August 28, 2002

Two dairy farmer organizations are urging USDA to maximize the use of an export tool that helps American dairy products compete in world markets - and provides better prices to U.S. farmers. The Dairy Export Incentive Program (DEIP) offers government-funded bonuses to domestic companies that export products including nonfat dry milk, butter and cheese.

But USDA has yet to announce the beginning of a new annual round of DEIP sales that was to have begun on July 1 -- the start of the yearly reporting period for agricultural export programs -- meaning that U.S. dairy products are missing out on potential sales opportunities overseas, even while domestic milk prices sit at extremely low levels.

"At a time when the USDA should be using every arrow in its quiver to shoot for higher domestic milk prices, it is failing to use the DEIP program at all," said Jerry Kozak, president and CEO of the National Milk Producers Federation. "The USDA's bureaucrats are just sitting on their hands instead of capitalizing on a perfectly effective and appropriate tool to help out America's dairy farmers."

U.S. dairy exporters "are having to turn away solid sales from long-standing customers in Latin America and Asia looking to purchase our products," said Tom Suber, president of the U.S. Dairy Export Council. "We are mystified as to why this legitimate and effective program lies idle while our customers go begging. Though Europe depresses world prices with its massive export subsidies, USDA won't get off the dime and let the U.S. industry counter those subsidies with our DEIP program."

Under its world trade commitments, the United States is allowed to subsidize a modest level of dairy exports each year. For the coming year, the U.S. DEIP export limits are 150 million pounds (68,201 metric tons) of nonfat dry milk powder, 46.5 million pounds (21,097 metric tons) of butterfat, and 6.7 million pounds (3,030 metric tons) of cheese.

Although those volumes are smaller than in the 1990s, they still represent a significant avenue by which U.S. farm interests can help compete with much more heavily-subsidized dairy commodities from competitive suppliers, such as the European Union, according to NMPF.

The need to maximize the DEIP program's use is all the more acute because the domestic prices for all three commodities - cheese, nonfat dry milk powder and butter - are hovering near record-low levels.

"Permitting the routine use of the DEIP should be a no-brainer for the USDA, particularly when farm prices are so low. We're not asking for a special favor - just that they use a program that Congress has specifically said should be utilized to the maximum extent possible," Kozak said.

USDA has expressed concerns about "the growing domestic stocks of nonfat dry milk, but the one clear option they have to rectify that problem - exporting some of that volume using DEIP bonuses - is not being used, for reasons that are as mystifying as they are frustrating," Suber said.