Most of the Federal Milk Marketing Order (FMMO) pricing revisions went into effect in June and will begin to be reflected in July milk checks. Additionally, announced changes to several risk management insurance programs will also soon impact producers’ bottom lines for those enrolling in 2026 coverage. All of this to say that now may be the right time to reevaluate risk management decisions for your dairy operation.
“No producer is getting paid exactly the published Class III or Class IV milk price, but many are using those prices in their risk management plans,” says Ben Laine of Terrain. “This becomes important because even if your mailbox price remains stable, the calculated and announced Class III and IV prices will decrease relatively because of the new FMMO formulas. Rules of thumb and risk management plans will need to be recalibrated.”
Here's Progressive Dairy’s look at important dates, reports and advice affecting risk management decisions, as well as other information that will affect dairy producers.
Dairy Margin Coverage (DMC) program
The all-milk price has continued to trend downward, and that seems to be the case in July before prices rebound to the $22-$23 range for the remainder of the year. At the same time, feed costs have fallen and are expected to be weaker for the second half of 2025, leading to favorable margins for dairy producers enrolled in the DMC program.
The May DMC margin and indemnity payments were announced Friday, June 27, with June’s margin to be calculated July 31.
The realized margin for April was $10.42 per hundredweight (cwt), tumbling $1.13 from March’s margin and the lowest year to date, but not low enough to trigger a payment. The all-milk price was mostly to blame for the tighter margin as feed costs have remained relatively stable despite some individual commodities having a stronger market than others. (Read: April’s DMC margin lowest yet of 2025)
As of June 27 the May margin was $10.41 per hundredweight (cwt), only a 1-cent decline from April’s margin and the result of movements in the all-milk price and feed costs that largely offset each other. After April and May’s low margins and February igniting that decline, June’s forecast may be the turning of a page for the remainder of 2025 as margins are expected to climb each month and end the year in the $13 range.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In July, Dairy-RP coverage is available for the fourth quarter of 2025 (October through December) through the third quarter of 2026 (July through September).
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. Also, the 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 (see Calendar).
With the FMMO revisions in place, coverage may look different in the upcoming quarter, explains Laine.
“The protection to a given farm that an $18-per-cwt Dairy-RP price floor offered in Q2 2025 is likely less than what the same $18-per-cwt floor offers in Q3 2025,” he says.
LGM for Dairy (LGM-Dairy) and Livestock Risk Protection (LRP)
LGM-Dairy is another subsidized margin insurance program administered by the Risk Management Agency (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 July 2025 includes the months of August 2025 through June 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.
New in July, dairy producers can enroll in the LRP insurance program to protect revenue on cull cows and beef-on-dairy calves. Unborn calves from dairy cows bred to beef bulls must be expected to weigh 0.6 to 0.99 cwt and sold within two weeks of birth, and cull cows expected to leave the milking herd for slaughter may receive coverage with a 13-week insurance period. The latter may be useful for timing herd reductions.
Production and price outlooks
- Milk production in 2026 is forecast to increase from 2025, driven by an expanding milk cow herd and slightly higher milk per cow. Estimated milk production is at 228.2 billion pounds. (Read: June WASDE forecasts higher milk yield per cow, rising cow numbers)
- The FMMO regional uniform milk prices were mixed in May with some orders reporting a small increase in prices while others saw another month of down prices. (Read: FMMO uniform milk prices mixed in May ahead of formula amendments)
- Sixteen states, including Texas, Idaho and Kansas, boosted milk production a combined 418 million pounds in May. (Read: Third consecutive rise in milk production, cow numbers, output per cow in May)
- Dairy cull cows marketed through U.S. slaughter plants in May are the lowest since 2008. (Read: May report on dairy cows culled for beef)
Check the Progressive Dairy website for updates affecting milk prices as they become available.
