updated 9/30/2009 2:30:55 PM ET 2009-09-30T18:30:55

Lawmakers from dairy-producing states announced agreement Wednesday on $350 million in aid for struggling milk farmers.

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Some $290 million would go for direct support of dairy farmers under a program to be devised by the Agriculture Department, according to Rep. David Obey and Sen. Herb Kohl, both Wisconsin Democrats. An additional $60 million would cover purchases of surplus cheese and other dairy products in hopes of raising prices. Food banks and other nutrition programs would get the goods.

The Senate had approved the $350 million in August, but without binding direction on how the money would help farmers.

"These are desperate times in farming," Kohl said.

The contentious issue of dairy subsidies clouded talks between House and Senate negotiators trying to reach a compromise. Supporters of smaller dairy operations in Wisconsin, Vermont and other states faced off against lawmakers such as Sen. Dianne Feinstein, D-Calif., whose state is home to huge dairy operations.

Lawmakers disclosed the agreement before an afternoon negotiation on a $23.3 billion agriculture spending bill for the budget year that starts Thursday.

The House's version didn't include any emergency dairy aid. But Obey, chairman of the House Appropriations Committee, embraced the $350 million proposal and wanted most of it for a program that pays farmers when prices fall. Benefits are capped after the first 3 million gallons of milk produced, equivalent to the annual output of perhaps 200 cows.

That has disproportionately benefited family farmers in the Northeast and Midwest with smaller herds.

Obey's plan ran into opposition from Feinstein and others. So Kohl, the Senate's chief negotiator and chairman of the Senate Appropriations subcommittee on agriculture, came up with a compromise: $290 million for livestock producers and flexibility for the Agriculture Department in distributing the money. It's unclear whether the entire $290 million would go out in direct payments to farmers or whether some of it would pay for some additional purchases of surplus dairy products.

Sen. Bernie Sanders, the Vermont independent who got the $350 million added to the bill, predicted the aid would have "fairly significant" benefits for farmers.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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