Risk Management

How McCarty Family Farms Hedges Fuel Costs to Protect Dairy Margins

Fri, 08 May 2026 13:17:13 GMT

The great rebalancing of 2026 has taught dairy producers a vital lesson: You cannot control the wind, but you can certainly adjust your sails. While much of the industry’s focus remains on milk checks and component values, a silent predator often lurks in the shadows of the balance sheet — the fuel pump.

For an operation like McCarty Family Farms in Rexford, Kan., the 2025 Milk Business Leader in Technology Award winner, which milks thousands of cows across multiple states, the scale of production is matched only by the scale of its energy requirements. With feed trucks, tractors and skid steers running 24/7, fuel is not just a line item; it is the lifeblood of the operation. And in an era of global energy volatility, leaving that lifeblood to the whims of the spot market is a risk Ken McCarty, co-owner and manager, is unwilling to take.

The Math of the Spike

To understand the McCarty strategy, one must first understand the stakes. On a modern, large dairy, the equipment never stops. The sheer volume of TMR moved and the constant management of manure requires a fleet that consumes thousands of gallons of diesel every week.

For large herds, like McCarty’s, a 50¢ spike in diesel can derail a quarterly budget. In reality, that half-dollar move isn’t just an inconvenience; it represents a massive shift in capital that could have been reinvested in herd health, technology or labor. By locking in fuel prices, McCarty isn’t just buying diesel; he is buying the psychological and financial stability required to manage a complex organization.

The 18-Month Horizon: A Layered Approach

The McCarty strategy is defined by its proactivity. While many producers wait for a good day at the local co-op, McCarty and his team are looking 12 to 18 months into the future. They don’t view fuel procurement as a single transaction but rather as a continuous process of layering.

The process begins with a deep dive into data. Working closely with their fuel seller, they evaluate historical usage patterns. They don’t just look at what they used last year; they account for upcoming changes, whether that’s an expansion in acreage, a shift in equipment efficiency or a change in the beef-on-dairy program that might increase hauling requirements.

Once the known demand is established, the layering begins. As forward months become available on the market, the McCarty team begins to book physical gallons. The goal is to reach approximately 90% coverage by the start of the budget year on Jan. 1.

Mitigation, Not Speculation

Perhaps the most important takeaway for other producers is the McCarty philosophy on winning. In a world of high-frequency trading and market gurus, it is easy to fall into the trap of trying to time the bottom of the market. Ken McCarty is quick to dispel that notion.

“We have never viewed this as a money-making strategy,” he says. “Instead, it is purely a risk mitigation strategy.”

For McCarty, the goal isn’t to hit the absolute lowest price of the year — a feat that is more about luck than skill. Instead, the benchmark is historical consistency. If the farm can land in the bottom third or bottom half of the 5- to 10-year historical average or even just maintain consistency year-over-year, the strategy is a success. This consistent-cost model allows the farm to set its milk margins with confidence, knowing that this large input on the farm is already settled.

The Hidden Exposures

Even with 90% of their consumed fuel locked in, McCarty acknowledges the limits of the hedge. The farm remains exposed to indirect fuel costs — the market effects on purchased goods and, perhaps most significantly, milk freight increases.

This distinction is crucial for producers to understand. Locking in the diesel for your own tractors doesn’t protect you from the fuel surcharges applied by the third-party haulers moving your milk or the trucks delivering your distillers grains. This reality reinforces why being aggressive on the fuel you can control is so important; it narrows the window of vulnerability on the variables you cannot control.

Beyond the Contract: Efficiency as a Hedge

While forward contracting provides financial protection, McCarty is also focused on the physical side of the equation: consuming less. Every gallon of diesel not burned is a gallon that doesn’t need to be hedged.

The farm is constantly searching for ways to reduce its energy footprint. This includes everything from optimizing feed routes to reduce idling time to investing in newer, more fuel-efficient equipment. In this view, energy efficiency is the ultimate long-term hedge. It is a permanent reduction in exposure that pays dividends regardless of what happens in the energy markets.

“We have lived through times like this in the past and have no desire to repeat it, so ultimately, if we can be in the bottom third or bottom half of the 5- to 10-year historical average, or at least consistent year-over-year, then we are satisfied,” McCarty shares. “Of course, we are constantly searching for ways to consume less fuel and energy in general as an additional method of reducing our exposure to energy markets.”

Lessons for the 500-Cow Producer

While the McCarty scale is vast, the principles are entirely scalable for a modern 500-cow operation. Whether you are milking 40,000 or 500, the great rebalancing of the market means that margins are found in the details.

Compeer Financial ag economist Megan Roberts concurs with McCarty and says hedging isn’t about hitting the top or the bottom of the market; it’s about avoiding the economic risk of doing nothing.

“Risk management strategies, including hedging, are less about predicting the market and more about carefully managing exposure, using consistent, incremental decisions to smooth volatility in a way that fits the needs of your dairy operation,” she says. “Every farm is different, but in today’s environment, having a clear plan in place and following it with discipline is a wise strategy.”

In the end, the McCarty’s approach to fuel is a reflection of its approach to dairy farming as a whole: disciplined, data-driven and focused on the long game. By taking the volatility of the energy market off the table, it allows McCarty’s to focus on what truly drives the farm’s success: the health of the cows and the quality of the milk.

In a year where milk prices are shifting and trade policies are in flux, the lesson from McCarty Family Farms is clear: Protect what you can, manage what you must and never leave your margin to chance.

Lock in Gains: How LRP Can Help Protect Beef-on-Dairy Profits

Wed, 18 Mar 2026 19:20:23 GMT

Record-high beef-on-dairy prices have reshaped the balance sheet for dairy farmers, turning a once-small revenue source into a major part of the bottom line. But without protection, those gains could disappear just as fast, underscoring how quickly momentum can shift in today’s cattle markets.

Experts caution today’s opportunity demands a more deliberate approach.

Mike North, president of the producer division at Ever.Ag, and Will Babler, principal at Atten Babler Risk Management LLC, made two points clear during the Professional Dairy Producers conference:

Beef-on-dairy is now a significant part of a dairy’s financial picture.
Tools like Livestock Risk Protection, or LRP, are critical to protecting those profits, especially at today’s historic highs.

Beef-on-Dairy Income Becomes a Major Revenue Stream

In just a few years, beef-on-dairy revenue has expanded dramatically. Strong demand from feedyards and packers, combined with tight U.S. cattle supplies, has pushed prices for beef-on-dairy calves to levels few producers expected even five years ago. For many farms, those calf checks now add several dollars per hundredweight to the milk check equivalent.

“At the end of 2022, the average dairy was getting paid about a $1 to a $1.50 a hundred in beef revenue,” North says. “Today, that number is north of $5. We’ve tripled that part of the financials. It’s a massive, massive opportunity, and with it a massive growing potential risk.”

Babler described beef as a new pillar supporting dairy profitability.

“We now have this other leg to the stool, whether it be black calves or cull cows,” Babler says. “That also has become a major contributor to our revenue stream.”

But as beef revenue grows, so does exposure to market swings. North and Babler say this makes it a smart time for producers to think about expanding their risk management toolbox . Alongside programs like DMC and DRP for milk, tools such as LRP can help protect beef-on-dairy income, letting producers capture strong markets while buffering against sudden drops.

Are Beef-on-Dairy Calves the New $24 Milk?

For many dairy producers, beef-on-dairy calves have become one of the most valuable animals leaving the farm. Day-old calves have averaged $1,500 in some regions and pushed over $2,000 in others — a price that would have been hard to imagine just a few years ago. North says the current market feels similar to $24 milk.

“What should one do with $24 milk?” he asks. “Walk quietly into the sunset and say, ‘We’ll wait to see if it gets better?’”

With prices sitting at all‑time highs, he says this isn’t the moment to step back.

“We’re talking about all-time records, and you just don’t walk away from those and say, ‘Ah, I’ll check back in next month.’ That’s not how we approach markets like this. You’ve got to go after it,” he says.

Lock in Gains

As attractive as today’s beef-on-dairy calf prices are, North cautions markets at record highs rarely stay there forever. When you’re standing at the top of the mountain, the fall can be just as steep on the way down. That’s why he encourages producers to think carefully about risk management tools like LRP to help guard against sudden market swings.

The federally subsidized insurance program administered by USDA allows producers to establish a price floor while still participating in market rallies, functioning similarly to a put option. Unlike futures contracts, which require fixed contract sizes, LRP policies can be written to cover the actual number of animals in a group rather than standardized futures contract weights.

Babler notes how attractive the program has become in the current market.

“When we look at the tools available, LRP really stands out for cross calves right now,” he says. “There’s a lot of reach in the market, and premiums have collapsed. We’re talking about $30 a head floors.”

Babler explains if prices fall below the level you insured, LRP pays an indemnity equal to that gap. Because the program uses national price indexes rather than individual sale prices, it protects against broad market declines, not differences from one sale barn to another.

Recent changes to the program have also helped increase interest among dairy producers. New coverage options now exist for cull cows and unborn calves, including beef-on-dairy crosses that may be sold shortly after birth.

Subsidy levels have also increased significantly, rising from about 13% in earlier versions of the program to roughly 35% to 55%, depending on the level of coverage selected. Premium payments are now due at the end of the coverage period rather than upfront, which improves cash-flow timing for producers.

These changes have also helped to improve the program’s flexibility. Babler says cattle can now be sold up to 60 days prior to the coverage end date without affecting the policy, compared to the previous 30-day window. Producers may also purchase coverage for animals they have under a valid purchase agreement, as long as possession occurs at least 90 days before coverage ends.

Taken together, those updates have reduced out-of-pocket costs and made LRP more accessible as a risk management tool.

Playing Offense with LRP

North and Babler emphasize LRP isn’t just a defensive strategy. It’s also a way for producers to play offense, capturing opportunities when markets are strong.

“Risk management really has two sides,” Babler says. “You play offense when markets give you opportunities, like we’re seeing in cattle right now, and you lock in the gains. At the same time, you play defense to protect yourself from the downside when things turn. In the past, dairy producers mostly dealt with corn and milk, which often moved in opposite directions. But now there are more markets to work with — milk products, protein, and beef — so there’s a better chance that at least one of them is working in your favor. The goal is to capture those strong markets while still protecting yourself when prices drop.”

While prices are expected to remain strong for now, Babler and North emphasize risk management tools provide a safety net, letting producers play offense when opportunities arise, while still playing defense to protect the gains they’ve worked hard to earn.

Dairy's 2026 Safety Net: Producers are Moving from DMC to DRP

Tue, 24 Feb 2026 14:56:55 GMT

In the high-stakes world of dairy production, the margin between a profitable versus a catastrophic year is often measured in pennies. For decades, the industry relied on a relatively simple equation: the price of milk minus the price of feed. In 2026, that equation is more complex. The tools that once served as a reliable safety net are now facing a paradox – a reality where the data says producers are thriving, but the checkbook says otherwise.

To understand the future of dairy survival, the two pillars of the federal safety net must be dissected: Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP). While one is a legacy program struggling to adapt to a world of hidden costs, the other is a flexible, high-tech shield that is rapidly becoming the industry standard.

The Dairy Margin Coverage Era: A Foundation in Flux

The Dairy Margin Coverage program, created by the 2018 farm bill, was designed to be the ultimate insulator against market shocks. Through various iterations from the 2014 farm bill’s Margin Protection Program for Dairy (MPP-Dairy) to the current DMC program, the program has been a statistical success. For most producers, the math is compelling: An average premium of 15 cents per cwt yields an average payment of $1 per cwt.

