DEIP Update, September 2004: USDA Announces Product Allocations

On September 17, the U.S. Department of Agriculture (USDA) announced the product tonnage allocations for the Dairy Export Incentive Program (DEIP), officially launching the program's 2005 fiscal year (July 1, 2004-June 30, 2005). While the allocations are the required first step for USDA to utilize DEIP, the department stated in its announcement that the bidding process would not begin immediately "due to current international and domestic market conditions."

Under DEIP, USDA pays a bonus to exporters as compensation for costs of procuring and transporting surplus domestic nonfat dry milk (NFDM), cheese and butter to overseas customers. However, domestic wholesale prices indicate a relatively short supply of butter and cheese in the U.S. market. In addition, current NFDM prices in the United States are 10-12 cents lower than international prices.

Consistent with previous years, USDA allocated the maximum amounts for all three products allowed under World Trade Organization (WTO) rules: 68,201 metric tons (MT) of NFDM, 3,030 MT of cheese, and 21,097 MT of butterfat.

Last year, USDA utilized DEIP for the full allocations for NFDM and cheese; USDA did not offer the butter allocation for bidding. For a detailed review of the 2004-05 DEIP year, click here to read a previous news story.

Posted September 20, 2004