IDFA - March 2002 DEIP Update

March 2002 DEIP Update:
Dairy Export Incentive Program Reaches Half-Way Point for NFDM

In February, the U.S. Department of Agriculture's (USDA) Dairy Export Incentive Program (DEIP) passed the 50% allocation point for nonfat dry milk (NFDM). Sixteen bids representing 7,580 MT of NFDM were accepted last month. In total, 85 bids have been awarded, bringing the year-to-date total to nearly 36,000 MT of NFDM.

DEIP also includes cheese and butter. The allocation for cheese has already been filled. USDA's Foreign Agriculture Service (FAS) has not yet invited bids for butter. Table 1 below summarizes the allocation and awarding of the products included in DEIP for 2001-2002, to date.

Table 1. DEIP Tonnage Allocations and Percentage Awarded,
by Product, through February 28, 2002

PRODUCT ALLOCATION PERCENT AWARDED
Nonfat Dry Milk 68,201 MT 53%
Cheese 3,030 MT 100%
Butterfat 21,097 MT Not Yet Invited

The Asia/Former Soviet region received three contracts representing the bulk of tonnage awarded for the month. However, the Carribean and Central/South American region is destined for more than 58% of the NFDM awarded to date for the whole program. Further information about the NFDM awards is presented in Table 2.

Table 2. DEIP Activity Through February 28, 2002

PRODUCT	ALLOCATION	DESTINATION	AMOUNT	BONUS
PRODUCT	ALLOCATION	DESTINATION	AMOUNT	$/MT	$/pound
Nonfat Dry Milk	68,201 MT
		Asia and F Soviet Union	13,331	$495	$0.2244
		Africa and Middle East	1,573	$423	$0.1917
		Carrib/Cent& S America	21,013	$390	$0.1771
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

Bid acceptance means USDA contracts with the bidder to pay a specified bonus on the export of an agreed amount of NFDM. 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 U.S. domestic purchase cost and the competing world market prices. Therefore, as prices paid by foreign customers drop, the bonus that an exporter must apply for increases.

For the two-week period ending March 1, 2002, the midpoints of the price ranges for NFDM from Europe and Oceania were $0.6804 and $0.6691/lb, respectively. The price of NFDM from Oceania is down $0.0340 from the beginning of February, while the European price actually rose slightly. At the same time, the prices for domestic NFDM stabilized in a range from $0.95 in the east to $0.91 in the west.

Over the same time period, DEIP bonuses continued to grow. In early February, bids had reached $550/MT, or about $0.2495 per pound, whereas the final bid accepted in February was for more than $618/MT, or $0.2806 per pound. The overall average bonus for this DEIP year now exceeds $430/MT and equals $0.1953 per pound. The total value of bonuses year-to-date is now $15.5 million.

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Posted: March 11, 2002