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At the time of publishing, Q4 2025 indemnities had not yet been released by USDA-RMA. As such, the most recent quarter’s indemnity payments in this report are estimated using announced class and component prices and milk yields.
Overview & Key Points
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Estimated indemnities for Q4 2025 averaged $2.03/cwt, marking the highest average payout in the program’s history. After factoring in producer premium costs, which averaged $0.36/cwt, the estimated net return to producers was +$1.67/cwt.
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Just over 12.9 billion pounds of milk were covered under DRP during Q4 2025, representing 22.3% of the US milk supply. While indemnity payments increased sharply from the previous quarter, up $1.38/cwt on average, total covered milk volumes fell by 9.7% (-1.4 billion pounds). Q4 2025 marked the lowest share of the US milk supply covered by DRP since Q1 2020.
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Ignoring yield adjustment factors (YAFs), both Class III and Class IV class pricing endorsements would have triggered indemnities in Q4 2025, as dairy prices fell significantly over the period. Class III prices settled below the 95% coverage level on 250 out of 258 days (97% of the time), while Class IV prices settled below the 95% coverage level on every available day.
Coverage Performance by Horizon
Note: Class IV coverage was not offered for Q4 2025 until July 26, 2024 (less than a month into nearby index 5).
Participation and Performance
Impact of Yield Adjustments
The Yield Adjustment Factor (YAF) is calculated as the state or pooled production region’s actual yield released in USDA’s Milk Production report divided by the expected yield at the time of coverage. The YAF can have a positive or negative impact on indemnity payments:
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YAF > 1: When the actual yield is greater than the expected yield, the potential indemnity is reduced.
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YAF < 1: When the actual yield is less than the expected yield, the potential indemnity is enhanced.
Net to producers is equal to the indemnity paid minus the producer premium. Effective covered milk production is equal to the declared production times the protection factor. Class III versus IV coverage is calculated as the effective covered milk production times the class price weighting factor or the component price weighting factor.
Disclaimer: HighGround Insurance Group (HGIG) is an agency affiliated with HighGround Dairy (HGD). HGIG is a licensed insurance agency in many US states. HighGround Dairy is a division of HighGround Trading (HGT), an Introducing Broker (IB) registered under United States Laws. Nothing contained herein shall be construed as a recommendation to buy or sell commodity futures or options on futures. This communication is intended for the sole use of the intended recipient. Futures and options trading involves substantial risk and is not suitable for all investors.
