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DEIP Update, February 2003: USDA Ponders Next Move To date, the U.S. Department of Agriculture (USDA) has not announced any new action in the Dairy Export Incentive Program (DEIP) for the last two months. USDA issued the most recent product allocation on November 15, when it allocated 62% of the tonnage limits for cheese, nonfat dry milk (NFDM) and butterfat. After this announcement, only cheese and NFDM were invited for bids. By November 26, all the cheese and NFDM tonnage had been awarded. Although butterfat has been included in the allocations, USDA has not yet invited bids on that product.However, rumors are circulating that USDA is considering an invitation for at least some of the butterfat allocation. Since May 2002, butter prices have been between $0.95 and $1.10. At the time, the purchase price under the Dairy Price Support Program (DPSP) was less than $0.85, so USDA did not activate the butterfat allocation of DEIP. As long as the market price was higher, butter was not being purchased for price support and there were no government stocks. On November 15, USDA adjusted the purchase prices for butter and NFDM under the DPSP, which resulted in a butter support price increase to $1.05. With the current market price hovering near the support price, the government purchased 2.4 million pounds of butter in January 2003 - its first such purchase in eight years. Rather than allow government stocks of butter to grow — as has been the case with NFDM — USDA may consider the subsidized export of butter as a way to avoid additional government purchases. As reported in last week's News Update, IDFA asked USDA in a recent letter to resist exporting butter through DEIP. (Members can click here to read the letter.) The DEIP allocation for butterfat is 21,097 metric tons (46.5 million pounds) in the form of butter, butteroil, anhydrous milkfat and ghee. Though butterfat has always been a component of the DEIP allocations, no invitation for bids on butterfat have been issued for the past two DEIP years (July 1 to June 30). In fact, the last award for butter under DEIP was in May 2000. Table 1 below summarizes the allocation and awards of the products included in the DEIP for fiscal year 2003: Table 1. DEIP Tonnage Allocations and Percentage Awarded by Product, through February 2, 2003
DEIP assists the export of U.S. dairy products by paying bonuses through competitive bids that compensate the exporting bidder for costs to procure and deliver domestic dairy products to a foreign port. Table 2 provides details about the average bonuses paid, as well as destinations for the awarded products: Table 2. DEIP Activity Through February 2, 2003
Posted February 10, 2003
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