link to page 2 link to page 1 link to page 1 
Updated February 8, 2024
Farm Bill Primer: Support for the Dairy Industry
The Dairy Margin Coverage (DMC) program was enacted
FSA calculates and reports the DMC milk-feed margin each
in the 2018 farm bill (P.L. 115-334) to support dairy
month (Figure 1). If margin payments were triggered,
operations. The DMC program replaced the 2014 farm
producers are paid for a 12th of covered annual milk
bill’s Margin Protection Program (MPP; P.L. 113-79, as
production history. Payments under DMC are subject to
amended by P.L. 115-123, the Bipartisan Budget Act of
sequestration reductions of 5.7% in 2021-2024.
2018). Prior to 2014, the U.S. Department of Agriculture
Table 1. DMC Premium Rates, $ per cwt
(USDA) purchased dairy products to support milk prices at
certain levels. Many stakeholders believed the support
Tier I ≤ 5
Tier II > 5
Margin
program failed to account for rising feed costs. In 2014,
million lbs.
million lbs.
Congress created a margin program to allow milk producers
$4.00
$0
$0
to select a guaranteed margin on milk production. The
$4.50
$0.0025
$0.0025
margin is the difference between the USDA national all
$5.00
$0.005
$0.005
milk price and a calculated feed cost, providing producers
$5.50
$0.030
$0.100
optional risk protection on price and feed costs.
$6.00
$0.050
$0.310
$6.50
$0.070
$0.650
DMC was to expire on December 31, 2023, but Section 102
$7.00
$0.080
$1.107
of the Further Continuing Appropriations and Other
$7.50
$0.090
$1.413
Extensions Act, 2024 (P.L. 118-22, Division B), extended it
$8.00
$0.100
$1.813
until December 31, 2024. The extension includes
$8.50
$0.105
NA
supplemental DMC that was authorized in the 2021
$9.00
$0.110
NA
appropriations act (see “DMC Adjustments”).
$9.50
$0.150
NA
DMC Basics
Source: Agricultural Improvement Act of 2018 (P.L. 115-334).
DMC allows milk producers to buy a guaranteed margin for
Since implementation of the DMC program, there have
their milk production. For example, if the margin—all milk
been 60 months of margin calculations, and producers who
price minus feed cost—amounted to $9.00 per
opted for a $9.50 margin have received payments in 36
hundredweight (100 pounds; cwt) of milk for a month,
months. Producers selecting margin coverage under $9.50
producers who selected $9.50 margin coverage would
have received payments in some of those months,
receive a $0.50 per cwt DMC payment on covered
particularly in 2021 and 2023. Payments on the $4.00
production. Under DMC, producers may select margin
catastrophic margin triggered in June and July 2023 for the
coverage from $4.00 per cwt up to $9.50 per cwt for annual
first time under DMC. The annual average monthly margin
milk production of 5 million pounds or less (Tier I). For
was $9.61 in 2019, $9.45 in 2020, $6.92 in 2021, $10.72 in
milk production over 5 million pounds (Tier II), the margin
2022, and $6.70 in 2023.
coverage tops out at $8.00 per cwt. The $4.00 margin, or
catastrophic coverage, is free for all dairy producers. For
Figure 1. DMC Milk-Feed Cost Margins, 2019-2023,
margin coverage above $4.00, producers pay increasing
$/cwt
premium rates as specified in statute (Table 1).
A participating dairy producer must have an established
milk production history with USDA’s Farm Service
Agency (FSA) and pay an annual administrative fee of
$100. The fee is waived for beginning, limited resource,
socially disadvantaged, or veteran producers. Each year,
dairy producers participating in DMC choose a margin
coverage level and the share of their milk production
history to cover—from 5% to 95%—and receive DMC
payments for months in which the margin is triggered.
The total premium amount that producers pay for margin
coverage above $4.00 per cwt is a product of the margin
level premium that is set in statute and the share of
production history the producer selects. Initially, producers
had the option to purchase either Tier I or II margin
Source: USDA, FSA.
coverage for the full five years of DMC, instead of an
Excluding 2020, on average, 72% of dairies with
annual selection. In return, milk producers received a 25%
established production history participated in DMC, and
discount on premium costs.
https://crsreports.congress.gov
link to page 2 Farm Bill Primer: Support for the Dairy Industry
71% of their milk production was covered. During
The DPRP provision reauthorizes the use of funding to
2019-2023, payments under DMC have totaled nearly $3.3
develop international markets in the generic promotion and
billion (Table 2).
research program (dairy checkoff) that is producer-funded
by a $0.15/cwt assessment on milk production.
Table 2. Dairies Enrolled in DMC, Covered
Production, and Total Payments
The 2018 farm bill established the Milk Donation
Billion
$
Reimbursement Program (MDRP) to pay certain costs of
Dairies
%
%
lbs.
million
fluid milk donations that producers, processors, and
2019
23,495
73.3
178.7
66.4
$451
cooperatives make to food banks and feeding organizations.