The structure for DMC, which is administered by the Farm Service Agency (FSA), is simple. Tier 1 offers a “safe harbor” for the first 5 million pounds of production, allowing for coverage up to $9.50 per cwt. Tier 2 allows larger operations to cover their excess production at a lower $8 cap and higher premiums.

However, the “success” of the DMC has hit a wall and is increasingly becoming a thing of the past. The formula relies on four main ingredients: the National All-Milk Price, corn, soybean meal and premium alfalfa. When these crop prices are low, the “calculated” margin looks healthy.

This is where the paradox lies.

“When crop prices are this low, it makes the milk margin under the DMC program look really high on paper, which is why the program didn’t trigger payments at any coverage level between May 2024 and November 2025,” says Danny Munch with the American Farm Bureau Federation.

The December 2025 pricing data finally points to the first payments in more than a year, but only for producers covered at the highest available $9.50 margin (at a $9.42 per cwt margin), he adds.

According to Katie Burgess with Ever.Ag, the DMC program uses national numbers for both the milk price and feed costs, so it has never really reflected the reality of any individual dairy operation.

“For the sake of keeping it simple and straight forward, I believe [the DMC program] does a fine job of representing a margin over feed. Of course, it’s not capturing the non-milk or feed data, so it’s not accounting for the higher non-feed costs the past few years. It’s also not making any adjustments for higher cull cow and calf revenue either,” she says. “For a producer really looking to dial in their margins, it’s not perfect. But, for a producer looking for some basic coverage against falling milk prices or rising feed costs, it does the trick – especially when you consider it comes at an affordable premium cost of 15 cents per hundredweight for the $9.50-margin Tier 1 coverage.”

The “Hidden Cost” Crisis

The primary criticism of the current DMC is its simplicity. Grant Grinstead with Vir-Clar Farms in Wis., says the DMC formula doesn’t account for modern cost factors.

“There are so many other cost factors that come into play now versus just feed,” he says. “I think we’re still missing some of that for true risk protection ... it makes us look like we’re doing better than we are.”

“The additives, minerals and fuel costs — those costs play a role,” Munch adds.

Beyond inputs, there is the massive, uncounted elephant in the room: labor. In fact, since 2016, the cost of keeping a reliable team on the ground has surged by 30% to 50%, driven by a tightening rural workforce and rising cost of living. This especially holds true for farms in states that have mandated overtime laws for dairy employees.

As dairy operations scale, labor has moved from a minor line item to one of the largest expenses on the balance sheet. Because DMC only looks at feed, a producer can be losing money on every gallon of milk due to labor and fuel, yet USDA data will show they are operating in a “healthy” margin.

Industry leaders are now “ringing the bell” for a formula enhancement. Suggestions include a “floor” for feed costs to protect those who grow their own crops or the inclusion of a “total cost of production” index that accounts for the reality of additives, minerals and human capital.

The Rise of Dairy Revenue Protection

As the DMC program struggles with its rigid formula, producers are shifting to a more surgical tool: DRP. Launched by the USDA Risk Management Agency in 2018, the program covered nearly 30% of all U.S. milk production in 2025.

Unlike the DMC, which focuses on the margin, DRP is designed to insure against unexpected declines in quarterly revenue. It is a “fluid” policy — markets change daily, and the coverage can be adjusted to match. For the lifetime of the program through 2025, net indemnities to producers have totaled more than $850 million, proving its effectiveness in a volatile market. Through the first three quarters in 2025, the program paid out a net of $31 million, but according to Phil Plourd, president of Ever.Ag, that number will go up considerably once Q4 figures land, estimated at an additional $150 million.

Ken McCarty, co-owner of McCarty Family Farms in Rexford, Kan., says that in their experience DMC is less applicable to a farm of their size compared to DRP.

“We believe that it is important that all safety net programs are kept nimble enough to adjust to changing market dynamics and the evolution of the dairy industry,” he says.

Grinstead views risk management as a way to provide control points for the business, ensuring the farm survives the future. Since 2019, Grinstead has utilized DRP as a net-positive tool for Vir-Clar Farms, managing his strategy at least a year in advance to secure incremental margins. After experiencing a significant premium loss during the COVID-19 pandemic, he shifted to combining DRP with options to protect his financial downside while still participating in potential market rallies.

“We’re not looking for home runs,” he shares. “We’re looking for base hits and just kind of driving our business through some control points and being here for the next generation tomorrow.”

5 Pillars of the Dairy Revenue Protection Strategy

For producers, DRP offers five advantages DMC cannot match:

1. Class vs. Component Pricing. DRP allows producers to choose how their milk is valued. Class pricing (Class III and IV) is ideal for those focused on fluid volume. However, for the rising number of Jersey and high-component herds, component pricing is a game-changer. It allows producers to establish an insured price based on butterfat, protein and other solids.

2. Flexible Coverage Levels. Producers aren’t locked into a “one-size-fits-all” tier. They can cover up to 100% of their expected production at levels between 80% and 95%. This allows a producer to “buy what they need” based on their specific break-even points.

3. State-Level Indexing. DRP is not a national average; it is indexed to the state or region where the producer is located. This accounts for regional basis and production fluctuations, making the indemnity much more accurate to the producer’s actual loss.

4. Natural Market Protection. DRP is a pure market tool. It covers revenue loss caused by natural occurrences in market prices and yields. While it doesn’t cover the death of cattle or management errors, it provides a “floor” that allows a producer to keep doing business even when the global market turns sour.

5. The 2026 Evolution. The program is not stagnant. For the 2026 crop year, several key revisions are being implemented to protect the integrity of the program and the producer. This includes a new “Insured’s Certification Against Subsidy Capture,” ensuring the program remains a legitimate insurance tool rather than a speculative one. Most importantly for herd health, the 2026 revisions include language that considers animal disease a “natural disaster” event that can trigger coverage if it prevents a producer from marketing milk.

“We continue to see strong interest in DRP insurance, as it helps protect against falling milk prices regardless of what feed prices do,” Burgess shares. “It’s especially useful for producers with output of more than 6 million pounds annually who can’t fully cover their production with the DMC program.”

Even if a producer can cover all their milk with DMC, it is also a good idea to have a DRP policy because many times DRP allows them to lock in a higher milk price than what would be protected by DMC, she adds.

“For instance, in 2025, many DRP policies saw sizable claim payouts whereas DMC only had an 8 cent payout in December,” Burgess notes. “Both DMC and DRP are useful programs, but knowing the strengths and weaknesses of each is important to make sure you are using the right tool for the job.”

The sign-up period for the 2026 DMC is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

One Week Remains for 2026 DMC Enrollment as Margin Pressure Builds

Wed, 18 Feb 2026 20:20:20 GMT

The sign-up period for 2026 Dairy Margin Coverage (DMC) is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

Why DMC Matters in 2026

Milk prices have started the year on the weak side, and with more milk coming from U.S. farms, plus plenty of product available on the world market, margins are expected to stay tight for much of the year. Lower feed costs have limited some of the downside, but the gap between milk income and overall production expenses continues to be narrow.

Because of those squeezed margins, analysts say early 2026 DMC payments are likely, with estimates pointing to more than $1 per hundredweight in support from January through April, followed by smaller payments into July.

Expanded Coverage Now Available

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, reauthorized the DMC program through 2031 and made several updates intended to improve its usefulness and flexibility. The changes reflect how milk production and risk management needs have evolved, particularly for small- and mid-sized operations that rely on DMC as a foundational safety net.

These improvements include:

Higher Tier 1 coverage – Tier 1 production increase from 5 million lb. to 6 million lb., allowing more milk to be insured at the lower premium.
New production history – All operations must establish updated production histories based on the highest milk marketings from 2021, 2022 or 2023, while newer operations will use their first year of production data. Milk marketing statements or other documentation will be required.
Multiyear enrollment with discounts – Producers can lock in coverage for 2026–2031 and receive a 25% discount on premium fees.
Flexible coverage options – Multiple levels remain available, including a catastrophic option at a $100 administrative fee. USDA’s online dairy decision tool can help producers determine the best level of protection.

Your DMC Enrollment Checklist

With milk margins tightening and updated coverage options in place for 2026, producers may need to evaluate whether DMC fits into their overall risk management plans. This risk management plan is structured to provide payments when the margin between milk prices and feed costs falls below selected coverage levels and is commonly evaluated alongside tools such as Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM) and futures or options strategies.

Before the enrollment deadline, producers should review the following items:

Verify Production History: Gather marketing statements from 2021, 2022 or 2023 to set your new baseline.
Evaluate Coverage Levels: Determine if the expanded 6 million lb. Tier 1 cap changes your strategy.
Compare Premium Costs: Weigh the 25% multiyear discount against your long-term cash flow goals.
Review Supplemental Tools: Consider how DMC works alongside Dairy Revenue Protection (DRP) or Livestock Gross Margin (LGM).
Assess Financial Goals: Determine how potential early-year payments fit into your 2026 budget.

How Do I Enroll in DMC?

To enroll in DMC, dairy producers must complete and submit an application to their local FSA office during the specified enrollment period, according to USDA. The application process includes providing production records and selecting the desired coverage level. Detailed enrollment instructions and deadlines are available through the local FSA office.

Idaho’s $4 Billion Dairy Boom: Why the Gem State is Defying West Coast Trends

Tue, 03 Feb 2026 14:05:50 GMT

While milk production across the West Coast faces a period of contraction, Idaho is carving out a different narrative. With USDA reporting the state’s production value near $4 billion in 2024, Idaho has transitioned from a regional player into a global dairy powerhouse. According to Rick Naerebout, chief executive officer of the Idaho Dairymen’s Association, this surge isn’t accidental. It is the result of a unique confluence of business-friendly policy, aggressive vertical integration and a fundamental shift in how dairy cattle are valued.

A Surge on a Massive Base

The sheer scale of Idaho’s recent growth is impressive. Naerebout reports the state has seen consistent growth rates of 5% to 8% per month year-over-year for the last 15 months. For 2025, Idaho is projected to be up 7.5% in total milk production.

“That 7.5% is on a very big base,” Naerebout explains. “It equates to roughly 3.5 million pounds of milk a day more this year than we had last year. We’ve definitely turned on the milk production.”

This growth has been facilitated by two primary catalysts. First, Idaho’s dairy producers are entering the current economic downturn with exceptionally healthy balance sheets following strong financial performances in 2024 and early 2025. Second, and perhaps most importantly, regional processors have finally lifted base restrictions that limited producers to fractional growth for years. With those caps removed, the Idaho dairy industry has surged to meet the available capacity.

The Magic Valley: The Heart of the Industry

The epicenter of this expansion remains the Magic Valley. While growth is visible across the state, approximately 75% of Idaho’s dairy industry is concentrated in this region. The concentration allows for an infrastructure of scale that is difficult to replicate elsewhere.

Idaho’s operations are notably larger than the national average, boasting nearly 2,500 cows per dairy. This scale, combined with a business-friendly climate — including the absence of agricultural overtime pay — allows Idaho producers to maintain lower costs than their neighbors in California or Washington.

Components and the “Black Calf” Phenomenon

Interestingly, the growth isn’t just coming from more cows; it’s coming from “better” milk. According to Naerebout, while volume is up 7.5%, the increase in milk components means the actual yield for processors is closer to 9%. This allows plants to produce more cheese, butter and powder for every pound of milk delivered.

Producers in Idaho, like other states, are also shifting culling practices.

