As fall arrives and a new month approaches, the dairy industry is buzzing with concern over falling milk prices as domestic supply flows with strong outputs of butter and cheese, and exports remain strong, particularly with cheese products turning out record volumes month over month. At the same time, weaker feed costs provide assurance for producers’ bottom line now, but expected corn and soybean yields this harvest season will shape the market outlook through the next few months.
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
Despite the forecast milk prices taking an unexpected hit in recent weeks due to both domestic and international market conditions influencing Class III and Class IV prices, low feed costs have kept the income over feed cost margin in dairy producers’ favor. However, as the DMC program margin forecast portrayed margins above the 80th percentile through spring of next year, market conditions have lowered projections with nine of the upcoming months falling below the 50th percentile, according to HighGround Dairy.
The July DMC margin was announced Aug. 29 at $10.94 per hundredweight (cwt), a mere 16 cents below June’s margin, a result of the all-milk price and feed costs falling lower month over month. July’s margin falls in line with values recorded in the spring, yet not low enough to provide an indemnity payment for dairy producers enrolled in the program. To date, no indemnity payments have been issued for the 2025 program year. (Read: Dairy Margin Coverage margin drops to $10.94 in July)
As of Sept. 17, the August DMC margin forecast rebounded to $11.52 per cwt with the all-milk price forecast rising 13 cents to $20.93 per cwt from July to August and the feed cost forecast falling 45 cents over the same period. The August DMC margin will be announced Sept. 30.
There were no details available for 2026 program enrollment at the time of this writing.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In October, Dairy-RP coverage is available for the first quarter of 2026 (January through March) through the first quarter of 2027.
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, 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).
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 October 2025 includes the months of November 2025 through September 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 or when major USDA reports impacting prices are released such as Cattle on Feed. RMA also has the right to close sales at their discretion.
As of Sept. 16, producers can lock in strong revenues through the LRP program. HighGround Dairy projects beef revenues to be above $4 per cwt of milk over the next 12 months, taking into account consistent milk production, and balanced heifer inventories and breeding strategies.
Production and price outlooks
- August Federal Milk Marketing Order (FMMO) uniform milk prices slide in all orders as the average falls 21 cents from the month prior. (Read: Uniform milk prices slip in all FMMOs for August)
- The FMMO advanced Class I base price decreased 66 cents per cwt from September to October for a milk price of $18.04 per cwt. (Read: Economic Update: October Class I base milk price falls to $18.04)
- The milk production forecast for 2025 is raised on higher cow inventories and a faster rate of growth in milk output per cow. (Read: USDA raises 2025 milk production forecast but lowers Class III and all-milk projections)
