AUGUSTA -- Sidney dairy farmer Dale Cole points to two recent food scares as evidence that local food is best.

Think tainted spinach.

Think poisoned dog food.

"It's important to have food come from local sources," he said.

Cole, a second-generation farmer who milks 100 cows, said his industry is doing better than it was four years ago, when dairy farmers showed up at the Statehouse in droves -- with cows in tow -- to plead for help.

But three straight years of poor crops, rising fuel and energy prices, and increasing feed prices continue to make his profession one of the least predictable.

Legislation that goes before lawmakers on Monday seeks to bring a little more stability to dairy farmers, who have seen family farms close at rapid rates in recent years.

After a steady decline in the number of dairy farms in Maine, the number has stabilized at 350, said Julie-Marie Bickford, executive director of the Maine Dairy Industry Association. Those that have closed recently have gotten out of the business for reasons other than "complete economic collapse," she said.

In 2003, the state gave farmers $4 million in temporary assistance, and later created a program by which farmers get money when the price of milk falls below a certain level.

"With the tier program, we're absolutely more stable," said Cole, president of the Maine Dairy Industry Association.

Farmers get different payments depending on how much milk they produce and the price of milk per hundredweight, which is set by the federal government. If the price is high, they don't get any payments.

The program is funded partly by a tax placed on milk processors and partly by the state General Fund. From August 2005, when the tax was first instituted, through December 2006, the state collected $4 million from the tax, but paid out nearly $12 million to farmers, according to the state Department of Agriculture.

To more adequately cover the cost of the program, Rep. John Piotti, D- Unity, is sponsoring a bill to raise the fee from a maximum of 12 cents per gallon to a maximum of 36 cents per gallon.

"There's so much money going out on dairy relief the existing fee is not keeping pace," he said.

If Piotti's bill had been in place last year, it would have generated $10.6 million, according to the agriculture department.

Piotti said processors and retailers should be able to absorb the extra cost, though nothing prevents them from passing it along to consumers.

Vermont lost 100 farms, while the number of Maine farms has been stable, he said.

Piotti and farmers say that's because the state stepped in to help.

"Maine has developed an ingenious system where the industry asked to have its own product taxed and have the money go back to the industry," Piotti said.

While Maine has taken steps to help the dairy industry, nationally, it's a difficult time for dairy farmers, said Ken Bailey, an associate professor of agricultural economics at Penn State University.

"Every three or four years we go through these years when you reach the end of the rope and you're about to go nuts," said Bailey, who specializes in dairy policy and price analysis.

Feed prices started going up last fall when the federal government gave a subsidy to ethanol producers to buy corn, he said.

The federal government does continue to provide some support to dairy farmers, but it doesn't come anywhere near what's needed to cover all losses, Bailey said.

"When you lose a dairy farm in Maine, you're losing a lot of economic activity in rural areas," he said. "It adds to the quality of life in Maine."

Yet it's not all bad news.

He said global demand for dry whey, which is used for food processing and animal feed, is high. Countries such as China, Canada, Mexico and Korea have strong demand for dry whey, which is the dried product made from the fluid separated from milk and cream.

The Maine Legislature's Agriculture, Conservation and Forestry Committee on Monday will also consider a bill sponsored by Sen. Peter Mills, R-Cornville, which seeks to add interest and depreciation on machinery and equipment to the farmer payment system.

Some dairy farmers, such as Jeff Bragg of Sidney, switched to organic dairy farming more than two years ago to try to avoid some of the volatility of the traditional milk market. The Mills bill would allow him to claim interest and depreciation on his equipment.

With machines and equipment to feed and milk the cows, and others to help with planting, harvesting, haying and handling manure, he's had to become handy with tools so he can repair anything that's broken.

He built a shop so he can do the work year round. If he didn't do it, it would cost $50 to $60 an hour to pay a mechanic.

"There's a lot of equipment on a dairy farm," he said. "One of the largest problems I see is the inability to replace equipment."

A second, more controversial part of the Mills bill would prohibit retail stores from selling milk for a price that exceeds 10 percent of the minimum retail price set by the Maine Milk Commission.

"Right now, the retail price of milk is two and a half to three times greater than what the farmer is getting," Mills said.

If a gallon of milk is selling at a grocery store for $3.98, the farmer gets $1.24, according to the Maine Dairy Industry Association.

A spokeswoman for Hannaford Bros. Co. in Scarborough declined to comment, saying the company wanted to wait until Monday to discuss both bills with lawmakers.

Mills, who represents many dairy farmers in his district, said farms not only supply fresh local milk, they preserve open space, provide jobs, and keep feed stores and tractor suppliers in business.

If the number of farmers falls below a critical mass, the whole industry could collapse, he said.

"Think of all the consequences to the landscape," he said. "The jobs. The whole way of life."

Susan Cover -- 623-1056

scover@centralmaine.com