“We’re hanging onto cows because they’ve got a black calf in them, and that calf is worth roughly $1,500,” Naerebout says.

The beef-on-dairy trend has become ubiquitous in Idaho, with adoption rates significantly higher than the national average of 70%. For many Idaho producers, the day-old calf has become a high-value commodity that provides immediate cash flow with minimal risk, as many are partnered with large feedlot operators, like Simplot, or feedlots to take the animals immediately.

Resilience Through Risk Management

The dairy industry is notoriously volatile, yet Idaho has shown remarkable resilience. Over the last 30 years, the state has only seen negative growth twice: in 2009 and 2013. Naerebout attributes this to a sophisticated approach to business that sets Idaho producers apart.

“Our dairymen are very savvy businessmen,” he notes. “We have a higher-than-average use of hedging tools. They insulate themselves from market downturns by making sure they are hedged.”

This financial discipline, coupled with being well-capitalized, allows these large-scale operations to weather economic storms that might shutter smaller farms in other regions.

The Shift to Vertical Integration

Perhaps the most significant structural change in Idaho’s dairy landscape is the move toward vertical integration. Unlike the traditional cooperative structure involving hundreds of members, Idaho has seen the rise of “processor-producers.”

Facilities like Idaho Milk Products and High Desert Milk were founded by small groups of dairy families — sometimes fewer than six — who pooled their capital to build their own processing plants. While Naerebout describes the startup phase of these ventures as “absolute hell” where families nearly lost everything, those who survived are now capturing the margins that previously went to third-party processors.

“They are capturing more margin for their business and using it as a form of risk mitigation,” Naerebout says.

This evolution from simple milk producers to sophisticated industrial processors represents the future of the Idaho dairy model.

Looking Ahead

As the industry faces a tightening economic window, Idaho’s producers remain focused on the long term. The goal for many is not just survival, but the creation of viable, multi-generational businesses. By combining aggressive adoption of technology, sophisticated risk management, and a willingness to invest in the processing side of the value chain, Idaho is proving that even in a mature industry, there is still significant room for a “growth state” to thrive.

“Idaho has been, and will likely remain, a growth area for plants and processors alike,” says Phil Plourd, president of Ever.Ag Insights. “It’s a hospital environment where all the stakeholders seem aligned around growing the industry.”

With strong components, high-value beef-on-dairy calves and a business environment that rewards scale, Idaho is well-positioned to remain the cornerstone of Western dairy production for the foreseeable future.

Your Next Read:
The 2026 Dairy Outlook: Navigating Volatility, Genetics and the Beef-on-Dairy Revolution

The 11th-Hour Trigger: December DMC Delivers the Only Payment of 2025

Mon, 02 Feb 2026 16:08:06 GMT

For the U.S. dairy producer, the 2025 calendar year was relatively stable, at least according to the Dairy Margin Coverage (DMC) program. For 11 consecutive months, the margin stayed above the $9.50 Tier I coverage level, leaving the program’s safety net untouched. But as the year drew to a close, the market finally blinked.

According to the USDA National Agricultural Statistics Service (NASS) ag prices report released Jan. 30, the December 2025 margin finally dipped to $9.42 per cwt. This 8¢ difference below the $9.50 trigger level officially established the first and only indemnity payment of the 2025 program year.

Math of the Margin

The December drop was driven by a significant softening in the all-milk price that outpaced a slight decline in feed costs. The U.S. average all-milk price for December fell 70¢ month-over-month to land at $19 per cwt.

On the other side of the ledger, total feed costs offered a small amount of relief, falling 8¢ to $9.58 per cwt. While soybean meal saw a healthy drop of nearly $19 per ton and dairy alfalfa hay fell by $5, corn was the lone outlier, rallying 12¢ to hit $4.10 per bushel.

When USDA applied the DMC formula — weighting corn, soybean meal and alfalfa hay — the resulting $9.42 margin left producers enrolled in Tier I coverage with an 8¢ per cwt payment. While the payment is modest, it is subject to a 5.7% sequestration deduction, and USDA has yet to announce a specific timeline for when these funds will hit producer bank accounts.

Stable Year in the Rearview

The fact that December provided the only payment of the year highlights how different 2025 was compared to the volatility of 2023 and 2024. For most of the year, the margin above feed cost remained healthy enough to keep the safety net from triggering. However, experts warn that this 8¢ payment shouldn’t be viewed as a fluke but rather as the canary in the coal mine for what is coming next.

Bleak Forecast for 2026

If December was a warning, the projections for the first half of 2026 are a siren. The latest price predictions updated Jan. 30 suggest a sharp economic turn is underway.

January’s margin is currently expected to plummet to $7.57 per cwt, a staggering $1.93 below the $9.50 trigger level. If this forecast holds, it will represent the lowest margin the industry has seen since August 2023. Current projections indicate margins will remain underwater, staying below the $9.50 Tier I level through at least July 2026.

While markets are famously unpredictable, the current data suggests that the quiet year of 2025 is over. The 2026 program year is shaping up to be one where the DMC program will be called upon frequently to provide much-needed liquidity to dairy operations.

The enrollment deadline for the 2026 coverage year is Feb. 26.

Your Next Read: The 2026 Dairy Outlook: Navigating Volatility, Genetics and the Beef-on-Dairy Revolution

Will Dairy Margin Coverage Deliver Payments in 2026?

Wed, 14 Jan 2026 17:21:27 GMT

With Dairy Margin Coverage (DMC) enrollment now open for 2026 , many dairy producers are asking the same question: Will the program actually pay out this year?

Based on current market conditions, analysts say the answer is yes.

Market Conditions Point to Early Payments

Weak milk prices, along with growing milk production both in the U.S. and abroad, are putting pressure on dairy margins, making it likely that DMC payments will be triggered early this year and possibly continue for several months. Analysts say these conditions make the program especially important as producers begin shaping their risk management plans.

“As we’re looking at 2026, milk prices are quite low to kick off the year,” says Katie Burgess, director of risk management at Ever.Ag. “And just based on the ample supply of milk coming off of farms, we are expecting low milk prices to continue into the foreseeable future, which will likely trigger DMC payments in the months ahead.”

Using mid-January market data, Burgess’ modeling gives producers a sense of what the first few months of 2026 could look like. Based on current pricing, the margin outlook suggests support might not be limited to just one or two months.

(Ever.Ag)

“Our model right now is showing payouts of more than $1 per hundredweight for January through April, and then some smaller payments for May through July as well,” she says.

Milk prices are at their lowest levels in quite some time, with the All-Milk price falling below $19 per cwt. Feed costs, meanwhile, remain relatively stable, helping to offset some of the pressure. But the gap between milk income and overall production costs is still tight for many operations.

Global markets are also awash in milk, with Europe and New Zealand adding to an already overwhelming supply. Burgess points to that international abundance as a major factor influencing U.S. prices

“Europe and New Zealand are creating a lot of milk,” Burgess adds. “So, we’re worried that we could lose some of our market share in the export space here in early 2026, which is another reason why prices are under so much pressure.”

Product Prices and Supply Weigh on Margins

William Loux, senior vice president of global economic affairs for the National Milk Producers Federation, says the margin outlook has become clearer in recent weeks, with market indicators also pointing toward a retroactive payment for December 2025.

“Given where dairy prices are today, I would certainly expect to see some DMC payments here through the first quarter and probably through the first half of the year,” Loux says. “ And I think it’s fairly well assured that we will have DMC payments for December’s milk.”

Loux stresses that while DMC is doing what it was designed to do, it’s never ideal to rely on safety net programs.

“It’s good that DMC is paying out, but it’s almost always better for prices, and better for dairy farmers, if they don’t,” he adds.

Butter and cheese prices continue to play an outsized role in shaping the milk price outlook. Because these commodities are major drivers of Class III and Class IV prices, prolonged weakness in either market pulls down the overall milk price and makes it harder for margins to improve, even if feed costs stay relatively manageable.

“Butter continues to drop and hit $1.30 today, cheese dropped below $1.30,” Loux says. “Those are the products that have the biggest influence on the milk check at the end of the day.”

Part of the challenge is on the demand side, particularly for cheese. While retail sales remain “pretty good,” Loux notes cheese is heavily dependent on foodservice.

“Cheese is one of those products that does better at food service than it does at home,” he says. “Your typical meal out to eat, especially in a fast food restaurant, is going to have more cheese on it than your average meal at home.”

With consumers pulling back on away‑from‑home spending, that softer foodservice demand is feeding directly into weaker cheese prices and a lower Class III milk price.

Butter is facing a different set of pressures. Rapid growth in butterfat tests has pushed more fat into the system, requiring the U.S. to move more butter and butterfat products into export channels. And until those export markets fully develop, that added supply is keeping a lid on butter prices.

Enrollment Now Open with Expanded Options

With margin pressure already emerging early in the year, producers now have the opportunity to enroll in the 2026 DMC coverage year. U.S. Secretary of Agriculture Brooke Rollins announced yesterday that enrollment for the DMC program will run from Jan. 12 through Feb. 26.

Signed into law on July 4, 2025, the One Big Beautiful Bill Act reauthorized DMC through 2031 and introduced several changes aimed at strengthening the program’s value. One of the biggest changes made gives producers more flexibility in how much of their milk can be protected at the lower Tier 1 premium.

“The most notable change for 2026 is that now producers will be able to enroll six million pounds at Tier 1, versus historically it’s been five million,” Burgess says. “So, it gives you an extra million pounds of coverage, especially for those medium-sized farms that could cover a lot of their milk, but not all of it.”

All operations enrolling in DMC for 2026 must establish a new production history. Existing dairies will base that history on the highest milk marketings from 2021, 2022 or 2023, while newer operations will use their first year of production data, even if incomplete.

Producers also have the option to lock in coverage for six years, from 2026 through 2031, and receive a 25% discount on premium fees. Coverage options remain flexible, including a catastrophic level available for the $100 administrative fee.

Incorporating DMC into Your Risk Management Toolbox

As producers begin to layout out their risk managment plans, Burgess says DMC remains one of the most cost-effective tools available.

“For that 15¢ a hundredweight it costs to enroll Tier 1 volume, it is the best risk management coverage you can buy right now,” she says. “For small or medium-sized farms, it’s meaningful coverage, and even for large farms, it’s at least one thing you can do to protect yourself.”

Still, both Burgess and Loux emphasize DMC works best when paired with other risk management tools. Loux encourages producers to consider Dairy Revenue Protection, Livestock Gross Margin or futures and options strategies alongside DMC.

“The uncertainty in dairy markets is not going away anytime soon,” Loux says. “So DMC, DRP — these are great programs to utilize.”

With enrollment open, milk prices under pressure and expanded coverage rules in place, DMC is positioned to play a big role in protecting dairy margins in 2026.

DMC Enrollment Opens for 2026, Now with Expanded Coverage

Tue, 13 Jan 2026 20:25:22 GMT

At a glance:

DMC enrollment for the 2026 coverage year opens Jan. 12 and runs through Feb. 26.
Tier 1 coverage expands from 5 million to 6 million pounds under OBBBA.
All producers will establish a new production history using more recent milk marketings.
Producers can lock in coverage from 2026 through 2031 with a 25% premium discount.

Dairy farmers will soon have the opportunity to enroll in an expanded and reauthorized Dairy Margin Coverage (DMC) program, following improvements included in the One Big Beautiful Bill Act (OBBBA).

