The USDA released a report in early August that forecast record corn yields this fall – production surpassing 16 billion bushels with a record-high yield of 188.8 bushels per acre. The announcement created buzz in the markets, which only further aided dairy producers’ income over feed cost (IOFC) outlook for the remainder of the year. On the milk side of the equation, prices are adjusting to continued pressures of expanded processing capacity and demand both domestically and internationally.
Considering all the factors that play into a dairy business’s bottom line, here’s Progressive Dairy’s look at important dates, reports and advice affecting risk management decisions, as well as information that will affect dairy producers.
Dairy Margin Coverage (DMC) program
IOFC margins continue to favor dairy producers even as the all-milk price stumbles some as the markets adjust to the expanded processing capacity and demand for U.S. dairy products, both domestically and internationally. As the seasons turn, it is the feed costs that are benefiting dairy producers enrolled in the DMC program with commodities used to calculate feed costs falling month after month. September forecasts are no different.
The June DMC margin was announced July 31 at $11.10 per hundredweight (cwt), 70 cents higher than the previous month with the all-milk price remaining the same as feed costs shifted a bit. June’s DMC margin was reflective of margins last seen in March, yet still not low enough to trigger any indemnity payments through the DMC program. The lack of indemnity payments each month has been a consistent trend this year. (Read: DMC margin settles at $11.10 per cwt in June)
As of Aug. 29, prior to the announced DMC margin for July, the July DMC margin forecast reflected an improved margin by nearly 50 cents brought on by feed costs that dropped nearly $1 despite the all-milk price also falling but to a lesser degree. At the time of this writing, the July DMC margin forecast was $11.56 per cwt, which would give dairy producers enrolled in the program yet another month without indemnity payments.
The August DMC margin will be announced Sept. 30.
Because of the lack of indemnity payments this year, the USDA’s Farm Service Agency (FSA) issued letters to enrolled producers regarding the 2025 program premiums. Those participating dairy operations that elected for margin protection coverage above the catastrophic coverage level are required to pay an annual premium fee. In most years, the fee is deducted from indemnity payments. The letter states outstanding premium balances are due Sept. 1, and failure to pay may affect eligibility to participate in future DMC program years.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In September, Dairy-RP coverage is available for the fourth quarter of 2025 (October through December) through the fourth quarter of 2026. This year’s fourth-quarter enrollment ends Monday, Sept. 15.
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).
An estimation of Dairy-RP indemnities in the second quarter of 2025 was released by HighGround Dairy in late July. According to the report, estimated indemnities averaged 48 cents per cwt with the net return to producers at about 13 cents per cwt once producer premiums were factored into the final number. During the second quarter, more than 16.4 billion pounds of milk were covered under Dairy-RP, representing 28% of the U.S. milk supply, down about 13% (2.4 billion pounds) from the previous quarter.
Livestock Gross Margin for Dairy (LGM-Dairy)
LGM-Dairy is a subsidized insurance program administered by the USDA Risk Management Agency (RMA).
LGM-Dairy provides 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 for LGM-Dairy can be purchased on expected milk marketing over a rolling 11-month insurance period. So the coverage period during September 2025 includes the months of October 2025 through August 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.
Livestock Risk Protection (LRP)
LRP is another subsidized insurance program administered by the RMA. The program is a valuable tool for dairy producers as beef-on-dairy and strategic culling decisions are key parts of herd management and business decisions. For dairy producers, LRP coverage is available as LRP-Feeder Cattle (beef-on-dairy calves) and LRP-Fed Cattle (cull cows) with four additional options to select the appropriate coverage, including head count, targeted marketing weight, and coverage length and level. No more than 12,000 head can be covered in a specific coverage endorsement with an annual limit of 25,000 head per farmer per crop year (July 1 to June 30).
The sales period for LRP coverage is open each afternoon after futures prices are settled and closes the following morning. Similar to Dairy-RP, LRP is not available on days when CME trading is closed due to holidays nor when major USDA reports impacting prices are released such as Cattle on Feed. The RMA also has the right to close sales at their discretion.
Production and price outlooks
- June U.S. milk production increased from May and is up about 3.35% from USDA’s estimates a year earlier. (Read: June milk production higher as dairy cow numbers rise)
- Milk production forecasts for 2025 and 2026 are raised from July. Cow inventories are also raised based on the most recent data in the National Agricultural Statistics Service. (Read: Monthly WASDE, Crop Production reports offer outlooks for dairy, beef and feedstuffs)
- July Federal Milk Marketing Order (FMMO) uniform milk prices are mostly higher from the month prior, yet two orders take a hit with Class III prices falling. (Read: Average FMMO uniform milk price rises despite some order setbacks)
- The FMMO advanced Class I base price dropped 23 cents per cwt from August to September for a Class I base price of $18.70 per cwt. (Read: Economic Update: September Class I base milk price falls 23 cents)
