Dairy Margin Coverage (DMC)

Definition

Dairy Margin Coverage (DMC) is a voluntary USDA Farm Service Agency (FSA) program that pays dairy operations when a national milk-over-feed margin falls below a coverage level the operation elects. It was created by the 2018 Farm Bill, replacing the Margin Protection Program for Dairy (MPP-Dairy).

Key terms:

DMC margin: the monthly US all-milk price minus a national formula feed cost, both in $/cwt of milk. It is a national index, not the farm’s own margin.
Production history: a fixed annual pound figure FSA assigns to the operation from past marketings. It does not change with this year’s shipments. For 2026–2031 every enrolling operation set a new history: the highest annual marketings of 2021, 2022 or 2023, or, for operations that started after January 1, 2023, their first year of marketings (FSA fact sheet, January 2026).
Coverage percentage: the share of production history the operation covers, elected in 5% steps from 5% to 95%.
Covered pounds: production history × coverage percentage.
Coverage level: the margin ($/cwt) below which payments start.
Tier 1 / Tier 2: covered pounds up to the Tier 1 cap get the full range of coverage levels and low premiums. Covered pounds above the cap are Tier 2, with a lower maximum coverage level and much higher premiums.

Item	Tier 1	Tier 2
Pounds	First 6 million lb of covered production history from 2026 (5 million lb in 2019–2025)	Covered pounds above the Tier 1 cap
Coverage levels	$4.00–$9.50/cwt in $0.50 steps	$4.00–$8.00/cwt in $0.50 steps
Premiums	Low; rise steeply only at the top levels	Much higher at every level above $5.00

Program terms as of November 2026 (FSA fact sheet, January 2026; 7 CFR 1430.407): Pub. L. 119-21 reauthorized DMC for calendar years 2026 through 2031 and raised the Tier 1 cap to 6 million lb. Coverage percentage runs from 5% to 95% in 5% steps. One coverage level and percentage apply to both tiers, except that an operation electing $8.50 or more in Tier 1 may choose a separate Tier 2 level between $4.00 and $8.00. The $4.00 catastrophic level at 95% coverage carries no premium.

Formula

Plain text:

feed cost ($/cwt) = 1.0728 × corn ($/bu)
                  + 0.00735 × soybean meal ($/ton)
                  + 0.0137 × hay ($/ton)

DMC margin ($/cwt) = all-milk price ($/cwt) − feed cost ($/cwt)

covered lb = production history (lb/yr) × coverage % / 100

monthly payment ($) = max(coverage level − DMC margin, 0) × (covered lb / 12) / 100
    (computed separately for the Tier 1 and Tier 2 portions, each at its own coverage level)

annual premium ($) = covered lb / 100 × premium rate ($/cwt), per tier

LaTeX:

F = 1.0728\,P_{\text{corn}} + 0.00735\,P_{\text{SBM}} + 0.0137\,P_{\text{hay}}
\qquad
M = P_{\text{all-milk}} - F

\text{Payment}_{m} = \max(C - M_m,\ 0) \times \frac{L_{\text{covered}}}{12 \times 100}
\qquad
L_{\text{covered}} = H \times \frac{\text{coverage \%}}{100}

where F is feed cost per cwt, M the monthly margin, C the elected coverage level ($/cwt), H production history (lb/yr), and the price inputs are the USDA monthly prices for corn ($/bu), soybean meal ($/ton) and hay ($/ton).

Feed cost inputs:

Corn: NASS monthly price received, $/bu.
Soybean meal: USDA AMS high-protein soybean meal price (Central Illinois), $/ton.
Hay: NASS price received for high-quality (premium and supreme) alfalfa hay, $/ton. In 2019 FSA used a 50/50 blend of premium alfalfa and conventional alfalfa hay prices. A December 2021 rule (86 FR 70689) moved to 100% premium/supreme alfalfa, retroactive to January 2020.

The coefficients and price series are those in 7 CFR 1430.411 (as of November 2026). Feed prices are the full-month prices published in the following month’s report.

Payments are reduced by federal sequestration and offset against premiums owed. Every enrolled operation also pays a $100 administrative fee each year, unless it qualifies for the waiver for limited resource, beginning, socially disadvantaged or veteran farmers. Payments are on a monthly margin but premiums are annual. An operation that locked in one coverage level and percentage for all of 2026–2031 during the 2026 signup gets a 25% premium discount (FSA fact sheet, January 2026).

Worked example (illustrative only, 2026 rules): production history 10,000,000 lb, 95% coverage → 9,500,000 covered lb. Tier 1 cap 6,000,000 lb at $9.50; the remaining 3,500,000 lb in Tier 2 at $5.00. In a month with an $8.00 margin, Tier 1 pays (9.50 − 8.00) × 6,000,000 / 12 / 100 = $7,500; Tier 2 pays nothing because $8.00 > $5.00.

How to pull it in DC305

DC305 doesn’t hold DMC margins, feed prices or production history. Get them from:

USDA FSA: the operation’s production history, elections and payment statements; monthly margin and feed-cost tables on the FSA DMC page.
USDA NASS Agricultural Prices: all-milk, corn and hay prices.
USDA AMS: soybean meal price.

What a herd record contributes:

Actual production to compare with covered pounds. Use annual shipped milk from milk checks or plant receipts. DC305 test-day milk (e.g. SUM MILK FOR LACT>0 × lactating cows × days) is only an estimate, because it excludes dumped milk and depends on test-day timing.
Farm margin for comparison. The farm’s own income over feed cost uses DC305 cow counts and pen milk, plus milk-check and feed-cost data. It is not the DMC margin.

Typical range

Herd context: national program index, US all breeds; nominal $/cwt.

DMC margin: the middle half of months from January 2019 to September 2026 fell between about $8.35 and $10.95/cwt. The record low was $3.52/cwt in July 2023, and the high was $15.57/cwt in September 2024 (FSA monthly margin tables).
Payment frequency: in that period the margin was below $9.50 in 43 of 93 months (about 46%), below $8.00 in 22 months, and below $5.00 in 3. Premium rates, $/cwt of covered milk, before any lock-in discount (FSA fact sheet, January 2026; unchanged from the 2018 Farm Bill schedule; selected levels):

Coverage level	Tier 1	Tier 2
$4.00	none	none
$5.00	$0.005	$0.005
$6.00	$0.050	$0.310
$7.00	$0.080	$1.107
$8.00	$0.100	$1.813
$9.00	$0.110	n/a
$9.50	$0.150	n/a

Common mistakes

Treating the DMC margin as the farm’s margin. It’s a national formula: US all-milk price minus a fixed ration of corn, soybean meal and hay priced at national averages. A farm’s IOFC uses its own milk price, its own shipped cwt and its actual ration. The two aren’t like-for-like, and neither is profit.
Assuming coverage follows actual production. Payments are on covered pounds (production history × coverage %), split evenly over 12 months, whatever the herd ships that month.
Pricing Tier 2 pounds at Tier 1 rates when production history exceeds the Tier 1 cap. Tier 2 pounds have much higher premiums. If Tier 1 is $8.50 or higher, they also have their own coverage level, capped at $8.00.
Forgetting premiums, fees and sequestration when estimating net benefit.
Using preliminary prices. Margins use NASS/AMS prices that can be revised; FSA publishes the final monthly margin.
Quoting old program limits. The Tier 1 cap, base years and program end date have changed with recent legislation.