During the 107^th American Farm Bureau Federation Convention, U.S. Secretary of Agriculture Brooke Rollins announced enrollment for the 2026 DMC coverage year will open Jan. 12 and run through Feb. 26. DMC remains a key safety net program designed to help offset the gap between milk prices and feed costs during periods of financial stress.

Signed into law by President Donald Trump on July 4, 2025, OBBBA reauthorized DMC through 2031 and introduced several significant changes aimed at strengthening the program’s value for dairy producers.

Higher Tier 1 Coverage

One of the most notable updates is the expansion of Tier 1 coverage. Under OBBBA, the Tier 1 production threshold increases from 5 million pounds to 6 million pounds of milk. This change allows more production to qualify for lower premium rates, improving affordability and risk protection for small- and mid-sized dairy operations.

New Production History Established

All dairy operations that enroll in DMC for the 2026 coverage year will establish a new production history.

For existing operations that began marketing milk on or before Jan. 1, 2023, production history will be based on the highest milk marketings from 2021, 2022 or 2023. New dairy operations that started after Jan. 1, 2023, will use their first year of monthly milk marketings, even if that year is incomplete.

Producers will be required to provide milk marketing statements or other acceptable production evidence to establish their production history.

Multiyear Enrollment Option with Discounted Premiums

OBBBA also introduces a long-term enrollment option. Dairy operations can choose to lock in DMC coverage levels for six years, covering 2026 through 2031. Producers who select this option will receive a 25% discount on premium fees, offering additional cost savings and predictability.

Coverage Options Remain Flexible

DMC continues to offer multiple coverage levels, including a catastrophic option that is available at no cost beyond the $100 administrative fee. Producers can select coverage levels that best align with their risk tolerance and financial goals.

To help evaluate coverage options, producers are encouraged to use USDA’s online dairy decision tool, which allows operations to compare scenarios and determine the most appropriate level of protection.

With higher Tier 1 coverage, discounted premiums for long-term participation and updated production history rules, the changes under OBBBA are expected to enhance DMC’s role as a risk management tool as producers plan for the years ahead.

Three East Coast Dairy Producers Share Strategic Planning and Risk Management Lessons

Mon, 22 Sep 2025 11:43:20 GMT

Navigating through the volatile milk market, rising production costs and numerous other challenges require innovation, strategic planning and sometimes a little outside help. In recent years, the transformations of three east coast dairy farms: Shafdon Farms, JoBo Holsteins and Misty Mountain Dairy exemplify how strategic interventions can lead to a sustainable future.

Shafdon Farms: Rising from Rock Bottom
Shafdon Farms, nestled in Jefferson, Md., stands as a testament to resilience and strategic transformation. Ten years ago, Shafdon Farms was struggling under a high debt load and poor forage quality. Dee Shafer and her family faced significant challenges with no clear path forward.

“We hit rock bottom,” Shafer says. “We finally realized we needed some outside help.”

In 2015, the Shafers made a pivotal decision —hiring an accountant with extensive experience in agriculture. Two years later, and with assistance from the Center for Dairy Excellence, they assembled a profit team.

The significance of a business plan and a collaborative approach cannot be overstated for any farm looking to climb out of economic hardship. Shafdon’s profit team — comprised of nutritionists, accountants, lenders and various consultants — was the catalyst for crafting a meticulous business plan. This blueprint aimed at setting production targets, managing expenses and providing a roadmap for future growth.

“I can’t stress enough the importance of a profit team and a business plan,” Shafer says, reflecting on the pivotal role teamwork played.

By channeling their combined knowledge and efforts, the Shafers went to work on several fronts — expanding their herd, optimizing facility usage, hiring a new custom forage operator and refining crop and ration strategies.

Fueling Growth with Strategic Changes
A new partnership with a lender streamlined the farm’s payments, granting the Shafers enhanced flexibility in their financial decisions. In an ambitious bid to boost milk production efficiency, they transitioned their barley and alfalfa acreage to double-cropped corn and triticale, necessitating changes in herd rations.

Noteworthy farm improvements were made, including the construction of a new manure storage pit, a heifer barn and an addition of 72 freestalls to enhance cow comfort. They also introduced separate rations for high and low producers, tailoring their approach to maximizing output.

Since 2017, the advancements at Shafdon Farms have been profound. Their herd has expanded from 240 cows to more than 400 cows. Financial health, once characterized by a deficit of approximately $155,000, has reversed impressively, now reflecting a positive balance exceeding $140,000.

JoBo Holsteins: Strategic Expansion and Profit Margin Focus
JoBo Holsteins, nestled in the charming landscapes of Gettysburg, Pa., is a testament to the power of strategic decision-making in agriculture. In a sector where operational difficulties are commonplace, the farm has managed to transform its challenges into opportunities, shifting from a struggling enterprise to one flourishing with positive cash flow and a promising future.

Dale Brown, one of the visionary partners behind JoBo Holsteins Farm LLC, sheds light on the pivotal strategies that fueled this turnaround. The farm’s unique five-way partnership has been instrumental in navigating financial distress. Through collaborative efforts, they have emphasized operational efficiencies and profit margins, focusing on the profit margin per cow and overall capacity as the backbone of their success. This strategic focus has been crucial in expanding the dairy to its current scale of approximately 1,050 milking cows.

Leverage Expertise for Growth
Like other successful farming entrepreneurs, Brown credits peer groups and financial consultants for their indispensable role in the dairy’s revival. These external experts provided invaluable insights and frameworks for sustainable growth, paving the way for the farm to embrace financial stability. As the profits flow more consistently, the decisions related to expansion and development can now be made with increased flexibility and confidence.

With solid financial footing, JoBo Holsteins is ready to tackle its next growth challenge. While operational stability has been achieved, the focus shifts to future objectives.

“Our next challenge is where to go next,” reflects Brown, highlighting the farm’s commitment to continuous innovation and development.

Misty Mountain Dairy: Building a Foundation on Profit Margins
Mark Mosemann of Misty Mountain Dairy LLC recounts how his family farm rose from challenging times through a combination of good communication, team planning, dedicated work and a touch of faith. It’s a story of resilience and strategic growth for the Mosemanns, who are driven by the pursuit of financial sustainability and family legacy.

For Mosemann and his family, the cornerstone of decision-making lies in profit margins. Operating a 500-cow dairy alongside his wife Lauren, his parents, brother, and two members of the next generation, Mosemann emphasizes the importance of financial health.

“If you’re not making the margin, you’re not making the income to survive,” Mosemann candidly shares. The family’s ethos revolves around the idea that every decision must enhance their financial footing.

Strategic Growth Through a Master Plan
Adapting to a complex agricultural landscape requires a thoughtful master plan for growth. Mosemann urges fellow farmers to devise a strategy that aligns with family goals while remaining economically viable. At Misty Mountain Dairy, this translates into a comprehensive approach where risk management plays a crucial role. The family keenly balances the cost of homegrown feed against purchasing options and fosters advantageous purchase agreements.

The Art of Incremental Growth
Instead of aiming for spectacular immediate success, Mosemann and his family embrace the power of incremental achievements.

“Hit singles instead of going for a grand slam,” Mosemann advises.

By focusing on internal herd growth and enhancing forage quality, they aim for steady, sustainable improvements. For them, measured progress is the pathway to durability.

Networking stands as a pivotal component of Misty Mountain Dairy’s transformation. By connecting with industry experts and fellow farmers, the Mosemann family expanded their horizons beyond initial limitations.

“The more people you know, the more options and information you will have,” Mosemann explains. This exchange of diverse perspectives has empowered them to be innovative thinkers— sometimes even discarding conventional structures in favor of new approaches.

Each of these farms exemplifies how strategic risk management, financial oversight and a focus on profit margins over gross sales can transform a dairy operation into a successful business. Whether it’s hiring knowledgeable consultants, forming a profit team or developing a master plan, these steps can pave the way for a brighter and more profitable future in the dairy industry.

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One Big Beautiful Bill Passes, What Does It Mean for Dairy Farmers?

Tue, 08 Jul 2025 15:00:00 GMT

After passing the “One Big Beautiful Bill act” (OBBB) last Thursday, the American dairy farmer has new legislation to hopefully help aid prices, offer tax relief and boost current insurance programs. Now that the dust has settled and the ink has dried, here is a closer look at what will affect the average dairy producer going forward.

The OBBB first and foremost extended the Dairy Margin Coverage (DMC) through 2031. This will ensure that producers have no gap in the insurance coverage that helps support income through the RMA. There are a few key changes made to make it a little more attractive to the producer such as changing the Tier 1 coverage limit from 5 million to 6 million pounds of milk per farm. As production per cow increases and farm sizes grow, this 20% increase was seen as necessary to support the farms that feed us. Another important change is farms can now use the highest production year from 2021-2023 as their baseline. There is also a 25% discount for producers to commit on multiple year enrollment on their premiums.

In an effort to ensure transparency for Class III and IV milk, both the House and Senate agreed that requiring a biennial USDA cost survey of dairy processors should be mandatory. The goal is to better align make-allowance estimates with timely real costs of producing cheese, butter and nonfat dry milk so the processor has less marketing power and help ensure the long-term pricing fairness.

As many dairy producers also have row crops, there are many benefits shared by extending the commodity and risk management programs like ARC and PLC as well. Higher payment caps (12.5%), higher ARC coverage (90%), higher reference prices and the ability to update base acres are a few of the highlights to help farmers.

There are many tax benefits on this bill as well. One key change is allowing farm implements to be deducted in full year one. Making it no longer a requirement to deduct large equipment purchases over several years. This puts the financial decisions in the farmer’s hands for how they want to expense large purchases. The bill also made the Section 199A deduction permanent to deduct up to 20% of business-related income as well as increasing the small business expense threshold.

For our future family farms, there are provisions that allow death tax exemptions which are now permanent. It increases the doubled Death Tax exemption which will aid in passing down farms and assets to the younger generation. While the new farmers are getting started, they have now increased the Beginning Farmer premium subsidy which helps cover a part of the cost of crop insurance and extended it from 5 to 10 years of aid.

On the animal health front, the bill ads verbiage that the USDA must spend $233 million per year on animal disease research and response efforts. This pumps significantly more money into the National Animal Disease Preparedness program as well as research in the vaccine production. With all eyes on screwworm lately, this is important for response time and veterinary preparedness to help diagnose faster as well as aid in the training of state responders on all diseases but highlights the importance of controlling threats such as new world screwworm.

While there are imperfections in all government programs, the aim of this bill was to help the American farmer and to support the family farm as well as the communities around them. We’ll learn more as time goes on about the good and the bad this bill brings but the intentions of the bill are clear and the benefits to the dairy farm, while subtle could be what makes the next five years a little easier on dairy farm economics.

Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net .

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Boost Your Dairy's Year-End Profits with Strategic Financial Planning

Wed, 25 Jun 2025 13:14:42 GMT

With summer now here, many of us begin to consider the best ways to ensure a prosperous financial year-end. In the agricultural sector — especially in dairy production — having a solid financial strategy is crucial. Independent financial dairy consultant Gary Sipiorski sheds light on how dairy producers can position themselves for financial success despite fluctuating market conditions.

Leverage Grain Prices to Your Advantage
With grain prices currently low, dairy producers are seeing some reprieve in their feed bill. However, the opportunity lies in forward contracting, which Sipiorski recommends looking into. These contracts could offer dairy producers more control over future feed costs and, ultimately, business outcomes.

As Sipiorski puts it, “Forward contracting needs to be investigated, and it is the owner’s choice regarding future feed needs and decisions.”

