USDA reports two costs for a 200-cow herd: $27.21/cwt on full economic cost, $14.53 on operating costs alone. S.4906 would set price floors from production costs without specifying which — making it either a $402,960 raise or a floor that never binds.
USDA publishes two costs of production for a 200-to-499-cow dairy in 2025 — $27.21/cwt on full economic cost, $14.53 on operating cost alone. Sen. Peter Welch’s S.4906, referred to Senate Agriculture on June 24 and unmoved since, would set minimum milk prices partly from that data without saying which measure it means. We ran the ERS size-of-operation workbook against the mechanism: the higher figure sits $7.36 above the current all-milk forecast, worth $402,960 a year on 200 cows. The lower one never binds. ERS also puts mid-size herds $3.59/cwt underwater on full cost while 2,000-plus herds clear $4.25. And the bill would switch off Dairy Margin Coverage while it runs.
USDA publishes a cost of production for your herd size. It publishes two of them, and the gap is $12.68 a hundredweight.
Sen. Peter Welch of Vermont introduced S. 4906 on June 24, 2026, cosponsored by Sen. Bernie Sanders. It was read twice and referred to the Senate Committee on Agriculture, Nutrition, and Forestry the same day, and hasn’t moved since. According to Welch’s own section-by-section summary, Section 3 creates a Dairy Market Stabilization Program by amending the Dairy Production Stabilization Act of 1983.
Here’s why the gap matters. If a rulemaking reads cost of production as full economic cost, a 200-cow herd’s floor lands at $27.21/cwt against an all-milk forecast of $19.85 — a raise of $7.36 on every hundredweight. If it reads the phrase as operating cost, the floor lands at $14.53, never binds, and pays nothing. Same herd, same USDA table, same survey year. Everything below turns on which number wins.
| Case | Cost Basis | Floor ($/cwt) | Binds at $19.85? | Whole-Herd Uplift |
|---|---|---|---|---|
| A — Full economic cost | ERS total costs, 200-499 tier, 2025 | $27.21 | Yes | +$402,960 |
| B — Operating cost only | ERS operating costs, 200-499 tier, 2025 | $14.53 | No | $0 |
What the Bill Would Do, on the Record
The mechanism, as described by the sponsor’s summary and independent bill analyses: national and regional dairy boards advising the Secretary, production limits set for each producer, minimum milk prices based partly on production costs, fees charged to producers who exceed their allotment, and those fees redistributed to producers who stay within theirs. Producers may appeal their allotment to the Secretary under the National Board’s advisement.
Two features matter for anyone comparing this to Canada. Allotments “could not be sold, leased, traded, or otherwise monetized,” and the bill limits the buying and selling of production quotas. There’s no asset to build equity in.
Then the provision nobody has costed. Section 3(b)(1) provides that while the Dairy Market Stabilization Program is in effect, the Dairy Margin Coverage program “shall have no force or effect.” Section 3(b)(2) would bar the Federal Crop Insurance Corporation from offering Dairy Revenue Protection or any substantially similar policy. Congress reauthorized DMC through calendar 2031 under the One Big Beautiful Bill Act in July 2025 and raised its Tier 1 threshold at the same time. Eleven months later, this bill would switch it off.
Section 6 would fund dairy training, farmworker ownership assistance, and regional processing infrastructure.
Does S.4906 Mean U.S. Dairy Supply Management in 2026?
It borrows Canada’s cost-of-production logic and breaks from it on the point a lender cares about most: the production right isn’t an asset.
| Point of comparison | Canada | S.4906 as described |
| Is the production right tradable? | Yes, through monthly provincial exchanges | Transferable between producers, but monetizing, leasing, selling or trading is prohibited |
| What is it worth? | Ontario’s cap is $24,000.00 per kg of butterfat, and quota trades at the cap. Saskatchewan, outside the P5 cap, cleared at $44,144.00 per kg of butterfat in April 2026 | Nothing. There is no price |
| Enforcement | Quota is required to market milk | A fee on production above your allotment |
| Can you retire on it? | Yes — quota is a saleable balance-sheet asset | No. Nothing to sell, nothing to borrow against |
| Who buys the milk | Provincial marketing board | The Secretary, per the descriptions available |
Sources and units: Dairy Farmers of Ontario publishes the Ontario figure as a quota price cap in its Quota Exchange Summary, March 2026, and DFO’s Markets Report records the same $24,000 cap in effect across Prince Edward Island, New Brunswick, Ontario, Nova Scotia and Quebec. SaskMilk publishes its figure as a market clearing price per kilogram of butterfat in its April 2026 newsletter. Agriculture and Agri-Food Canada reports provincial averages as dollars per kilogram of butterfat per day. All figures Canadian dollars.
