When the 2008 federal Farm Bill expired on Sept. 30, the milk income-loss contract program expired with it, leaving thousands of dairy farmers without a much-needed cushion against falling milk prices.

It was the latest in a series of blows for small farms trying to make it at a difficult time, and it highlights just how badly a change is needed in the milk pricing structure.

The MILC program acts as a buffer, compensating dairy producers when the price of milk falls below a certain level. The problem is, even with that buffer, the cost of producing milk exceeds the price the farmer is being paid, and that gulf is getting wider all the time. In 2011, regional processors were paying $20.64 per hundredweight, while studies show it costs local farms, including feed, fuel and labor, about $25.03.

“What with the Midwest drought and all, the price of grain is up three times what it was a few years ago,” said Bill Rust, who passed on to his sons the 650-acre Rusty Knoll Farm in Gorham, with its 130 milking cows. “But has the price of milk come up three times? Of course not. We have no control at all over the price we get.”

Milk prices haven’t moved because they are set not by the farm or how much it costs to produce, but according to a complex system based in part on the going rate for futures at the Chicago Mercantile Exchange. Milk pricing is different from other agricultural goods, the thinking goes, because it is produced every day and is highly perishable, it has multiple uses, and it is seasonal. In the short run, supply and demand are not linked like with other goods: a cow gives milk, whether someone wants it or not. That’s the argument on the wide scale, anyway.

But without the ability to charge what they like and compete among themselves, local dairy producers are fighting a losing battle against rising prices that will eventually put most of the small-scale producers out of business.

What’s at stake? In Maine, it is the 306 dairy farms accounting for more than 5,000 jobs and 700,000 acres of farmland. However, that is down from 479 farms in 2007 and 776 in 1997, mostly due to the pressures of the pricing system and rising costs. Similar figures can be found in New Hampshire and Vermont, and likely across the country, as well.

An amendment to the Farm Bill offered by Maine Sen. Olympia Snowe and Sen. Kirsten Gillibrand of New York is aimed at helping those farms feeling the pinch. The amendment, which has been supported in the Senate, asks for analysis of the federal pricing scheme, and would help protect the small dairy farms that make up the industry in Maine. It is the first step toward ending the volatile and complex pricing that harms small-scale dairy farms, and, along with the encouraging consumers to buy locally sourced products, is part of the solution for an ailing dairy industry.

Ben Bragdon, managing editor