Burlington Free Press staff report

The bill would create a disincentive for farmers to rapidly increase milk production when prices increase.

"Following last year's devastating dairy price crisis, the need for a plan to match supply with demand is clear," Welch said in a news release. "To delay in addressing the enduring challenges of price volatility is to leave Vermont farmers vulnerable to a system that simply is not working."

In 1999, there were 1,782 dairy farms in Vermont. In December, that tally had fallen to 1,026, according to data from the Vermont Agency on Agriculture. Welch said introducing the legislation is an important first step. "Working together, we will refine it to ensure that it works for dairy farmers -- in Vermont and throughout the country," he said.

The legislation calls on the U.S. Department of Agriculture to determine the capacity for growth in the dairy market every three months. Producers who exceed the percentage increase allowed by the USDA would pay a fee, which would be distributed to all farmers.

Bob Wellington, the senior economist for Agri-Mark Inc., explained why some form of supply management is needed during a dairy summit in Burlington last month.

A 2 percent to 3 percent oversupply of milk causes prices to fall 20 percent to 30 percent, Wellington said. Last year, there was a 5 percent oversupply. That forced prices from about $18 a hundredweight in 2008 to $12 a hundredweight in 2009, he said, causing financial agony among dairy farmers in Vermont and throughout the country. A hundredweight, the unit commonly used to sell milk in bulk, is 11.6 gallons.

Earlier this year, Wellington estimated that the typical Vermont dairy farm lost $100,000 last year.

Vermont Secretary of Agriculture Roger Allbee expressed his support for the Welch's measure Friday.

"It is well recognized that the current federal pricing system is broken, and that growth management is needed to reduce the extreme price volatility that exists that is bringing economic havoc to farmers, their families, and our rural landscape," Allbee said.

The bill allows farmers to vote on whether to enact the program. After three years, farmers would vote again on whether to continue it.

Welch said he will introduce the Dairy Price Stabilization Act next week with Rep. Jim Costa, D-Calif.