That second row is the whole difference, and the Saskatchewan number shows the scale of it. A Canadian dairy farmer who wants out sells quota — at $24,000 a kilogram in Ontario, or $44,144 where the cap doesn’t apply. A U.S. producer under S.4906 hands an allotment to a neighbor and books nothing.
Ontario also shows what rationing looks like when the asset exists and nobody will part with it: Dairy Farmers of Ontario’s own quota exchange archive records cancellations in February, April, May, July, and August 2026 — five of the first eight months — with the September exchange running. Our breakdown of the May exchange found 1,978 producers bidding against eighteen offering.
The historical parallel is narrower than usually claimed. NMPF published its Foundation for the Future proposal in June 2010, and a version was introduced in the 112th Congress as H.R. 3062, the Dairy Security Act, by House Agriculture Committee Ranking Member Collin Peterson on September 23, 2011. The Agricultural Act of 2014, signed February 7, 2014, included the Margin Protection Program and the Dairy Product Donation Program. The supply-control companion didn’t survive. NMPF’s position at the time, reported by DTN Ag Policy Blog on January 15, 2014, was that House Speaker John Boehner’s opposition “effectively served to kill our proposal within the committee.”
NMPF Answered Through a Trade Outlet, Not a Filing
The National Milk Producers Federation, which represents dairy cooperatives, has one public statement on this bill. Alan Bjerga, NMPF’s executive vice president of communications and industry relations, told Progressive Dairy on September 7, 2026: “Government-mandated supply management has a track record of unintended consequences: It limits farmers’ ability to grow and respond to market signals, it puts producers who have invested in expanding their operations at a disadvantage, and it raises consumer grocery costs.” He added: “Rigid production controls aren’t the right path forward for dairy.”
“Rigid production controls” describes a mechanism the available descriptions don’t support. In the sponsor’s summary and independent analyses, the bill enforces through a fee on over-allotment production, not a prohibition on marketing. That’s a different instrument with a different incentive, and the statement doesn’t engage it — nor does it engage Section 3(b).
The consumer-cost half of the statement is a different matter, and the arithmetic below supports it plainly. A floor set at mid-size full cost of production transfers $7.36 per hundredweight, and somebody pays it.
NMPF issued detailed public praise for Chairman John Boozman’s Senate farm bill draft, naming Dairy Margin Coverage continuation, common cheese name protections, and export promotion funding. The International Dairy Foods Association, which represents dairy processors and manufacturers, endorsed the same draft on June 22. Neither has publicly addressed Section 3(b). We put the question to IDFA the same day we wrote to NMPF.
The bill’s endorsers filed their own record on June 28: the National Family Farm Coalition, Farm Aid, Wisconsin Farmers Union, and the Northeast Organic Dairy Producers Alliance among dozens of farm and food organizations. Wisconsin Farmers Union president Darin Von Ruden, a dairy farmer at Westby, said: “If we want family farms to stay in business, we need a dairy economy that works for the people producing the milk and not one that expects farmers to just work harder.”
NFFC’s own legislative document states the Act “includes a parallel pricing and supply management system for organic farmers.” How that parallel system sets organic floors, and whether organic producers sit inside or outside the main Program, is another question we’ve asked.
What Would Cost-of-Production Pricing Do to a 200-Cow Milk Check?
Running the Numbers — Bullvine calculation
Scope: 200 cows, 12 months, Northeast or Upper Midwest, USD.
The bill would base minimum prices partly on production costs. USDA publishes those costs by herd size, and it publishes two of them.
What Is Cost of Production for a 200-Cow Dairy in 2025?
