The start of the new year predicted favorable margins throughout 2025. But as the spring flush arrives and consumer spending softens some, while at the same time headwinds are expected for the export markets, new concerns have arisen for the remainder of the year. The bright spot is that feed costs continue falling.
“At the start of 2025, there was a strong sense of optimism among producers. … However, that optimism has quickly faded as the margin outlook for 2025 has deteriorated,” says Alex Gambonini of HighGround Dairy. “Risk management is all about preparation, and having a plan in place can make all the difference when markets shift unexpectedly.”
Curtis Bosma of HighGround Dairy agrees:
“… we tend to sidestep challenges with too many unknowns, where it’s harder to pinpoint a clear solution,” he says. “If the idea of projecting your cash flow feels like nails on a chalkboard, take heart as there are professionals ready to step in and help. Having organized financial systems allows you to look ahead and make decisions to build resilience against market volatility.”
Here’s Progressive Dairy’s look at important dates, reports and advice affecting risk management decisions, as well as other information impacting the milk check in April.
Dairy Margin Coverage (DMC) program
The enrollment period for the 2025 DMC program coverage year will close Monday, March 31. Dairy producers can submit applications to their local USDA FSA office to secure coverage. (Read: 2025 Dairy Margin Coverage enrollment begins Jan. 29)
“Markets can change quickly, which is why we continue to encourage producers to secure coverage when possible,” Gambonini says. “Despite being limited in the amount of production able to be covered, the DMC program remains the best dollar-for-dollar safety net available.”
Research from HighGround Dairy shows that Tier I coverage at the $9.50 margin would have triggered payments in 65% of the months over the past decade.
“That makes it one of the most effective and affordable tools producers can use to manage risk,” Gambonini says.
The February DMC margin and indemnity payment will payment will be announced Monday, March 31, with March’s margin calculated April 30.
The realized DMC margin for January was $13.85 per hundredweight (cwt) as a result of a higher all-milk price but also higher feed costs. While feed costs did help tighten January’s margin, it still remained well above the $9.50 per cwt top coverage level in Tier I and resulted in no indemnity payments for the first month of 2025. (Read: January DMC margin starts year with a positive tone)
As of March 26 prior to the announced DMC margin, the February margin forecasts show a slight improvement from January at $13.94 per cwt. While milk price is predicted to fall, so are all commodity prices that contribute to the feed cost calculation. If realized, February’s margin is forecast to be the highest of 2025 as margins fall through August and then begin a small rebound to close out the year.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In April, Dairy-RP coverage is available for the third quarter of 2025 (July through September) through the third quarter of 2026.
The market changes daily and Dairy-RP endorsements must be purchased between the Chicago Mercantile Exchange (CME) market closing and the next CME opening. Dairy-RP is also not available on days when applicable futures contracts move limit-up or limit-down, or on days when CME trading is closed due to holidays (see Calendar).
Also, Dairy-RP coverage cannot be purchased on days when major USDA dairy reports that could impact markets are released. This includes Milk Production, Cold Storage and Dairy Products reports.
“While [Dairy-RP] prices have softened since late 2024, opportunities still exist, and it’s crucial for producers to stay engaged with the markets,” Gambonini says. “Being proactive and vigilant can help ensure coverage is secured at a level that works for each operation’s needs.”
Livestock Gross Margin for Dairy (LGM-Dairy)
LGM-Dairy is another subsidized margin insurance program administered by the USDA’s Risk Management Agency (RMA).
The insurance program provides a protection when feed costs rise or milk prices drop, and can be tailored to any size farm. The program uses futures prices for corn, soybean meal and milk to determine the expected gross margin and the actual gross margin. LGM-Dairy is similar to buying both a call option to limit higher feed costs and a put option to set a floor on milk prices.
Coverage can be purchased on expected milk marketing over a rolling 11-month insurance period. So the coverage period during April 2025 includes the months of May 2025 through March 2026.
Sales periods for the LGM-Dairy program are open on a weekly basis. Unlike Dairy-RP, LGM-Dairy is available even if a sales period falls on the day of a USDA report. Premium payments are due at the end of the insurance period.
Production and price outlooks
- The gap between February Class III and Class IV milk prices fell to 28 cents per cwt, the slimmest spread since March 2023 and cutting into incentive for depooling milk. (Read: February 2025 Class II, III and IV milk prices lower)
- The 2025 milk production forecast is reduced on lower expected milk output per cow more than offsetting slightly higher cow inventories. (Read: March WASDE report forecasts reduced milk output per cow, higher cow inventories)
- High Class I milk utilization regions saw small price increases, while dips in Class III and IV milk prices pushed uniform prices slightly lower elsewhere. (Read: FMMO uniform milk price mixed again in February 2025)
- According to the USDA’s preliminary January Milk Production report, U.S. milk production fell about 2.5% compared to the same month last year. (Read: Milk production lower, cow numbers higher in February)
- At $19.57 per cwt, the April Class I base price is down $1.45 from March but 39 cents higher than the same month last year. (Read: Economic Update: Class I base milk price falls again for April)
Check the Progressive Dairy website for updates affecting milk prices as they become available.
