The past year provided ample opportunities for dairy producers to capitalize on market conditions with both longstanding and new risk management strategies. With the new year on the horizon and pricing forecasts indicating a slower start to 2026, now is the time for dairy producers to evaluate their current risk management options and secure additional coverage.
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
Following a lengthy government shutdown, USDA reports began providing critical data for dairy producers’ operations, including ag prices used to calculate the monthly DMC program margin. Released Dec. 15, reports revealed that both September and October margins remained above $10.50 per hundredweight (cwt) as the price for feedstuffs were mixed and milk prices were slightly lower. (Read: September-October 2025 DMC margins stay above $10.50 per cwt)
November’s DMC value will be calculated Dec. 31, following the regularly scheduled USDA Ag Prices report. As of Dec. 19, November’s milk price is forecast at $19.61 per cwt with feed costs at $10.07 for an estimated DMC margin forecast of $9.54 per cwt. Then, December values of a lower milk price and slightly higher feed cost may result in the program’s first triggered payment of the year with a margin of $8.73 per cwt. Although, markets do change. December 2025’s margin will be announced Jan. 30.
Details for 2026 program enrollment were yet to be announced 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 January, 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, typically Dairy-RP coverage cannot be purchased on days when major USDA dairy reports that could impacts 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 December 2025 includes the months of January 2026 through November 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.
Production and price outlooks
- The Class I base price for January 2026 is $1.86 per cwt below the base price in December 2025, and more than $4 less than the same time a year ago. It’s the lowest Class I base milk price since April 2021. (Read: Economic Update: Class I base milk price slumps to start 2026)
- Federal Marketing Order (FMMO) regional uniform milk prices continued to fall in November, in many cases hitting multiyear lows with prices and negative PPDs contributing to the decline. (Read: November 2025 FMMO uniform milk prices continue downward trend)
- The milk production forecast for 2025 is unchanged from November based on the most recent report. (Read: USDA outlook sees little change in 2025-26 milk production)
- Prices for U.S. replacement dairy cows kept rising into the fourth quarter of 2025, reaching their highest level on record in October. (Read: Dairy replacement cow prices set new records in late 2025)
