IDFA - January 2002 DEIP Update

January 2002 DEIP Update:
Dairy Export Incentive Program Bloats over Holidays

In the month since December's Dairy Export Incentive Program (DEIP) report, the Foreign Agriculture Service (FAS) of the U.S. Department of Agriculture more than doubled the tonnage from accepted bids for nonfat dry milk (NFDM). As of January 4, 54 bids in total have been approved, up from 38 as of December 6, 2001. The total amount of accepted bids for NFDM under the program is now 26,169 metric tons.

The program also includes cheese and butter. The DEIP allocation for cheese has already been filled, and FAS has not yet invited bids for butter. Table 1 below summarizes the allocation and completion of the products included in DEIP for 2001-2002.

Table 1. DEIP Tonnage Allocations and Percentage Complete,
by Product, 2001-2002

PRODUCT	ALLOCATION	PERCENT COMPLETE
Nonfat Dry Milk	68,201 MT	38%
Cheese	3,030 MT	100%
Butterfat	21,097 MT	Not Yet Invited

Recent NFDM accepted bids came at a higher cost as well. Whereas some early bonuses were accepted for less than $220/ MT (about $0.10 per pound), every bid accepted after December 20 was $420/MT ($0.19 per pound) or more! These higher bids pushed the overall average bonus to $371/ MT, or $0.17 /lb. Consequently, the total cost of DEIP so far this year (which began July 1, 2001) is more than $9.7 million.

The Carribean/Central and South America region continues to dominate as the destination of the awarded NFDM -- Over 17,500 metric tons are headed there. By comparison, only 1,184 metric tons have been earmarked for Africa and the Middle East. Asian/Former Soviet Union business picked up markedly, winning 6,700 metric tons in bids, to raise its tonnage to 7,475. Further information about the NFDM awards is presented in Table 2.

Table 2. DEIP Activity Through January 4, 2002

PRODUCT	ALLOCATION	DESTINATION	AMOUNT	BONUS/MT	Bonus $/pound
Nonfat Dry Milk	68,201 MT
		Asia and F Soviet Union	7475	$409	$0.1856
		Africa and Middle East	1184	$380	$0.1721
		Carrib/Cent& S America	17510	$355	$0.1611
Cheese	3,030 MT
-Mozzarella		Carrib/Cent& S America	2,230	$590	$0.2676
-Monterey Jack		Carrib/Cent& S America	500	$590	$0.2676
-Varietal		Carrib/Cent∓ S America	300	$590	$0.2676
Butterfat	21,097 MT		0	0	0

The bonus paid compensates the exporter for costs to procure and deliver NFDM to a foreign port. These bonuses vary with the difference between the domestic purchase cost and the competing world market prices. At the beginning of January, the midpoints of the price ranges for NFDM from Europe and Oceania were $0.7484 and $0.7541/lb, respectively. These are $0.04 less than at the end of November. At the same time, the prices for domestic NFDM dropped about 1 cent, to $0.96 in the East and $0.9125 in the West. The net result is about a $0.03 increase in the DEIP bonus paid per pound. The CCC purchase price under the U.S. support price program is $0.90. ###

Posted: January 14, 2002