The volatility in dairy product prices and dairy producer milk prices is extremely difficult for dairy producers, milk processors and end users of milk and dairy products to manage. Such volatility creates major problems for dairy producers to manage cash flow and make capital investment decisions. When prices are at their lows returns over feed costs become unfavorable and even negative. These unfavorable returns have a negative impact beyond the dairy producer level. Farm input suppliers are negatively impacted as dairy producers reduce their purchases of feed, seed, fertilizer, crop chemicals, machinery and other inputs. These lower input purchases negatively impact local businesses and communities. Program objectives: • To prevent severely depressed producer milk prices that result in low and negative returns over feed costs to dairy producers. • To reduce the volatility of dairy product prices and producer milk prices and thereby reduce the price risk to dairy producers, dairy processors and end users of milk and dairy products. • Provide flexibility in allowing dairy producers who wish to expand their dairy operations as well as providing for new producers who wish to enter dairying. • To complement and not replace other existing dairy programs such as the federal dairy price support program and the Milk Income Loss Contract Program. In fact, this program would reduce the federal government cost of both of these two programs. • Provide for a long run dairy program for seven years with a five year review for continuation and/or modifications based on past performance. Program provisions: • The program is mandatory in that all states will be included. However, it is flexible in that individual producers may decide to expand their dairy operation and new producers are allowed to enter the dairy industry. States having programs to grow their dairy industry will still be able to implement such programs. • For the purpose of this legislation, the term “new producer” shall be defined as any individual or group of individuals entering the dairy business, none of whom have any interest in milk producing cows at the time of this bill’s enactment. • Upon implementation of the program, each dairy producer will be assigned an initial base of raw milk marketings using an average of the calendar years 2007, 2008, and 2009. • There will be a committee setup to review individual appeals. • For those producers with less than a 3-year history, calendar year 2009 will be their initial allowable milk marketings base. Each producer’s base will be divided into their quarterly historical milk marketings. Bases are a moving base whereby at the beginning of the next 12-month period, a producer’s base will be the recent past 12 months. The base is assigned to the producer owning the producer license for the dairy operation. • Bases can be transferred by filing the exchange with the Farm Service Agency.