S 2525 IS

To establish regional dairy marketing areas to stabilize the price of milk and support the income of dairy producers.

June 16, 2004

Mr. SPECTER (for himself and Mr. SCHUMER) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry

To establish regional dairy marketing areas to stabilize the price of milk and support the income of dairy producers.

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 `National Dairy Equity Act of 2004'.

SEC. 2. REGIONAL DAIRY MARKETING AREAS.

Subtitle E of title I of the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 7981 et seq.) is amended--

(1) by inserting before section 1501 (7 U.S.C. 7981) the following:

`CHAPTER 1--GENERAL PROVISIONS';

(2) by adding at the end the following:

`CHAPTER 2--REGIONAL DAIRY MARKETING AREAS

`SEC. 1511. DEFINITIONS.

`In this chapter:

`(1) Board- The term `Board' means the Regional Dairy Board established for a Region under section 1514.

`(2) Classes of milk- The terms `Class I milk', `Class II milk', `Class III milk', and `Class IV milk' mean milk (including components of milk) classified as Class I, II, III, or IV milk, respectively, under a Federal milk marketing order.

`(3) Covered processor- The term `covered processor' means a person or entity operating--

`(A) a milk plant located in the regulated area of a Region; or

`(B) a milk plant that, while not located in the regulated area of a Region, distributes Class I milk products in a regulated area.

`(4) Eligible producer- (A) The term `eligible producer' means an individual or entity that the Secretary determines directly or indirectly--

`(i) shares in the risk of producing milk; and

`(ii) makes contributions (including land, labor, management, equipment, or capital) to the dairy farming 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.

`(B) The term does not include an individual or entity that elects under section 1512(c) to continue to receive national dairy market loss payments pursuant to a contract entered into under section 1502.

`(5) Fund- The term `Fund' means the National Dairy Producers Fund established under section 1518.

`(6) Federal milk marketing order- The term `Federal milk marketing order' means a Federal 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) Over-order premium- The term `over-order premium' means the difference between--

`(A) the over-order price established by the Board for the regulated area of a Region; and

`(B) the Class I milk price per hundredweight in Boston under the applicable Federal milk marketing order.

`(8) Over-order price- The term `over-order price' means the minimum price for Class I milk in the regulated area of a Region, as established by the Board by regulation under section 1515.

`(9) Partially regulated plant- (A) The term `partially regulated plant' means--

`(i) a milk plant that, while not located in the regulated area of a Region, distributes Class I milk products in a regulated area; or

`(ii) a milk plant that, while located in the regulated area of a Region, distributes Class I milk products in the regulated area of a different Region.

`(B) The term does not include a milk plant described in subparagraph (A) that distributes less than a minimum quantity of Class I milk in the regulated area in which such distribution occurs, or derives less than a minimum quantity of receipts from such distribution. The Board for the regulated area in which such distribution occurs shall establish the minimum quantity of milk or receipts for purposes of this exclusion.

`(10) Participating state- The term `participating State' means a State that is designated as a participating State in a Region under section 1512.

`(11) Pool plant- The term `pool plant' means a milk plant located in the regulated area of a Region.

`(12) Region- The term `Region' means a Regional Dairy Marketing Area established under section 1513.

`(13) Regulated area- The term `regulated area' means that portion of a Region consisting of participating States.

`(14) Secretary- The term `Secretary' means the Secretary of Agriculture.

`SEC. 1512. PARTICIPATING STATES.

`(a) Designation of Participating States- For the purpose of this chapter, the following States are participating States:

`(1) Each State in the Northeast, Southern, and Upper Midwest Regions specified in section 1513.

`(2) Each State in a different Region specified in section 1513, if that State elects to become a participating State by providing to the Secretary written notice through the Governor of the State in accordance with State law.

`(b) Termination of Participation-

`(1) Method of termination- To terminate the designation of a State as a participating State in a Region, the Governor of the State (with the concurrence of the legislature of the State) shall submit written notice to the Secretary and the applicable Board of the termination.

