Milk production surged across the U.S. in 2025 with dairy farmers producing 2.8% more milk than the year prior, and there is little sign of slowing down as we turn the page into February 2026. The influx of milk has pushed prices downward, and despite alternative revenue sources helping ease the pain on farms’ bottom lines, pressure is mounting on margins. The latest price forecasts indicate a painful first quarter before markets are predicted to find some balance later in 2026.
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
Higher average feed costs and lower milk prices tightened the DMC program margin in November 2025 to the smallest margin of the year, but it was still not enough to trigger indemnity payments. The margin was down 48 cents from the month prior to land at $10.04 per hundredweight (cwt), which continued the 21-month trend of no margin below the Tier I coverage level of $9.50 per cwt since February 2024. (Read: November DMC margin shrinks but no indemnity payments triggered)
December’s DMC value will be calculated Jan. 30. While markets are subject to change, current forecasts show signs that U.S. dairy producers participating in the DMC program will see an indemnity payment for the last month of 2025. As of Jan. 26, the December DMC program margin was forecast at $9.20 per cwt, an improvement from the forecast in late December, but remains 30 cents below the $9.50 per cwt trigger point.
Enrollment for the 2026 coverage year is now open and will end on Feb. 26. Revisions to the program include an opportunity to establish new production history based on the highest annual milk production level from 2021, 2022 or 2023; clarification on how new operations will establish production history; eligibility for operations to enroll their first 6 million pounds of production at the Tier I level; and an opportunity for operations to make a one-time election of coverage level and coverage percentage for a six-year period from January 2026 to December 2031, resulting in a 25% premium discount.
Current forecasts for the year are indicative of a weak start with January and February margins predicted at $7.67 and $8.78 per cwt, respectively, due to low milk prices and feed costs seen throughout the second half of 2025. At the time of this writing, the remainder of the year shows margins floating just above the $9.50 per cwt coverage level, but no greater than $11.11 per cwt. Although markets do change.
For more information, visit the DMC webpage or contact your local USDA Service Center.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In February, 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 impact markets are released. This includes Milk Production, Cold Storage and Dairy Products 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 February 2026 includes the months of March 2026 through January 2027. 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
- December 2025 U.S. milk production increased from November and was also up about 4.4% from the USDA’s estimates a year earlier with 19 states boosting a combined 904 million pounds. (Read: Milk production increases in December as dairy herd expands)
- The February Class I base price is $1.65 per cwt below the base price for January and $6.57 per cwt less than February 2025, making it the lowest Class I base milk price since June 2020. (Read: Economic Update: February Class I base milk price hits 68-month low)
- Federal Milk Marketing Order (FMMO) uniform milk prices improved in most regions in December 2025, with the largest increases in those orders with higher percentages of milk pooled through Class I markets. (Read: December 2025 FMMMO uniform milk prices mostly higher)
- Based on the latest USDA monthly Livestock Slaughter report data, the number of dairy cull cows marketed through U.S. slaughter plants in December 2025 was estimated at 248,400. (Read: Dairy cows culled for beef to rise in 2026)
- Since the July 2025 World Ag Supply and Demand Estimates report, corn-harvested area has surged 4.5 million acres, and the record corn crop in 2025 exceeds the record set in 2023 by 1.7 billion bushels. (Read: WASDE outlook sees higher corn acreage, record 2025 crop)
