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USDA Actions Create More DEIP Activity USDA opened the doors to more activity for the Dairy Export Incentive Program (DEIP) in the past week. In September, instead of allocating and inviting bids for the full tonnage allowed by the World Trade Organization (WTO), USDA opened this year's program at 25% of the allowable levels. But after the initial tonnage was awarded, USDA held off further activity until decisions were made on other major dairy industry questions.Perhaps most important to DEIP was the adjustment in the butter and nonfat dry milk (NFDM) purchase prices under the Dairy Price Support Program. Because NFDM has been in surplus for the past few years, the price support for NFDM has largely determined its domestic price. Until the support price change was announced, it was not possible to determine the correctness of a DEIP bid. With future butter and NFDM prices better understood, USDA announced (actually in the same press release) the allocation of one-half of the remaining quantities allowable under WTO. On November 18, USDA released amended invitations for the new allocations of cheese and NFDM. No invitation has yet been issued for any of the butterfat allocation. Table 1 below summarizes the allocation and awards of the products included in the DEIP for 2002-2003.
Since the new invitations, bids have been awarded for both NFDM and cheese. In fact, the new cheese allocation has been filled and less than 10% of the NFDM allocation remains. The bonus paid compensates the exporter for costs to procure and deliver NFDM to a foreign port. Prices for domestic NFDM as reported by Dairy Market News were .9550 - .9650/lb and .9000 - .9200/lb in the Central/East and West, respectively. For the two-week period ending November 22, 2002, the midpoints of the price ranges for NFDM from Europe and Oceania were $0.6350 and $0.6803/lb, respectively. These recent NFDM awards will pay average bonuses of slightly more than 15 cents/lb. One reason given by USDA for making partial allocations of DEIP tonnage was better management of the program. On the first partial allocation bonuses had averaged 27.5 cents/lb which means a $0.12/lb reduction in NFDM bonuses, or $5.8 million so far on this second allocation. In addition there were savings on cheese awards. The simple average of bonuses from the first partial allocation was $758/ MT, compared to $583/ MT for the second allocation. The $175/ MT difference equates to about 8-cents per pound of cheese or a savings of $330,000. More detail about the average bonuses paid, as well as destinations for the awarded products, are presented below in Table 2.
Posted November 25, 2002
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