On May 22, 2009, the U.S. Department of Agriculture announced the reintroduction of the Dairy Export Incentive Program (DEIP), the first announced allocations since 2006/2007. DEIP is designed to open foreign markets to U.S nonfat dry milk, cheese and butter by compensating U.S. exporters for the costs associated with procuring and delivering product to an overseas port.

The total announced allocation was 68,201 metric tons of nonfat dry milk; 21,097 metric tons of butterfat; 3,030 metric tons of cheese; and 34 metric tons of other dairy products, the maximum allowable yearly allocation levels consistent with U.S. World Trade Organization obligations. Before the end of the DEIP year, June 30, 2009, USDA accepted bids totaling 20,025 metric tons of nonfat dry milk, 1,862 metric tons of butterfat and 152 metric tons of cheese. The total cost of DEIP bonuses for these products was $5.62 million.

With a new DEIP year beginning, on July 6, 2009 USDA announced new allocations equal to our annual WTO limits minus the total accepted bids prior to June 30. Through September 2, 2009, USDA has accepted bids for 17,183 metric tons of nonfat dry milk, 5,045 metric tons of butter and 236 metric tons of cheese at a total cost of approximately $8.12 million. 

Nonfat dry milk bonuses during DEIP year ending June 30, 2009, totaled just over $4 million dollars with an average bonus of $201/metric ton, or $0.09/pound. The majority of the nonfat dry milk (61 percent) went to Africa and the Middle East, followed by Asia and the former Soviet Union (36 percent). On average, bonuses for nonfat dry milk going to Africa and the Middle East were more than double that of exports to Asia and the former Soviet Union.

The export destinations appear to be changing, however, during the first part of the new DEIP year. Since July 1, 2009, Asia and Eurasia, which imported a minimal amount of nonfat dry milk during the last DEIP year, have so far imported the bulk of the DEIP nonfat dry milk exports (81 percent), while Africa and the Middle East only made up (19 percent).

While the average nonfat dry milk bonus level for exports into Asia and Eurasia increased by about 30 percent, the average bonus for exports to Africa and the Middle East declined by close to 17 percent. In the new DEIP year, exports of butterfat have increased 170 percent over 2008/2009 levels, with bonus levels increasing on average about 2.6 percent. Total DEIP cheese exports still remain minimal, but average bonuses have increased dramatically.