The Dairy Margin Coverage (DMC) enrollment period for the 2026 Program Year will close next week on February 26th. Those farms that enroll could potentially receive payments on milk produced in at least January and February, based on current margin projections on the USDA Decision Tool. As of February 16, the January margin under the DMC Program was forecast at $8.33 per hundredweight, which would provide an indemnity payment of $1.17 per cwt., or about $975 on a million pounds of production covered under Tier 1 at the $9.50 margin level, which would cover about two-thirds of the premium costs. February’s margin is projected at $8.07 per hundredweight, which if realized, would provide an indemnity payment of $1.43 per cwt., covering the remaining portion of the premium cost.
The One Big Beautiful Bill Act, passed in July 2025, increased DMC’s Tier 1 coverage level from five million pounds to six million pounds. All dairy operations that elect to enroll in DMC for 2026 will establish a new production history. Existing dairy operations that started marketing milk on or before January 1, 2023, will use the higher of milk marketings for the years of 2021, 2022, or 2023. New dairy operations starting after January 1, 2023, will use their first year of monthly milk marketings, even for a partial year. Milk marketing statements or production evidence are required to establish a production history.
Dairy operations also have the option to lock-in coverage levels for six years (2026-2031) with premium fees discounted by 25%. The OBBA reauthorized DMC for calendar years 2026 through 2031 and provided substantial program improvements, including establishing new production history and increasing Tier 1 coverage.
For farms that have never enrolled in DMC before, it is important to understand that the DMC program is intended to serve as a safety net against volatility in either your milk price or in the price you are paying for your feed. It is margin-based insurance that was authorized under the 2018 Farm Bill and is administered through USDA’s Farm Service Agency (FSA). Farms can protect anywhere from a $4 to a $9.50 margin in 50-cent increments.
New in 2026, farms that fall under 6 million pounds in annual production (about 250 to 300 cows) can enroll all their milk in Tier 1 coverage, with very reasonable premium levels. You can protect a $9.50 margin on your dairy for 15 cents per hundredweight. The margin is derived from subtracting the feed costs per one hundred pounds of milk produced from the announced All-Milk price for that month. For those farms that are above that 6-million-pound threshold, you can enroll the first 6 million pounds in the Tier 1 Program and purchase additional coverage under Tier 2. However, the premium levels are much higher, and you can only cover up to an $8 margin.
DMC margin projections in 2026 start at a low of $7.52 per hundredweight in January and increase throughout the year to $10.89 in November before dropping to $10.79 in December for an average margin of $9.73 per hundredweight. If realized, this would result in a total net indemnity payment of $1,264 per one million pounds of production covered at the maximum $9.50 level for Tier 1, after the premium is deducted from the total indemnity amount but before any sequestration.
For those enrolled in the DMC Program in 2025, December’s margin was calculated to be $9.42 per hundredweight with the release of the USDA Ag Price and Feedstuffs reports. December was the first month that the DMC margin fell below the $9.50 threshold in 2025, with an average margin of $11.15 per hundredweight, above the projected average margin for the coming year, which was at $9.88 per hundredweight as of February 16.
DMC offers different levels of coverage, including an option that is free to producers, minus a $100 administrative fee. Again, it is important to remember that the USDA DMC Program is intended to provide a safety net against very low milk prices. There has been a lot of volatility in the market in the past couple months, and it’s hard to know what the next 10 months will bring. This coming year may be a time when dairy farms will be thankful to have that safety net. To learn more about the program and enroll, visit your local USDA Farm Service Agency office before next Thursday.
Editor’s Note: This column is written by Jayne Sebright, executive director for the Center for Dairy Excellence.