The milk market is taking shape with components reaching record highs and milk production climbing with the spring flush, but also with trade wars shaking the grain markets and concerns for domestic dairy demand letting up. Current forecasts predict 2025 dairy margins to be favorable although not as strong as previously anticipated.
Here’s Progressive Dairy’s look at important dates, reports and advice affecting risk management decisions, as well as other information impacting the milk check in May.
Dairy Margin Coverage (DMC) program
Enrollment for the 2025 DMC program coverage year closed March 31. At the time of this writing, enrollment data for the year was not yet available. However, the most recently published data released March 3 indicated nearly three-quarters of all dairy operations with production history were enrolled in the program in 2024.
Margins in 2025 are expected to be lower than they were a year ago but still remain well above the $9.50 per hundredweight (cwt) coverage level.
The March DMC margin and indemnity payment will be announced Wednesday, April 30, with April’s margin calculated May 30.
The realized DMC margin for February was $13.12 per cwt as milk prices dropped 50 cents and feed costs climbed 23 cents. February’s margin fell 73 cents from the previous month but remained $3.62 per cwt above the $9.50 per cwt top coverage level in Tier I and resulted in no indemnity payments for the second time in 2025. (Read: February DMC margin is $13.12)
As of April 25 prior to the announced DMC margin, the March margin forecast shows another tumble in markets with the margin settling at $12.27 per cwt. Tariff threats and rising pricing on the global market have softened international trade in both dairy and feed, while economic turmoil in the U.S. has cautioned consumer spending, all leading to more modest DMC margins predictions. If March’s margin is realized, it will be the highest through August before prices are anticipated to rise again in the fall months.
Although the markets have fluctuated, projected income over feed costs remain healthy over the next 12 months with only three months projected to fall under the 75th percentile (April at 73%, June at 60% and July at 64%), according to HighGround Dairy.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In May, Dairy-RP coverage is available for the third quarter of 2025 (July through September) through the third quarter of 2026.
The market changes daily and Dairy-RP endorsements must be purchased between the Chicago Mercantile Exchange (CME) market closing and the next CME opening. Dairy-RP is also not available on days when applicable futures contracts move limit-up or limit-down, or on days when CME trading is closed due to holidays (see Calendar).
Also, Dairy-RP coverage cannot be purchased on days when major USDA dairy reports that could impact markets are released. This includes Milk Production, Cold Storage and Dairy Product reports.
At the time of this writing, indemnities from quarter one of 2025 were not released by the USDA Risk Management Agency (RMA), however, HighGround Dairy provided estimates. Estimated indemnities averaged 13 cents per cwt. After factoring in producer premiums at 31 cents per cwt, the estimated net return was negative 18 cents, with nearly 33% of the U.S. milk supply covered under the program.
The evaluation of the program also showed that if ignoring yield adjustment factors, indemnities would only trigger Class IV endorsements and on 105 days of the 191 days coverage was available in quarter one.
Livestock Gross Margin for Dairy (LGM-Dairy)
LGM-Dairy is another subsidized margin insurance program administered by the RMA.
The insurance program provides a protection when feed costs rise or milk prices drop and can be tailored to any size farm. The program uses futures prices for corn, soybean meal and milk to determine the expected gross margin and the actual gross margin. LGM-Dairy is similar to buying both a call option to limit higher feed costs and a put option to set a floor on milk prices.
Coverage can be purchased on expected milk marketing over a rolling 11-month insurance period. So the coverage period during May 2025 includes the months of June 2025 through April 2026.
Sales periods for the LGM-Dairy program are open on a weekly basis. Unlike Dairy-RP, LGM-Dairy is available even if a sales period falls on the day of a USDA report. Premium payments are due at the end of the insurance period.
Production and price outlooks
- May’s Class I prices will average about $21.19 per cwt across all Federal Milk Marketing Orders (FMMOs) with Class I zone differentials, impacting May regional FMMO uniform prices. (Read: Economic Update: May Class I drops to $18.37 per cwt)
- U.S. milk production rose about 0.9% compared to the same month last year, according to the USDA’s preliminary report. (Read: Milk production, cow numbers, output per cow all higher in March)
- FMMO regional uniform milk prices fell in March, a trend likely to continue. (Read: FMMO uniform milk prices fall in March)
- The 2025 milk production forecast is raised about 700 million pounds from February’s report. (Read: April WASDE report forecasts higher milk output per cow, higher cow inventories)
- U.S. cheese set an all-time record high for sales in February, but it wasn’t enough to curb the export market. (Read: Dairy product exports fall 5% in February)
Check the Progressive Dairy website for updates affecting milk prices as they become available.