USDA ERS, Milk Cost of Production Estimates, size-of-operation series, 2025 values, dollars per hundredweight sold:
| Herd Size (Cows), 2025 | Total Full Cost ($/cwt) | Operating Cost Only ($/cwt) | Milk Sold ($/cwt) | Total Gross Value ($/cwt) | Net on Full Cost ($/cwt) |
| Fewer than 50 | $47.33 | $16.37 | $23.45 | $27.79 | −$19.54 |
| 50–99 | $37.05 | $16.77 | $22.72 | $26.46 | −$10.59 |
| 100–199 | $29.56 | $14.87 | $21.55 | $24.61 | −$4.95 |
| 200–499 | $27.21 | $14.53 | $20.94 | $23.62 | −$3.59 |
| 500–999 | $23.06 | $14.33 | $21.74 | $24.72 | +$1.65 |
| 1,000–1,999 | $21.08 | $13.32 | $21.04 | $24.11 | +$3.03 |
| 2,000 or more | $18.65 | $12.69 | $20.26 | $22.90 | +$4.25 |
| All sizes | $23.37 | $13.75 | $21.00 | $23.92 | +$0.55 |
Read the columns in order, because milk alone doesn’t cover full cost on any tier under 500 cows. Total Gross Value adds cattle sales and other income to the milk check — that’s what ERS nets against total cost, which is why Net isn’t Milk Sold minus Total Full Cost. The All sizes row is ERS’s own aggregate, not our average of the tiers.
The largest single driver on the mid-size row is capital recovery on machinery, housing, and equipment at $7.51/cwt.
Other published inputs:
- All-milk price, 2026 forecast: $19.85/cwt. USDA ERS, Livestock, Dairy, and Poultry Outlook, August 19, 2026, U.S. national average, revised down 15 cents
- Class III, August 2026: $16.64/cwt. USDA AMS, U.S. national
- DMC in 2026: Tier 1 covers the first 6 million lbs of production history, raised from 5 million under the One Big Beautiful Bill Act, which also reauthorized the program through 2031. Coverage $4.00 to $9.50/cwt; $9.50 costs $0.15/cwt plus a $100 annual fee. USDA Farm Service Agency
- DMC margin below $9.50 in 39 of 84 months, 2019 through 2025, or 46.4%. University of Wisconsin-Madison Division of Extension
- The margin did not slip below $9.50 until December 2025, per the American Farm Bureau Federation, then triggered again in February 2026 on a margin of $8.46/cwt
- Output per cow, 200–499 class, 2025: 23,479 lbs. USDA ERS
Stated assumptions, not source figures:
- 75 lbs/cow/day, 365 days = 27,375 lbs/cow/year = 273.75 cwt. A managed Northeast or Upper Midwest herd, above the ERS class average. Substitute your own DHIA number.
- The floor operates as a minimum, not a substitute price. A floor below market does nothing.
- The 200–499 tier is the relevant one for a 200-cow herd if floors are tiered by herd size, as the sponsor’s materials describe.
Bullvine math:
200 cows × 75 lbs × 365 days = 5,475,000 lbs = 54,750 cwt.
The Two Costs, Side by Side
| Case | Cost basis | Floor ($/cwt) | Binds at $19.85? | Uplift ($/cwt) | Whole-Herd | Per Cow |
| A — full economic cost | ERS total costs listed, 200–499, 2025 | $27.21 | Yes | +$7.36 | +$402,960 | +$2,015 |
| B — operating cost only | ERS operating costs, 200–499, 2025 | $14.53 | No | $0 | $0 | $0 |
Same herd. Same tier. Same dataset. Same year. The only variable is which cost measure a rulemaking adopts. Full economic cost includes imputed returns to owned land and the value of unpaid family labor. Operating cost doesn’t. When a producer says “my cost of production,” they almost always mean the second. When ERS publishes cost of production, it leads with the first.
Read Case A as a per-hundredweight transfer before you read it as a per-cow windfall. A $7.36/cwt uplift is what full-cost pricing actually costs — a 37% lift on the current all-milk forecast, and the strongest available argument against the bill as well as for it. Substitute the ERS class output of 23,479 lbs/cow and the same floor delivers $345,611 whole-herd, or $1,728 a cow.
The Handler Problem, and Why the Bill Reaches for a Single Desk
A tiered floor creates an immediate commercial trap, though not quite the one it first appears to be.
On the 2025 ERS numbers, a full-cost floor prices 200-to-499-cow milk at $27.21/cwt. A 2,000-plus-cow herd’s full cost is $18.65 — below the $19.85 all-milk forecast, so a floor set there never binds and that milk still clears at market. The penalty for sourcing from the smaller herd isn’t the gap between the two floors. It’s $27.21 minus $19.85: $7.36/cwt, the identical figure the mid-size producer gains.
That symmetry is the finding. A transfer has two sides, and both are the same size. No processor buying in a normal market absorbs $7.36 voluntarily, which is why mid-size patrons would be the first contracts under pressure.
