Dairy Farmers Will See Enhanced Margin Coverage in 2026
‘Beautiful Bill’ Extends Program to 2031 and Increases Coverage Levels
Dairy farmers will see an increase in benefits under the USDA’s primary dairy price support program in 2026, thanks to changes contained in the “One Big Beautiful Bill” (OBBB), enacted in July 2025.
However, the specific rules and regulations governing the new benefits have not yet been announced by the USDA, as is the case for all agriculture benefit programs that will see increases due to the OBBB. It is anticipated that the USDA will announce the increase in dairy benefits and any changes in rules governing the program by January 2026, which historically is the month the program opens for annual registration by dairy farmers.
The Dairy Margin Coverage (DMC) program, administered by the Farm Service Agency (FSA), protects dairy farmers from fluctuations in milk prices and feed costs that could inflict severe economic damage. It is an insurance program with premium rates that vary based on coverage levels dairy farmers select and the production history of the individual dairy operation. There are two levels of coverage:
- Tier 1: Covers the first 5 million pounds of production with margin coverage from $4 to $9.50 per hundredweight at lower premium rates as compared to Tier 2 premiums.
- Tier 2: Covers production above 5 million pounds, with a maximum coverage level of $8 per hundredweight and higher premiums.
To be eligible, U.S. dairy operations must produce and commercially market milk from cows. Producers must provide production records and comply with conservation regulations.
To determine benefit payments, the DMC monitors milk and feed prices in all regions of the U.S. monthly. Payments are calculated monthly when the actual dairy production margin falls below the selected coverage level. The margin is determined by the difference between the National All-Milk Price and the calculated feed cost to produce 100 pounds of milk.
The University of Tennessee created a calculator spreadsheet to help you determine the best level of coverage for your dairy.
What Changed Under the OBBB?
The OBBB extended the DMC program through 2031 and increased Tier 1 coverage to 6 million pounds of milk. It also created a discount for multi-year enrollment. Enrolling in January 2026 (or whenever the program opens) and extending it through 2031 will earn a 25% discount.
Another provision allows you to update your production numbers, using your highest production year between 2021 and 2023. Since benefits under the DMC are tied to historical production numbers, this is to the farmer’s benefit. If the base has increased, you’re potentially eligible for a higher payment if the program determines that a payout will be made. Historically, production numbers were locked in for a longer period of time, disadvantaging farmers whose production grew.
The changes to DMC were driven by concern over the impact that recently-ordered tariffs may have on dairy product prices, as well as the experience of the Covid-19 pandemic, which had profound effects on the dairy industry with disruptions in supply chains and changes in consumer behavior. Additionally, the cost of feed for dairy cows has surged, particularly due to lower feed carryover from previous crops, as well as drought conditions affecting feed production. Feed prices have continued to rise even as milk prices have been depressed, making it difficult for dairy farms to maintain a positive cash flow.
Questions?
The DMC is a pivotal federal program that protects dairy farmers when market forces — falling milk prices and rising feed costs — threaten their economic viability. Enhancements to the DMC contained in the OBBB are expected to be in effect by early 2026.
If you have questions or would like to discuss your participation in the DMC, contact an Adams Brown agriculture advisor.