Manage Interest Rate Changes
As we are midway through 2025, it’s a good time for producers to review the status of any five-year loans taken out at low-interest rates, as many of these are now coming due. To avoid financial discomfort, consult with lenders to explore different interest rate options. This proactive approach will prevent any unpleasant surprises and support long-term sustainability.

Reassess Your Projections
This is a prime time of year to compare initial financial projections with actual figures. It’s important to forecast the rest of the year’s finances and make adjustments to ensure profitability. Part of this involves managing deals in all areas to maximize revenue and minimize losses.

Capitalize on High Beef Prices
Persisting record beef values calls for strategic herd management choices. Culling cows that will not affect production can generate substantial additional income. Looking at the next few years, using sexed semen on heifers and breeding some mature cows to beef — while ensuring adequate springing heifers — appears to be a sound decision. One-week-old beef-mix calves may continue to sell for as much as $1,200 until the beef herd expands significantly.

Dairy producers have diverse strategies available to solidify their year-end financial standing. Jay Retzer, senior dairy lending specialist with Compeer Financial, advises mid-year evaluations of financial health and necessary adjustments to maintain profitability. He outlines four strategic focus areas:

Review Budgets and Adjust if Needed
Evaluate year-to-date performance, identifying any areas where expenses exceeded projections. Based on current conditions and market forecasts, adjust budgets for the remainder of the year if necessary.
Cash Flow Management
Assess the current cash flow forecast to ensure liquidity for operational needs.
Risk Management
Review existing risk management strategies and consider additional measures to hedge against potential market downturns and business disruptions.
Tax Planning
Early consultation with a tax adviser can help manage year-end tax liabilities, mitigating any last-minute surprises.

By leveraging current grain prices, managing upcoming loan interest changes rigorously, reassessing projections and capitalizing on beef market trends, dairy producers can position themselves for lasting success. It requires a mix of proactive management and strategic planning to thrive in this ever-evolving market landscape.

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Why Strong Milk Prices May Block DMC Payments This Year

Tue, 10 Jun 2025 15:56:00 GMT

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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Stay Protected: Extended Dairy Coverage Brings Stability Through 2031

Fri, 16 May 2025 13:03:07 GMT

National Milk Producers Federation (NMPF) recently expressed strong support for the House Agriculture Committee’s reconciliation proposal, which includes vital provisions aimed at bolstering the agricultural sector and providing stability to farmers. The proposal is set to bring significant advancements, particularly for dairy producers.

“We commend Chairman GT Thompson and committee members for advancing important investments that will help support and create opportunities for dairy,” said Gregg Doud, president and CEO of NMPF. He emphasized the importance of working with lawmakers to support these provisions as they progress through Congress, noting the positive impact for the dairy sector from the House Agriculture Committee’s approval.

Extension of Dairy Margin Coverage Program
A major highlight of the proposal is the extension of the Dairy Margin Coverage (DMC) program through 2031. This extension ensures long-term risk management support for dairy producers. The DMC program is a voluntary risk management initiative that helps dairy producers manage the financial impacts of fluctuating milk prices and feed costs. By participating in DMC, dairy farmers receive payments when the difference between the All-Milk price and the average feed price, known as the margin, falls below the coverage level they choose. This mechanism is crucial in protecting farmers’ income from variations in milk prices and increases in feed costs.

Katie Burgess, director of risk management with Ever.Ag, supports this move, highlighting DMC’s strong track record of generating payouts when margins are squeezed.

Updated Production History Calculation
The bill proposes updates to the DMC production history calculation, allowing farmers to use their highest production year from 2021, 2022, or 2023. This adjustment aims to better reflect current production trends, offering farmers a more accurate and favorable baseline for future calculations.

Additionally, the legislation allocates funding for mandatory USDA dairy processing plant cost surveys, scheduled biennially. These surveys are designed to provide critical data that will guide future discussions on make allowances, ensuring the dairy industry remains competitive and informed.

Broader Legislative Package for Agricultural Support
Beyond dairy-specific measures, the proposal includes sustained funding for trade promotion, conservation efforts, agricultural research and animal health initiatives. It is expected to pass the House Agriculture Committee and get incorporated into a broader budget reconciliation package. This larger package encompasses essential tax policy extensions, such as the permanent adoption of the Section 199A tax deduction. This provision allows dairy cooperatives to return the deduction to their farmer members or reinvest in their operations.

Doud underscored the importance of getting policy right in this legislation, highlighting the enormous stakes involved in risk management and tax issues.

The reconciliation proposal represents a comprehensive effort to bolster the dairy industry, providing long-term support and opportunities for growth in an ever-changing economic landscape.

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Navigating the Complex Waters of the Global Dairy Market

Thu, 01 May 2025 17:20:15 GMT

The global dairy market is a fascinating tapestry of interconnections and influences. From the impact of tariffs to the strategic importance of export markets, the intricacies of this sector demand strategic attention and planning. In a recent episode of “AgriTalk,” Chip Flory sat down with industry expert Matt Tranel from Ever.Ag to discuss the intricate dynamics of the global dairy market. The conversation delved into the factors influencing Class III futures, the importance of export markets like Mexico, and the domestic demand for dairy products.

The Impact of Tariffs and Global Competition
Tranel says tariff talk initially rattled the cheese markets, driving prices downward. Despite these initial setbacks, the U.S. remained a competitive value buy in the global cheese market.

“Regardless of having tariffs or not, we were a very good value buy from a cheese export standpoint,” he says.

This competitiveness fueled export orders, particularly in the second and third quarters, which impacted available cheese stocks and drove up prices in futures, Tranel says.

The global market dynamics are influenced by regional competitiveness, with New Zealand and Europe playing significant roles.

“New Zealand ... is in large part supplying the Chinese market,” Tranel says, highlighting the geographical advantage and tariff implications that shape trade flows. Meanwhile, European challenges, such as blue tongue disease and foot and mouth disease, create variables that can influence supply and demand dynamics.

Mexico’s Crucial Role in U.S. Dairy Exports
Mexico is the No. 1 importer of U.S. dairy products. In fact, according to the U.S. Dairy Export Council (USDEC), in 2022, Mexico was the first $2-billion U.S. dairy export market, with sales increasing 37% to $2.5 billion and volume up 9% to 556,497 MT. In 2024, U.S. dairy exports reached $8.2 billion, marking the industry’s second-highest level ever. Critical to this success is Mexico, who imported record values at $2.47 billion.

Tranel says with Mexico purchasing a significant portion of U.S. cheese exports, maintaining favorable trade relations is imperative. In fact, Mexico bought 33 million pounds out of the total U.S. cheese exports. This underscores Mexico’s strategic importance and the necessity of keeping this market engaged and satisfied.

Domestic Market Dynamics
Domestic dairy demand was another focal point, with Tranel pointing out varied trends across different products. While frozen pizza sales remain robust, reflecting economic pressures and consumer behavior, the overall cheese demand has been stable. Interestingly, the push toward real butter continues, though the increased butter production has led to price declines.

“Frozen pizza sales continue to be up pretty substantially through the end of 2024 into 2025,” Tranel says, noting that frozen pizza is an economical meal for a family. “A lot of times that can be a little bit of a barometer as far as where the economy has been or is, from a cheese standpoint, overall, it’s been okay. It’s actually performed maybe a little bit better in 2025 than maybe what some expectations would have been, just due to all of the new capacity that is and has come online.”

Big-Ticket Prices of Beef-on-Dairy
Innovative strategies such as the use of beef-on-dairy have evolved dairy business models by integrating beef production into dairy operations. Tranel points out that the $1,000 day-old beef-on-dairy calves and the price of cull cows is helping cash flow situations on dairies.

“The economics certainly suggest that we should be pushing that as hard as we can, and ultimately, that’s keeping a few more replacement animals out of the system and maybe some of the supply down the road,” he says.

Risk Management in a Volatile Market
Managing risk is critical in the current volatile market. Tranel advises employing protective financial strategies, such as using CME puts and leveraging other dairy-specific risk management tools. The objective is to maintain a floor on potential losses while staying open to top-side market opportunities.

“You got to protect the bottom, because you know you have to be the lowest price, but you got to stay open to the top side, because you’re going to see some volatility,” he emphasizes.

The global dairy market is characterized by its complexity and interdependence. From tariffs and export markets to domestic demand and innovative production strategies, navigating this landscape requires astute attention to market signals and strategic planning. As the sector evolves, staying informed and adaptable will be key to thriving in this dynamic market environment. To listen to the entire conversation between Chip Flory and Tranel, go to: AgriTalk-4-24-25-PM-Matt Tranel - AgriTalk PM - Omny.fm

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Navigating the Shifting Tides of the Dairy Market: What 2025 Holds for Milk Prices

Wed, 19 Mar 2025 14:36:28 GMT

The U.S. dairy market is experiencing dynamic changes, influenced by various factors ranging from international trade relations to evolving consumer behaviors. Recently, Katie Burgess, the dairy market advising director with Ever.Ag, offered an in-depth examination of these ongoing developments at the Oregon Dairy Farmers Convention in Salem, Ore. Her insights shed light on the potential trajectories for the dairy industry in 2025.

The Importance of Exports for the U.S. Dairy Market
A key takeaway from Burgess’s presentation is the critical role exports play in the U.S. dairy market. In 2024, while exports started off slowly, they ultimately achieved record cheese export months, providing a crucial buffer for maintaining milk prices. Notably, cheese exports hit an all-time high last year, signaling growing global consumer interest in American dairy products—a trend particularly crucial as domestic production increases.

“This is really good news that consumers around the world are finding value in American dairy products, because as we grow here domestically, that’s going to be the key,” she said.

Impact of Tariffs on Trade Relations
The imposition of tariffs by the U.S. on countries like Canada, Mexico, and China has stirred significant repercussions, with these countries preparing retaliatory tariffs on American dairy products. This development poses a considerable risk, especially concerning Mexico, which accounted for nearly 40% of U.S. cheese exports in 2025. Burgess expressed concerns about a potential decline in export volumes to Mexico due to higher consumer costs there, although milk powder exports remain unaffected by Mexican tariffs, offering some reprieve.

“We do think that our export volumes to Mexico could be subject to pulling back a bit as they get more expensive from a Mexican consumer perspective,” she says.

Investment in Cheese Processing Capacity
Investment in the U.S. dairy industry is another critical factor at play. Significant expansions, such as the Leprino plant capable of processing 8 million pounds of products daily and the Valley Queen expansion in South Dakota, are set to elevate cheese production capacity further. Burgess points out the possible consequences of this growth, cautioning that the U.S. may face an abundance of cheese if exports do not keep pace. This situation could necessitate an increase in domestic cheese consumption, which typically grows by 1-2% annually.

“If we can’t get the cheese exported, and we’re making a lot of it, it means we’re going to need to eat a lot more cheese,” she says.

Consumer Behavior Trends in a Shifting Economy
Amidst these industry shifts, consumer behavior is also evolving. As food inflation impacts U.S. households, there is a noticeable trend towards reduced eating out, with more people opting for home-cooked meals. This shift, observed since 2024, persists into 2025 and drives increased grocery sales.

“It’s part of a continued trend that we saw across 2024 less foot traffic into food service. Grocery sales looked pretty solid as people rotated to eating at home. And this has really continued here into 2025, I think, with the uncertainty in the economy right now,” she says.

Predictions for Milk Production in 2025
Looking forward, milk production is forecasted to rise this year despite previous contractions in supply, partly due to factors like HPAI in key states like California. However, the dairy sector faces a unique challenge as the expected number of dairy heifers calving in 2025 reaches its lowest point in over 20 years. This production increase will likely vary across regions with new processing plant capacities.