The bill appears to see this coming, and its answer is structural rather than financial. On the descriptions available, the Secretary would purchase milk from producers and sell it on to handlers. That removes the choice: a cheese plant can’t drop its small patrons because it wouldn’t have patrons, it would have a supply relationship with a Regional Board.
Which moves the $7.36 rather than erasing it. Somebody still pays the difference between what the Board pays a 200-cow herd and what it charges the plant, and the resale price is the number we can’t find. That’s the question a mid-size operator should want answered before anything else in this bill — not whether the floor is generous, but who sits on the other side of it, and at what price.
What You’d Be Giving Up
Section 3(b) would settle the other half of the math. DMC would be suspended while the Program runs, and Dairy Revenue Protection couldn’t be offered. Here’s the arithmetic on giving that up.
At $9.50 coverage on 95% of a 200-cow herd’s production history, 52,012.5 cwt at $0.15/cwt is $7,801.88 a year in premium, plus the $100 fee. DMC repays that in any year when indemnities exceed $0.15/cwt of covered production— the premium rate itself. February 2026’s $1.04/cwt shortfall, spread across a twelfth of annual production, is worth $0.0867/cwt on the year, so roughly 1.7 months at February’s depth covers it. Across 2019 through 2025 the margin sat below $9.50 in 46.4% of months, though the record since December 2025 has been sparser.
Methodology Note. Both floor figures are ERS-published 2025 values from the size-of-operation workbook, read directly from the file, not Bullvine constructions; the modeled inputs are yield and DMC election only. “Total Full Cost” is ERS “total costs listed” — operating costs plus allocated overhead, which for the 200–499 row is $14.53 plus $12.68. All uplift figures are calculated against the all-milk forecast as of the August 19, 2026 ERS release; USDA’s release calendar puts the next Livestock, Dairy, and Poultry Outlook on September 16, and it will supersede that figure. Class III appears as market context only; Class III, CME futures, and a legislated floor are three separate things. Per-cwt uplift scales linearly with volume. No double counting: the DMC premium appears once, indemnities once. We do not model any dividend, because its size would depend on how much over-allotment milk the country ships. On how sharply full and cash cost diverge as herds get smaller, see our small herd cost of production breakdown.
One more thing about the data. ERS states that estimates since 2021 “are based on the 2021 USDA, Agricultural Resource Management Survey (ARMS) data from milk producers, with subsequent updates based upon annual price changes.” The 2025 figures above are price-updated from a 2021 structural snapshot. Any floor built on this series inherits that, and the next ARMS re-survey would reset the entire cost ladder.
The 30/90/365 Playbook for Herds Shipping Under 500 Cows
30 days
- Get two cost numbers from your accountant, not one: cash cost, and full cost with unpaid labor and capital recovery included. Your tier’s 2025 ERS figures are $14.53 and $27.21. Requires one meeting. Threshold: the gap between your two numbers is the range cost-of-production pricing would swing your milk check across. Backfire risk: quoting only cash cost in a comment to USDA argues for the floor that pays you nothing.
- Pull your 2026 DMC election and divide last year’s indemnities by your covered hundredweight. The Tier 1 threshold moved to 6 million pounds this year, so more of your production may be covered than you think. Threshold: if that number beats $0.15/cwt, DMC has been paying you, and Section 3(b) would take it away. Backfire risk: DMC is a national margin, so yours may have moved differently.
- Red-flag trigger: if your debt service coverage ratio has been under 1.2 for three consecutive months on your lender’s calculation, losing DMC and Dairy Revenue Protection together is a covenant conversation, not a policy curiosity.
90 days
- Ask your lender how they underwrite your operating line of credit. DMC indemnities are a documented, program-based cash flow with a published trigger — the kind of line a bank can put in a pro forma and lean on when sizing a winter feed line. Dairy Revenue Protection is the same. If both were suspended, ask specifically: higher cash equity, tighter collateral margins, a lower advance rate, or a covenant change? Requires your loan officer, your last two operating-line renewals, and both cost figures above. Threshold: urgent before your next renewal if either program appears in your credit file. Backfire risk: raising a hypothetical bill can spook a nervous lender — lead with the arithmetic and the fact that nothing is in force.
- Write down the production figure you’d want as your allotment base and the three years behind it. Requires DHIA or handler records for the past three years. Threshold: if your last twelve months ran more than 5% above your three-year average, how a base gets calculated is worth real money to you.
