The USDA National Agricultural Statistics Service (NASS) Ag Prices report, released Feb. 27, established January’s Dairy Margin Coverage (DMC) program calculations. Factors contributing to the margin include a milk price $1.50 below December 2025’s price and feed costs 11 cents higher than that of the month prior. The result is a DMC margin of $7.81 per hundredweight (cwt). This margin triggers a $1.69 indemnity payment for operations enrolled in Tier I at the $9.50 per cwt coverage level, and a 19-cent indemnity payment under Tier II at the $8 per cwt coverage level.
January DMC at a glance
The Ag Prices report showed prices for major dairy feedstuffs mostly lower to start 2026 (see Table 1).
DMC program margin factors for January compared to December 2025 were as follows:
- Dairy alfalfa hay: $226 per ton, up $15
- Corn: $4.10 per bushel, unchanged
- Soybean meal: $299.25 per ton, down $12.68
- Total feed costs: $9.69 per cwt, up 11 cents
- Milk price: $17.50 per cwt, down $1.50
- Margin above feed cost: $7.81 per cwt, down $1.61
Milk prices fold under pressure
The announced average all-milk price for January was $17.50 per cwt, down $1.50 from December 2025. Average all-milk prices have not been this low since July 2023.
The all-milk price across the 24 major dairy states fell month over month in January, the result of continued market pressure from healthy milk production and ample supply of product (Table 2). California recorded the greatest loss, down $2.10 per cwt from the month prior to $17.50 per cwt, while Oregon posted the smallest loss at 70 cents per cwt to land at $19.20 per cwt. In comparing the all-milk prices from January 2026 to January 2025, the loss is significant. The average all-milk price folded at $6.60 per cwt, with Arizona and Washington recording the greatest losses at $7.50 per cwt to $16.20 and $17.20 per cwt, respectively.
Payments triggered in both tiers
January’s feed costs rose 11 cents as the cost of dairy-quality alfalfa hay was higher from the month prior, and the price of corn per bushel remained unchanged. Soybean meal had the only loss, down nearly 13 cents from the month prior and $17.72 per ton less than the same month a year ago.
The DMC feed cost for each month is calculated by summing three numbers: 1) the corn price per bushel times 1.0728; plus 2) the soybean meal price per ton times 0.00735; plus 3) the alfalfa hay price per ton times 0.0137.
It was the disappointing milk price that influenced the income over feed cost margin in January. At a DMC margin of $7.81 per cwt, operations enrolled in both Tier I and Tier II will receive indemnity payments based on the selected coverage level. All payments are subject to a 5.7% sequestration deduction.
Looking ahead
The margin forecast has improved for 2026 in its entirety, although producers should expect some turmoil yet in February, according to the Feb. 27 economic analysis of price and margin estimates. February’s DMC margin may hit $7.97 per cwt, the result of another month of sinking milk prices, although feed costs are anticipated to continue rebounding marginally. If realized, February’s margin would be the lowest since August 2023 when the margin reached $6.46 per cwt and triggered indemnity payments up to $1.48 per cwt.
At the time of this writing, margins are expected to improve beginning in March with a DMC margin forecast of $10.04 per cwt. But as we know, markets do change.