`(2) Effective date of termination-

`(A) Initial termination authority- If a State submits the written notice required by paragraph (1) before the end of the 30-day period beginning on the date of enactment of this chapter, the termination of the designation of the State as a participating State shall take effect 30 days after the date on which the notice was submitted.

`(B) Subsequent termination authority- If a State submits the written notice required by paragraph (1) after the end of the period specified in subparagraph (A), the termination of the designation of the State as a participating State shall take effect 1 year after the date on which notice was submitted.

`(c) Relation to National Dairy Market Loss Payments-

`(1) Election of benefits- In the case of each eligible producer operating in a participating State that is also a party to a contract entered into under section 1502 to receive national dairy market loss payments, the Secretary shall give the producer a 60-day period within which to elect to terminate the contract and to instead receive payments under this chapter. The 60-day period for eligible producers in a State shall commence on the date on which the State is first designated as a participating State under subsection (a).

`(2) Effective date of termination- If an eligible producer elects to terminate a contract under section 1502, as authorized by paragraph (1), the termination shall take effect on the date on which payments are first made to eligible producers under section 1521 in the participating State in which the producer operates.

`(3) Protection during initial state termination period- If a State exercises the initial termination authority provided under subsection (b), any election made by an eligible producer in that State under paragraph (1) to terminate a contract under section 1502 shall not take effect.

`(4) Effect of election to continue contract- An eligible producer that does not elect to terminate a contract under section 1502, as authorized by paragraph (1), shall cease to be an eligible producer for the purpose of this chapter at the end of the period specified in such paragraph. The contract of such a producer shall terminate on September 30, 2005, notwithstanding any amendment to section 1502 to extend the duration of such contracts. After that date, the producer shall be ineligible for national dairy market loss payments under section 1502 and ineligible for payments under this chapter.

`SEC. 1513. DAIRY MARKETING AREAS.

`There are established 5 Regional Dairy Marketing Areas to be composed of the following States, so long as the States are designated as participating States:

`(1) Northeast region- A Northeast Dairy Marketing Area composed of the States of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Vermont.

`(2) Southern region- A Southern Dairy Marketing Area composed of the States of Alabama, Arkansas, Florida, Georgia, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Texas, Tennessee, Virginia, and West Virginia.

`(3) Upper midwest region- An Upper Midwest Dairy Marketing Area composed of the States of Illinois, Indiana, Iowa, Michigan, Minnesota, North Dakota, South Dakota, and Wisconsin.

`(4) Intermountain region- An Intermountain Dairy Marketing Area composed of the States of Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming.

`(5) Pacific region- A Pacific Dairy Marketing Area composed of the States of Alaska, California, Hawaii, Oregon, and Washington.

`SEC. 1514. REGIONAL DAIRY BOARDS.

`(a) In General- Each Region shall be administered by a Regional Dairy Board.

`(b) Composition-

`(1) Number and appointment- The Board for a Region shall be composed of 3 members from each participating State in the Region, appointed by the Secretary from nominations submitted as provided in paragraph (2).

`(2) Nomination process- The members of the Board from a participating State shall be selected from at least 9 individuals nominated by the Governor of the State, except that, if the commissioner of the department of agriculture of the State is an elected position, the nominations for the State shall be made by the commissioner. The nominations shall be made in consultation with eligible producers and the dairy industry in the participating State.

`(3) Representation- Of the members of the Board nominated and appointed to represent a participating State--

`(A) at least 1 member shall be an eligible producer in the State at the time of nomination and appointment; and

`(B) at least 1 member shall be a consumer representative.

`(c) Terms-

`(1) In general- Except as provided in paragraph (2), each member of the Board shall serve for a term of 3 years.

`(2) Initial appointments- Of the members first appointed to the Board from a participating State, the Secretary shall appoint--

`(A) 1 member to serve a term of 1 year;

`(B) 1 member to a term of 2 years; and

`(C) 1 member to a term of 3 years.