- If you’re a co-op delegate, ask your government affairs staff three questions in writing: what happens to your co-op’s base plan if a federal allotment system arrives, what the co-op considers cost of production to mean, and what price handlers would pay a Regional Board. Requires one email. Threshold: immediate if your co-op is preparing a position.
365 days
- Decide whether your next capital commitment assumes a volume-growth path or a component-and-efficiency path, and run both. Capital recovery is already the largest cost line on your tier at $7.51/cwt. Requires a nutritionist, a breeding plan, and a capital budget. Threshold: any commitment past 2027 with payback built on more hundredweight. Backfire risk: over-rotating to components on a thin premium schedule leaves money on the table if no supply program passes.
- Opportunity signal: the bill’s described structure redirects allotment toward new entrants and funds farmworker ownership assistance. If a generational transition sits on your five-year horizon, those are the provisions to read when the text is in front of you.
The Committee Vote That Decides Whether Any of This Matters
The Senate Agriculture Committee voted 10-11 against reporting the 2026 Farm Bill out of committee on August 6. Chairman Boozman recessed the committee before the summer break rather than reporting the failed vote, so he could call members back without a lengthy amendment and debate process.
He’s calling them back. Boozman told POLITICO on September 10 that he plans another committee vote next week, without a firm date set: “I really feel like it’s important to continue to have members express where they’re at on this, and so we are going to vote again next week.” He said he’ll call the vote whether or not Sen. Mitch McConnell — hospitalized since June, home for rehab since August, and hoping to attend “if it’s humanly possible” — is well enough to be there. McConnell’s absence, alongside unified Democratic opposition, is what stalled the August markup.
Note what the fight is actually about, because it isn’t dairy. Democrats voted the package down over SNAP spending cuts, and their demand is two extra years for all states before a new requirement that states pay part of SNAP benefits. Boozman’s bill offers a one-year delay, and he told POLITICO that’s his best and final offer. Which means the dairy title’s fate rides on a nutrition-program dispute, and a reopened dairy title is where stabilization language would arrive as an amendment. Advocacy groups backing S.4906 have spent the past week urging exactly that. As of today the bill remains referred, unmarked-up, and unscheduled on its own.
Whether cost-of-production pricing pays you $7.36 a hundredweight or nothing turns on which of USDA’s two cost numbers a rulemaking picks. Get both from your accountant this month — cash and full. Then ask your lender what your operating line looks like if Section 3(b) takes Dairy Margin Coverage off the table.
Key Takeaways
- USDA publishes two cost figures for a 200-to-499-cow herd in 2025 — $27.21/cwt full economic cost and $14.53 operating cost. S.4906 would price milk off cost of production without saying which. That’s $402,960 a year on 200 cows, or nothing.
- Section 3(b) would suspend Dairy Margin Coverage and bar Dairy Revenue Protection while the Program runs. DMC at $9.50 costs a 200-cow herd $7,801.88 a year and repays that whenever indemnities clear $0.15/cwt — about 1.7 months at February 2026’s margin.
- A full-cost floor prices mid-size milk $7.36/cwt above what the market pays for large-herd milk — the same figure the producer gains. The bill’s answer is to make USDA the buyer, which relocates that transfer rather than removing it. Nobody has said what handlers would pay.
- Senate Agriculture is expected back in markup the week of September 14, on a vote Boozman says he’ll hold regardless of attendance. The blocker is SNAP, not dairy — but a reopened dairy title is the route an amendment would take.
- Get both cost numbers from your accountant this month, cash and full, before any comment period opens. Then ask your lender what your operating line looks like without DMC.
Run Your Numbers
Dairy Profit Projector — This article gives you USDA’s two cost figures. The Projector gives you yours: drop in your herd size, production, and ration to get your own breakeven milk price and margin per cwt, then move the milk price to see where a floor would actually bind.
Learn More
- The Small Herd Cost-of-Production Trap: Why Cash Flow Hides the Real Number — Arms you with the specific accounting steps to uncover your operation’s full economic cost per hundredweight before public comment periods lock in arbitrary federal floor calculations.
- Why 2,000 Cows Clear $4.25 While You Lose $3.59: The Structural Shift in U.S. Dairy — Exposes the five-year balance-sheet trajectory favoring mega-dairies, giving strategic planners the benchmark numbers needed to evaluate herd consolidation versus component-heavy equity models.
- Beyond Base-Excess: How Component Efficiency Rewrites Milk Check Economics — Breaks down contrarian breeding and feeding strategies to capture high-fat market premiums, insulating your bottom line from regional volume quotas and volatile federal margin policies.
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