 
        effect on the date of enactment of this Act in administering 
        Federal milk marketing orders.
            (2) Federal milk market order review commission.--The 
        Secretary may elect to use the Federal Milk Market Order Review 
        Commission established under section 1509(a) of the Food, 
        Conservation, and Energy Act of 2008 (Public Law 110-246; 122 
        Stat. 1726), or documents of the Commission, to conduct all or 
        part of the study.
            (3) Report.--Not later than 180 days after the date of 
        enactment of this Act, the Secretary shall submit to the 
        Committee on Agriculture of the House of Representatives and 
        the Committee on Agriculture, Nutrition, and Forestry of the 
        Senate a report that describes the results of the study 
        required under this subsection, including any recommendations.

 PART III--REPEAL OR REAUTHORIZATION OF OTHER DAIRY-RELATED PROVISIONS

SEC. 1471. REPEAL OF DAIRY PRODUCT PRICE SUPPORT AND MILK INCOME LOSS 
              CONTRACT PROGRAMS.

    (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 Program.--
            (1) Payments under milk income loss contract program.--
        Section 1506(c) of the Food, Conservation, and Energy Act of 
        2008 (7 U.S.C. 8773(c)) is amended--
                    (A) in paragraph (2)(A), by striking ``$16.94'' and 
                inserting ``$18.85''; and
                    (B) in paragraph (3)--
                            (i) in subparagraph (A), by inserting 
                        ``and'' after the semicolon;
                            (ii) in subparagraph (B), by striking 
                        ``August 31, 2013, 45 percent; and'' and 
                        inserting ``on the date that is 270 days after 
                        the date of enactment of the Dairy Income 
                        Fairness Act of 2013, 45 percent.''; and
                            (iii) by striking subparagraph (C).
            (2) Extension.--Section 1506(h)(1) of the Food, 
        Conservation, and Energy Act of 2008 (7 U.S.C. 8773(h)(1)) is 
        amended by striking ``September 30, 2013'' and inserting ``the 
        date that is 270 days after the date of enactment of the Dairy 
        Income Fairness Act of 2013''.
            (3) Repeal.--Effective on the date that is 271 days after 
        the date of enactment of the Dairy Income Fairness Act of 2013, 
        section 1506 of the Food, Conservation, and Energy Act of 2008 
        (7 U.S.C. 8773) is repealed.

SEC. 1472. REPEAL OF DAIRY EXPORT INCENTIVE PROGRAM.

    (a) Repeal.--Section 153 of the Food Security Act of 1985 (15 
U.S.C. 713a-14) is repealed.
    (b) Conforming Amendments.--Section 902(2) of the Trade Sanctions 
Reform and Export Enhancement Act of 2000 (22 U.S.C. 7201(2)) is 
amended--
            (1) by striking subparagraph (D); and
            (2) by redesignating subparagraphs (E) and (F) as 
        subparagraphs (D) and (E), respectively.

SEC. 1473. EXTENSION OF DAIRY FORWARD PRICING PROGRAM.

    Section 1502(e) of the Food, Conservation, and Energy Act of 2008 
(7 U.S.C. 8772(e)) is amended--
            (1) in paragraph (1), by striking ``2012'' and inserting 
        ``2017''; and
            (2) in paragraph (2), by striking ``2015'' and inserting 
        ``2020''.

SEC. 1474. EXTENSION OF DAIRY INDEMNITY PROGRAM.

    Section 3 of Public Law 90-484 (7 U.S.C. 450l) is amended by 
striking ``2012'' and inserting ``2017''.

SEC. 1475. EXTENSION OF DAIRY PROMOTION AND RESEARCH PROGRAM.

    Section 113(e)(2) of the Dairy Production Stabilization Act of 1983 
(7 U.S.C. 4504(e)(2)) is amended by striking ``2012'' and inserting 
``2017''.

SEC. 1476. EXTENSION OF FEDERAL MILK MARKETING ORDER REVIEW COMMISSION.