`(d) Voting- The members of the Board representing a participating State shall be entitled to cast only 1 vote on behalf of the participating State in any vote taken by members of the Board.

`(e) Powers- In carrying out this chapter in a Region, the Board for the Region is authorized--

`(1) to investigate, or provide for investigations or research projects designed to review, the laws of participating States in the Region--

`(A) to measure the impact of the laws on--

`(i) the production and marketing of milk; and

`(ii) the shipment of milk and milk products in the Region; and

`(B) to review the administration and costs of the laws.

`(2) to study and recommend to participating States of the Region joint or cooperative programs for the administration of dairy marketing laws and to prepare estimates of cost savings and benefits of such programs;

`(3) to encourage harmonious relationships between the various elements of the dairy industry in the Region for the solution of material problems, including conducting symposia or conferences designed to improve dairy-industry relations; or resolve problems of the dairy industry;

`(4) to submit to participating States in the Region periodic reports on activities and programs of the Board;

`(5) to review the processing and marketing system for milk and milk products in the regulated area of the Region and to recommend changes in the system used for the production and distribution of milk to assist, improve, or promote more efficient production and distribution of milk;

`(6) to investigate costs and charges in the regulated area of the Region for producing, hauling, handling, processing, distributing, selling, and conducting all other services performed with respect to milk;

`(7) to examine--

`(A) economic forces affecting eligible producers in the Region;

`(B) probable trends in production and consumption of milk and milk products in the Region;

`(C) the level of dairy farm prices in relation to costs in the Region;

`(D) the financial condition of eligible producers in the Region; and

`(E) the need for an emergency order to relieve critical conditions on dairy farms in the regulated area;

`(8) to take such actions as may be necessary to manage any overproduction of milk in the regulated area of the Region, including the authority to develop and implement an incentive-based supply management program in addition to other actions to manage such overproduction; and

`(9) to issue such orders, promulgate such regulations, and take such other actions as are necessary to carry out this chapter in the regulated area of the Region.

`(f) Use of Other Agencies- The Board for a Region shall, to the maximum extent practicable, enter into agreements with Federal or State agencies for the exchange of information or services for the purpose of reducing regulatory burden and cost of administering this chapter. The Board may reimburse other agencies for the reasonable cost of providing the services.

`(g) Technical Assistance- At the request of the Board, the administrator of a Federal milk marketing order shall provide technical assistance to the Board. The Board shall reimburse the administrator for the reasonable cost of providing the technical assistance.

`SEC. 1515. ESTABLISHMENT OF OVER-ORDER PRICE FOR SALE OF CLASS I MILK.

`(a) Authority to Establish Over-Order Price- Subject to subsection (b), the Board for a Region may establish, by regulation, an over-order price for the sale of Class I milk in the regulated area of a Region that--

`(1) is higher than the price for Class I milk established under Federal milk marketing orders operating in the regulated area; and

`(2) is higher than the price for fluid milk otherwise applicable in any portion of the regulated area not covered by a Federal milk marketing order.

`(b) Maximum Authorized Over-Order Price- During the beginning on the date of the enactment of this chapter and ending on December 31, 2005, an over-order price established under subsection (a) may not exceed $17.50 per hundredweight. For each subsequent calendar year, the maximum over-order price applicable during the preceding year shall be adjusted by the Secretary to reflect changes for the 12-month period ending the preceding November 30 in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor.

`(c) Application of Over-Order Price and Premium-

`(1) Uniform prices- In the regulations establishing an over-order price, the Board shall provide for--

`(A) the payment of uniform prices to all eligible producers and associations of eligible producers delivering milk to all covered processors for all milk so delivered, irrespective of the uses made of the milk by an individual covered processor; or

`(B) the payment of uniform prices to all eligible producers and associations of eligible producers delivering milk to the same covered

processor for all milk delivered by the eligible producers and associations to that covered processor.

`(2) Payment by covered processors- As provided in section 1516, the over-order premium applicable to the regulated area of a Region, determined on the basis of the over-order price established under subsection (a) for the regulated area, shall be paid by pool plants, partially regulated plants, and all other covered processors receiving milk from eligible producers located in a regulated area.

