Connecticut dairy farmers are worried they will soon go out of business. They are getting less money for milk than they are spending to produce it.

Currently, local farmers are losing almost a dollar a gallon. In today’s market , a gallon of milk brings the producer only $1, while the cost of production is $1.90, according to a press release by Connecticut Farmers Bureau Association , based in Windsor.

This price disparity exists because the federal government fixes the milk price nationwide, taking into consideration the larger dairy farming states, such as Idaho and Wisconsin that produce at a lower cost.

The predetermined milk price is adversely affecting local farmers, small or big, because the cost of production in this part of the country runs much higher. For Matt Peckman, a small dairy farmer in Woodstock, it takes about $40,000 a month to keep his farm of 130 cows running. But with prices so low, he says he is not even meeting the cost, let alone making any profit.

“We are looking at a disaster,” said Peckman, 31, father of three young children . Peckman, who inherited the farm from his grandfather, is worried that he may soon have to abandon the business his family has been in for generations. “We’re basically losing 50 percent of our income. A family with three small kids can’t absorb a loss like that,” said Peckman.

In Connecticut, dairy farming is a billion dollar industry, which provides over 4,000 jobs, according to a report published by the Department of Economic and Community Development and the Department of Agriculture. The study says that the fall of this industry would have an impact on several other related services, as well.

“It is important to note that the dairy industry is not just farms and open space; it is transportation, heavy machinery , jobs in food production, manufacturing , construction and sales,” the report noted.

To keep this industry from fading out, dairy farmers are asking legislators in Hartford to create a system to protect them during dire economic times.

“We’re asking our government to recognize regional differences, in terms of cost of production,” said Peter Orr, a dairy farmer in Thompson and a member of the Connecticut Farm Bureau.

Some states with viable dairy industry , such as Massachusetts and South Carolina, provide tax credits to farmers whenever the price that farmers receive for milk falls below the cost of production , according to the DECD report.

Another Woodstock farmer, Paul Miller, owner of Fairvue Farm, says that he is losing about $10,000 a month. “We would like to be able to get our cost of production,” said Miller.

But when the state government itself is fighting an economic downturn, legislators in support of the farmers are looking at different avenues to keep this industry going.

One such proposition comes from Brian Hurlburt, a Democratic state representative and vice-chair of the Environmental Committee. He is proposing a bill to increase the retail license fee, which is currently a flat rate of $30, to $500 and reaching up to $3,000, depending on the volume of milk sold daily.

“We have to find a revenue stream,” said Rep. Hurlburt, who says that the small stores that sell less volume of milk will have to pay less than larger supermarkets. Hurlburt argues that the retailers have a mark-up price of $2 per gallon and hence they will be able to offset the increased fee without affecting the price to the consumer.

However, retailers are not too happy with such a proposition. They say that this kind of hike is going to add to the cost of doing business. “We are empathetic to the dairy farmers, but an increase of this magnitude is unjustified and exorbitant,” said Stan Sorkin, president of the Connecticut Food Association . Sorkin said that retailers are ready to accept an increase in license fee, but only up to $150.

The DECD study suggests various alternatives such as fuel tax exemption, reduction in transportation cost, incentives , tax credits, and so on. But time is running out for the farmers. Neither does the federal stimulus package offer any help for dairy agriculture, nor has the state government made any significant move.

Farmers such as Peckman and Miller, who don’t have any say about the price of their own products, are in a fix. They want something to be done, sooner than later. “If we don’t take the step now to protect the dairy industry, the whole issue of keeping low prices for milk will go out the window because there will be no local farmers and we’ll have to import [milk],” said Peckman.