MONTPELIER, Vt. (AP) -- The farm bill passed by the U.S. Senate includes a new program designed to stabilize milk price paid to farmers by managing the supply of some milk and allowing farmers to buy insurance that pays out when milk prices plummet, which Vermont's congressional delegation called a big step forward on Monday.
A provision of the voluntary program is designed to stop the dramatic swings in prices paid to dairy farmers for their milk. When milk prices drop, farmers produce more to pay their bills, flooding the market which causes prices to drop further. Under the five-year farm bill passed by the Senate on June 21, farmers who participate would decrease production when prices drop and could buy federally subsidized insurance on a margin between production costs and the price of milk.
"This is going to help stabilize the volatile price roller coaster," said Sen. Patrick Leahy, a Democratic member of the Senate Agriculture Committee.
"It was built from the ground up, and it came from ideas we heard first here in Vermont," he said.
As farmers faced record low prices in 2006, a group called Dairy Farmers Working Together started with the mission of stabilizing milk prices by balancing supply and demand. The group has traveled the country to discuss the concept.
The new dairy program replaces the Milk Income Loss Contract, which provides payments to dairy farmers when prices fall below a certain level.
It's an excellent compromise and accomplished what we wanted it to," said Woodstock dairy farmer Paul Doton. "It's the margin that's going to be stabilized. We're insuring the margin."
Agriculture Secretary Tom Vilsack on Friday urged the Republican-led House to vote on a farm policy bill. Without it, livestock producers could be exposed to disasters and other farmers uncertain about the future, he said.