`(3) Legal obligation to pay price- The legal obligation to pay the over-order price shall be determined solely by the terms and purpose of the regulation establishing the price, without regard to the location of the transfer of title, possession, or any other factors not related to the purposes of the regulation and this chapter.

`(4) Producer-handlers- A producer-handler (as defined in the applicable Federal milk marketing order) that sells not more 150,000 pounds of milk per month shall not be subject to an over-order price under this subsection or the payment of the resulting over-order premium.

`(d) Equalization Pools-

`(1) Over-order prices- In the case of regulations establishing an over-order price, the Board may establish 1 or more equalization pools within the regulated area for the sole purpose of equalizing returns to eligible producers throughout the regulated area.

`(2) Pooling and equalization of over-order prices- For purposes of the pooling and equalization of an over-order price--

`(A) the value of milk used in other use classifications shall be calculated at the appropriate class price established pursuant to the applicable Federal milk marketing order; and

`(B) the value of milk not covered by a Federal milk marketing order shall be calculated in relation to the nearest prevailing class price in accordance with and subject to such adjustments as the Board may prescribe by regulation.

`(e) Factors- In determining the amount of an over-order price to be established under this section, the Board shall consider--

`(1) the balance between production and consumption of milk and milk products in the regulated area;

`(2) the costs of milk production in the regulated area, including--

`(A) the price of feed, including the cost of hay, silage, pasture, and other forage;

`(B) the cost of labor, including the reasonable value of the eligible producer's own labor and management;

`(C) machinery expenses;

`(D) interest expenses; and

`(E) other cash expenses, including the cost of hauling, veterinary services and medicine, bedding and litter, marketing, custom services and supplies, fuel, lubrication, electricity, machinery and building repairs, labor, association fees, and assessments;

`(3) the prevailing price for milk outside the regulated area;

`(4) the purchasing power of the public; and

`(5) the price necessary to yield a reasonable return to the eligible producer.

`(f) Producer Settlement Funds- The regulations shall require that the account of any person regulated under the over-order price shall be adjusted for any payments made to or received by the person with respect to a producer settlement fund of any Federal milk marketing order within the regulated area.

`SEC. 1516. PAYMENTS FROM COVERED PROCESSORS.

`(a) Payments Required- Subject to subsection (b), each covered processor that purchases Class I milk during a month that will be sold in the regulated area of a Region shall pay to the Secretary an amount equal to the product obtained by multiplying--

`(1) the over-order premium in effect for the regulated area for the month; by

`(2) the quantity of Class I milk so purchased from eligible producers during the month.

`(b) Reduction for Any Applicable Equalization Payments- The product obtained under subsection (a) for a covered processor for a month shall be reduced by any applicable equalization payments made for the same month by the covered processor pursuant to regulations issued under section 1517(a).

`(c) Deposit of Payments in Fund- The Secretary shall deposit amounts received under this section in the Fund.

`SEC. 1517. OPTIONAL PROVISIONS FOR PRICING ORDERS.

`(a) Equalization Payments-

`(1) In general- In issuing regulations establishing an over-order price, the Board for a Region may include a provision to require persons that bring Class I milk into the regulated area of the Region to make equalization payments with respect to all such milk to the extent necessary to equalize the cost of milk purchased by covered processors subject to the over-order price.

`(2) Discrimination- The regulations shall not discriminate against milk producers outside the regulated area.

`(3) Amount- The regulations for equalization payments may require payment of the difference between--

`(A) the applicable over-order price; and

`(B) the Class I price required to be paid for the milk in the State of production by a Federal milk marketing order.

`(b) Partially Regulated Plants- The regulations issued by the Board for a Region may provide special provisions governing the pricing and pooling of milk handled by partially regulated plants.

`(c) Other Provisions- The regulations issued by the Board for a Region may contain such other provisions

and requirements as the Board determines are necessary or appropriate--

`(1) to effectuate the purposes of this chapter; and

`(2) to provide for the payment of fair and equitable minimum prices for milk sold by eligible producers.

