Strong milk prices and lower feed costs have kept Dairy Margin Coverage (DMC) margins relatively healthy so far in 2025, making a program payment unlikely for the remainder of the year. But while the numbers may look good on paper, Katie Burgess, dairy market advising director at Ever.Ag, warns volatility still lurks beneath the surface.
“For the past 10 years, we’ve seen Class III milk prices hit $19 or higher half the time, and 2025 will fall in that category,” she says. “But it’s not the full picture.”
Corn and soybean meal prices have trended lower thanks to strong planting progress and ample inventories. But milk production is growing, and increasing supply could weigh on milk prices later this summer.
“Volatility is always lurking in this market,” Burgess says. “We’ve had Class III above $20 early this year, but it doesn’t take much — a market shock, a trade disruption or a shift in consumer buying — for things to swing the other direction.”
She points to USDA data showing that in nine of the past 10 years, Class III prices have fallen below $16 per hundredweight at least once. The only exception was 2022.
“While current Class III forecasts are well above $16, you can’t fully rule it out — and $16 milk today is a lot different than it was five or six years ago,” she says. “With rising non-feed costs like labor, insurance and supplies, that number now falls below the cost of production for most farms.”
DMC, created in 2018, was designed to be a financial backstop when margins are squeezed. In turbulent years like 2020 and 2023, the program more than paid for itself —specially for those who opted into $9.50 Tier I coverage. But this year, that safety net may stay folded.
“When feed costs are high, the program leans toward paying out,” Burgess explains. “But with feed prices low this year, it’s less likely to dip into major payout territory. That’s why expectations should be managed. It’s not the slam dunk it was in years like 2023.”
Unless milk prices take an unexpected dive or feed costs jump significantly, 2025 appears to be following the playbook of years like 2022 or 2024: margins get tighter, but not tight enough to trigger substantial DMC support.
“Risk management isn’t magic — it’s math,” Burgess says. “DMC remains a useful tool in the toolbox, but it shouldn’t be the only one. Producers should consider layering strategies like Dairy Revenue Protection, Livestock Gross Margin and forward contracts. Because the one thing you can count on in dairy markets is uncertainty.”
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