    Section 1509(a) of the Food, Conservation, and Energy Act of 2008 
(Public Law 110-246; 122 Stat. 1726) is amended by inserting ``or other 
funds'' after ``Subject to the availability of appropriations''.

              PART IV--FEDERAL MILK MARKETING ORDER REFORM

SEC. 1481. FEDERAL MILK MARKETING ORDER PROGRAM PRE-HEARING PROCEDURE 
              FOR CLASS III PRICING.

    (a) In General.--The Secretary shall use the pre-hearing procedure 
described in this section to determine to conduct a hearing to consider 
alternative formulas for Class III milk product pricing under section 
8c of the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with 
amendments by the Agricultural Marketing Agreement Act of 1937.
    (b) Requests for Proposals.--
            (1) In general.--Not later than 60 days after the date of 
        enactment of this Act, the Secretary shall issue a request for 
        the submission by interested persons of preliminary proposals 
        for replacement of the Class III milk product pricing formula.
            (2) Preliminary proposals.--Preliminary proposals submitted 
        under paragraph (1)--
                    (A) may include competitive pay price formulas; and
                    (B) shall provide sufficient detail in concept to 
                serve as the basis for the convening by the Secretary 
                of a public information session for review and 
                discussion in accordance with section 900.24 of title 
                7, Code of Federal Regulations (as in effect on the 
                date of enactment of this Act), but need not conform 
                with the other procedural requirements of part 900 of 
                title 7, Code of Federal Regulations (as in effect on 
                the date of enactment of this Act).
    (c) Pre-Hearing Information Session Review.--
            (1) In general.--Not later than 180 days after the date of 
        enactment of this Act, the Secretary shall convene a public 
        information session under section 900.24 of title 7, Code of 
        Federal Regulations (as in effect on the date of enactment of 
        this Act).
            (2) Requirements.--The Secretary shall review all 
        preliminary proposals submitted under this section that are of 
        sufficient conceptual detail to allow for the review described 
        in paragraph (1).
    (d) Hearing Determination.--
            (1) In general.--Not later than 90 days after the conduct 
        of the public information session under subsection (c), the 
        Secretary shall determine whether to conduct a formal hearing 
        in accordance with part 900 of title 7, Code of Federal 
        Regulations (as in effect on the date of enactment of this 
        Act).
            (2) Hearing to be conducted.--If the Secretary determines 
        under paragraph (1) to conduct a formal hearing, the Secretary 
        shall issue notice and conduct the hearing in accordance with 
        part 900 of title 7, Code of Federal Regulations (as in effect 
        on the date of enactment of this Act).
            (3) Hearing not to be conducted.--If the Secretary 
        determines under paragraph (1) not to conduct a formal hearing, 
        not later than 90 days after that determination, the Secretary 
        shall submit to the Committee on Agriculture of the House of 
        Representatives and the Committee on Agriculture, Nutrition and 
        Forestry of the Senate a written report that explains the basis 
        for the decision.
    (e) Proceeding With a Hearing at Any Time.--Consistent with the 
purposes of this section, the Secretary may dispense with the pre-
hearing requirements of this section and initiate at any time a formal 
hearing under part 900 of title 7, Code of Federal Regulations (as in 
effect on the date of enactment of this Act).

SEC. 1482. FEDERAL MILK MARKETING ORDERS.

    Not later than 180 days after the date of enactment of this Act, 
the Secretary shall conduct hearings--
            (1) to analyze the implications of transitioning from a 4-
        class system for milk products to a 2-class system;
            (2) to explore methods to improve signals for price 
        discovery in the short- and long-term to allow dairy producers 
        to better use risk management tools; and
            (3) to assess whether a 2-class competitive pay pricing 
        system for milk products would be more or less transparent than 
        the system in effect as of the day before the date of enactment 
        of this Act.

                         PART V--EFFECTIVE DATE

SEC. 1491. EFFECTIVE DATE.

    Except as otherwise provided in this subtitle, this subtitle and 
the amendments made by this subtitle take effect on October 1, 2012.
                                 <all>