AFBF Analysis Highlights Gaps in Dairy Margin Coverage Program
TOPICS
DairyDaniel Munch
Economist
Chad Smith
Associate News Service Editor, NAFB
photo credit: AFBF Photo, Terri Moore
Daniel Munch
Economist
Chad Smith
Associate News Service Editor, NAFB
The Dairy Margin Coverage Program is meant to be a safety net for dairy farmers. However, as Chad Smith shares, the program has some flaws.
Smith: The Dairy Margin Coverage Program is a farm safety net program that helps U.S. dairy farmers manage risk when the gap between milk prices and feed costs shrinks. Danny Munch, an economist with the American Farm Bureau Federation, said the DMC has been a big help to dairy farmers.
Munch: Farmers choose a coverage level at 50 cent increments, up to $9.50, and the program will pay out to farmers when the national dairy margin falls below the selected level they chose. There's currently a six-million-pound production capped under the more affordable Tier One level, and really it's the best safety net out there for dairy producers to protect their margins.
Smith: However, Munch says that recent years have highlighted limits in the program’s effectiveness because it only covers milk prices against feed costs, which doesn’t account for other input costs.
Munch: Labor, fuel, veterinary costs, and equipment, which, combined, have risen over 21 percent in the last five years. So, in recent months, particularly in the second half of 2025, when feed costs were low but these other costs were high, the program did not trigger, even though many dairies were unable to cover costs.
Smith: He said Congress can make needed updates to the DMC through the farm bill or other standalone legislation.
Munch: Now we're working with dairy industry stakeholders to sort of figure out how we can make the program a little bit more reliable in these differing market conditions, where feed is not the biggest cost for our dairy farmers, so looking forward to trying to bring some changes that can make the program more adaptable moving forward.
Smith: For more information, go to the Market Intel page at fb.org. Chad Smith, Washington.
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