IDFA - News Article Template - Updated July 7, 2003

DEIP Update, July 2003: Export Dock Closes 2002-03 Fiscal Year

On June 30, the U.S. Department of Agriculture (USDA) concluded another fiscal year of moving domestic dairy production into export markets through the Dairy Export Incentive Program (DEIP). In its 2002-2003 fiscal year, DEIP awarded contracts for a total of 68,201 metric tons (MT) of nonfat dry milk (NFDM), 3,029 MT of cheese, and 10,000 pounds (butter equivalent) of butteroil and anhydrous milkfat. The contracts totaled $42.8 million in reimbursements to exporters for costs of procuring and shipping U.S. dairy products to a foreign port.

Table 1 below summarizes the tonnage and bonuses paid.

TABLE 1: DEIP TONNAGE AND BONUS SUMMARY, 2002-2003

Product Tonnage Total Bonus
Dollars (mil) Percent of Total
Bonus Dollars Average Bonus
per Pound
NFDM 68,201 $22.5 52.7% $0.1499
Cheese 3,029 $1.8 4.2% $0.2719
Butterfat 10,000 (a) $18.4 43.1% $0.8355
TOTALS (a) $42.8

(a) Because the butterfat tonnage is a butter-equivalent of butteroil and/or anhydrous milkfat, actual tonnage shipped was not 10,000, therefore a total is meaningless.

The 2002-03 DEIP year was somewhat inconsistent with recent program years. For the first year since 1999-2000, awards were made for the export of butterfat. Under World Trade Organization (WTO) agreements, the United States is allowed to subsidize the export of up to 21,097 MT of butterfat. This year, DEIP made available 10,000 MT. The other WTO product limits are 3,030 MT of cheese and 68,201 MT of NFDM.

Also, USDA announced at the beginning of the program year that DEIP awards would be made in "tranches" allocated throughout the year in an attempt to better match program effects with periods of need and avoid disruption of domestic markets. This led to a few bursts of activity to claim a portion of each allocation. In contrast, prior DEIP years were marked by a gradual draw-down of available tonnage that moved more in relation to world market conditions.

DairyAmerica Inc. was the most successful bidder this past year. In total, the company was awarded contracts for 58,511 MT of NFDM for a $17.8 million bonus. These contracts represent 79% of all tonnage and 86% of all bonuses awarded for NFDM. Ronald A. Chisholm (USA), Inc. received the larger share of the awards for cheese, with contracts for 1,403 MT, for 46% of the tonnage and 49% of the bonuses. Gerber California, Inc. received 5,137 MT, or 51% of the butterfat and 53% of the bonus dollars.

July 1st marked the start of the 2003-04 DEIP year. At press time, USDA had not issued any announcements on product allocations or other plans for the new DEIP year.

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Posted July 7, 2003