DEIP Update, September 2003: NFDM Allocation Fully Awarded

The U.S. Department of Agriculture's (USDA) Dairy Export Incentive Program (DEIP) continued its cycle of activity, with a flurry of bidding and awards that closed out the initial nonfat dry milk (NFDM) allocation within a week of the August 15 opening of the 2003-04 program fiscal year.

USDA awarded 12 bids over three business days to clear out the 22,733 metric tons (MT) of allocated NFDM, which was the first and only product allocation offered for bids to date in the new fiscal year. On August 15, USDA opened the new DEIP fiscal year (July 1, 2003-June 30, 2004) with a three-pronged announcement: that the full World Trade Organization (WTO) limits for NFDM, cheese and butter would apply; that one-third of the limit on each product was being allocated; and that all of the this initial NFDM allocation was invited for bids. Although cheese and butterfat were included in this opening allocation, no tonnage for either product has been invited for bids. The current status of the 2003-04 program is summarized in Table 1 below.

Table 1 — DEIP Tonnage Allocations, and Percentage of Allocation Awarded by Product, through August 29, 2003

PRODUCT	WTO LIMIT	ALLOCATION	% AWARDED/ALLOC.
Nonfat Dry Milk	68,201 MT	22,733 MT	100%
Cheese	3,030 MT	1,010 MT	Not Yet Invited
Butterfat	21,097 MT	7,032 MT	Not Yet Invited

The awards exhaust the first tranch of DEIP activity for 2003-04. Following a system set during the 2002-03 year, USDA is using the tranch (or partial) method of allocation — instead of allocating the entire WTO-allowed amount at the year's start — to better manage the program throughout the year. The awarded bids average $120.95 per MT or about 5.5 cents per pound. These bids are for the bonus to be paid to an exporter as compensation for the costs associated with procuring and shipping the domestic dairy product overseas. This first round of awards totaled more than $2.7 million in bonus money.

Most of the NFDM tonnage awarded is destined for the Caribbean/Central and South America region. Almost 17,700 MT, about 75% of the allocation, is headed to this region. The remainder is going to Asia and/or the former Soviet Union. Table 2 below summarizes the destinations and bonuses to date for NFDM.

Table 2 — DEIP Nonfat Dry Milk Activity through August 29, 2003

PRODUCT	ALLOCATION	DESTINATION	AMOUNT	BONUS/MT	$/pound
Nonfat Dry Milk	22,733 MT
		Asia and F Soviet Union	5,050	$112	$0.0510
		Africa and Middle East	0	$0	$0.0000
		Carib/Cent& S America	17,683	$123	$0.0560

Posted September 2, 2003