Jason Hartschuh, Extension Field Specialist, Dairy Management and Precision Livestock, The Ohio State University
Enrollment for Dairy Margin Coverage (DMC) for 2026 opened on January 12th and will be available until Feb 26th. The DMC program is a risk management tool dairy producers can use to protect the margin between the national All Milk Price and the average feed cost. The One Big Beautiful Bill Act reauthorized the DMC Program for 2026-2031 with a few significant changes.
DMC will continue to have 2 tiers of coverage; however, the level of those tiers has changed. The first and more economical tier has increased from 5 million pounds of production history to 6 million pounds. All dairy farmers who enroll in the DMC program for 2026 will need to establish a new production history. For farms that were marketing milk before January 1, 2023, production history will be established using the highest milk marketing history from 2021, 2022, or 2023. You will need to provide proof of production using milk marketing statements or other approved marketing evidence from these three years. For new dairy farms that began operations after January 1, 2023, production history will be established based on the first year of monthly milk marketing. If a full year is not available, a partial year will be used.
Coverage Selection
Coverage remains available under Tier 1 for margins from $4.00 to 9.50, in $0.50 increments. The $4.00 margin is available at no cost beyond a $100 administration fee, while the $9.50 margin is maintained at $0.15/cwt. For Tier 1 coverage, the $9.50 margin remains a very economical tool for managing both milk price and feed cost risks. DMC projections for 2026 are listed in Table 1 based on futures market prices on January 23rd. While the milk price is currently projected to improve slightly throughout the year, feed costs are also projected to rise slightly. DMC margins are projected to be less than $9.50 for January through August. The current projection is that the January payments for $9.50 margin coverage will cover the Tier 1 premiums for the year.
Table 1. Dairy Margin Coverage (DMC) price forecast (retrieved from https://dmc.bozic.io/#/price-forecasts).
For production history over 6 million pounds, DMC can also be used to protect a margin of $4.00 to 8.00/cwt as long as Tier 1 cover of $8.50 or higher is chosen. Table 2 shows the premium costs for Tier 1 and Tier 2 at coverage levels from $4.00 to 9.50. The cost of both Tiers is the same, from $4.00 to 5.00, then Tier 2 costs increase exponentially. Since 2021, the DMC margin has only fallen below $5.00 for 3 months in 2023. For production history over 6 million pounds, DMC should be used as a tool to protect your operation from catastrophic losses. In November of 2022, during the DMC program sign-up, the lowest projected milk margin was $8.80, but it fell all the way to $3.52 in July of 2023, demonstrating the need to use risk management tools even when the risk does not appear to be present. U.S. milk prices can be greatly affected by unexpected world events. During the 2026 sign-up, dairy operations can make a one-time election of their coverage level and percentage for the calendar year 2026-2031 and will receive a 25% discount on premium rates.
Table 2. Dairy Margin Coverage level for Tier 1 versus Tier 2 (Source: FSA factsheet)
Use Other Risk Management Strategies
Along with DMC, other risk management tools should also be used. Dairy Revenue Protection (DRP) can protect your operation from milk price declines using Class III or Class IV milk, which can also be combined with fat and protein to cover the components you actually produce. While current DRP coverage is below many producers' costs of production for 2026, it can still be used as a tool to protect your operation from even greater losses. Livestock Gross Margin Dairy (LGM-Dairy) can also be used to protect your operation's margin using Class III milk futures and corn and soybean meal futures prices. Corn and soybean meal amounts can be customized to better match your operations costs. Beyond DRP and LGM-Dairy, there is still an opportunity to use the futures and options market or to use forward contracting in your process to lock in a known milk price. While the milk price outlook is low for 2026, tools to manage your risk of even greater milk price declines may be important. While other programs have year-round sign-up, be sure to visit your local FSA office to sign up for the DMC program by February 26th, 2026.