|
Dairy Export Incentive Program Active in December; Support Price for NFDM May Be Adjusted As stated in November's column, the Foreign Agriculture Service (FAS) of U.S. Department of Agriculture began awarding bids last month for nonfat dry milk (NFDM) under the Dairy Export Incentive Program (DEIP). Through the first week of December 2001, FAS accepted 16 more bids since IDFA's November DEIP column was published, bringing the total of accepted NFDM contracts to 38. The allocation for cheese exports was completely filled earlier in the year. To date, over 11,480 metric tons of NFDM have been awarded through the program. Most of the accepted bids specify shipping NFDM to the Carribean or South America. This region accounts for 98% of the affected tonnage thus far. Table 1 below summarizes the allocation and completion of the products included in the DEIP for 2001-2002. Table 1. DEIP Tonnage Allocations and Percentage Complete,
by Product, 2001-2002
In monetary terms, the running total cost of the program now eclipses $3.5 million. The average bonus calculates to $309.95 per metric ton, about $0.14 per pound. This is up significantly from the $242.07 after November 20th. As a result, the average bonus per pound has risen from $0.11 to just over $0.14. Further information about the NFDM awards is presented in Table 2. Table 2. DEIP Activity Through December 6, 2001
Support Price for NFDM May Be Adjusted The markets for NFDM explain why the bonus is growing. Since November 10th, the midpoints of the price ranges for NFDM from Europe and Oceana have dropped four and eight cents to $0.7881 and $0.7995 per pound, respectively. European NFDM is still trading at a discount because of Foot and Mouth Disease worries. The domestic prices that the DEIP bonuses are netted against range from $0.9235 per pound in the western US to $0.9700 in the east. As implied by current DEIP bonuses, these prices are around $0.14 per pound higher than the price that is received when the NFDM is sold internationally. However, pressure may be mounting to allow domestic prices to fall. Over much of the summer, domestic prices were low enough to discourage sales of surplus NFDM to the government to support the price of farm milk. After three months of virtually no price support activity, USDA purchased 44.7 million pounds of powder in November and early December 2001. By adjusting downward the purchase price of NFDM, USDA would reduce not only its cost of support purchases, but also the DEIP bonuses necessary to divert NFDM to the export market. ### |