“So even though our forecast shows milk production will grow this year, I think it’s going to be kind of a mixed story that we expect milk to grow in spots with new plant capacity,” she shares.

Risk Management Amidst Uncertainty
Given the pervasive uncertainties symbolizing the current economic climate, Burgess emphasizes the need for rigorous risk management strategies. Over the last decade, Class III prices often surpassed $19 per hundredweight, but at least once each year, market prices dipped below $16 per hundredweight. For many, a breakeven point higher than $16 necessitates protective measures to manage risks when prices fall. As Burgess aptly notes, “Hedging is not gambling. Hedging is when we take risk away.”

As we navigate the milk market’s changing dynamics in 2025, stakeholders must remain vigilant and proactive. Strategic investments, diversification of export markets, and effective risk management will be essential strategies to harness opportunities and mitigate challenges within this complex and evolving industry landscape.

Your Next Read: A Resilient Comeback: U.S. Bovine Semen Industry Sees Growth in 2024

Don’t Wait: Sign Up for Dairy Margin Coverage Before it’s too Late

Mon, 17 Mar 2025 14:49:22 GMT

Dairy farming comes with enough uncertainties—don’t let market volatility be one of them. As dairy producers navigate the challenges and opportunities of 2025, the USDA’s Farm Service Agency (FSA) is once again offering a vital safety net through the Dairy Margin Coverage (DMC) program. With the enrollment period open until March 31, 2025, now is the time to take action and ensure your operation is protected against unpredictable market conditions.

Why Enroll in DMC?
Market volatility is an unavoidable reality, but financial stability doesn’t have to be. FSA Administrator Zach Ducheneaux emphasizes the significance of safety-net programs like DMC.

“Our safety-net programs provide critical financial protections against commodity market volatilities for many American farmers, so don’t delay enrollment,” he says.

This program acts as a crucial buffer, shielding dairy producers when the gap between the all-milk price and the average feed price falls below a selected margin. In uncertain times, securing coverage through DMC can make the difference between stability and financial strain.

Affordable Risk Protection
For just $0.15 per hundredweight at the $9.50 coverage level, DMC offers affordable peace of mind. The program provides dairy farmers with a reliable mechanism to offset financial risks associated with fluctuating milk and feed prices. Given its cost-effective nature, signing up is a strategic move to protect both current and future profitability.

Avoid the Last-Minute Rush
Even if you’re already enrolled and don’t plan to change your program election for 2025, you must still sign a contract to ensure continued coverage. Ducheneaux urges producers to act promptly.

“If you’re getting coverage through the Agriculture Risk Coverage or Price Loss Coverage programs, avoid the rush and contact your local FSA office for an appointment,” he adds.

How to Enroll

Contact your local FSA office to schedule an appointment.
Review your coverage options and select the best margin protection for your operation.
Sign the necessary paperwork to finalize your enrollment before March 31, 2025.

Your Next Read: The US–Canada Dairy Trade Dispute: Unraveling the Complexities

What to Do and Not to Do to Endure Financial Tough Times

Thu, 20 Jul 2023 17:54:20 GMT

Producers are challenged paying the bills with the lack-lusting prices that have shown up on milk checks so far this year. Independent financial consultant, Gary Sipiorski, shares six tips to focus on during financial tough times.

Conduct family and staff meetings so everyone understands what’s going on. Be realistic, not pessimistic about your dairy’s financial situation.
Reconsider all expenses.
Cows don’t understand that milk prices are considerably less. Keep taking care of your cows. Now is not the time to make shortcuts.
With the high price of beef, take a hard look at culling that will take a minimum hit to the bulk tank.
Gather with your lender to talk about finances. Have the funds approved for an operating loan, even if you don’t need them right now. Make sure you bring a financial projection for the remainder of 2025 to the meeting.
Keep on leading. The owner sets the atmosphere for all.

“It is hard to say how long milk prices will be low, where the bottom is and how long before markets turn up,” Sipiorski says.

Curtis Gerrits with Compeer Financial concurs with Sipiorski, adding the importance of staying connected with your professional team.

“Have continued discussions with your veterinarian, nutritionist, commodity broker, and banker on how to continue to improve your operation,” he says. “With these discussions keep margin management at the front of mind on any operational adjustments you may be considering.”

Gerrits adds to keep looking towards the future.

“Look out 12-18 months for areas of opportunity with managing your margins,” he says. “DRP, LGM, DMC and other hedging strategies may present opportunities to capture some positive margins even when prices are low today as you look out into the future. Review your dairy’s budget for this year and think through your budget for the rest of 2025 and into 2026. Explore areas of opportunity to lower your cost of production whether that be on the income or expense side of your operation.”

What Not to Do

Wayne Knoblauch, professor in the Dyson School of Applied economics and Management in the SC Johnson College of Business and the College of Agriculture and Life Sciences at Cornell University adds the following 11 things to avoid when dairy farmers are facing financial difficulty.

Making decisions that will cause the problem to be worse a week, month, or year down the road.
Continuing the same practices simply because you’ve always done it that way.
Neglecting needed accounting tasks because there isn’t time right now.
Utilizing farm-produced feeds so rapidly that they are used up without a replacement plan.
Reducing purchased feed just to save money.
Purchasing products that promise to be a cure-all unless you have hard data and the experiences of others to confirm.
Making capital investments to reduce tax liability or because “it is a good buy.”
Borrowing money unless the profitability of the farm is reasonably expected to increase in order to provide for repayment.
Neglecting the details; cleaning and maintaining equipment, detecting heats, etc.
Using alcohol to excess. Alcohol and other drugs can make a tough situation even worse.
Assuming a management strategy that worked for one farm will be effective on yours.

30 Minutes With Secretary of Agriculture Brooke Rollins In Her First Week On the Job

Wed, 19 Feb 2025 21:14:01 GMT

Since Saturday, Nov. 23, 2024 , Brooke Rollins has been focused on how to build the teams and the plans that impact the trajectory of agriculture and rural America. On that day, while en route with her husband and four teenagers in their motor home to Auburn, Ala., for the Texas A&M football game, she got a call from now President Donald Trump. The purpose of his call: She was his top choice to fill his final significant cabinet position, Secretary of Agriculture.

Obviously, she had to wait for confirmation, which came last week on Feb.13 when the Senate overwhelmingly confirmed her as the 33^rd Secretary of Agriculture , but since that Saturday before Thanksgiving, she’s been on the go with an accelerated enthusiasm to understand the significant challenges facing rural communities that lost 147,000 family farms between 2017 and 2022 and why the cost of inputs are up 30% as exports are down $37 billion this year and likely to fall further in the months to come.

“This is a crisis, and this is something that I understand inherently,” Rollins said to kick off Top Producer Summit in Kansas City on Tuesday. “My promise to you is this, and my commitment will never waver, that every minute of every day for the next four years I will do everything within my power, with hopefully God’s hand on all of us and our work, to ensure we are not just entering the golden age for America, as my boss, President Trump, likes to say, but we are entering the golden age for agriculture.”

What Has Rollins Been Up to the Past Four Years?
Secretary Rollins and President Trump have worked together for almost eight years. She was in the West Wing with him for years two, three and four of his first term running his domestic policy agenda.

“This real estate guy from New York City brought that vision to life, and then in the last term, was able to really do some remarkable things,” Rollins said in regard to President Trump returning power to the people who just want a chance at the American dream. “I call it the great pause, the four years in between term one and term two. But I think the great pause allowed very intentional planning. It allowed a courageous and bold leader in President Trump to become a fearless leader and to do everything he can to bring America back to greatness.”

In the “dark days of January 2021,” as she described, Secretary Rollins helped launch the America First Policy Institute, a think tank established by former Trump officials to promote conservative policies. The idea was that those policies that made America great in Trump’s first term would continue indefinitely, not just for a second term, but for four years, eight years or 36 years, Rollins described.

First Week On the Job
Since being confirmed last week, Secretary Rollins has been in the Washington, D.C., USDA office for a few hours, but most of her time has been spent in Kentucky at National Farm Machinery Show in Louisville and Gallrein Farms and in Kansas visiting Finney’s County Feeder, High Plains Ponderosa Dairy and the National Beef Packing Plant .

Describing herself as “a reader and a studier,” Rollins seems adamant to hear firsthand from farmers and ranchers. She referenced her visits to the dairy farm and National Beef facility as inspiring, in a good way but also in a way that helps her understand the real challenges at hand.

Speaking to the crowd at Top Producer Summit, she shared her appreciation for the “entrepreneurial American game changers” who are doing their part to feed the world.

“It is so inspiring and a reminder of the very beginning of our country.” Rollins said. “Our revolution was fought by farmers, our Founding Fathers, like Thomas Jefferson and George Washington. The backbone of the great American experiment is this community.”

Thank you @topproducermag for hosting @RogerMarshallMD and me in Kansas City, Missouri, with 1,000 of the Top Producers from across the US to talk about issues like expanding trade access and cutting regulatory red tape for farmers.

Biden’s ZERO trade deals and inflationary… pic.twitter.com/ejMxKxkRMG
— Secretary Brooke Rollins (@SecRollins) February 19, 2025

Farmer Q&A
Watch and listen to what Secretary Rollins, as well as Sen. Roger Marshall of Kansas, had to say on stage at Top Producer Summit about these 7 topics:

Trade and tariffs — “ Let’s go barnstorm the world , and let’s go find some more trade partners and access [to market opportunities],” Rollins said.
Department of Government Efficiency (DOGE) efforts and modernizing USDA — “DOGE is a very valid and important effort across all government. The stories of waste and abuse were really just, not USDA specific but across government, beginning,” Rollins said.
Federal programs, such as CSP and EQIP — “Our commitment is that if there have been commitments made, those will be honored. Getting our arms around all of that right now is really, really, important. Again, going back to the President’s heart and commitment to our farmers, I feel confident we will be able to solve any issues that are in front of our ag community, that are potentially being compromised by the DOGE effort, while at the same time recognizing how very, very important it is,” Rollins said.
Future of USDA — “There’s no question USDA needs some modernization. I’m just beginning to lean into that as well,” Rollins said. USDA has 106,000 employees and 29 departments. “The Secretary is taking over a department where only 6% of the [D.C.] people work in the office,” Marshall added.
Renewable fuels — Prior to President Trump’s first term, he was “the first major candidate to support biofuels, and I think that carried him through Iowa in many ways. … We’ve got E15 year-round. I think that gives us some certainty as well. … The President is supporting that. I think we’re trying to figure out how to save 45Z, but we can’t let China benefit from it. Right now, China is benefiting more from [45Z] than my farmers and ranchers are, so we’ve got to fix that,” Marshall says.
Immigration policies and availability of long-term labor — “I have a full-bodied understanding of the challenges within the labor market, and I believe the President does too. … I believe that we will very soon be talking about it again. Clearly, the H-2A program needs significant reform, and Lori Chavez-DeRemer, she’s going through the [confirmation] process right now. … Hopefully she’ll get her vote very soon. We’ve got a lot of work to do,” Rollins said.
Trump’s cabinet members — “Our cabinet is comprised of people that have been working together and have been friends and colleagues for years, with a few exceptions. Bobby Kennedy is a new friend, but Lee Zeldin and I worked together in America First Works and America First Policy Institute for the last almost four years, Linda McMahon in education and John Brooks — these are our people,” Rollins said.