The donation program received mandatory funding of $9
2020
13,547
45.0
121.3
47.4
$234
million for FY2019 and $5 million annually for FY2020-
2021
19,125
69.0
162.7
68.6
$1,186
FY2023. The Dairy Donation Program, which is similar to
the MDRP, was created by the Consolidated Appropriations
2022
17,996
71.2
154.4
71.3
$84
Act, 2021, and funded at $400 million in response to
2023
17,101
75.0
154.4
77.0
$1,300
disruptions caused by the COVID-19 pandemic. This
Source: USDA, FSA, DMC Program Enrollment Information,
program reimbursed certain costs for dairy product
updated February 5, 2024.
donations and was authorized through September 1, 2023.
Note: Percentage share of dairies with established production
Unlike the 2014 farm bill, milk producers using DMC also
history and their covered share of milk production.
are allowed to participate in Livestock Gross Margin-Dairy
and Dairy Revenue Protection insurance programs.
DMC Adjustments
USDA made key adjustments to DMC following
In addition, the 2018 farm bill amended the FMMO formula
implementation in 2019. First, the 2018 farm bill directed
for the Class I skim milk price. During the pandemic, the
USDA to begin reporting premium alfalfa hay prices.
change resulted in lower minimum prices milk handlers
USDA’s initial feed cost formula contained a 50-50 blend
paid to producers in FMMOs (see CRS Report R45044,
of alfalfa and premium alfalfa prices. In December 2021,
Federal Milk Marketing Orders: An Overview). Some dairy
FSA changed the formula to 100% premium alfalfa to
stakeholders have asked that the old formula be restored.
better reflect producer costs. This resulted in a higher
Dairy Policy in the Next Farm Bill
calculated feed cost, lower calculated margins, and higher
DMC payments compared with the prior feed formula.
DMC is usually viewed favorably by dairy stakeholders as
USDA paid dairy producers the difference in the two
an improvement in risk protection, especially for Tier I
margin calculations retroactive to January 2020 for months
production. Dairy stakeholders noted the effectiveness of
margin payments were triggered.
DMC in both House (June 2022) and Senate (May 2023)
agriculture committee hearings on dairy policy. As milk
The Consolidated Appropriations Act, 2021 (P.L. 116-260),
producers confront rising costs for feed and other inputs,
authorized supplemental DMC payments based on milk
they may look to Congress to evaluate the adequacy of
marketings in 2019. If 2019 actual milk marketing volumes
dairy policies.
exceeded established production histories, producers could
receive payments on 75% of the difference. Eligible milk
Dairy stakeholders have suggested the supplemental
producers must have participated in DMC during 2021 and
payment authority for updated production histories be
have actual milk marketings of less than 5 million pounds.
included in a future farm bill. Current production histories
For the additional production, producers pay the Tier I
are based on production levels from 2011, 2012, or 2013.
premium and may cover this milk for 2021 through 2023.
Total milk production in 2023 was about 14% higher than
the average of these three base years. Until the DMC
Other Dairy Provisions
supplemental was enacted, milk producers were unable to
The 2018 farm bill reauthorized the Dairy Forward Pricing
use DMC to protect milk productivity gains.
Program (DFPP, 7 U.S.C. §8772), the Dairy Indemnity
Some stakeholders may argue the catastrophic $4.00 margin
Payment Program (DIPP, 7 U.S.C. §4553), and a provision
is not high enough or that the top margin level needs to be
in the Dairy Promotion and Research Program (DPRP,
raised to provide adequate income support. DMC premium
7 U.S.C. §4504).
rates favor dairies with 220 or fewer cows. Reduced Tier II
DFPP allows milk producers and milk handlers/processors
premium rates or higher margin levels could lead to
to negotiate forward contracts for milk used in Class II (soft
increased use of DMC by larger dairies.
products), Class III (cheese), or Class IV (butter/powder)
An expanded dairy donation program could also be
products that are pooled on Federal Milk Marketing Orders
supportive of milk prices. Donations may allow producers
(FMMO). Class I fluid milk may not be forward contracted.
to avoid dumping milk under certain circumstances.
Handlers pay the agreed-upon contract price instead of the
FMMO calculated minimum blend price.
A consideration for Congress is that these types of changes
could raise the projected cost of a farm bill.
DIPP makes payments to dairy producers who have to
dispose of raw milk because of chemical, radiation, or
Joel L. Greene, Analyst in Agricultural Policy
pesticide contamination. In 2021, DIPP regulations
(7 C.F.R. 760) were amended to give USDA the discretion
IF12202
to indemnify producers for the depopulation of cows
affected by long-term contamination.
https://crsreports.congress.gov
Farm Bill Primer: Support for the Dairy Industry
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF12202 · VERSION 4 · UPDATED