`SEC. 1518. NATIONAL DAIRY PRODUCERS FUND.

`(a) Establishment- There is established in the Treasury of the United States a revolving fund to be known as the `National Dairy Producers Fund'. The fund shall consist of the following:

`(1) Payments by covered processors required to be deposited in the Fund under section 1516(c).

`(2) The interest on, and the proceeds from the sale or redemption of, any obligations held in the Fund under subsection (d).

`(3) To the extent that amounts referred to in the preceding paragraphs are insufficient to carry out this chapter, funds of the Commodity Credit Corporation, which shall be transferred by the Secretary to the Fund to make up the short-fall.

`(b) Expenditures From Fund- On request by the Secretary, the Secretary of the Treasury shall transfer from the Fund to the Secretary such amounts as the Secretary determines are necessary to carry out this chapter.

`(c) Investment of Amounts-

`(1) In general- The Secretary of the Treasury shall invest such portion of the Fund as is not, in the judgment of the Secretary, required to meet current operating requirements.

`(2) Investments- Investments may be made only in interest-bearing obligations of the United States.

`(3) Acquisition of obligations- For the purpose of investments under paragraph (1), obligations may be acquired--

`(A) on original issue at the issue price; or

`(B) by purchase of outstanding obligations at the market price.

`(4) Sale of obligations- Any obligation acquired by the Fund may be sold by the Secretary of the Treasury at the market price.

`SEC. 1519. COMPENSATION FOR ADMINISTRATIVE AND INCREASED FOOD ASSISTANCE COSTS.

`(a) Administrative Costs-

`(1) Board assessment for administrative costs- The Board for a Region may impose and collect an assessment on covered processors operating in the regulated area of the Region to cover administrative costs incurred by the Board to carry out its duties under this chapter. The assessment amount may not exceed $0.03 per hundredweight.

`(2) Use of fund- The Secretary shall use amounts in the Fund to cover--

`(A) administrative costs incurred by the Secretary to carry out this chapter; and

`(B) any administrative costs incurred by the Boards not covered by the assessments imposed under paragraph (1).

`(b) Increased Federal Food Assistance Costs- The Secretary shall use amounts in the Fund to cover the increased cost of any milk and milk products that results from carrying out this chapter--

`(1) child nutrition programs (as defined in section 25(b) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1769f(b)); and

`(2) nutrition services provided through projects carried out under part C of title IV of the Older Americans Act of 1965 (42 U.S.C. 3030e et seq.).

`(c) Increased State Food Assistance Costs- The Secretary shall use amounts in the Fund to make payments to each participating State for the increased costs incurred by the participating State of any milk or milk products provided under the special supplemental nutrition program for women, infants, and children established by section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786) that results from carrying out this chapter.

`(d) Compensation of Commodity Credit Corporation for Increased Milk Purchases- At the end of each month for which an over-order price is in effect for a Region, the Board of the Region shall compensate the Commodity Credit Corporation for the cost of any purchases of milk and milk products by the Corporation in the regulated area of the Region for that month resulting from a rate of increase in milk production for the month in the regulated area in excess of the national average rate of the increase in milk production over the 3-year period ending at the end of the preceding month, as determined by the Secretary.

`SEC. 1520. USE OF FUND TO ASSIST ELIGIBLE PRODUCERS.

`(a) Provision of Funds to Boards- The Secretary shall use amounts in the Fund to make monthly payments to the Boards.

`(b) Amount- The amount of a payment made to a Board for a Region for the most recent month for which data are available shall be the greater of--

`(1) the amount of payments made by covered processors to the Fund under section 1516 for purchases of Class I milk that will be sold in the regulated area of the Region during the month; or

`(2) the amount obtained by multiplying--

`(A) a payment quantity equal to the total quantity of all milk produced in the regulated area of the Region during the month;

`(B) a payment rate equal to the over-order premium in effect for the regulated area for the month; and

`(C) 50 percent.