BREAKING: USDA Secretary Brooke Rollins and Sen. Roger Marshall to Join Farmers At Top Producer Summit

Sun, 16 Feb 2025 21:24:21 GMT

Secretary of Agriculture Brooke Rollins and Sen. Roger Marshall of Kansas will speak Tuesday morning at this week’s Top Producer Summit in Kansas City. The event is among the secretary’s first public appearances since being confirmed Feb. 13 . The fireside chat will cover key topics driving the future of agriculture.

A one-day pass to the event is available to give the agriculture industry a chance to hear Secretary Rollins share her vision for U.S. agriculture. Advanced registration is required due to security protocols. Register now with discount code ONEDAY to receive the special rate.

Secretary Rollins, originally from Glen Rose, Texas, serves as the 33rd Secretary of Agriculture. Most recently, she was founder, president and CEO of the America First Policy Institute. During President Donald Trump’s first administration, she was the director of the Domestic Policy Council and assistant to the President for Strategic Initiatives in the White House. She also previously served as director of the Office of American Innovation.

Sen. Marshall is a physician and U.S. Senator for Kansas. As a fifth-generation farmer from Butler County, Sen. Marshall became the first in his family to attend college. In the Senate, he serves on the Committee on Agriculture, Nutrition, and Forestry. He is the chairman of the Subcommittee on Conservation, Climate, Forestry, and Natural Resources and a member of the Subcommittee on Food and Nutrition, Specialty Crops, Organics, and Research.

Tickets are still available to attend the entire Top Producer Summit , which is agriculture’s premier educational and networking event for forward-thinking farmers and ranchers. The event will bring producers of nearly a dozen commodities together at the Loews Kansas City Hotel to share business opportunities and ideas for taking their operations to the next level.

In addition to the fireside chat with Secretary Rollins and Sen. Marshall, the agenda includes:

The Future of Farming with Byron Reese, futurist, technologist and entrepreneur
Conquer Decision Paralysis with Rena Striegel, Transition Point Business Advisors
How Income Taxes May Change Due To The Election with CPA Paul Neiffer
Land Diversification: What to Know Before Exploring Renewable Energy and Conservation Opportunities with Quint Shambaugh, Pinion
What’s Ahead for Farm Input Pricing with Sam Taylor, Rabo AgriFinance
What to Watch With the Weather in 2025 with Eric Snodgrass, Principal Atmospheric Scientist, Conduit Ag
Global Fertilizer Market Overview: What It Means At Your Farm Gate with Josh Linville, StoneX

Some of the nation’s most outstanding farm operations will be recognized, including winners of the 2025 Top Producer of the Year award , the 2025 Women in Ag award and the 2025 Next Gen award .

Navigating the Complex Relationship Between Dairy Producers and Processors

Tue, 21 Jan 2025 14:35:08 GMT

In an era where industries must continuously evolve to meet modern challenges, the dairy sector exemplifies the pivotal role of collaboration between processors and producers. At the heart of this evolution is a relationship that transcends mere business transactions, forming a partnership that significantly influences the industry’s trajectory.

Recently, this crucial dynamic was the focal point of discussions at the 2024 Milk Business Conference held in Las Vegas. Trevor Fleege, senior director of milk procurement and commodity management at Agropur; Jacob Brey, co-owner of Brey Cycle Farm LLC in Sturgeon Bay, Wis.; and Jacob Larson, co-owner of Larson Dairy Inc. in Okeechobee, Fla., all shared insightful perspectives on the growing interdependence within the dairy industry.

The Need for Increased Integration and Communication
Larson points out that processors are increasingly keen on understanding more about the farms producing milk for them. This sentiment is echoed by Fleege, who highlights that greater integration within supply chains necessitates forging stronger partnerships between processors and producers.

Although, Brey reflected on the pre-COVID-19 era, noting a lack of substantial communication between these entities.

“Covid obviously threw a big wrench in a lot of everybody’s plans,” he remarked, pointing out how issues like BST and tail docking brought forward complex challenges years ago. Brey emphasizes the need for a collective mindset, moving beyond a farmer versus processor mentality to a ‘We are all in this together’ approach.

The Importance of Transparency
Transparency emerged as a recurring theme during the discussion, including the subject matter of sustainability. Larson stressed the importance of fairness while also underscoring profitability as a critical component of sustainability.

“Without profitability, dairy farmers cannot be sustainable,” he says. “We have to remember that we have the safest, most affordable, most abundant food supply in the world, and we’re the envy of a lot of other countries.”

Fleege emphasized that the responsibility largely falls on processors to ensure clear communication. He emphasized the importance of providing context and insights so producers can better understand the environment in which they operate. Encouraging producers to ask challenging questions, Fleege noted, is how processors can enhance their efficiency and stay ahead of competitors. “There’s a codependency that exists between producers and processors,” he says. “The last thing either one of us wants is a message to get distorted.”

Brey added that producers are cautious about the horror stories of processors sending notes saying they are not going to pick up the patron’s milk anymore.

“Dairy farmers don’t like surprises,” he says. “We milk cows every day. But we also don’t know what’s going to come next.”

Establishing Trust
Open communication is fundamental to trust-building, according to Brey, who advocates for regular dialogue between farmers and processors. He suggests producers maintain an open line of communication with field representatives regarding their future plans, as well as the processors willingness to take on more milk.

“I think just having open dialog and open communication, talking to your field man, sending them a text and give them a call and just kind of say, ‘Hey, what’s up,’ is a good thing,” Brey says.

Larson further elaborated on the cyclical nature of production and supply in the dairy industry.

“If we [producers] do something that works, we want to replicate it and do it again and again and again. And so, supply and demand are a pretty basic economic model. And right now, what we’ve seen in this past year is replacement cows have been tight. Milk supply has been tight. And so that kind of supply has demand being higher which has helped all of our prices to increase,” he says, questioning if we need to reimagine future products plants might produce.

“Having that relationship like we’ve been talking about is really important, but at the same time, we also need to know when to pull the lever and constrict, and maybe we need to diversify, whether it’s a processor or a farmer. Instead of milking more cows and making more milk and making the price cheaper, maybe we ought to do something different.”

A Shared Future for the Dairy Industry
Looking forward, Larson warned of the potential detriment to the industry if a processor were to go out of business.

“We’ve seen bankruptcies in the last 5-7 years that have been a very detrimental part of that consolidation,” he says. He pointed out the hope that there would be substantial investment back into the infrastructure to prevent such issues down the road.

As the dairy industry navigates evolving challenges, the bond between processors and producers is more significant than ever. By fostering transparent communication and a unified approach, the industry can continue to thrive and set benchmarks for sustainability and innovation worldwide.

Watch the Full Recording of the Processor and Producer Relationship Panel from Milk Business Conference

Your Next Read:
Discover How Innovation Transforms at Grotegut Dairy

2025 Dairy Margin Coverage Sign Up Opens Soon

Thu, 16 Jan 2025 14:34:30 GMT

As we look ahead to the opportunities and challenges of 2025, the USDA’s Farm Service Agency (FSA) is once again opening the doors for enrollment in the Dairy Margin Coverage (DMC) program. Mark your calendars, as the enrollment period runs from January 29 to March 31, 2025.

Why Enroll in DMC?
In the words of FSA Administrator, Zach Ducheneaux, “Our safety-net programs provide critical financial protections against commodity market volatilities for many American farmers, so don’t delay enrollment.” This underscores the importance of these programs in safeguarding the livelihoods of farmers across America against the unpredictable fluctuations in commodity markets.

How DMC Works
The DMC program, authorized under the 2018 farm bill, offers a shield of protection to dairy producers. It focuses on providing assistance when the gap between the all-milk price and the average feed price dips below a margin that the producer selects in advance. This ensures farmers can maintain their operation even when market conditions are less than favorable.

Affordable Protection
For those wondering about the cost, Ducheneaux highlighted that at $0.15 per hundredweight for $9.50 coverage, risk protection through DMC is a relatively low-cost investment. It’s not just about safeguarding earnings; it’s about securing peace of mind in the face of market uncertainties.

Although it might be tempting to leave this task until later, Ducheneaux advises against procrastination.

“If you’re getting coverage through the Agriculture Risk Coverage or Price Loss Coverage programs, avoid the rush and contact your local FSA office for an appointment,” he suggests. Even if you’re not planning to change your program election for 2025, it remains necessary to sign a contract to enroll.

What to Do Next
Producers are urged to get in touch with their local Farm Service Agency office to initiate the sign-up process. Taking this proactive step not only ensures continuous coverage but also provides producers a structured way to manage risks associated with milk and feed price volatilities.

Your Next Read:
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Consumers Are Driving Sustainability Initiatives

Wed, 04 Dec 2024 21:21:35 GMT

By Heather Gieseke

When it comes to sustainability initiatives, many farmers believe it’s politics driving carbon strategies and programs.

True, climate change and politics have become interconnected. Climate-smart grants, for example, have incentivized businesses to reduce carbon emissions.

But it’s consumers inducing U.S. companies to carry out these initiatives. Today’s shoppers want to know about the climate impacts or the humanitarian elements behind how their food is grown or services are delivered.

Purchasing Power Change

Sustainability is also important among younger generations, who will soon have most of the purchasing power in the U.S.

“Companies that understand these trends, and create truly sustainable brands that make good on their promises to people and the planet, will seize advantage from brands that make flimsy claims or have not invested sufficiently in sustainability,” reports the Harvard Business Review.

Products making environmental, social and governance-related claims averaged 28% cumulative growth between 2018 to 2022, versus 20% for products that didn’t, according to McKinsey & Company.

It’s important to note these sustainability initiatives are completely voluntary. They’re not being driven by government requirements but by consumer trends. That should give farmers more confidence in the increased opportunities ahead for incorporating climate-smart practices.

Pay-Off for Farmers

It’s also important to keep in mind there are additional rewards beyond reducing emissions or taking advantage of government programs or supply-chain premiums. Sustainability practices take time, learning and adjustment, but they can bring significant on-farm benefits, such as soil health, improved water quality and availability, reduced expenses and, ultimately, greater productivity on your farm.

The shift in purchasing power, the drive for transparency and the growing passion for food’s journey is certain to continue driving increased demand for sustainable products that are more than just a label. Increased transparency across the supply chain is resulting in meaningful and measurable stories of how sustainable, climate-smart products are better than their less sustainable counterparts.

Farmers should be increasingly aware of how you, too, can create your own measurable stories, whether it’s selling carbon offsets you’re generating on your farm or earning premiums for grain produced with fewer emissions than your neighbor down the road.

These changes are valuable both on and off the farm and will continue to be there in the future.

No one knows better than you that the future of your farm depends on balancing practices and profits that sustain your land, resources and family . The stakes are evolving based on weather patterns, technology, market demand and more. What actions are you taking to remain resilient?

How Do You Know When Agriculture Is In A Recession?

Wed, 04 Sep 2024 20:51:10 GMT

Agriculture can sometimes act as a buffer during broader economic recessions, as demand for essential food items tends to remain relatively stable. However, when multiple indicators align, it can signal a recession in the agricultural sector.

