Farm Bureau Advocates for Expanded Coverage in Dairy Risk Programs
The American Farm Bureau Federation has highlighted the need for adjustments in dairy risk management programs to align with today's economic realities faced by dairy farmers. The Dairy Margin Coverage (DMC) program, which acts as a financial safety net when the margin between milk revenue and feed costs narrows, currently has most of its enrolled milk at the Tier 1 ceiling. At present, 98% of this milk is covered at the $9.50 maximum level, indicating a significant demand for coverage beyond what is presently offered.
Analysis of margin history from 2020 to 2025 suggests that increasing the Tier 1 ceiling to $11 would have resulted in program payments in 53 out of 72 months, compared to 41 months with the existing $9.50 ceiling. This adjustment would have added an average of 87 cents per hundredweight beyond the current ceiling, particularly benefiting small to mid-sized dairies with 50 to 499 cows, which face the highest per-unit costs and fall entirely within Tier 1.
In addition to changes in the DMC, the Dairy Revenue Protection (DRP) program also has room for adjustment. Currently, 94% of all DRP liability is at the statutory 95% ceiling, which is not driven by market preference. The Farm Bureau suggests that raising this ceiling would parallel the flexibility already present in the Livestock Risk Protection program, which allows for coverage above 95%.
These proposed changes aim to enhance the two primary tools used by dairy farmers for risk management. Adjusting the ceilings as recommended would provide a more accurate reflection of modern production costs without overhauling the fundamental structure of either program. Without such changes, coverage levels under the DMC will remain static at least until the 2031 farm bill, more than a decade after the $9.50 ceiling was set.
Since its current configuration was established in 2019, the DMC program has delivered over $2.7 billion in net support, including significant payouts in 2021 and 2023. However, the structural limitations of the program mean that it only accounts for the national income-over-feed-cost margin, excluding other rising costs such as labor, fuel, and veterinary expenses. These costs have increased approximately 21% since 2021, underscoring the need for a program that better matches current financial pressures on dairy farms.
The Farm Bureau's analysis considers the potential benefits of raising coverage ceilings in 50-cent increments up to $12 for the DMC, and sees a similar opportunity in reevaluating the DRP statutory limits. Such measures would enable better risk management for farmers facing challenging economic conditions.
