Steve Putnam has accepted government money for losses he suffered during the last year on his dairy farm near Bend. But he said he accepts it begrudgingly, at best.

Putnam and dairy farmers internationally watched the price of milk dissipate earlier this year, sparked by overproduction and the ailing economy. Federal safety nets are in place to aid farmers who lose money because of low milk prices, but local dairy producers say those nets merely delay the problem rather than fix it.

“It’s not a real save per se,” said Putnam, who operates a ranch of about 100 cows on Innes Market Road. “It’s a short-term fix, but it’s not going to solve the problem. You rob Peter to pay Paul.”

President Barack Obama signed an appropriations bill Wednesday that will distribute $290 million in federal money to farmers who have suffered economic hardship because milk prices are below federal minimum standards, as they have been since February. That money is in addition to more than $700 million that has already been spent this year through the U.S. Department of Agriculture’s Milk Income Loss Contract Payments, one of a few federal safety net programs.

The government pays farmers when the price of Class I milk — the top-tier product, primarily used for drinking — drops below $16.94 per 100 pounds, a government-set minimum price that was created along with the USDA payment program. (One hundred pounds of milk is equivalent to about 11.6 gallons.)

Milk prices tanked in part because a large number of U.S. suppliers began keeping more cows, producing more milk and selling their product internationally in 2007 to fill a gap in the global market, where prices were unusually high, said Larry Salathe, a senior economist in the USDA’s chief economist’s office in Washington, D.C.

A few large international producers had reduced the amount of milk they sold on the market, which created the gap. For example, Australia and New Zealand, some of the largest milk suppliers in the world, were forced to cut production because of droughts, Salathe said.

With prices so high, U.S. producers jumped at the chance to fill in and make a profit, he said.

When heavy producers like Australia came back in 2009, the global market had a glut of milk. Dairy farmers everywhere had more product than the market demanded, driving down milk prices.

Low milk prices were another symptom of the overall economic crisis, Salathe said.

“Farmers, who were selling at their high prices in 2007, start keeping more calves and heifers,” he said. “Prices are now low, so you’ve got a perfect storm here for a collapse in the market.”

For October, prices nationally are estimated at about $15.60 per 100 pounds, more than $1 below the government minimum.

U.S. Sen. Charles Schumer, D-N.Y., took the lead on securing the additional $290 million for the dairy reimbursements in the federal appropriations bill signed Wednesday. Schumer also has called for USDA Secretary Tom Vilsack to pour additional money into the reimbursement program.

But for producers like Putnam, the amount of money farmers like him get isn’t enough to make much of a difference.

“You’re basically making a false economy,” he said. “It’s a little teaser. It might help get you over the hump. But, in the long run, it’s going to prolong the agony.”

To get the industry back to normal, Putnam said most farms will have to reduce their milk supply, and some may even shut down.

Supply reduction is something the industry has already begun. Dairy farmers’ cooperatives began working on reducing cattle numbers — primarily through slaughter — about 1 1/2 years ago, when problems first emerged. Cooperatives Working Together, a Virginia-based group that works throughout the U.S., is holding its fifth “herd retirement” since mid-2008.

“When supply gets out (ahead) of demand, we’re able to reduce the number of cows out on the market and hopefully getting dairy farmers’ prices up where they need to be,” said Jim Tillison, chief operating officer of the cooperative.

The organic milk industry has faced similar financial problems. But, because organics make up only about 6 percent of all milk supply, milk buyers have merely asked farmers to sell them less milk, said Jos Poland, owner of the organic Poland Dairy outside Madras.

Poland said Horizon, which he sells to, asked him to cut back by about 5 percent. That has worked for Poland and other organic farmers, he said.

Poland was able to sell his remaining product to Bend-based Tumalo Farms when it started making cow’s cheese to complement its goat cheese lineup. Other farmers might have sold cows, or merely reduced the amount of grain they feed their cows, in turn lessening the milk production, Poland said.

“Actually the cow is probably healthier” by feeding it less, he said. “You cut your cost of producing milk at the same time.”

Putnam is among the farmers nationwide who contribute 2 cents per 100 pounds of milk they sell to Cooperatives Working Together in an attempt to rein in the market. He said he’ll take advantage of the USDA’s Milk Income Loss Contract reimbursement program, however, until the market stabilizes.

“If somebody is throwing $100 out of a third-floor window … we all go grab our share,” Putnam said.