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DEIP Update, December 2002: USDA Fills Second Allocation of NFDM, Cheese The U.S. Department of Agriculture (USDA) recently awarded all of the nonfat dry milk (NFDM) and cheese in the Dairy Export Incentive Program (DEIP) from its second allocation of tonnage for the 2003 fiscal year. On November 25, USDA accepted bids on the 3,600 metric tons of NFDM that remained from the second allocation, which was announced just a week earlier on November 18. While butter was also part of that allocation, USDA has not yet invited bids on that product.USDA's strategy to better manage DEIP's impact on the market this year has been to gradually make available tonnage allowed to the program under World Trade Organization (WTO) agreements. In its first allocation, USDA released just one-quarter of the total annual allowable tonnage in September. On November 18, one-half of the remaining tonnage became eligible for the program. These two allocations still leave 37.5% of the annual WTO limit remaining. It is uncertain when USDA will deem the market ready for the remaining tonnage. Table 1 below summarizes the allocation and awards of the products included in the DEIP for fiscal year 2003:
by Product, through December 5, 2002
The DEIP bonus paid compensates the exporting bidder for costs to procure and deliver products to a foreign port. These costs vary by product, destination, and current domestic and world market prices. Prices for domestic NFDM as reported by Dairy Market News for the week of November 25-29 were $0.9550 - 0.9650/lb in the Central/East and $0.9000 - 0.9200/lb in the West. According to that same report, cheddar cheese traded at the Chicago Mercantile Exchange for $1.0967/lb. for barrels and $1.1233/lb. for blocks. There are also the prevailing international prices to consider. For the two-week period ending December 6, 2002, the midpoint of the price ranges for NFDM from Europe was $0.6690 and from Oceania was $0.7144/lb. In Oceania, cheddar cheese's midpoint was $0.7484/lb. USDA's most recent NFDM awards will pay an average bonus of $0.1490/lb, while the average bonus of all DEIP activity since July 1, 2002, is $0.1995. Table 2 provides details about the average bonuses paid, as well as destinations for the awarded products:
Posted December 16, 2002
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