According to analysts and economists, pay particular attention to the following:

Declining farm income. A significant drop in net farm income is a major sign. For example, USDA forecasts another major decline in farm income for 2024, on top of the big decline in 2023. That would be the largest ever two-year decline.
Sharply declining commodity prices. Weak prices for major crops and livestock products can indicate economic trouble for farmers. Crop prices have seen sharply declining prices, with the meat sector showing continued strength.
Elevated input prices costs. When input costs such as fertilizer, fuel and labor remain elevated while commodity prices fall, it squeezes farm profitability.
Reduced agricultural exports. Slowing exports and a growing trade deficit in agriculture can signal economic challenges. USDA forecasts the third straight year of a U.S. ag trade deficit , with the fiscal year 2025 at $42.5 billion.
Debt vs. cash flow. Increasing farm debt relative to cash flow combined with higher borrowing costs due to interest rate increases can strain farm finances.
Weakening credit conditions. Lower repayment rates on farm loans and increased loan renewals/extensions can indicate financial stress.
Declining demand for agricultural products. Reduced consumer spending on discretionary food items during broader economic recessions can impact certain agricultural sectors.
Falling farmland values. Higher interest rates and lower farm profitability can lead to downward pressure on land prices .
Increased inventory levels. Growing stockpiles of crops and livestock products can spur further price declines.
Widespread financial stress. When a large number of farmers across different regions and commodity sectors experience financial difficulties simultaneously it can point to an industry-wide recession.

Your Next Read: More Than 50% of Ag Economists Now Think the U.S. Ag Economy is Already In a Recession

‘Cheap’ Corn: Economists Encourage Producers to Pack the Bunkers and Plan Ahead

Wed, 28 Aug 2024 21:35:08 GMT

Experts are predicting that Dairy Margin Coverage (DMC) will average between $11.85/cwt and $12.20/cwt during 2024. If this projection holds true, it will mark the highest average margin for a calendar year under the DMC program and the highest since margin protection became the foundation of the federal safety net program for dairy in 2015. For some perspective, the DMC for 2023 averaged significantly lower, at $6.70/cwt.

Katie Burgess, dairy market advising director with Ever.Ag, says their model is also forecasting an annual margin around $12/cwt for 2024.

“Although that number is moving around a bit given all the recent volatility in milk prices,” she says. “Milk and grain futures are currently projecting that on-farm margins stay strong into 2025 – our model currently averages around $12/cwt for next year, too.”

With relatively ‘cheap’ corn prices, Dan Basse, president of AgResource Company, advises dairy producers to chop as much corn as possible and consider managing feed costs strategically. He specifically recommends purchasing December corn call options and selling puts before mid-September.

“We think that DMC margins hold, but at slightly lower levels,” Basse notes. “Feed prices should bottom in the next 30 days and trend higher into year-end on strong U.S. corn export demand.”

Expected Trends in Feed and Corn Prices
According to Basse, these trends suggest that the DMC could decline slightly due to rising feed costs, with the milk market holding within a broad range. This nuanced outlook on the feed market brings into focus the balance between managing input costs and maximizing output revenue for dairy producers.

“We doubt that September or December corn can trade too far below $3.50-$3.60 longer term support,” Basse says. “So, pack the bags, bunkers and bins with cheap feed. Note that we feel that soymeal prices can decline further – so this is more about rising corn than soybean meal.”

In essence, while corn prices are expected to increase, soymeal prices might continue to decline, thus requiring a vigilant approach to feed management for optimal cost efficiency.

Utilize Risk Management Tools
One thing that top dairy producers do is follow, understand and utilize risk management programs. Leland Kootstra with Frazier LLP recently told Peggy Coffeen, the host of UpLevel podcast, that producers spend too much time thinking about the cost of some of those [risk management] tools versus what that cost actually buys.”

Particularly, he notes the value of dairy-specific tools that limit exposure, like DMC and Dairy Revenue Protection (DRP).

“These operators have spent so much time, so much effort, so much money making sure that they are as efficient as possible, that they’re controlling as much of the volatility as they can,” he says. “Why would they expose themselves to volatility outside of their control?”

Burgess shares a few key points that producers should keep in mind:

Right now, futures are projecting strong margins into 2025 – but markets are volatile, so make sure to play some defense.
Feed costs are currently cheap – look for opportunities to lock in lower priced feed and take advantage of those markets this fall.
Most importantly, as feed costs are getting set for the year ahead, also consider protecting milk prices. DRP insurance is a great way to do so – you can put on floor under milk prices to protect the milk-over-feed margin that is available today. And, then if milk markets remain strong into next year, there’s still the opportunity to capture even larger margins.

Six Steps to Help Maximize Dairy Profit Margins

Mon, 26 Aug 2024 21:24:10 GMT

The formula is finally in favor of the dairy producer as milk prices inch upward after months and months of lackluster prices. Coupled with low grain prices, this upward trend brings a much-needed respite and the potential for profitability. However, to fully capitalize on this opportunity, producers need to make informed and strategic financial decisions. Independent financial consultant Gary Sipiorski offers actionable tips on how to take advantage of these improved profit margins.

Milk Prices on the Rise
“It does look like there should be some margin in milk based on cow numbers being down, heifers that are pricy, lower feed costs along with dairy products moving well domestically and globally,” Sipiorski says.

Utilizing Risk Management Strategies
For producers who work with a broker, Sipiorski advises using their services to stay educated on risk management and future market positions.

“If a producer works with a broker they have been working with and have educated themselves on risk management, future market positions can be watched and considered,” he explains. Understanding market trends and employing risk management strategies can help producers make more informed decisions.

Financial Priorities
Sipiorski emphasizes the importance of making prudent financial decisions as profits start to increase.

“Remember, this ultimately is always the owner’s decision,” he says. He suggests prioritizing the repayment of supplies once there is more money in the checkbook. This helps in maintaining good vendor relationships and ensuring smooth operations.

Reducing Debt
Next, Sipiorski recommends paying down lines of credit to prepare for potential future downturns in the dairy economy. Lowering debt levels can provide financial flexibility and stability in times of economic uncertainty.

Investing in Infrastructure
“Replacing and upgrading machinery, milking parlors, and cattle housing will be needed for the long term,” he advises. Investing in infrastructure improvements can enhance efficiency and productivity, leading to better long-term profitability.

Tax Planning and Cash Flow Projections
Lastly, Sipiorski underscores the importance of tax planning and cash flow projections. He advises producers to schedule an appointment with their accountant in October or November for year-end tax planning.

“Tax planning advice is always needed long before year-end,” he recommends, adding that it’s crucial to prepare cash flow projections for the next year to plan with some optimism.

While rising milk prices present a significant opportunity for dairy producers, it is imperative to make strategic financial decisions. Making strategic next steps, producers can navigate through the current favorable conditions with confidence and lay a strong foundation for future growth.

3 Strategies to Increase Cash Flow on Dairy Farms

Mon, 25 Mar 2024 17:34:59 GMT

In the world of dairy farming, maximizing profits and ensuring financial viability is a constant challenge. However, as a dairy farm consultant who gets shoulder-to-shoulder with employees in the barn, and also sits down at the table to evaluate income and expenses, I’ve developed a strategic approach to help dairies improve profitability and efficiency for short-term gains and long-term success.

Here are three of the key strategies I use:

Money is made in the milking parlor.

My first strategic priority to increase cash flow for any dairy farm is to evaluate the milking parlor. Is it running at maximum capacity? Do we need to reorganize labor to improve cow flow and milking efficiency? Do we have downtime, and if so, which groups of cows could we run through 4x to grab those extra pounds of milk without increasing labor costs?

Labor Optimization and Cross-Training

I also look for the good employees. My definition of a “good employee” is one who performs well in their current role, and also enjoys being challenged. They are the most valuable players on the team, and often, I find these are also the ones who welcome being cross-trained to do other jobs on the dairy. This strategy may even allow you to eliminate positions and save significant dollars on labor costs.

Financial Management and Risk Mitigation

Operational efficiencies are only part of the strategic approach to increasing income and reducing expenses. We must tie that together with the financial side. That includes looking at the current costs for each area of the dairy and determining where opportunities are to cut back on unnecessary expenses.

From there, we create a budget and follow it. Managing risks and keeping debt levels low are also part of this strategic approach.

By tightening up on these three key areas and applying a strategic approach to both increasing income and reducing expenses, I believe it is possible to lower your breakevens, even during the most challenging times. To hear more on these strategies, listen to this Uplevel Dairy Podcast: Dairy Farming with a $15 Breakeven

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Dairy Finances: Being Prepared For Tough Times Has Big Payback

Tue, 19 Mar 2024 17:56:35 GMT

If there’s any assurance about the economic picture for the dairy industry and agriculture in general going forward in the next few years, it’s that volatility will be a constant. That’s according to David Kohl, PhD, Professor Emeritus in Agriculture and Applied Economics at Virginia Tech University, Blacksburg, Va.

Kohl recently told the audience of the Ag Outlook 2024 conference, hosted by eastern Iowa rural lender Hills Bank, that today’s agricultural realities of mostly low commodity prices, steep input costs, and higher interest rates are putting the squeeze on margins after a handful of profitable years.

He said the global economy is in a downturn, citing current recessions and/or stalled economies in China, Great Britain, and Germany. And in 2024, half of the world’s population will go through a national election, with India, Mexico, Russia, and the U.S. all in an election cycle that could dramatically affect global trade.

“One out of every 5 dollars in U.S. net farm income comes from exports, so disruptions in trade would most certainly affect U.S. farmers,” said Kohl. He also noted that the U.S. already has slipped to the status of “secondary supplier” in the world marketplace, in that Asia now seeks trade with the southern hemisphere first, and the U.S. as an alternate if their needs are not met.

How can agriculture prepare for the storm clouds that may roll in? Kohl borrowed a phrase from a fellow agricultural speaker, meteorologist Eric Snodgrass: “Don’t be scared, be prepared.”

His #1 piece of advice is to pile up cash reserves. Ideally, he advises working capital of 25% or more of annual expenses. He said the top 20% of U.S. farms have an average of 44% of their expenses in cash reserves, while the bottom 20% have only 11%.

“Equity doesn’t get you the loan,” he declared. And even though cash may be perceived as a stagnant asset, Kohl advised it also is invaluable in riding out red-ink years. “Higher expenses will outlast higher incomes. If we hit the skids on revenues, most farms can survive one year. But the ones with healthy cash reserves will be able to weather multiple years.”

And the worst thing you can do, according to Kohl: Take a look at your financials once a year when it’s tax time. “That’s a 1960s approach that doesn’t work anymore,” he stated. “At minimum, cash flows need to be evaluated quarterly, and preferably monthly.”

Other predictions for the next 2-5 years Kohl shared included:

Females will play an increasingly active role in U.S. agriculture in the next 15 years and beyond.
Declines in interest rates by the Federal Reserve will be slow and very measured.
As a result, loan interest rates in the neighborhood of 6-8% should be expected.
Green energy must be in the black without government subsidies to be practical. “We’re not there yet,” stated Kohl.
“Greenlash” – or lashing back on the green energy movement, as is happening currently in Europe – may become a larger factor in the U.S.
Land will remain a solid investment, and demand for land will be strong as Baby Boomers continue to purchase it.
Technology and artificial intelligence will displace workers. But he noted technology adoption could be stalled due to a shortage of technicians to service it.

To stay ahead of the curve financially and plan strategically, Kohl recommended relying on the input of trusted advisors. “You need some assistant coaches on the bench to back you up,” he advised. “Sometimes it takes the perspective of an outside individual to help you set your vision.”

And, like a successful basketball team that religiously practices free throws, Kohl said farming excellence required dedication to the fundamentals – setting goals; formulating a plan; benchmarking performance; knowing your cost of production; monitoring cash flow; and continually striving to improve by 5% annually in your business, family, and personal life. “Success is about focusing on the fundamentals and basics,” he advised.

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