ELKHART COUNTY — Dairy farmers across the country are being milked dry by rising production costs and falling prices. On Friday, the federal government unveiled a new plan aimed at providing "immediate relief." But, will it work? And, what will it mean for you at the grocery store?

The U.S. Department of Agriculture plan will raise the price paid at commodity markets for milk and cheddar cheese. Administrators call it a "dairy price support program." Secretary of Agriculture Tom Vilsack says it will help the dairy industry weather "one of it's worst crises in decades."

The price paid by dairy processors to farmers is set by the USDA based on commodity markets that rise and fall with global demand. Dairies increased production when demand for U.S. milk exports soared last year, but once the global recession accelerated last fall, demand dropped and farmers were left with too much milk and too many cows.

That dropped wholesale prices like a rock.

To combat that, the USDA will increase the price it pays for powdered milk by 15%. The price paid for cheese will go up by approximately 16%.

Both price increases will last through October.

But, some say it won't be enough to solve the long term problem facing dairies right now.

"It's too little, too late," said Elkhart County dairy farmer Mike Yoder, a County Commissioner who also owns Crystal Dairy Farms. "We are losing a lot of money right now, and have been for many, many months."

In fact, Yoder's profit margins are almost non-existent, swept away by rising supply, plummeting demand and export markets down 26% so far this year. Add to that the fact that wholesale milk prices are down nearly 50% from a year ago, and his 500 cows are costing him nearly twice as much as they're earning back.

"It's costing producers $17 to $18 for every 100 pounds of milk. At the worst, they were getting about $10 back, now it's probably $11 back at wholesale. We're losing about $1,800 a day right now. This is absolutely the worst I've ever experienced it. If there's a dairy farmer making money in the United States, I'd like to know who it is," Yoder said.

"It gets to be pretty depressing. Because, I've got 30 years of work and labor into this business, and I've basically lost most of that equity in the last 12 months," he added.

But, the USDA estimates the price hikes can create $243 million in new revenue for dairy farmers.

But, Yoder says that will only solve a short term problem.

"We're losing billions, and they're throwing a few million at it. And, it's dollars that won't show up until September, maybe October. So, it's pretty meaningless," he said.

Purdue University Agricultural Economist Dr. Chris Hurt estimates the U.S. dairy industry to be worth approximately $22 billion in 2009.

"Right now, we're looking at something in the range of $6 billion to $7 billion in losses. So, [the USDA money] would replace about 4% of the losses. Does that make them whole? No. Does it help? Perhaps. It's the old question: would you rather have $100 or not have $100? Well, sure, you take the money," Hurt said.

But, where will that money come from?

The answer, Hurt says, is consumers.

Experts say it's unlikely that dairy prices will go up significantly over the next few weeks. But, by late September, some predict butter prices will eclipse their all time record of $3.93 per pound. Cheddar cheese could top $5 a pound, according to the National Milk Producers Federation.

But, Yoder says that increase in prices is unlikely to mean much to producers.

"If the government would have come out with a "cash for clunker" cow deal, that would have helped us. But, this won't," he said.

The only solution left may be a reduction in supply.

Last month, the National Milk Producers Federation began paying dairies to slaughter more than 100,000 cows, hoping to decrease supply, and artificially boost demand.

But, Yoder says that won't be enough.

"We need to lose 400,000 to 500,000 cows in this industry," he said. "The government could have done that for about half the price of what they're spending on this program. I'm expecting a lot of cows now to be sold in the next 60 days. Downsizing's going to happen."

The Associated Press contributed to this report