`(c) Payments to Producers- The Board for a Region shall use amounts received under this section to make payments to eligible producers for all classes of milk that is produced in the regulated area of the Region.

`SEC. 1521. PRODUCER REFERENDUM.

`(a) Referendum Required- For the purpose of ascertaining whether the issuance, amendment, or termination of regulations establishing an over-order price is approved by eligible producers in the regulated area of a Region, the Board for the Region shall conduct a referendum among such eligible producers.

`(b) Timing- The referendum shall be held in a timely manner, as determined by regulation of the Board.

`(c) Ballot Content-

`(1) In general- The terms and conditions of the proposed order or amendment shall be described by the Board in the ballot used in the referendum.

`(2) Actions- The nature, content, or extent of the description shall not be used a basis for attacking the legality of the order or any action relating to the order.

`(d) Approval- An order or amendment shall be considered approved by eligible producers if the Board determines that the order or amendment is approved by a majority of the voting eligible producers who, during a representative period determined by the Board, have been engaged in the production of milk the price of which would be regulated under the proposed order or amendment.

`(e) Cooperatives-

`(1) In general- Subject to paragraphs (2) through (6), for the purpose of a referendum, the Board shall consider the approval or disapproval by any cooperative association of eligible producers qualified under the Act entitled `An Act to authorize association of producers of agricultural products' (commonly known as the `Capper-Volstead Act') (7 U.S.C. 291 et seq.) and engaged in marketing milk, or in rendering services for or advancing the interests of eligible producers, as the approval or disapproval of the eligible producers who are members or stockholders in, or under contract with, the cooperative association of eligible producers.

`(2) Common marketing agency- No cooperative that has been formed to act as a common marketing agency for both the cooperative and individual eligible producers shall be qualified to block vote for the cooperative or individual eligible producers.

`(3) Notification by cooperative-

`(A) In general- Any cooperative that is qualified to block vote shall, before submitting the approval or disapproval of the cooperative in any referendum, give prior written notice to each of the members of the cooperative as to whether and how the cooperative intends to cast the vote of the cooperative.

`(B) Administration- The notice shall be given in a timely manner as established, and in the form prescribed, by the Board.

`(4) Producer ballots-

`(A) In general- Any eligible producer may obtain a ballot from the Board in order to register approval or disapproval of the proposed order.

`(B) Ballots- If a cooperative provides notice to an eligible producer of the intent of the cooperative to approve or not approve a proposed order and the eligible producer casts a ballot that is contrary to the intent of the cooperative--

`(i) the eligible producer shall notify the Board as to the name of the cooperative of which the eligible producer is a member; and

`(ii) the Board shall--

`(I) remove the name of the eligible producer from the list certified by the cooperative of corporate vote of the cooperative; and

`(II) provide the eligible producer with an independent ballot that may be cast in the referendum.

`(5) Notification by board- In order to ensure that all eligible producers are informed regarding the proposed order, the Board shall notify all eligible producers that--

`(A) an order is being considered; and

`(B) each eligible producer may register the approval or disapproval of the eligible producer with the Board directly or through the cooperative of the eligible producer.

`SEC. 1522. ENFORCEMENT WITH RESPECT TO COVERED PROCESSORS.

`In the case of covered processors, the Board may enforce this chapter (including regulations establishing an over-order price and other regulations issued under this chapter) by--

`(1) commencing an action for legal or equitable relief brought in the name of the Board in Federal or State court of competent jurisdiction;

`(2) referral to the State agency for enforcement by judicial or administrative remedy with the agreement of the appropriate State agency of a participating State; or

`(3) bringing an action for an injunction to enforce this chapter, without being compelled to allege or prove that an adequate remedy of law does not exist.'.

SEC. 3. NATIONAL DAIRY MARKET LOSS PAYMENTS.

Section 1502 of the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 7982) is amended by striking `2005' each place it appears in subsections (f) and (g)(1) and inserting `2007'.

END