As the farm bill debate continues, examining how the Dairy Margin Coverage (DMC) program has operated — particularly what has triggered payments under the program — is instructive. This analysis looks at whether low milk prices, high feed costs, or the combination of both caused a DMC payment to be triggered at a $9.50 coverage level over the 2010 to 2023 period. Low milk prices are defined as milk prices below the 2010 to 2023 average of $19.12 per hundredweight (cwt.), while high feed costs are defined as feed costs exceeding the 2010 to 2023 average of $10.55 per cwt. calculated using the DMC feed cost calculation.

Though DMC was not in operation before the passage of the 2018 Farm Bill, this analysis considers how the program would have operated if it had been in place since 2010 and does not consider how the operation of the program might have altered the milk and feed prices that occurred prior to 2018. The historical time period chosen for the analysis is critical to the outcomes, and if a different time period was analyzed, the results shown here could change.

The graph shows a summary of payments at different DMC payment levels. For example, the leftmost bar in the chart shows the combination of margin components responsible for a payment of 50 cents or less. In this case, low milk prices triggered payments in two-thirds of the outcomes. The numbers in the parenthesis are the number of months between 2010 and 2023 that a payment in that range was triggered.