When producers call to ask, “Should I sign up for DMC since there are no projected payments for 2025?” my response is usually, “It depends on whether you can afford not to – how much does it cost you to make a cwt of milk.”  A number of dairy herds in NC produce less than 5 M lbs of milk annually, which means they fall under Tier I coverage for the majority of their milk. For those folks, it’s worth using the DMC Decision Tool to determine the cost of the baseline risk management tool for the year. In years where the projected payments offset the premium, I don’t get this question. In years like 2025, when the projected payments are non-existent, with DMC margins north of $11.26, I do.

Let’s consider points from an article written by the University of Wisconsin’s Dairy Markets and Policy Outreach Specialist:

• DMC issued payments in 48 out of 72 months (66.67% of the time) between 2018 and 2024.
• The average payment was $1.49/cwt, with a maximum payment of $5.58/cwt.
• Accounting for the average premium cost of $0.142/cwt, the net indemnity averaged $1.35/cwt.
• These historical data points underscore the program’s relevance in mitigating downside risk for participating dairy producers.

So, what else do you need to consider before opting to fork out premium payments for DMC if you are one of the many < 5Mlb producers in NC? Considering what market factors influence the DMC program calculations the most, research from the University of Wisconsin (UW) found that changes in the All Milk Price and corn price have the largest impacts on margin. The table below shows how changes in program market prices impact DMC margins. The all-milk price has a direct 1:1 relationship with the margin, while corn price increases have the most significant negative effect. Corn price volatility remains the biggest feed price risk in program pricing, with a $1 increase reducing the margin by $1.07. Soybean meal and alfalfa hay prices have comparatively smaller negative impacts.

Although forecasts suggest minimal or no DMC payments in 2025, dairy producers should carefully consider the program’s proven track record. Over the life of the program payments have been in 66.67% of months, providing an average net indemnity of $1.35/cwt (accounting for premium cost) evidence of its effectiveness in mitigating market volatility. For a producer with a production history of 5M lbs of milk, the premium for 95% 2025 DMC coverage at $9.50/cwt (maximum coverage in Tier I) is $7,125, which is, effectively, basic insurance for under $600/month. Producers have to decide how comfortable they are with their own costs of production and then consider the potential volatility remaining for 2025 with regards to federal policy changes that may impact formula prices, especially All Milk Price and corn.

According to Leonard Polzin at UW, “With the potential for All Milk Price reductions of $0.10–3.00/cwt due to policy shifts and FMMO reforms, alongside rising Class III utilization in the second half of 2025, remaining enrolled in DMC can serve as a prudent safeguard within a broader risk management strategy. Additionally, producers who are eligible to update or establish supplemental production history have an opportunity to enhance coverage levels. Overall, the 2025 DMC program continues to offer a critical buffer against pricing uncertainties, building on the strong historical performance of timely payouts and reinforcing the value of thoughtful, proactive enrollment decisions.”

It’s the producer’s call, and it often depends on how risk tolerant he or she is. It seems like reasonable baseline risk management option to me, especially for smaller producers who don’t have other risk management practices in motion, but I’m not the one taking the risks!